10-Q

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, 2023

☐

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, 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.)

250 West 34 th Street 3 rd Floor New York, New York		10119
(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 Preferred Stock Purchase Rights	WT	The New York Stock Exchange The New York Stock Exchange

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 ☐ No

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.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

12b-2

of the Exchange Act). Yes ☐ No ☒

As of August 2, 2023, there were 150,324,501 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q,

or Report, 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, 2022. 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;

•

whether we will experience future growth;

•

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

•

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

•

our ability to successfully implement our strategy relating to digital assets and blockchain-enabled financial services, including WisdomTree Prime

™

, and achieve its objectives;

•

our ability to successfully operate and expand our business in

non-U.S.

markets;

•

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

•

actions of activist stockholders.

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, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Per Share Amounts)


	June 30, 2023		December 31, 2022
Assets	(unaudited)
Current assets:


Cash and cash equivalents (Note 3)	$	83,735	$	132,101
Financial instruments owned, at fair value (including $38,451 and $25,283 invested in WisdomTree products at June 30, 2023 and December 31, 2022, respectively) (Note 5)		65,492		126,239
Accounts receivable (including $32,642 and $24,139 due from related parties at June 30, 2023 and December 31, 2022, respectively)		34,208		30,549
Prepaid expenses		8,161		4,684
Income taxes receivable		894		—
Other current assets		376		390

Total current assets		192,866		293,963
Fixed assets, net		487		544
Indemnification receivable (Note 20)		—		1,353
Securities held-to-maturity		245		259
Deferred tax assets, net (Note 20)		7,626		10,536
Investments (Note 7)		40,002		35,721
Right of use assets—operating leases (Note 12)		849		1,449
Goodwill (Note 22)		86,841		85,856
Intangible assets, net (Note 22)		604,407		603,567
Other noncurrent assets		454		571

Total assets	$	933,777	$	1,033,819

Liabilities and stockholders’ equity
Liabilities
Current liabilities:
Fund management and administration payable	$	30,635	$	36,521
Compensation and benefits payable		17,800		24,121
Operating lease liabilities (Note 12)		849		1,125
Convertible notes—current (Note 10)		—		59,197
Deferred consideration—gold payments (Note 9)		—		16,796
Income taxes payable		—		1,599
Accounts payable and other liabilities		18,997		9,075

Total current liabilities		68,281		148,434
Convertible notes (Note 10)		274,140		262,019
Deferred consideration—gold payments (Note 9)		—		183,494
Operating lease liabilities (Note 12)		—		339
Other noncurrent liabilities (Note 20)		—		1,353

Total liabilities		342,421		595,639

Preferred stock—Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding; redemption value of $103,480 and $77,969 at June 30, 2023 and December 31, 2022, respectively) (Note 11)		132,569		132,569

Contingencies (Note 13)
Stockholders’ equity
Preferred stock, par value $0.01; 2,000 shares authorized		—		—
Preferred stock—Series C Non-Voting Convertible, par value $0.01; 13.087 shares authorized, issued and outstanding		—		—
Common stock, par value $0.01; 400,000 shares authorized; issued and outstanding: 150,343 and 146,517 at June 30, 2023 and December 31, 2022, respectively		1,503		1,465
Additional paid-in capital		383,621		291,847
Accumulated other comprehensive loss		(693)		(1,420)
Retained earnings		74,356		13,719

Total stockholders’ equity		458,787		305,611

Total liabilities and stockholders’ equity	$	933,777	$	1,033,819

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

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WisdomTree, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating Revenues:



Advisory fees	$	82,004	$	75,586	$	159,641	$	152,103
Other income		3,720		1,667		8,127		3,518

Total revenues		85,724		77,253		167,768		155,621

Operating Expenses:
Compensation and benefits		26,319		24,565		53,717		49,352
Fund management and administration		17,727		16,076		34,880		31,570
Marketing and advertising		4,465		3,894		8,472		7,917
Sales and business development		3,326		3,131		6,320		5,740
Contractual gold payments (Note 9)		1,583		4,446		6,069		8,896
Professional fees		8,334		4,308		12,049		8,767
Occupancy, communications and equipment		1,172		1,049		2,273		1,802
Depreciation and amortization		121		53		230		100
Third-party distribution fees		1,881		1,818		4,134		4,030
Other		2,615		2,109		4,872		3,954

