QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
th Floor |
||
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
Page Number |
||||
4 |
||||
4 |
||||
30 |
||||
45 |
||||
46 |
||||
46 |
||||
46 |
||||
46 |
||||
46 |
||||
47 |
||||
47 |
||||
47 |
||||
48 |
• | the ultimate duration of the COVID-19 pandemic and its short-term and long-term impact on our business and the global economy; |
• | anticipated trends, conditions and investor sentiment in the global markets and 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. |
ITEM 1. |
FINANCIAL STATEMENTS |
March 31, 2021 |
December 31, 2020 |
|||||||
(unaudited) |
||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Securities owned, at fair value (including $ |
||||||||
Accounts receivable (including $ |
||||||||
Income taxes receivable |
— | |||||||
Prepaid expenses |
||||||||
Other current assets |
||||||||
|
|
|
|
|||||
Total current assets |
||||||||
Fixed assets, net |
||||||||
Indemnification receivable (Note 19) |
||||||||
Securities held-to-maturity |
||||||||
Deferred tax assets, net |
||||||||
Investments (Note 7) |
||||||||
Right of use assets – operating leases (Note 12) |
||||||||
Goodwill (Note 21) |
||||||||
Intangible assets (Note 21) |
||||||||
Other noncurrent assets |
||||||||
|
|
|
|
|||||
Total assets |
$ | $ | ||||||
|
|
|
|
|||||
Liabilities and stockholders’ equity |
||||||||
Liabilities |
||||||||
Current liabilities: |
||||||||
Fund management and administration payable |
$ | $ | ||||||
Compensation and benefits payable |
||||||||
Deferred consideration – gold payments (Note 9) |
||||||||
Operating lease liabilities (Note 12) |
||||||||
Income taxes payable |
— | |||||||
Accounts payable and other liabilities |
||||||||
|
|
|
|
|||||
Total current liabilities |
||||||||
Convertible notes (Note 10) |
||||||||
Deferred consideration – gold payments (Note 9) |
||||||||
Operating lease liabilities (Note 12) |
||||||||
Other noncurrent liabilities (Note 19) |
||||||||
Total liabilities |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Preferred stock – Series A Non-Voting Convertible, par value $ |
||||||||
|
|
|
|
|||||
Contingencies (Note ) |
||||||||
Stockholders’ equity |
||||||||
Preferred stock, par value $ |
||||||||
Common stock, par value $ |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive income |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total stockholders’ equity |
||||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
|
|
|
|
Three Months Ended March 31, |
||||||||
2021 |
2020 |
|||||||
Operating Revenues: |
||||||||
Advisory fees |
$ | $ | ||||||
Other income |
||||||||
|
|
|
|
|||||
Total revenues |
||||||||
Operating Expenses: |
||||||||
Compensation and benefits |
||||||||
Fund management and administration |
||||||||
Marketing and advertising |
||||||||
Sales and business development |
||||||||
Contractual gold payments (Note 9) |
||||||||
Professional fees |
||||||||
Occupancy, communications and equipment |
||||||||
Depreciation and amortization |
||||||||
Third-party distribution fees |
||||||||
Acquisition and disposition-related costs |
— | |||||||
Other |
||||||||
|
|
|
|
|||||
Total operating expenses |
||||||||
|
|
|
|
|||||
Operating income |
||||||||
Other Income/(Expenses): |
||||||||
Interest expense |
( |
) | ( |
) | ||||
Gain/(loss) on revaluation of deferred consideration – gold payments (Note 9) |
( |
) | ||||||
Interest income |
||||||||
Impairments (Notes 12 and 22) |
( |
) | ( |
) | ||||
Other losses, net |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Income/(loss) before income taxes |
( |
) | ||||||
Income tax benefit |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net income/(loss) |
$ | $ | ( |
) | ||||
|
|
|
|
|||||
Earnings/(loss) per share – basic (Note 18) |
$ | $ | ( |
) | ||||
|
|
|
|
|||||
Earnings/(loss) per share – diluted (Note 18) |
$ | $ | ( |
) | ||||
|
|
|
|
|||||
Weighted-average common shares – basic (Note 18) |
||||||||
|
|
|
|
|||||
Weighted-average common shares – diluted (Note 18) |
||||||||
|
|
|
|
|||||
Cash dividends declared per common share |
$ | $ | ||||||
|
|
|
|
Three Months Ended March 31, |
||||||||
2021 |
2020 |
|||||||
Net income/(loss) |
$ | $ | ( |
) | ||||
Other comprehensive loss |
||||||||
Reclassification of foreign currency translation adjustment to other losses, net, upon the sale of WisdomTree Asset Management Canada, Inc. (“WTAMC” or “Canadian ETF business”) (Note 22) |
— | ( |
) | |||||
Foreign currency translation adjustment, net of income taxes |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Other comprehensive loss |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Comprehensive income/(loss) |
$ | $ | ( |
) | ||||
|
|
|
|
