Exhibit 99.1

 

 

 

WisdomTree Announces Fourth Quarter 2023 Results

 

Surpasses $100 Billion in Total AUM

 

520bps of Operating Margin Expansion vs. the Prior Year

 

Diluted Earnings Per Share of $0.16 ($0.11, as Adjusted)

 

13% Annualized Organic Growth Rate Across All Products

 

 

New York, NY – (Business Wire) – February 2, 2024 – WisdomTree, Inc. (NYSE: WT), a global financial innovator, today reported financial results for the fourth quarter of 2023.

 

$19.1 million net income ($18.6(1) million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.

 

$100.1 billion of ending AUM, an increase of 6.8% arising primarily from market appreciation.

 

$0.3 billion of net outflows, primarily driven by outflows from our fixed income and commodity products, partly offset by inflows into our U.S. equity and emerging markets products.

 

0.36% average advisory fee, unchanged from the prior quarter.

 

$90.8 million of operating revenues, essentially unchanged from the prior quarter.

 

79.7% gross margin(1), a 0.4 point decrease from the prior quarter due to higher fund costs.

 

28.7% operating income margin, an 0.8 point decrease compared to our operating margin of 29.5% in the prior quarter primarily due to higher expenses.

 

Repurchase of Series C non-voting preferred shares convertible into 13.1 million shares of common stock from Gold Bullion Holdings (Jersey) Limited (“GBH”), a subsidiary of the World Gold Council, for aggregate cash consideration of approximately $84.4 million, with $40.0 million paid on the closing date and the remainder of the purchase price payable in equal annual installments on the first, second and third anniversaries of the closing date, with no requirement to pay interest. The repurchase price per share equated to $6.02 per share when taking into consideration the interest-free financing element of the transaction.

 

$0.03 quarterly dividend declared, payable on February 28, 2024 to stockholders of record as of the close of business on February 14, 2024.

Update from Jarrett Lilien, WisdomTree COO and President

“In 2023, we generated over $10 billion of net inflows and extended our positive inflow streak to three consecutive years. This is the direct result of consistent hard work and our success in deepening relationships with advisors – in 2023 we grew our client base by 20% and also saw a 20% increase in the number of clients holding multiple WisdomTree products. Our strategy to expand our client base while deepening wallet share penetration, coupled with the success of our Portfolio Solutions initiative, is compounding growth and proving to be a formula for continued momentum in our organic growth for 2024 and years to come.”

 

 1 
 

 

Update from Jonathan Steinberg, WisdomTree CEO

“WisdomTree’s strong execution was on display once again in 2023, as demonstrated by our industry-leading organic growth. Our proactive management actions coupled with continued scale benefits drove 540 basis points of adjusted operating margin expansion year-over-year.

I’m thrilled that WisdomTree achieved $100 billion of global assets under management for the first time in company history, and I’m confident that it will take significantly less time to gather the next $100 billion in the years ahead – this next phase for WisdomTree will be driven by continued organic growth from adding new clients, the launch of new products, deepening wallet share with models, and our continued leadership in tokenization and blockchain-enabled finance.”

OPERATING AND FINANCIAL HIGHLIGHTS

  

Three Months Ended

 
   Dec. 31,
2023
   Sept. 30,
2023
   June 30,
2023
   Mar. 31,
2023
   Dec. 31,
2022
 
Consolidated Operating Highlights ($ in billions):                         
AUM—end of period  $100.1   $93.7   $93.7   $90.7   $82.0 
Net (outflows)/inflows  $(0.3)  $2.0   $2.3   $6.3   $5.3 
Average AUM  $96.6   $95.7   $91.6   $87.5   $77.6 
Average advisory fee   0.36%    0.36%    0.36%    0.36%    0.36% 
                          
Consolidated Financial Highlights ($ in millions, except per share amounts):                         
Operating revenues  $90.8   $90.4   $85.7   $82.0   $73.3 
Net income/(loss)  $19.1   $13.0   $54.3   $16.2   $(28.3)
Diluted earnings/(loss) per share  $0.16   $0.07   $0.32   $0.10   $(0.20)
Operating income margin   28.7%    29.5%    21.2%    20.2%    16.0% 
                          
As Adjusted (Non-GAAP(1)):                         
Gross margin   79.7%    80.1%    79.3%    79.1%    76.9% 
Net income, as adjusted  $18.6   $18.0   $14.9   $11.2   $7.0 
Diluted earnings per share, as adjusted  $0.11   $0.10   $0.09   $0.07   $0.04 
Operating income margin, as adjusted   28.7%    29.5%    26.9%    21.4%    16.0% 
                          

RECENT BUSINESS DEVELOPMENTS

Company News

·In January 2024, our Board of Directors appointed (i) Smita Conjeevaram to replace Win Neuger as Chair of the Compensation Committee and (ii) Shamla Naidoo to replace Smita Conjeevaram as Chair of the Nominating and Governance Committee of the Board of Directors. Mr. Neuger will continue to serve as Chair of the Board and a member of the Compensation Committee and Ms. Conjeevaram will continue to serve as a member of the Nominating and Governance Committee.
·In November 2023, we completed the repurchase of our Series C non-voting preferred shares convertible into 13.1 million shares of WisdomTree common stock from a subsidiary of the World Gold Council.
·In December 2023, WisdomTree was named as a 2023 “Best Places to Work in Money Management” by Pensions & Investments for the fourth consecutive year; and we surpassed $100.0 billion in total global assets under management.