Total operating expenses		67,543		61,449		133,016		122,128

Operating income		18,181		15,804		34,752		33,493
Other Income/(Expenses):
Interest expense		(4,021)		(3,733)		(8,023)		(7,465)
Gain/(loss) on revaluation/termination of deferred consideration—gold payments (Note 9)		41,361		2,311		61,953		(14,707)
Interest income		1,000		770		2,083		1,564
Impairments (Note 7)		—		—		(4,900)		—
Loss on extinguishment of convertible notes (Note 10)		—		—		(9,721)		—
Other gains and losses, net		1,286		(4,474)		(721)		(29,181)

Income/(loss) before income taxes		57,807		10,678		75,423		(16,296)
Income tax expense/(benefit)		3,555		2,673		4,938		(14,040)

Net income/(loss)	$	54,252	$	8,005	$	70,485	$	(2,256)

Earnings/(loss) per share—basic	$	0.32	$	0.05	$	0.43	$	(0.02)

Earnings/(loss) per share—diluted	$	0.32	$	0.05	$	0.42	$	(0.02)

Weighted-average common shares—basic		144,351		143,046		144,108		142,915

Weighted-average common shares—diluted		170,672		158,976		165,468		142,915

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

Table of Contents

WisdomTree, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(In Thousands)

(Unaudited)


	For the Three Months Ended June 30, 2023
	Series C Preferred Stock				Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Shares Issued		Par Value		Shares Issued		Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance—April 1, 2023		—	$	—		149,291	$	1,493	$	292,971	$	(954)	$	25,028	$	318,538
Shares issued in connection with termination of the deferred consideration—gold payments obligation, net of issuance costs (Note 9)		13		—		—		—		86,801		—		—		86,801
Restricted stock issued and vesting of restricted stock units, net		—		—		41		—		—		—		—		—
Shares issued in connection with convertible notes that matured on June 15, 2023 (Note 10)		—		—		1,037		10		35		—		—		45
Shares repurchased		—		—		(26)		—		(156)		—		—		(156)
Stock-based compensation		—		—		—		—		3,970		—		—		3,970
Other comprehensive income		—		—		—		—		—		261		—		261
Dividends		—		—		—		—		—		—		(4,924)		(4,924)
Net income		—		—		—		—		—		—		54,252		54,252

Balance—June 30, 2023		13	$	—		150,343	$	1,503	$	383,621	$	(693)	$	74,356	$	458,787


	For the Three Months Ended June 30, 2022
	Series C Preferred Stock				Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Total
	Shares Issued		Par Value		Shares Issued		Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Total
Balance—April 1, 2022		—	$	—		146,560	$	1,466	$	284,421	$	196	$	(32,706)	$	253,377
Restricted stock issued and vesting of restricted stock units, net		—		—		(49)		(1)		1		—		—		—
Stock-based compensation		—		—		—		—		2,432		—		—		2,432
Other comprehensive loss		—		—		—		—		—		(1,721)		—		(1,721)
Dividends		—		—		—		—		(4,837)		—		—		(4,837)
Net income		—		—		—		—		—		—		8,005		8,005

Balance—June 30, 2022		—	$	—		146,511	$	1,465	$	282,017	$	(1,525)	$	(24,701)	$	257,256

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

WisdomTree, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(In Thousands)

(Unaudited)


	For the Six Months Ended June 30, 2023
	Series C Preferred Stock				Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Shares Issued		Par Value		Shares Issued		Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance—January 1, 2023		—	$	—		146,517	$	1,465	$	291,847	$	(1,420)	$	13,719	$	305,611
Shares issued in connection with termination of the deferred consideration—gold payments obligation, net of issuance costs (Note 9)		13		—		—		—		86,801		—		—		86,801
Restricted stock issued and vesting of restricted stock units, net		—		—		3,420		34		(34)		—		—		—
Shares issued in connection with convertible notes that matured on June 15, 2023 (Note 10)		—		—		1,037		10		35		—		—		45
Shares repurchased		—		—		(631)		(6)		(3,534)		—		—		(3,540)
Stock-based compensation		—		—		—		—		8,506		—		—		8,506
Other comprehensive income		—		—		—		—		—		727		—		727
Dividends		—		—		—		—		—		—		(9,848)		(9,848)
Net income		—		—		—		—		—		—		70,485		70,485