For the Three Months Ended March 31, 2021 |
||||||||||||||||||||||||
Common Stock |
Additional Paid-In Capital |
Accumulated Other |
Accumulated Deficit |
Total |
||||||||||||||||||||
Shares Issued |
Par Value |
Comprehensive Income |
||||||||||||||||||||||
Balance—January 1, 2021 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
Reclassification of equity component related to convertible notes, net of deferred taxes of $ASU 2020-06 (Note 10) |
— | ( |
) | ( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance—January 1, 2021 (as adjusted) |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
Restricted stock issued and vesting of restricted stock units, net |
( |
) | — | — | — | |||||||||||||||||||
Shares repurchased |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
Exercise of stock options, net |
— | — | ||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividends |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance—March 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2020 |
||||||||||||||||||||||||
Common Stock |
Additional Paid-In Capital |
Accumulated Other |
Accumulated Deficit |
Total |
||||||||||||||||||||
Shares Issued |
Par Value |
Comprehensive Income |
||||||||||||||||||||||
Balance—January 1, 2020 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
Restricted stock issued and vesting of restricted stock units, net |
( |
) | — | — | — | |||||||||||||||||||
Shares repurchased |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
Exercise of stock options, net |
— | — | — | |||||||||||||||||||||
Stock-based compensation |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividends |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
Net income |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance—March 31, 2020 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
||||||||
2021 |
2020 |
|||||||
Cash flows from operating activities: |
||||||||
Net income/(loss) |
$ | $ | ( |
) | ||||
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: |
||||||||
Advisory fees received in gold, other precious metals and bitcoin |
( |
) | ( |
) | ||||
Contractual gold payments |
||||||||
Stock-based compensation |
||||||||
Deferred income taxes |
||||||||
(Gain)/loss on revaluation of deferred consideration – gold payments |
( |
) | ||||||
Amortization of right of use asset |
||||||||
Amortization of issuance costs – convertible notes |
— | |||||||
Impairments |
||||||||
Depreciation and amortization |
||||||||
Gain on sale – Canadian ETF business |
— | ( |
) | |||||
Amortization of issuance costs - former credit facility |
— | |||||||
Other |
( |
) | ( |
) | ||||
Changes in operating assets and liabilities: |
||||||||
Securities owned, at fair value |
( |
) | ||||||
Accounts receivable |
||||||||
Prepaid expenses |
( |
) | ( |
) | ||||
Gold, other precious metals and bitcoin |
||||||||
Other assets |
||||||||
Fund management and administration payable |
( |
) | ||||||
Compensation and benefits payable |
( |
) | ( |
) | ||||
Income taxes receivable/payable |
( |
) | ( |
) | ||||
Securities sold, but not yet purchased, at fair value |
— | ( |
) | |||||
Operating lease liabilities |
( |
) | ( |
) | ||||
Accounts payable and other liabilities |
||||||||
|
|
|
|
|||||
Net cash provided by/(used in) operating activities |
( |
) | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchase of investments |
( |
) | — | |||||
Purchase of fixed assets |
( |
) | ( |
) | ||||
Proceeds from held-to-maturity |
||||||||
Proceeds from sale of Canadian ETF business, net |
— | |||||||
|
|
|
|
|||||
Net cash (used in)/provided by investing activities |
( |
) | ||||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Dividends paid |
( |
) | ( |
) | ||||
Shares repurchased |
( |
) | ( |
) | ||||
Repayment of debt |
— | ( |
) | |||||
Proceeds from exercise of stock options |
||||||||
|
|
|
|
|||||
Net cash used in financing activities |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Decrease in cash flow due to changes in foreign exchange rate |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
Cash and cash equivalents—beginning of year |
||||||||
|
|
|
|
|||||
Cash and cash equivalents—end of period |
$ | $ | ||||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for taxes |
$ | $ | ||||||
|
|
|
|
|||||
Cash paid for interest |
$ | — | $ | |||||
|
|
|
|
• | WisdomTree Asset Management, Inc. non-consolidated third party, is a Delaware statutory trust registered with the SEC as an open-end management investment company. The Company has licensed to WTT the use of certain of its own indexes on an exclusive basis for the WisdomTree ETFs in the U.S. |
• | WisdomTree Management Jersey Limited leveraged-and-inverse |