Product News

·In November 2023, we launched the WisdomTree UK Quality Dividend Growth UCITS ETF (UGRW) on the London Stock Exchange.
·In December 2023, we launched the WisdomTree Bianco Total Return Fund (WTBN) on the NASDAQ; we launched the WisdomTree Megatrends UCITS ETF (WMGT) on the London Stock Exchange and Börse Xetra; our UCITS ETF platform surpassed $5.0 billion in assets under management; and we launched three blockchain-enabled funds available on WisdomTree Prime™, each leveraging research insights from Professor Jeremy Siegel, Senior Economist to WisdomTree.
·In January 2024, in the U.S. the WisdomTree Bitcoin Fund (BTCW) launched on the Cboe BZX Exchange and in February 2024 the management fee of BTCW was reduced by 5 basis points, lowering the total expense ratio from 0.30% to 0.25%.  For a six-month period that commenced on January 11, 2024, the entire fee is being waived for the first $1.0 billion of BTCW’s assets. 
·In January 2024, we also launched the WisdomTree U.S. MidCap Quality Growth Fund (MGRW) and the WisdomTree U.S. SmallCap Quality Growth Fund (SGRW); and we listed the WisdomTree Megatrends UCITS ETF (WMGT) on the Borsa Italiana. In addition, in Europe we reduced fees for the WisdomTree European Physical Bitcoin ETP (BTCW) from 0.95% to 0.35%; fee reductions apply to our other ETPs in WisdomTree’s European Crypto ETP range as well.

 

 2 
 

 

WISDOMTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

  

Three Months Ended

 

Years Ended

   Dec. 31,
2023
  Sept. 30,
2023
  June 30,
2023
  Mar. 31,
2023
  Dec. 31,
2022
  Dec. 31,
2023
  Dec. 31,
2022
Operating Revenues:                                   
Advisory fees  $86,988   $86,598   $82,004   $77,637   $70,913   $333,227   $293,632 
Other income   3,856    3,825    3,720    4,407    2,397    15,808    7,713 
Total revenues   90,844    90,423    85,724    82,044    73,310    349,035    301,345 
Operating Expenses:                                   
Compensation and benefits   27,860    27,955    26,319    27,398    24,831    109,532    97,897 
Fund management and administration   18,445    18,023    17,727    17,153    16,906    71,348    64,761 
Marketing and advertising   4,951    3,833    4,465    4,007    4,240    17,256    15,302 
Sales and business development   3,881    3,383    3,326    2,994    3,407    13,584    11,871 
Contractual gold payments           1,583    4,486    4,107    6,069    17,108 
Professional fees   3,201    3,719    8,334    3,715    2,666    18,969    13,800 
Occupancy, communications and equipment   1,208    1,203    1,172    1,101    1,110    4,684    3,898 
Depreciation and amortization   335    307    121    109    104    872    262 
Third-party distribution fees   2,549    2,694    1,881    2,253    1,793    9,377    7,656 
Other   2,379    2,601    2,615    2,257    2,427    9,852    8,705 
Total operating expenses   64,809    63,718    67,543    65,473    61,591    261,543    241,260 
Operating income   26,035    26,705    18,181    16,571    11,719    87,492    60,085 
Other Income/(Expenses):                                   
Interest expense   (3,758)   (3,461)   (4,021)   (4,002)   (3,736)   (15,242)   (14,935)
Gain/(loss) on revaluation/termination of
deferred consideration—gold payments
           41,361    20,592    (35,423)   61,953    27,765 
Interest income   1,225    791    1,000    1,083    945    4,099    3,320 
Impairments   (339)   (2,703)       (4,900)       (7,942)    
Loss on extinguishment of convertible notes               (9,721)       (9,721)    
Other gains and losses, net   1,602    (2,512)   1,286    (2,007)   (1,815)   (1,631)   (36,285)
Income/(loss) before income taxes   24,765    18,820    57,807    17,616    (28,310)   119,008    39,950 
Income tax expense/(benefit)   5,688    5,836    3,555    1,383    (21)   16,462    (10,734)
Net income/(loss)  $19,077   $12,984   $54,252   $16,233   $(28,289)  $102,546   $50,684 
Earnings/(loss) per share—basic  $0.16(2)  $0.07(2)  $0.32(2)  $0.10(2)  $(0.20)  $0.66(2)  $0.31(2)
Earnings/(loss) per share—diluted  $0.16(2)  $0.07   $0.32   $0.10   $(0.20)  $0.64(2)  $0.31(2)
Weighted average common shares—basic   145,310    145,284    144,351    143,862    143,126    144,707    143,020 
Weighted average common shares—diluted   171,703    177,140    170,672    159,887    143,126    170,413    158,914 
                                    