Balance—June 30, 2023		13	$	—		150,343	$	1,503	$	383,621	$	(693)	$	74,356	$	458,787


	For the Six Months Ended June 30, 2022
	Series C Preferred Stock				Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Total
	Shares Issued		Par Value		Shares Issued		Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Total
Balance—January 1, 2022		—	$	—		145,107	$	1,451	$	289,736	$	682	$	(22,445)	$	269,424
Restricted stock issued and vesting of restricted stock units, net		—		—		1,993		20		(20)		—		—		—
Shares repurchased		—		—		(589)		(6)		(3,388)		—		—		(3,394)
Stock-based compensation		—		—		—		—		5,368		—		—		5,368
Other comprehensive loss		—		—		—		—		—		(2,207)		—		(2,207)
Dividends		—		—		—		—		(9,679)		—		—		(9,679)
Net income		—		—		—		—		—		—		(2,256)		(2,256)

Balance—June 30, 2022		—	$	—		146,511	$	1,465	$	282,017	$	(1,525)	$	(24,701)	$	257,256

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

WisdomTree, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022

Cash flows from operating activities:
Net income/(loss)	$	70,485	$	(2,256)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
(Gain)/loss on revaluation/termination of deferred consideration—gold payments		(61,953)		14,707
Advisory and license fees paid in gold, other precious metals and cryptocurrency		(25,692)		(31,511)
Loss on extinguishment of convertible notes		9,721		—
Stock-based compensation		8,506		5,368
Contractual gold payments		6,069		8,896
Impairments		4,900		—
Deferred income taxes		2,964		3,378
Amortization of issuance costs—convertible notes		1,069		1,293
(Gains)/losses on financial instruments owned, at fair value		(947)		9,322
Losses on investments		819		—
Amortization of right of use asset		640		332
Depreciation and amortization		230		100
Other		—		120
Changes in operating assets and liabilities:
Accounts receivable		(5,254)		(3,718)
Prepaid expenses		(3,425)		(3,613)
Gold and other precious metals		18,441		23,743
Other assets		347		(241)
Intangibles—software development		(946)		(724)
Fund management and administration payable		6,419		423
Compensation and benefits payable		(18,941)		(13,537)
Income taxes payable		(2,523)		(5,235)
Operating lease liabilities		(652)		(348)
Accounts payable and other liabilities		9,752		2,043

Net cash provided by operating activities		20,029		8,542

Cash flows from investing activities:
Purchase of financial instruments owned, at fair value		(40,532)		(32,488)
Purchase of investments		(10,000)		(11,863)
Acquisition of Securrency Transfers, Inc. (net of cash acquired)		(985)		—
Purchase of fixed assets		(58)		(205)
Proceeds from the sale of financial instruments owned, at fair value		102,020		21,455
Receipt of contingent consideration – Sale of Canadian ETF business		1,477		—
Proceeds from held-to-maturity securities maturing or called prior to maturity		14		31

Net cash provided by/(used in) investing activities		51,936		(23,070)

Cash flows from financing activities:
Repurchase and maturity of convertible notes (Note 10)		(184,272)		—
Termination of deferred consideration—gold payments		(50,005)		—
Dividends paid		(9,647)		(9,679)
Issuance costs—Convertible notes		(3,548)		—
Shares repurchased		(3,540)		(3,394)
Issuance costs—Series C Preferred Stock		(97)		—
Proceeds from the issuance of convertible notes (Note 10)		130,000		—

Net cash used in financing activities		(121,109)		(13,073)

Increase/(decrease) in cash flow due to changes in foreign exchange rate		778		(3,372)

Net decrease in cash and cash equivalents		(48,366)		(30,973)
Cash and cash equivalents—beginning of year		132,101		140,709

Cash and cash equivalents—end of period	$	83,735	$	109,736

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	5,900	$	7,724

Cash paid for interest	$	4,514	$	6,156

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WisdomTree, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(In Thousands)

(Unaudited)

NON-CASH

INVESTING AND FINANCING ACTIVITIES

On May 10, 2023, the Company issued

13.087

shares of Series C Non-Voting Convertible Preferred Stock (valued at $

86,898) in connection with the termination of its deferred consideration—gold payments obligation. See Notes 9 and 11 for additional information.

