Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number

001-10932

WisdomTree Investments, Inc.

(Exact name of registrant as specified in its charter)


Delaware		13-3487784
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

245 Park Avenue, 35 th Floor New York, New York		10167
(Address of principal executive offices)		(Zip Code)

212-801-2080

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

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

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐

☒

As of

July 25

, 2019, there were

155,099,477

shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

Table of Contents

WISDOMTREE INVESTMENTS, INC.

Form 10-Q

For the Quarterly Period Ended June 30, 2019

TABLE OF CONTENTS


	Page Number
PART I: FINANCIAL INFORMATION		4

Item 1. Financial Statements		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		36

Item 3. Quantitative and Qualitative Disclosures about Market Risk		56

Item 4. Controls and Procedures		57

PART II: OTHER INFORMATION		57

Item 1. Legal Proceedings		57

Item 1A. Risk Factors		57

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		57

Item 3. Defaults Upon Senior Securities		58

Item 4. Mine Safety Disclosures		58

Item 5. Other Information		58

Item 6. Exhibits		59

Unless otherwise indicated, references to “the Company,” “we,” “us,” “our” and “WisdomTree” mean WisdomTree Investments, Inc. and its subsidiaries.

WisdomTree

and Modern Alpha

are trademarks of WisdomTree Investments, Inc. in the United States and in other countries. All other trademarks are the property of their respective owners.

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 our results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 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 Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission, or the SEC, as exhibits to this Report, 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 Report may include statements about:

•

anticipated trends, conditions and investor sentiment in the global markets and exchange traded products, or 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;

•

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 operate and expand our business in non-U.S. markets; and

•

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

The forward-looking statements in this Report represent our views as of the date of this Report. 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 Report.

PART I: FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Per Share Amounts)


	June 30, 2019			December 31, 2018
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	79,611		$	77,784
Securities owned, at fair value		9,095			8,873
Accounts receivable		24,442			25,834
Income taxes receivable		1,235			1,181
Prepaid expenses		6,192			4,441
Other current assets		1,017			163

Total current assets		121,592			118,276
Fixed assets, net		8,604			9,122
Notes receivable, net (Note 8)		31,485			28,722
Indemnification receivable (Note 21)		30,877			34,876
Securities held-to-maturity		20,136			20,180
Deferred tax assets, net		4,599			7,042
Investments, carried at cost (Note 9)		28,080			28,080
Right of use assets – operating leases (Note 14)		18,997			—
Goodwill (Note 23)		85,856			85,856
Intangible assets (Note 23)		603,291			603,209
Other noncurrent assets		1,258			2,155

Total assets	$	954,775		$	937,518

Liabilities and stockholders’ equity
Liabilities
Current liabilities:
Fund management and administration payable	$	23,753		$	22,508
Compensation and benefits payable		14,619			18,453
Deferred consideration – gold payments (Note 11)		12,857			11,765
Securities sold, but not yet purchased, at fair value		543			1,698
Operating lease liabilities (Note 14)		3,632			—
Accounts payable and other liabilities		7,738			8,377

Total current liabilities		63,142			62,801
Long-term debt (Note 12)		195,762			194,592
Deferred consideration – gold payments (Note 11)		148,416			149,775
Operating lease liabilities (Note 14)		20,190			—
Deferred rent payable		—			4,570
Other noncurrent liabilities (Note 21)		30,877			34,876

Total liabilities		458,387			446,614

Preferred stock – Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding (Note 13)		132,569			132,569

Contingencies (Note 15 )
Stockholders’ equity
Preferred stock, par value $0.01; 2,000 shares authorized:		—			—
Common stock, par value $0.01; 250,000 shares authorized; issued and outstanding: 155,108 and 153,202 at June 30, 2019 and December 31, 2018, respectively		1,551			1,532
Additional paid-in capital		367,750			363,655
Accumulated other comprehensive income		725			467
Accumulated deficit		(6,207	)		(7,319	)

Total stockholders’ equity		363,819			358,335

Total liabilities and stockholders’ equity	$	954,775		$	937,518

The accompanying notes are an integral part of these consolidated financial statements

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating Revenues:
Advisory fees	$	65,627		$	73,778		$	130,467		$	132,234
Other income		666			997			1,311			1,445