As Adjusted (Non-GAAP(1))                                   
Total operating expenses  $64,809   $63,718   $62,630   $64,506   $61,591           
Operating income  $26,035   $26,705   $23,094   $17,538   $11,719           
Income before income taxes  $23,908   $23,902   $19,752   $14,485   $8,615           
Income tax expense  $5,342   $5,854   $4,833   $3,287   $1,588           
Net income  $18,566   $18,048   $14,919   $11,198   $7,027           
Earnings per share—diluted  $0.11   $0.10   $0.09   $0.07   $0.04           
Weighted average common shares—diluted   171,703    177,140    170,672    159,887    159,478           

 

 3 
 

 

QUARTERLY HIGHLIGHTS

Operating Revenues

·Operating revenues were essentially unchanged from the third quarter of 2023 and increased 23.9% from the fourth quarter of 2022 primarily due to higher average AUM.
·Our average advisory fee was 0.36% during the fourth quarter of 2023, the third quarter of 2023 and the fourth quarter of 2022, respectively.

Operating Expenses

·Operating expenses increased 1.7% from the third quarter of 2023 primarily due to higher marketing expenses, sales and business development expenses and fund management and administration costs. These increases were partly offset by lower professional fees.
·Operating expenses increased 5.2% from the fourth quarter of 2022 primarily due to higher stock-based compensation and headcount, fund management and administration costs, third party distribution expenses and marketing expenses. These increases were partly offset by the termination of our deferred consideration—gold payments obligation on May 10, 2023.

Other Income/(Expenses)

·Interest expense increased 8.6% from the third quarter of 2023, primarily due to the recognition of imputed interest on our obligation payable to GBH. Interest expense was essentially unchanged from the fourth quarter of 2022, as the increase related to imputed interest on our obligation payable to GBH was offset by a lower level of debt outstanding.
·Interest income increased 54.9% from the third quarter of 2023 and 29.6% from the fourth quarter of 2022 due to a higher level of interest-earning assets.
·During the fourth quarter of 2023, we recognized a non-cash impairment charge of $0.3 million on our investment in Securrency, Inc., as we marked our investment to net realizable value in connection with the closing of the sale of Securrency, Inc. to an unrelated third party.
·Other gains and losses, net was a gain of $1.6 million for the fourth quarter of 2023. This quarter includes gains of $0.5 million and $1.0 million on our financial instruments and our investments, respectively. Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold exchange-traded products (“ETPs”), foreign exchange fluctuations and other miscellaneous items.

Income Taxes

·Our effective income tax rate for the fourth quarter of 2023 was 23.0%, resulting in income tax expense of $5.7 million. The effective tax rate differs from the federal statutory rate of 21.0% primarily due to non-deductible executive compensation and state and local taxes, partly offset by a lower tax rate on foreign earnings.
·Our adjusted effective income tax rate for the fourth quarter was 22.3%(1).

ANNUAL HIGHLIGHTS

·Operating revenues increased 15.8% as compared to 2022 due to higher average AUM and higher other income from large flows from some of our European products, partly offset by a lower average advisory fee.
·Operating expenses increased 8.4% as compared to 2022 primarily due to higher stock-based compensation and headcount, fund management and administration costs, professional fees, marketing expenses, third-party distribution fees, sales and business development expenses and other expenses. These increases were partly offset by the termination of our deferred consideration—gold payments obligation on May 10, 2023.
·Significant items reported in other income/(expense) in 2023 include: an increase in interest income of 23.5% due to a higher level of interest-earning assets, a non-cash gain on revaluation/termination of deferred consideration of $62.0 million during the first and second quarters; loss on extinguishment of convertible notes of $9.7 million arising from the repurchase of $115.0 million in aggregate principal amount of our 4.25% Convertible Senior Notes (the “2020 Notes”) in the first quarter; non-cash impairment charges totaling $7.9 million, primarily on our investments in Securrency, Inc.; a non-cash charge of $1.4 million arising from the release of tax-related indemnification assets upon the expiration of the statute of limitations (an equal and offsetting benefit was recognized in income tax expense); and losses on our financial instruments owned and investments of $0.7 million. Gains and losses also generally arise from the sale of gold earned on management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.
·Our effective income tax rate for 2023 was 13.8%, resulting in income tax expense of $16.5 million. The effective tax rate differs from the federal statutory rate of 21.0% primarily due to a non-taxable gain on revaluation/termination of deferred consideration, a reduction in unrecognized tax benefits associated with the release of the tax-related indemnification asset described above and a lower tax rate on foreign earnings. These items were partly offset by a non-deductible loss on extinguishment of the 2020 Notes during the first quarter of 2023, an increase in the deferred tax asset valuation allowance on losses recognized on our investments and non-deductible executive compensation.