On June

15, 2023, the Company issued 1,037 shares of common stock (as the conversion option was in the money) in connection with the maturity of $60,000 aggregate principal amount of 4.25% Convertible Senior Notes.

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

Table of Contents

WisdomTree, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(In Thousands, Except Share and Per Share Amounts)

1. Organization and Description of Business

WisdomTree, Inc., through its global subsidiaries (collectively, “WisdomTree” or the “Company”), is a global financial innovator, offering a well-diversified suite of exchange-traded products (“ETPs”), models and solutions. Building on its heritage of innovation, the Company is also developing and has recently launched next-generation digital products and structures, including digital or blockchain-enabled mutual funds (“Digital Funds”) and tokenized assets, as well as its blockchain-native digital wallet, WisdomTree Prime

™

. The Company has the following wholly-owned operating subsidiaries:

•

WisdomTree Asset Management, Inc.

is a New York based investment adviser registered with the SEC, providing investment advisory and other management services to the WisdomTree Trust (“WTT”) and WisdomTree exchange-traded funds (“ETFs”). The WisdomTree ETFs are issued in the U.S. by WTT. WTT is a

non-consolidated

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

(“ManJer”) is a Jersey based management company providing management services to seven issuers (the “ManJer Issuers”) in respect of the ETPs issued and listed by the ManJer Issuers covering commodity, currency, cryptocurrency and

leveraged-and-inverse

strategies.

•

WisdomTree Multi Asset Management Limited

(“WTMAML”) is a Jersey based management company providing management services to WisdomTree Multi Asset Issuer PLC (“WMAI”) in respect of the ETPs issued by WMAI. WMAI is a

non-consolidated

public limited company domiciled in Ireland.

•

WisdomTree Management Limited

(“WML”) is an Ireland based management company providing management services to WisdomTree Issuer ICAV (“WTICAV”) in respect of the WisdomTree UCITS ETFs issued by WTICAV. WTICAV is a

non-consolidated

public limited company domiciled in Ireland.

•

WisdomTree UK Limited

(“WTUK”) is a U.K. based company registered with the Financial Conduct Authority currently providing distribution and support services to ManJer, WTMAML and WML.

•

WisdomTree Europe Limited

is a U.K. based company which is the legacy distributor of the WMAI ETPs and WisdomTree UCITS ETFs. These services are now provided directly by WTUK. WisdomTree Europe Limited is no longer regulated and does not provide any regulated services.

•

WisdomTree Ireland Limited

is an Ireland based company authorized by the Central Bank of Ireland providing distribution services to ManJer, WTMAML and WML.

•

WisdomTree Digital Commodity Services, LLC

is a New York based company that has been formed to serve as the sponsor of the WisdomTree Bitcoin Trust and WisdomTree Ethereum Trust, each an ETF currently under review with the SEC.

•

WisdomTree Digital Management, Inc.

(“WT Digital Management”) is a New York based investment adviser registered with the SEC, providing investment advisory and other management services to the WisdomTree Digital Trust (“WTDT”) and WisdomTree Digital Funds. The WisdomTree Digital Funds are issued in the U.S. by WTDT. WTDT is a

non-consolidated

Delaware statutory trust registered with the SEC as an

open-end

management investment company. Each Digital Fund uses blockchain technology to maintain a secondary record of its shares on one or more blockchains (e.g., Stellar or Ethereum), but does not directly or indirectly invest in any assets that rely on blockchain technology, such as cryptocurrencies.

•

WisdomTree Digital Movement, Inc

. is a New York based company operating as a money services business registered with the Financial Crimes Enforcement Network and seeking state money transmitter licenses to operate a platform for the purchase, sale and exchange of digital assets, while also providing digital wallet services through WisdomTree Prime

™

to facilitate such activity.