Total revenues		66,293			74,775			131,778			133,679

Operating Expenses:
Compensation and benefits		21,300			19,301			42,601			38,133
Fund management and administration		15,576			14,621			30,742			25,533
Marketing and advertising		2,910			3,778			5,590			6,973
Sales and business development		4,171			4,503			8,593			8,316
Contractual gold payments (Note 11)		3,110			2,715			6,208			2,715
Professional and consulting fees		1,296			1,560			2,778			3,196
Occupancy, communications and equipment		1,548			1,574			3,166			2,937
Depreciation and amortization		264			337			533			692
Third-party distribution fees		1,919			1,666			4,319			3,391
Acquisition-related costs (Note 3)		33			7,928			346			9,990
Other		2,255			2,261			4,308			4,051

Total expenses		54,382			60,244			109,184			105,927

Operating income		11,911			14,531			22,594			27,752
Other Income/(Expenses):
Interest expense		(2,910	)		(2,356	)		(5,802	)		(2,356	)
(Loss)/gain on revaluation of deferred consideration – gold payments (Note 11)		(4,037	)		9,898			367			9,898
Interest income		818			612			1,597			1,574
Impairment (Note 14)		—			—			(572	)		—
Other gains and losses, net		284			(501	)		(4,343	)		(762	)

Income before income taxes		6,066			22,184			13,841			36,106
Income tax expense		3,587			5,460			2,538			9,958

Net income	$	2,479		$	16,724		$	11,303		$	26,148

Earnings per share—basic	$	0.01		$	0.10		$	0.07		$	0.17

Earnings per share—diluted	$	0.01		$	0.10		$	0.07		$	0.17

Weighted-average common shares—basic		151,818			149,056			151,722			142,230

Weighted-average common shares—diluted		167,249			163,346			166,855			149,979

Cash dividends declared per common share	$	0.03		$	0.03		$	0.06		$	0.06

The accompanying notes are an integral part of these consolidated financial statements

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(In Thousands)

(Unaudited)


	For the Three Months Ended June 30, 2019
	Common Stock								Accumulated			Accumulated Deficit			Total
	Shares Issued			Par Value		Additional Paid-In Capital			Other Comprehensive Income			Accumulated Deficit			Total
Balance—April 1, 2019		155,056		$	1,551	$	364,717		$	758		$	(3,592	)	$	363,434
Restricted stock issued and vesting of restricted stock units, net		66			—		—			—			—			—
Shares repurchased		(14	)		—		(102	)		—			—			(102	)
Stock-based compensation		—			—		3,135			—			—			3,135
Other comprehensive loss		—			—		—			(33	)		—			(33	)
Dividends		—			—		—			—			(5,094	)		(5,094	)
Net income		—			—		—			—			2,479			2,479

Balance—June 30, 2019		155,108		$	1,551	$	367,750		$	725		$	(6,207	)	$	363,819

	For the Three Months Ended June 30, 2018
	Common Stock								Accumulated			Accumulated Deficit			Total
	Shares Issued			Par Value		Additional Paid-In Capital			Other Comprehensive Income			Accumulated Deficit			Total
Balance—April 1, 2018		137,751		$	1,378	$	218,488		$	1,163		$	(19,424	)	$	201,605
Common stock issued (Note 3)		15,250			153		137,097			—			—			137,250
Restricted stock issued and vesting of restricted stock units, net		158			—		—			—			—			—
Shares repurchased		(27	)		—		(272	)		—			—			(272	)
Exercise of stock options, net		10			—		85			—			—			85
Stock-based compensation		—			—		3,529			—			—			3,529
Reclassification of stock issuance costs to temporary equity		—			—		139			—			—			139
Other comprehensive loss		—			—		—			(702	)		—			(702	)
Dividends		—			—		—			—			(5,035	)		(5,035	)
Net income		—			—		—			—			16,724			16,724

Balance—June 30, 2018		153,142		$	1,531	$	359,066		$	461		$	(7,735	)	$	353,323

The accompanying notes are an integral part of these consolidated financial statements

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(In Thousands)

(Unaudited)