 

 4 
 

 

CONFERENCE CALL DIAL-IN AND WEBCAST DETAILS

WisdomTree will discuss its results and operational highlights during a live webcast on Friday, February 2, 2024 at 11:00 a.m. ET, which can be accessed using the following link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=CoAvcnGg.

Participants also can dial in using the following numbers: (877) 407-9210 or (201) 689-8049. Click here to access the participant international toll-free access numbers. To avoid delays, we encourage participants to log in or dial into the conference call 10 minutes ahead of the scheduled start time. All earnings materials and the webcast can be accessed through WisdomTree’s investor relations website at https://ir.wisdomtree.com. A replay of the webcast will also be available shortly after the call.

About WisdomTree

WisdomTree is a global financial innovator, offering a well-diversified suite of exchange-traded products (ETPs), models, solutions and products leveraging blockchain-enabled technology. We empower investors and consumers to shape their future and support financial professionals to better serve their clients and grow their businesses. WisdomTree is leveraging the latest financial infrastructure to create products that provide access, transparency and an enhanced user experience. Building on our heritage of innovation, we are also developing and have launched next-generation digital products, services and structures, including digital or blockchain-enabled mutual funds and tokenized assets, as well as our blockchain-native digital wallet, WisdomTree Prime™.*

* The WisdomTree Prime digital wallet and digital asset services are made available through WisdomTree Digital Movement, Inc. (NMLS ID: 2372500) in select U.S. jurisdictions and may be limited where prohibited by law. Visit https://www.wisdomtreeprime.com or the WisdomTree Prime mobile app for more information.

WisdomTree currently has approximately $100.6 billion in assets under management globally.

For more information about WisdomTree and WisdomTree Prime™, visit: https://www.wisdomtree.com.

Please visit us on X, formerly known as Twitter, at @WisdomTreeNews.

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

PRODUCTS AND SERVICES AVAILABLE VIA WISDOMTREE PRIME:

NOT FDIC INSURED | NO BANK GUARANTEE | NOT A BANK DEPOSIT | MAY LOSE VALUE | NOT SIPC PROTECTED | NOT INSURED BY ANY GOVERNMENT AGENCY

The products and services available through the WisdomTree Prime app are not endorsed, indemnified or guaranteed by any regulatory agency.

______________

(1)See “Non-GAAP Financial Measurements.”
(2)Earnings/(loss) per share (“EPS”) is calculated pursuant to the two-class method as it results in a lower EPS amount as compared to the treasury stock method. In addition, the three months and year ended December 31, 2023 includes a gain of $7,966 recognized upon the repurchase of our Series C non-voting preferred shares convertible into 13.1 million shares of common stock from GBH, which is excluded from net income, but required to be added to net income to arrive at income available to common stockholders in the calculation of EPS. This gain is excluded from our EPS when computed on a non-GAAP basis.

 

 

Contact Information:

 

Investor Relations Corporate Communications
Jeremy Campbell Jessica Zaloom
+1.646.522.2602 +1.917.267.3735
jeremy.campbell@wisdomtree.com  jzaloom@wisdomtree.com

 

 5 
 

 

WISDOMTREE, INC. AND SUBSIDIARIES

KEY OPERATING STATISTICS

(Unaudited)

 

   Three Months Ended 
  

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
GLOBAL ETPs ($ in millions)                    
                     
Beginning of period assets  $93,735   $93,666   $90,740   $81,993   $70,878 
(Outflows)/inflows   (255)   1,983    2,327    6,341    5,264 
Market appreciation/(depreciation)   6,644    (1,914)   599    2,406    5,851 
End of period assets  $100,124   $93,735   $93,666   $90,740   $81,993 
Average assets during the period  $96,557   $95,743   $91,578   $87,508   $77,649 
Average advisory fee during the period   0.36%   0.36%   0.36%   0.36%   0.36%
Revenue days   92    92    91    90    92 
Number of ETFs—end of the period   337    344    344    341    339 
                          
U.S. LISTED ETFs ($ in millions)                         
                          
Beginning of period assets  $68,018   $65,903   $61,283   $55,973   $48,043 
(Outflows)/inflows   (67)   3,601    3,249    4,012    4,232 
Market appreciation/(depreciation)   4,535    (1,486)   1,371    1,298    3,698 
End of period assets  $72,486   $68,018   $65,903   $61,283   $55,973 
Average assets during the period  $69,717   $68,008   $62,712   $59,430   $53,655 
Number of ETFs—end of the period   76    80    80    80    79 
                          
EUROPEAN LISTED ETPs ($ in millions)                         
                          
Beginning of period assets  $25,717   $27,763   $29,457   $26,020   $22,835 
(Outflows)/inflows   (188)   (1,618)   (922)   2,329    1,032 
Market appreciation/(depreciation)   2,109    (428)   (772)   1,108    2,153 
End of period assets  $27,638   $25,717   $27,763   $29,457   $26,020 
Average assets during the period  $26,840   $27,735   $28,866   $28,078   $23,994 
Number of ETPs—end of the period   261    264    264    261    260 
                          