•

WisdomTree Securities, Inc

. is a New York based limited purpose broker-dealer (i.e., mutual fund retailer), facilitating transactions in WisdomTree Digital Funds.

•

WisdomTree Transfers, Inc.

is a New York based transfer agent registered with the SEC, providing transfer agency services for the Digital Funds. The transfer agent maintains the official record of share ownership in book entry form and reconciles the official record with the secondary record of ownership of shares on one or more blockchains.

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2. Significant Accounting Policies

Basis of Presentation

These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and in the opinion of management reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of financial condition, results of operations, and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Consolidation

The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). The usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. If the Company has a majority voting interest in a VOE, the entity is consolidated. The Company has a controlling financial interest in a VIE when the Company has a variable interest that provides it with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company reassesses its evaluation of whether an entity is a VOE or VIE when certain reconsideration events occur.

Segment and Geographic Information

The Company, through its subsidiaries in the U.S. and Europe, conducts business as a single operating segment as an ETP sponsor and asset manager which is based upon the Company’s current organizational and management structure, as well as information used by the chief operating decision maker to allocate resources and other factors.

Foreign Currency Translation

Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar are translated based on the end of period exchange rates from local currency to U.S. dollars. Results of operations are translated at the average exchange rates in effect during the period. The impact of the foreign currency translation adjustment is included in the Consolidated Statements of Comprehensive Income/(Loss) as a component of other comprehensive (loss)/income.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. Actual results could differ materially from those estimates.

Revenue Recognition

The Company earns substantially all of its revenue in the form of advisory fees from its ETPs and recognizes this revenue over time, as the performance obligation is satisfied. Advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.

Contractual Gold Payments

Contractual gold payments are measured and paid monthly based upon the average daily spot price of gold (Note 9). The Company’s obligation to continue making these payments terminated on May 10, 2023.

Marketing and Advertising

Marketing and advertising costs, including media advertising and production costs, are expensed when incurred.

Depreciation and Amortization

Depreciation and amortization is provided for using the straight-line method over the estimated useful lives of the related assets as follows:


Equipment			3 to 5 years
Internally-developed software			3 years

The assets listed above are recorded at cost less accumulated depreciation and amortization.

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Stock-Based Awards

Accounting

for stock-based compensation requires the measurement and recognition of compensation expense for all equity awards based on estimated fair values. Stock-based compensation is measured based on the grant-date fair value of the award and is amortized over the relevant service period. Forfeitures are recognized when they occur.

Third-Party Distribution Fees

The

Company pays a percentage of its advisory fee revenues based on incremental growth in assets under management (“AUM”), subject to caps or minimums, to marketing agents to sell WisdomTree ETFs and for including WisdomTree ETFs on third-party customer platforms and recognizes these expenses as incurred.

Cash and Cash Equivalents

The

Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be classified as cash equivalents. The Company maintains deposits with financial institutions in an amount that is in excess of federally insured limits.

Accounts Receivable

Accounts

receivable are customer and other obligations due under normal trade terms. The Company measures credit losses, if any, by applying historical loss rates, adjusted for current conditions and reasonable and supportable forecasts to amounts outstanding using the aging method.

Impairment of Long-Lived Assets

The

Company performs a review for the impairment of long-lived assets when events or changes in circumstances indicate that the estimated undiscounted future cash flows expected to be generated by the assets are less than their carrying amounts or when other events occur which may indicate that the carrying amount of an asset may not be recoverable.