• | WisdomTree Multi Asset Management Limited non-consolidated third party, is a public limited company domiciled in Ireland. |
• | WisdomTree Management Limited non-consolidated third party, is a public limited company domiciled in Ireland. |
• | WisdomTree UK Limited |
• | WisdomTree Europe Limited e gulated and does not provide any regulated services. |
• | WisdomTree Ireland Limited |
• | WisdomTree Commodity Services, LLC |
Equipment | ||||
Furniture and fixtures |
Level 1 – |
Quoted prices for identical instruments in active markets. | |
Level 2 – |
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. | |
Level 3 – |
Instruments whose significant drivers are unobservable. |
March 31, 2021 |
||||||||||||||||
Total |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
Assets: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Cash equivalents |
$ | $ | $ | — | $ | — | ||||||||||
Securities owned, at fair value |
||||||||||||||||
ETFs |
— | — | ||||||||||||||
Pass-through GSEs |
— | — | ||||||||||||||
Corporate bonds |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | — | |||||||||||
Non-recurring fair value measurements: |
||||||||||||||||
Securrency, Inc. – Series A convertible preferred stock (1) |
$ |
$ |
— |
$ |
— |
$ |
||||||||||
Liabilities: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Deferred consideration (Note 9) |
$ |
$ |
— |
$ |
— |
$ |
||||||||||
(1) |
Fair value determined on March 8, 2021 (Note 7). |
December 31, 2020 |
||||||||||||||||
Total |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
Assets: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Cash equivalents |
$ | $ | $ | — | $ | |||||||||||
Securities owned, at fair value |
||||||||||||||||
ETFs |
— | — | ||||||||||||||
Pass-through GSEs |
— | — | ||||||||||||||
Corporate bonds |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
Non-recurring fair value measurements: |
||||||||||||||||
AdvisorEngine Inc. (“AdvisorEngine”) – Financial interests (1) |
$ | $ | $ | $ | ||||||||||||
Thesys Group, Inc. (“Thesys”) – Series Y Preferred Stock (1) |
||||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
Liabilities: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Deferred consideration (Note 12) |
$ | $ | $ | $ | ||||||||||||
Non-recurring fair value measurements: |
||||||||||||||||
Convertible notes (2) |
$ | $ | — | $ | $ | — | ||||||||||
(1) | The fair value of the AdvisorEngine financial interests of $ |
(2) | Fair value of $ |
Three Months Ended March 31, |
||||||||
2021 |
2020 |
|||||||
Deferred consideration (Note 9) |
||||||||
Beginning balance |
$ | $ | ||||||
Net realized losses (1) |
||||||||
Net unrealized (gains)/losses (2) |
( |
) | ||||||
Settlements |
( |
) | ( |
) | ||||
Ending balanc e |
$ | $ | ||||||
(1) |
Recorded as contractual gold payments expense on the Company’s Consolidated Statements of Operations. |
(2) |
Recorded as gain/(loss) on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations. |
March 31, 2021 |
December 31, 2020 |
|||||||
Securities Owned |
||||||||
Trading securities |
$ | $ | ||||||
March 31, 2021 |
December 31, 2020 |
|||||||
Debt instruments: Pass-through GSEs (amortized cost) |
$ | $ | ||||||
March 31, 2021 |
December 31, 2020 |
|||||||
Cost/amortized cost |
$ | $ | ||||||
Gross unrealized gains |
||||||||
Gross unrealized losses |
( |
) | ( |
) | ||||
Fair value |
$ | $ | ||||||
March 31, 2021 |
December 31, 2020 |
|||||||
Due within one year |
$ | $ | ||||||
Due one year through five years |
||||||||
Due five years through ten years |
||||||||
Due over ten years |
||||||||
Total |
$ | $ | ||||||
March 31, 2021 |
December 31, 2020 |
|||||||||||||||
Carrying Value |
Cost |
Carrying Value |
Cost |
|||||||||||||
Securrency, Inc. – Series A convertible preferred stock |
$ | $ | $ | $ | ||||||||||||
Securrency, Inc. – Series B convertible preferred stock |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
Inputs (Initial Recognition – March 8, 2021) |
||||
Expected volatility |
% | |||
Time to exit (in years) |
March 31, 2021 |
December 31, 2020 |
|||||||
Equipment |
$ | $ | ||||||
Furniture and fixtures |
||||||||
Leasehold improvements |
||||||||
Less: accumulated depreciation and amortization |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
March 31, 2021 |
December 31, 2020 |
|||||||
Forward-looking gold price (low) – per ounce |
$ | $ | ||||||
Forward-looking gold price (high) – per ounce |
$ | $ | ||||||
Forward-looking gold price (weighted average) – per ounce |
$ | $ | ||||||
Discount rate |
% |
% |
||||||
Perpetual growth rate |
% |
% |
Three Months Ended March 31, |
||||||||
2021 |
2020 |
|||||||
Contractual Gold Payments |
$ | $ | ||||||
Contractual Gold Payments – gold ounces paid |
||||||||
Gain/(loss) on revaluation of deferred consideration – gold payments(1) |