PRODUCT CATEGORIES ($ in millions)                         
                          
U.S. Equity                         
Beginning of period assets  $25,644   $26,001   $24,534   $24,112   $20,952 
Inflows/(outflows)   487    864    414    (149)   1,022 
Market appreciation/(depreciation)   3,025    (1,221)   1,053    571    2,138 
End of period assets  $29,156   $25,644   $26,001   $24,534   $24,112 
Average assets during the period  $26,844   $26,501   $24,732   $24,725   $23,492 
                          
Commodity & Currency                         
Beginning of period assets  $20,465   $22,384   $24,924   $22,097   $19,561 
(Outflows)/inflows   (449)   (1,815)   (1,513)   2,003    796 
Market appreciation/(depreciation)   1,320    (104)   (1,027)   824    1,740 
End of period assets  $21,336   $20,465   $22,384   $24,924   $22,097 
Average assets during the period  $21,254   $22,278   $24,033   $23,807   $20,345 
                          
Fixed Income                         
Beginning of period assets  $21,797   $20,215   $18,708   $15,273   $11,695 
(Outflows)/inflows   (715)   1,671    1,471    3,513    3,392 
Market appreciation/(depreciation)   115    (89)   36    (78)   186 
End of period assets  $21,197   $21,797   $20,215   $18,708   $15,273 
Average assets during the period  $21,889   $20,965   $19,185   $17,176   $13,962 

 

 6 
 

 

   Three Months Ended 
  

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
International Developed Market Equity                         
Beginning of period assets  $13,902   $13,423   $11,433   $10,195   $9,183 
Inflows/(outflows)   9    798    1,593    450    40 
Market appreciation/(depreciation)   1,192    (319)   397    788    972 
End of period assets  $15,103   $13,902   $13,423   $11,433   $10,195 
Average assets during the period  $14,267   $13,873   $12,276   $10,879   $10,000 
                          
Emerging Market Equity                         
Beginning of period assets  $9,569   $9,191   $8,811   $8,116   $7,495 
Inflows/(outflows)   412    451    329    486    (53)
Market appreciation/(depreciation)   745    (73)   51    209    674 
End of period assets  $10,726   $9,569   $9,191   $8,811   $8,116 
Average assets during the period  $9,833   $9,652   $8,998   $8,666   $7,770 
                          
Leveraged & Inverse                         
Beginning of period assets  $1,781   $1,864   $1,785   $1,754   $1,523 
(Outflows)/inflows   (59)   (1)   12    43    59 
Market appreciation/(depreciation)   93    (82)   67    (12)   172 
End of period assets  $1,815   $1,781   $1,864   $1,785   $1,754 
Average assets during the period  $1,803   $1,894   $1,798   $1,757   $1,623 
                          
Cryptocurrency                         
Beginning of period assets  $243   $248   $239   $136   $163 
Inflows/(outflows)   28    10    (1)   13    (4)
Market appreciation/(depreciation)   143    (15)   10    90    (23)
End of period assets  $414   $243   $248   $239   $136 
Average assets during the period  $325   $238   $236   $190   $152 
                          
Alternatives                         
Beginning of period assets  $334   $340   $306   $310   $306 
Inflows/(outflows)   32    5    22    (18)   12 
Market appreciation/(depreciation)   11    (11)   12    14    (8)
End of period assets  $377   $334   $340   $306   $310 
Average assets during the period  $342   $342   $320   $308   $305 
                          
Headcount   303    299    291    279    273 

 

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

Source: WisdomTree

 

 7 
 

 

WISDOMTREE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

  

Dec. 31,
2023

  

Dec. 31,
2022

 
    (Unaudited)      
ASSETS          
Current assets:          
Cash and cash equivalents  $129,305   $132,101 
Financial instruments owned, at fair value   58,722    126,239 
Accounts receivable   35,473    30,549 
Prepaid expenses   5,258    4,684 
Other current assets   1,036    390 
Total current assets   229,794    293,963 
Fixed assets, net   427    544 
Indemnification receivable       1,353 
Securities held-to-maturity   230    259 
Deferred tax assets, net   11,057    10,536 
Investments   9,684    35,721 
Right of use assets—operating leases   563    1,449 
Goodwill   86,841    85,856 
Intangible assets, net   605,082    603,567 
Other noncurrent assets   459    571 
Total assets  $944,137   $1,033,819 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
LIABILITIES          
Current liabilities:          
Fund management and administration payable  $30,085   $36,521 
Compensation and benefits payable   38,111    24,121 
Payable to Gold Bullion Holdings (Jersey) Limited (“GBH”)   14,804     
Income taxes payable   3,866    1,599 
Operating lease liabilities   578    1,125 
Convertible notes—current       59,197 
Deferred consideration—gold payments       16,796 
Accounts payable and other liabilities   15,772    9,075 
Total current liabilities   103,216    148,434 
Convertible notes—long term   274,888    262,019 
Payable to GBH   24,328     
Deferred consideration—gold payments       183,494 
Operating lease liabilities       339 
Other noncurrent liabilities       1,353 
Total liabilities   402,432    595,639 
Preferred stock:          
Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding   132,569    132,569 
STOCKHOLDERS’ EQUITY          
Common stock, par value $0.01; 400,000 shares authorized:          
Issued and outstanding: 150,330 and 146,517 at December 31, 2023 and 2022, respectively   1,503    1,465 
Additional paid-in capital   312,440    291,847 
Accumulated other comprehensive loss   (548)   (1,420)
Retained earnings   95,741    13,719 
Total stockholders’ equity   409,136    305,611 
Total liabilities and stockholders’ equity  $944,137   $1,033,819 