Financial Instruments Owned and Financial Instruments Sold, but Not yet Purchased (at Fair Value)

Financial

instruments owned and financial instruments sold, but not yet purchased are financial instruments classified as either trading or

available-for-sale

(“AFS”). These financial instruments are recorded on their trade date and are measured at fair value. All equity instruments that have readily determinable fair values are classified by the Company as trading. Debt instruments are classified based primarily on the Company’s intent to hold or sell the instrument. Changes in the fair value of debt instruments classified as trading and AFS are reported in other income/(expenses) and other comprehensive income, respectively, in the period the change occurs. Debt instruments classified as AFS are assessed for impairment on a quarterly basis and an estimate for credit loss is provided when the fair value of the AFS debt instrument is below its amortized cost basis. Credit-related impairments are recognized in earnings with a corresponding adjustment to the instrument’s amortized cost basis if the Company intends to sell the impaired AFS debt instrument or it is more likely than not the Company will be required to sell the instrument before recovering its amortized cost basis. Other credit-related impairments are recognized as an allowance with a corresponding adjustment to earnings. Impairments resulting from noncredit-related factors are recognized in other comprehensive income. Amounts recorded in other comprehensive income are reclassified into earnings upon sale of the AFS debt instrument using the specific identification method.

Securities

Held-to-Maturity

The

Company accounts for certain of its securities as

held-to-maturity

on a trade date basis, which are recorded at amortized cost. For

held-to-maturity

securities, the Company has the intent and ability to hold these securities to maturity and it is not

more-likely-than-not

that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be maturity.

Held-to-maturity

securities are placed on

non-accrual

status when the Company is in receipt of information indicating collection of interest is doubtful. Cash received on

held-to-maturity

securities placed on

non-accrual

status is recognized on a cash basis as interest income if and when received.

The

Company reviews its portfolio of

held-to-maturity

securities for impairment on a quarterly basis, recognizing an allowance, if any, by applying an estimated loss rate after consideration for the nature of collateral securing the financial asset as well as potential future changes in collateral values and historical loss information for financial assets secured with similar collateral.

Investments

in pass-through government-sponsored enterprises (“GSEs”) are determined to have an estimated loss rate of zero due to an implicit U.S. government guarantee.

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Investments

The

Company accounts for equity investments that do not have a readily determinable fair value under the measurement alternative prescribed in Accounting Standards Codification (“ASC”) Topic 321,

Investments – Equity Securities

(“ASC 321”), to the extent such investments are not subject to consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment.

Investments

in debt instruments are accounted for at fair value, with changes in fair value reported in other income/(expenses).

Goodwill

is the excess of the purchase price over the fair values of the identifiable net assets at the acquisition date. The Company tests goodwill for impairment at least annually and at the time of a triggering event requiring

re-evaluation,

if one were to occur. Goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value. If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill. A reporting unit is an operating segment or a component of an operating segment provided that the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component.

Goodwill

is allocated to the Company’s U.S. business and European business components. For impairment testing purposes, these components are aggregated as a single reporting unit as they fall under the same operating segment and have similar economic characteristics.

Goodwill

is assessed for impairment annually on November 30

. When performing its goodwill impairment test, the Company considers a qualitative assessment, when appropriate, and a quantitative assessment using the market approach and its market capitalization when determining the fair value of the reporting unit.

Intangible Assets

Indefinit

e-lived intangible assets are tested for impairment at least annually and are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair values are less than their carrying values.

Finit

e-lived intangible assets, if any, are amortized over their estimated useful life, which is the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the Company. These intangible assets are tested for impairment at the time of a triggering event, if one were to occur. Finite-lived intangible assets may be impaired when the estimated undiscounted future cash flows generated from the assets are less than their carrying amounts.

The

Company may rely on a qualitative assessment when performing its intangible asset impairment test. Otherwise, the impairment evaluation is performed at the lowest level of reasonably identifiable cash flows independent of other assets. The annual impairment testing date for all of the Company’s intangible assets is November 30

Software Development Costs

Software

development costs incurred after the preliminary project stage is complete are capitalized if it is probable that the project will be completed and the software will be used as intended. Capitalized costs consist of employee compensation costs and fees paid to third parties who are directly involved in the application development efforts and are included in intangible assets, net in the Consolidated Balance Sheets. Such costs are amortized over the estimated useful life of the software on a straight-line basis and are included in depreciation and amortization in the Consolidated Statements of Operations. Once the application development stage is complete, additional costs are expensed as incurred.