$ | $ | ( |
) |
(1) | Gains on revaluation of deferred consideration – gold payments result from a decrease in spot gold prices, a decrease in the forward-looking price of gold, a decrease in the perpetual growth rate and an increase in the discount rate used to compute the present value of the annual payment obligations. Losses on revaluation of deferred consideration – gold payments result from an increase in spot gold prices, an increase in the forward-looking price of gold, an increase in the perpetual growth rate and a decrease in the discount rate used to compute the annual payment obligations. |
• | Maturity date |
• | Interest rate of |
• | Conversion price of $5.92 |
• | Conversion of the Indenture but only with respect to the Convertible Notes called (or deemed called) for redemption; or (iv) upon the occurrence of specified corporate events. On or after March 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances. |
• | Cash settlement of principal amount of the Convertible Notes being converted in either cash, shares of its common stock or a combination of cash and shares of its common stock. |
• | Redemption price of $7 70 th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least |
• | Limited investor put rights |
• | Conversion rate increase in certain customary circumstances |
• | Seniority and Security Non-Voting Convertible Preferred Stock (Note 11). |
March 31, 2021 |
December 31, 2020 |
|||||||
Principal amount |
$ | $ | ||||||
Plus: premium on Additional Notes |
||||||||
Gross proceeds |
||||||||
Less: Unamortized discount (1) |
— | ( |
) | |||||
Less: Unamortized issuance costs (1) |
( |
) | ( |
) | ||||
Carrying amount |
$ | $ | ||||||
Effective interest rate (2) |
% | % | ||||||
(1) | Unamortized discount was reduced by $2020-06 on January 1, 2021. The discount previously arose from the bifurcation of the conversion option which occurred prior to the adoption of ASU 2020-06. The unamortized issuance costs are reported net of the unamortized premium on the Additional Notes. |
(2) | Includes amortization of the issuance costs allocated to the Convertible Notes and amortization of the premium associated with the Additional Notes. The effective interest rate prior to January 1, 2021 also included amortization of the discount arising from the bifurcation of the conversion option. |
March 31, 2021 |
December 31, 2020 |
|||||||
Issuance of Preferred Shares |
$ | $ | ||||||
Less: Issuance costs |
( |
) | ( |
) | ||||
Preferred Shares – carrying value |
$ | $ | ||||||
Three Months Ended March 31, |
||||||||
2021 |
2020 |
|||||||
Lease cost: |
||||||||
Operating lease cost |
$ | $ | ||||||
Short-term lease cost |
||||||||
Total lease cost |
$ | $ | ||||||
Other information: |
||||||||
Cash paid for amounts included in the measurement of operating liabilities (operating leases) |
$ | $ | ||||||
Right-of-use |
n/a | n/a | ||||||
Weighted-average remaining lease term (in years) – operating leases |
||||||||
Weighted-average discount rate – operating leases |
% |
% | ||||||
Remainder of 2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
2026 and thereafter |
||||
Total future minimum lease payments (undiscounted) |
$ | |||
Amounts recognized in the Company’s Consolidated Balance Sheet |
||||
Lease liability – short term |
$ | |||
Lease liability – long term |
||||
Subtotal |
||||
Difference between undiscounted and discounted cash flows |
||||
Total future minimum lease payments (undiscounted) |
$ | |||
March 31, 2021 |
December 31, 2020 |
|||||||
Carrying Amount – Assets (Securrency) |
||||||||
Preferred stock – Series A Shares |
$ | $ | ||||||
Preferred stock – Series B Shares |
— | |||||||
Total (Note 7) |
$ | $ | ||||||
Maximum exposure to loss |
$ | $ | ||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Revenues from contracts with customers: |
||||||||
Advisory fees |
$ | $ | ||||||
Other |
||||||||
Total operating revenues |
$ | $ | ||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Revenues from contracts with customers: |
||||||||
United States |
$ | $ | ||||||
Jersey |
||||||||
Ireland |
||||||||
Canada (Note 22) |
— | |||||||
|
|
|
|
|||||
Total operating revenues |
$ | $ | ||||||
|
|
|
|
March 31, 2021 |
December 31, 2020 |
|||||||
Receivable from WTT |
$ | $ | ||||||
Receivable from ManJer Issuers |
||||||||
Receivable from WMAI and WTI |
||||||||
Receivable from WTCS |
— | |||||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Advisory services provided to WTT |
$ | $ | ||||||
Advisory services provided to ManJer Issuers |
||||||||
Advisory services provided to WMAI and WTI |
||||||||
Advisory services provided to WTAMC |
— | |||||||
Advisory services provided to WTCS |
— |