 

 8 
 

 

WISDOMTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

   Years Ended, 
  

Dec. 31,

2023

  

Dec. 31,

2022

 
Cash flows from operating activities:          
Net income  $102,546   $50,684 
Adjustments to reconcile net income to net cash provided by operating activities:          
Gain on revaluation/termination of deferred consideration—gold payments   (61,953)   (27,765)
Advisory and license fees paid in gold, other precious metals and cryptocurrency   (49,400)   (57,290)
Stock-based compensation   16,190    10,385 
Loss on extinguishment of convertible notes   9,721     
Impairments   7,942     
Contractual gold payments   6,069    17,108 
Amortization of issuance costs—convertible notes   1,817    2,592 
Amortization of right of use asset   1,285    963 
Depreciation and amortization   872    262 
Losses on financial instruments owned, at fair value   517    16,516 
Deferred income taxes   (481)   (1,296)
Imputed interest on payable to GBH   297     
Losses on investments   242     
Other       386 
Changes in operating assets and liabilities:          
Accounts receivable   (6,212)   (720)
Prepaid expenses   (518)   (808)
Gold and other precious metals   42,150    41,847 
Other assets   281    (309)
Fund management and administration payable   5,837    3,723 
Compensation and benefits payable   1,209    4,485 
Income taxes payable   2,260    (2,308)
Operating lease liabilities   (1,284)   (965)
Accounts payable and other liabilities   6,213    (33)
Net cash provided by operating activities   85,600    57,457 
Cash flows from investing activities:          
Purchase of financial instruments owned, at fair value   (57,364)   (67,734)
Purchase of investments   (11,228)   (21,863)
Cash paid—software development   (2,149)   (2,370)
Cash paid—acquisition of Securrency Transfers, Inc. (net of cash acquired)   (985)    
Purchase of fixed assets   (113)   (220)
Proceeds from the sale of financial instruments owned, at fair value   123,564    52,115 
Proceeds from the sale of investment in Securrency, Inc.   28,818     
Receipt of contingent consideration—Sale of Canadian ETF business   1,477     
Proceeds from held-to-maturity securities maturing or called prior to maturity   29    45 
Net cash provided by/(used in) investing activities   82,049    (40,027)
Cash flows from financing activities:          
Repurchase and maturity of convertible notes   (184,272)    
Termination of deferred consideration—gold payments   (50,005)    
Repurchase of Series C Non-Voting Convertible Preferred Stock   (40,000)    
Dividends paid   (20,144)   (19,362)
Shares repurchased   (3,570)   (3,418)
Issuance costs—convertible notes   (3,548)    
Issuance costs—Series C Non-Voting Convertible Preferred Stock   (97)    
Proceeds from the issuance of convertible notes   130,000     
Net cash used in financing activities   (171,636)   (22,780)
Increase/(decrease) in cash flow due to changes in foreign exchange rate   1,191    (3,258)
Net decrease in cash and cash equivalents   (2,796)   (8,608)
Cash and cash equivalents—beginning of year   132,101    140,709 
Cash and cash equivalents—end of period  $129,305   $132,101 
Supplemental disclosure of cash flow information:          
Cash paid for income taxes  $16,156   $12,500 
Cash paid for interest  $10,709   $12,313 

 

 9 
 

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 press release include:

Adjusted Operating Income, Operating Expenses, Income Before Income Taxes, Income Tax Expense, Net Income and Diluted Earnings per Share

We disclose adjusted operating income, operating expenses, income before income taxes, income tax expense, net income and diluted earnings per share as non-GAAP financial measurements in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting these non-GAAP financial measurements provides investors with a consistent way to analyze our performance. These non-GAAP financial measurements exclude the following:

Gains or losses on financial instruments owned: We account for our financial instruments owned as trading securities, which requires these instruments to be measured at fair value with gains and losses reported in net income. We exclude these items when calculating our non-GAAP financial measurements as the gains and losses introduce volatility in earnings and are not core to our operating business.

Tax windfalls and shortfalls upon vesting and exercise of stock-based compensation awards: GAAP requires the recognition of tax windfalls and shortfalls within income tax expense. These items arise upon the vesting and exercise of stock-based compensation awards and the magnitude is directly correlated to the number of awards vesting/exercised as well as the difference between the price of our stock on the date the award was granted and the date the award vested or was exercised. We exclude these items when calculating our non-GAAP financial measurements as they introduce volatility in earnings and are not core to our operating business.