Leases

The

Company accounts for its lease obligations in accordance with ASC Topic 842,

Leases

(“ASC 842”), which requires the recognition of both (i) a lease liability equal to the present value of the remaining lease payments and (ii) an offsetting

right-of-use

asset. The remaining lease payments are discounted using the rate implicit in the lease, if known, or otherwise the Company’s incremental borrowing rate. After lease commencement,

right-of-use

assets are assessed for impairment and otherwise are amortized over the remaining lease term on a straight-line basis. These recognition requirements are not applied to short-term leases which are those with a lease term of 12 months or less. Instead, lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term.

ASC

842 also provides a practical expedient which allows for consideration in a contract to be accounted for as a single lease component rather than allocated between lease and

non-lease

components. The Company has elected to apply this practical expedient to all lease contracts, where applicable.

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Deferred Consideration—Gold Payments

Deferred

consideration—gold payments represented the present value of an obligation to pay gold to a third party into perpetuity and was measured using forward-looking gold prices observed on the CMX exchange, a selected discount rate and perpetual growth rate (Note 9). Changes in the fair value of this obligation were reported as gain/(loss) on revaluation/termination of deferred consideration—gold payments in the Consolidated Statements of Operations.

Convertible Notes

Convertible

notes are carried at amortized cost, net of issuance costs. The Company accounts for convertible instruments as a single liability (applicable to the convertible notes) or equity with no separate accounting for embedded conversion features unless the conversion feature meets the criteria for accounting under the substantial premium model or does not qualify for a derivative scope exception. Interest expense is recognized using the effective interest method and includes amortization of issuance costs over the life of the debt.

Contingencies

The

Company may be subject to reviews, inspections and investigations by regulatory authorities as well as legal proceedings arising in the ordinary course of business. The Company evaluates the likelihood of an unfavorable outcome of all legal or regulatory proceedings to which it is a party and accrues a loss contingency when the loss is probable and reasonably estimable.

Contingent Payments

The

Company recognizes a gain on contingent payments when the contingency is resolved and the gain is realized.

Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Net income available to common stockholders represents net income of the Company reduced by an allocation of earnings to participating securities. The Series A

non-voting

convertible preferred stock and Series C

non-voting

convertible preferred stock (Note 11) and unvested stock-based equity awards that contain

non-forfeitable

rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant to the

two-class

method. Stock-based equity awards that do not contain such rights are not deemed participating securities and are included in diluted shares outstanding (if dilutive).

Diluted

EPS is calculated under the treasury stock method and the

two-class

method. The calculation that results in the lowest diluted EPS amount for the common stock is reported in the Company’s consolidated financial statements. The treasury stock method includes the dilutive effect of potential common shares including unvested stock-based awards, the Series A

non-voting

convertible preferred stock, the Series C

non-voting

convertible preferred stock and the convertible notes, if any. Potential common shares associated with the Series A

non-voting

convertible preferred stock, the Series C

non-voting

convertible preferred stock and the convertible notes are computed under the

if-converted

method. Potential common shares associated with the conversion option embedded in the convertible notes are dilutive when the Company’s average stock price exceeds the conversion price.

Income Taxes

The

Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is

more-likely-than-not

that some portion or all the deferred tax assets will not be realized.

Tax

positions are evaluated utilizing a

two-step

process. The Company first determines whether any of its tax positions are

more-likely-than-not

to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company records interest expense and penalties related to tax expenses as income tax expense.

The

Global Intangible

Low-Taxed

Income (“GILTI”) provisions of the Tax Reform Act requires the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. An accounting policy election is available to either account for the tax effects of GILTI in the period that is subject to such taxes or to provide deferred taxes for book and tax basis differences that upon reversal may be subject to such taxes. The Company accounts for the tax effects of these provisions in the period that is subject to such tax.

Non-income

based taxes are recorded as part of other liabilities and other expenses.

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PART I: FINANCIAL INFORMATION		4

ITEM 1.	FINANCIAL STATEMENTS	4

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	57

ITEM 4.	CONTROLS AND PROCEDURES	58

PART II: OTHER INFORMATION		59

ITEM 1.	LEGAL PROCEEDINGS	59

ITEM 1A.	RISK FACTORS	59

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	59

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	59

ITEM 4.	MINE SAFETY DISCLOSURES	59

ITEM 5.	OTHER INFORMATION	60

ITEM 6.	EXHIBITS	61