	For the Six Months Ended June 30, 2019
	Common Stock						Additional			Accumulated Other		Accumulated Deficit			Total
	Shares Issued			Par Value			Paid-In Capital			Comprehensive Income		Accumulated Deficit			Total
Balance—January 1, 2019		153,202		$	1,532		$	363,655		$	467	$	(7,319	)	$	358,335
Restricted stock issued and vesting of restricted stock units, net		2,211			21			(21	)		—		—			—
Shares repurchased		(325	)		(2	)		(2,105	)		—		—			(2,107	)
Exercise of stock options, net		20			—			14			—		—			14
Stock-based compensation		—			—			6,207			—		—			6,207
Other comprehensive income		—			—			—			258		—			258
Dividends		—			—			—			—		(10,191	)		(10,191	)
Net income		—			—			—			—		11,303			11,303

Balance—June 30, 2019		155,108		$	1,551		$	367,750		$	725	$	(6,207	)	$	363,819

	For the Six Months Ended June 30, 2018
	Common Stock					Additional			Accumulated Other		Accumulated Deficit			Total
	Shares Issued			Par Value		Paid-In Capital			Comprehensive Income		Accumulated Deficit			Total
Balance—January 1, 2018		136,996		$	1,370	$	216,006		$	291	$	(24,716	)	$	192,951
Common stock issued (Note 3)		15,250			153		137,097			—		—			137,250
Restricted stock issued and vesting of restricted stock units, net		825			7		(7	)		—		—			—
Shares repurchased		(87	)		—		(1,006	)		—		—			(1,006	)
Exercise of stock options, net		158			1		138			—		—			139
Stock-based compensation		—			—		6,838			—		—			6,838
Other comprehensive income		—			—		—			170		—			170
Dividends		—			—		—			—		(9,167	)		(9,167	)
Net income		—			—		—			—		26,148			26,148

Balance—June 30, 2018		153,142		$	1,531	$	359,066		$	461	$	(7,735	)	$	353,323

The accompanying notes are an integral part of these consolidated financial statements

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	11,303		$	26,148
Adjustments to reconcile net income to net cash provided by operating activities:
Advisory fees received in gold and other precious metals		(22,872	)		(11,033	)
Contractual gold payments		6,208			2,715
Stock-based compensation		6,207			6,838
Deferred income taxes		2,443			(1,055	)
Amortization of right of use asset		1,590			—
Amortization of credit facility issuance costs		1,430			637
Paid-in-kind interest income (Note 8)		(1,223	)		(840	)
Impairment		572			—
Depreciation and amortization		533			692
Gain on revaluation of deferred consideration – gold payments		(367	)		(9,898	)
Other		5			834
Changes in operating assets and liabilities:
Securities owned, at fair value		(222	)		(2,028	)
Accounts receivable		1,833			2,871
Income taxes receivable/payable		(44	)		8,109
Prepaid expenses		(1,746	)		(1,669	)
Gold and other precious metals		16,318			8,930
Other assets		(552	)		975
Fund management and administration payable		1,231			(380	)
Compensation and benefits payable		(3,938	)		(21,170	)
Securities sold, but not yet purchased, at fair value		(1,155	)		1,077
Payable to ETFS Capital Limited		—			222
Operating lease liabilities		(1,760	)		—
Accounts payable and other liabilities		(435	)		(2,961	)

Net cash provided by operating activities		15,359			9,014

Cash flows from investing activities:
Purchase of fixed assets		(15	)		(34	)
Funding of AdvisorEngine notes receivable (Note 8)		(1,540	)		(5,000	)
Proceeds from held-to-maturity securities maturing or called prior to maturity		39			1,063
Proceeds from sales and maturities of debt securities available-for-sale		—			64,498
Cash paid – ETFS Acquisition, net of cash acquired (Note 3)		—			(233,172	)

Net cash used in investing activities		(1,516	)		(172,645	)

Cash flows from financing activities:
Dividends paid		(10,191	)		(9,167	)
Shares repurchased		(2,107	)		(1,006	)
Credit facility issuance costs		—			(8,690	)
Preferred stock issuance costs		—			(181	)
Proceeds from the issuance of long-term debt (Note 12)		—			200,000
Proceeds from exercise of stock options		14