Imputed interest on our payable to the Gold Bullion Holdings (Jersey) Limited (“GBH”): During the fourth quarter of 2023, we repurchased our Series C Non-Voting Convertible Preferred Stock which were convertible into 13.1 million shares of WisdomTree common stock, from GBH, a subsidiary of the World Gold Council, for aggregate cash consideration of approximately $84.4 million. Under the terms of the transaction, we paid GBH $40.0 million on the closing date, with the remainder of the purchase price payable in equal annual installments on the first, second and third anniversaries of the closing date, with no requirement to pay interest. Under US GAAP, the obligation is recorded at its present value utilizing a market rate of interest on the closing date of 7.0% and the corresponding discount is amortized as interest expense pursuant to the effective interest method of accounting over the life of the obligation. We exclude this item when calculating our non-GAAP financial measurements as recognition of interest expense is non-cash and contrary to the stated terms of our obligation.

Other items: Unrealized gains or losses on the revaluation/termination of deferred consideration—gold payments, which we terminated in the second quarter of 2023, loss on extinguishment of our convertible notes, impairments, remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business, unrealized gains and losses recognized on our investments, changes in deferred tax asset valuation allowance, expenses incurred in response to an activist campaign and litigation expenses associated with certain provisions of our Stockholder Rights Agreement dated as of March 17, 2023, as amended, with Continental Stock Transfer & Trust Company, as Rights Agent, are excluded when calculating our non-GAAP financial measurements.

Adjusted Effective Income Tax Rate

We disclose our adjusted effective income tax rate as a non-GAAP financial measurement in order to report our effective income tax rate exclusive of items that are non-recurring or not core to our operating business. We believe reporting our adjusted effective income tax rate provides investors with a consistent way to analyze our income taxes. Our adjusted effective income tax rate is calculated by dividing adjusted income tax expense by adjusted income before income taxes. See above for information regarding the items that are excluded.

Gross Margin and Gross Margin Percentage

We disclose our gross margin 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. These measures also assist us in analyzing the profitability of our products. We define gross margin as total operating revenues less fund management and administration expenses. Gross margin percentage is calculated as gross margin divided by total operating revenues.

 

 10 
 

 

GAAP to NON-GAAP RECONCILIATION (CONSOLIDATED)

(in thousands)

(Unaudited)

 

   Three Months Ended 

 

Adjusted Net Income and Diluted Earnings per Share:

 

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
                     
Net income/(loss), as reported  $19,077   $12,984   $54,252   $16,233   $(28,289)
(Deduct)/add back: (Gains)/losses on financial instruments owned, net of income taxes   (370)   1,479    762    (1,479)   669 
(Deduct)/add back: (Gains)/losses recognized on investments, net of income taxes   (336)   323    (2,346)   2,966    469 
(Deduct)/add back: (Decrease)/increase in deferred tax asset valuation allowance on financial instruments owned and investments   (280)   1,234    (508)   1,667    364 
Add back: Impairments, net of income taxes   257    2,046        3,710     
Add back: Imputed interest on payable to GBH, net of income taxes   224                 
(Deduct)/add back: Tax (windfalls)/shortfalls upon vesting and exercise of stock-based compensation awards   (6)   (18)   33    (185)    
(Deduct)/add back: (Gain)/loss on revaluation/termination of deferred consideration—gold payments           (41,361)   (20,592)   35,423 
Add back: Expenses incurred in response to an activist campaign, net of income taxes           3,720    732     
Add back: Litigation expenses associated with certain provisions of the Stockholder Rights Agreement, net of income taxes           367         
Add back: Loss on extinguishment of convertible notes, net of income taxes               9,623     
Deduct: Remeasurement of contingent consideration—sale of former Canadian ETF business               (1,477)    
Deduct: Decrease in deferred tax asset valuation allowance on net operating losses of a European subsidiary                   (1,609)
Adjusted net income  $18,566   $18,048   $14,919   $11,198   $7,027 
Weighted average common shares—diluted   171,703    177,140    170,672    159,887    159,478 
Adjusted earnings per share—diluted  $0.11   $0.10   $0.09   $0.07   $0.04 

 

   Three Months Ended 

 

Gross Margin and Gross Margin Percentage:

 

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
                     
Operating revenues  $90,844   $90,423   $85,724   $82,044   $73,310 
Less: Fund management and administration   (18,445)   (18,023)   (17,727)   (17,153)   (16,906)
Gross margin  $72,399   $72,400   $67,997   $64,891   $56,404 
Gross margin percentage   79.7%   80.1%   79.3%   79.1%   76.9%

 

   Three Months Ended 

Adjusted Operating Income and Adjusted Operating

Income Margin:

 

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
                     
Operating revenues  $90,844   $90,423   $85,724   $82,044   $73,310 
Operating income  $26,035   $26,705   $18,181   $16,571   $11,719 
Add back: Expenses incurred in response to an activist campaign           4,913    967     
Adjusted operating income  $26,035   $26,705   $23,094   $17,538   $11,719 
Adjusted operating income margin   28.7%   29.5%   26.9%   21.4%   16.0%

 

 11 
 

 

   Three Months Ended 

 

Adjusted Total Operating Expenses:

 

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
                     
Total operating expenses  $64,809   $63,718   $67,543   $65,473   $61,591 
Deduct: Expenses incurred in response to an activist campaign           (4,913)   (967)    
Adjusted total operating expenses  $64,809   $63,718   $62,630   $64,506   $61,591 

 

   Three Months Ended 

 

Adjusted Income Before Income Taxes:

 

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
                     
Income/(loss) before income taxes  $24,765   $18,820   $57,807   $17,616   $(28,310)
(Deduct)/add back: (Gains)/losses recognized on investments   (1,003)   426    (3,099)   3,918    619 
(Deduct)/add back: (Gains)/losses on financial instruments owned   (489)   1,953    1,007    (1,954)   883 
Add back: Impairments   339    2,703        4,900     
Add back: Imputed interest on payable to GBH   296                 
(Deduct)/add back: (Gain)/loss on revaluation/termination of deferred consideration—gold payments           (41,361)   (20,592)   35,423 
Add back: Expenses incurred in response to an activist campaign           4,913    967     
Add back: Litigation expenses associated with certain provisions of the Stockholder Rights Agreement           485         
Add back: Loss on extinguishment of convertible notes               9,721     
Deduct: Remeasurement of contingent consideration—sale of former Canadian ETF business               (1,477)    
Add back: Loss recognized upon reduction of a tax-related indemnification asset               1,386     
Adjusted income before income taxes  $23,908   $23,902   $19,752   $14,485   $8,615 

 

   Three Months Ended 
Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate: 

Dec. 31,

2023

  

Sept. 30,

2023

  

June 30,

2023

  

Mar. 31,

2023

  

Dec. 31,

2022

 
                     
Adjusted income before income taxes (above)  $23,908   $23,902   $19,752   $14,485   $8,615 
Income tax expense/(benefit)  $5,688   $5,836   $3,555   $1,383   $(21)
(Deduct)/add back: Tax (expense)/benefit on gains and losses on investments   (667)   103    (753)   952    150 
Add back/(deduct): Decrease/(increase) in deferred tax asset valuation allowance on financial instruments owned and investments   280    (1,234)   508    (1,667)   (364)
(Deduct)/add back: Tax (expense)/benefit arising from (gains)/losses on financial instruments owned   (119)   474    245    (475)   214 
Add back: Tax benefit arising from impairments   82    657        1,190     
Add back: Tax benefit on imputed interest   72                 
Add back/(deduct): Tax windfalls/(shortfalls) upon vesting and exercise of stock-based compensation awards   6    18    (33)   185     
Add back: Tax benefit arising from expenses incurred in response to an activist campaign           1,193    235     
Add back: Tax benefit arising from litigation expenses associated with certain provisions of the Stockholder Rights Agreement           118         
Add back: Decrease in deferred tax asset valuation allowance on net operating losses of a European subsidiary                   1,609 
Add back: Tax benefit arising from extinguishment of convertible notes               98     
Add back: Tax benefit arising from reduction of a tax-related indemnification asset               1,386     
Adjusted income tax expense  $5,342   $5,854   $4,833   $3,287   $1,588 
Adjusted effective income tax rate   22.3%   24.5%   24.5%   22.7%   18.4%

 

 12 
 

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 could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, the risks described below. If one or more of these or other risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this press release completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

In particular, forward-looking statements in this press release may include statements about:

·anticipated trends, conditions and investor sentiment in the global markets and ETPs;
·anticipated levels of inflows into and outflows out of our ETPs;
·our ability to deliver favorable rates of return to investors;
·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.

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

·declining prices of securities, gold and other precious metals and other commodities and changes in interest rates and general market conditions can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETP investors to sell their fund shares and trigger redemptions;
·fluctuations in the amount and mix of our AUM, whether caused by disruptions in the financial markets or otherwise, including but not limited to a pandemic or war conflict, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity or increase the cost of borrowing upon a refinancing;
·competitive pressures could reduce revenues and profit margins;
·we derive a substantial portion of our revenues from a limited number of products, and as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products and market-specific and political and economic risk;
·a significant portion of our AUM is held in products with exposure to U.S. and international developed markets, and we therefore have exposure to domestic and foreign market conditions and are subject to currency exchange rate risks;
·withdrawals or broad changes in investments in our ETPs by investors with significant positions may negatively impact revenues and operating margins;
·we face increased operational, regulatory, financial and other risks as a result of conducting our business internationally;
·many of our ETPs 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. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETP investors; and
·actions of activist stockholders against us, which have been costly and may be disruptive and cause uncertainty about the strategic direction of our business.

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, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

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.

 

Category: Business Update

 

 

13