$8.8 million net income, or $7.7
million net income, as adjusted
WisdomTree Investments, Inc. (NASDAQ: WETF), an exchange-traded
fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset
manager today reported net income of $8.8 million or $0.05 diluted
EPS in the first quarter. Adjusted net income (a non-GAAP
measure1) was $7.7 million1 or $0.05 diluted EPS1. This
compares to net income of $9.4 million or $0.07 diluted EPS (as
adjusted, $11.0 million1 2 or $0.08 diluted EPS1) in the first
quarter of last year and a net loss of ($11.6) million or ($0.08)
diluted loss per share (as adjusted, $9.8 million1 2 or $0.06
diluted EPS1) in the fourth quarter of 2018.
WisdomTree CEO and President Jonathan Steinberg said, “In the
first quarter, excluding our two largest currency hedged products,
we generated $1.8 billion of inflows, representing 16% annualized
organic growth, more than double the growth rate of the ETF
industry. This marks the second consecutive quarter of strong,
diversified flows and evidence our strategic initiatives around
Advisor Solutions, accessing new distribution channels and
leveraging technology are positively impacting our growth. The
investments we've made over the past few years have truly
transformed our platform.”
Steinberg continued, “In 2019, WisdomTree's focus remains on
generating strong, diversified and profitable growth for our
stockholders. WisdomTree is well positioned for the next wave of
profitable growth.”
|
|
|
|
Three Months Ended |
Change From |
|
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Consolidated
Operating Highlights ($, in billions): |
|
|
|
|
|
AUM |
$ |
58.9 |
|
$ |
54.1 |
|
$ |
45.0 |
|
|
8.9 |
% |
|
31.1 |
% |
Net inflows/(outflows) |
$ |
0.6 |
|
$ |
0.2 |
|
$ |
(2.2) |
|
|
138.7 |
% |
|
n/a |
|
Average AUM |
$ |
57.7 |
|
$ |
56.4 |
|
$ |
47.7 |
|
|
2.2 |
% |
|
20.9 |
% |
Average advisory fee |
|
0.46 |
% |
|
0.47 |
% |
|
0.50 |
% |
|
-0.01 |
|
|
-0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Financial Highlights ($, in millions, except per
share amounts): |
|
|
|
|
|
Operating revenues |
$ |
65.5 |
|
$ |
67.9 |
|
$ |
58.9 |
|
|
(3.5%) |
|
|
11.2% |
|
Net income/(loss) |
$ |
8.8 |
|
$ |
(11.6) |
|
$ |
9.4 |
|
|
n/a |
|
|
(6.4 |
%) |
Diluted earnings/(loss)
per share |
$ |
0.05 |
|
$ |
(0.08) |
|
$ |
0.07 |
|
|
n/a |
|
$ |
(0.02) |
|
Operating income
margin |
|
16.3 |
% |
|
17.4 |
% |
|
22.4 |
% |
|
-1.1 |
|
|
-6.1 |
|
Non-GAAP1: |
|
|
|
|
|
Net income, as
adjusted |
$ |
7.7 |
|
$ |
9.82 |
|
$ |
11.02 |
|
|
(21.3 |
%) |
|
(29.7 |
%) |
Diluted earnings per
share, as adjusted |
$ |
0.05 |
|
$ |
0.06 |
|
$ |
0.08 |
|
$ |
(0.01) |
|
$ |
(0.03) |
|
Operating income margin,
as adjusted |
|
19.9 |
% |
|
21.9 |
% |
|
25.9 |
% |
|
-2.0 |
|
|
-6.0 |
|
|
|
|
|
|
|
Recent Business Developments
Company News
- In April 2019, we announced winning two 2019 ETF.com Awards:
Index of the Year – The WisdomTree U.S. Multifactor Index and Best
New Asset Allocation ETF – The WisdomTree 90/60 U.S. Balanced Fund
(NTSX); we cross-listed five UCITS ETFs on the Bolsa de Valores de
Lima (BVL) in Peru; we announced winning two 2019 Mutual Fund
Industry & ETF Awards: ETF of the Year – The WisdomTree
Floating Rate Treasury Fund (USFR) and ESG/Impact ETF of the Year –
The WisdomTree Emerging Markets ex-State-Owned Enterprises Fund
(XSOE); and we announced that Susan Cosgrove was appointed to our
Board of Directors.
U.S. Listed Product News
- In February 2019, we announced the addition of 44 WisdomTree
ETFs to Schwab ETF OneSourceTM, one of the largest commission-free
ETF programs in the industry; and we announced the closing and
liquidation of eight WisdomTree ETFs.
- In March 2019, we announced the implementation of changes for
the WisdomTree Dynamic Currency Hedged Europe Equity Fund (DDEZ) to
the WisdomTree Europe Multifactor Fund (EUMF) and the WisdomTree
Dynamic Currency Hedged Japan Equity Fund (DDJP) to the WisdomTree
Japan Multifactor Fund (JAMF), transitioning to transparent,
actively managed multifactor strategies.
- In April 2019, we announced the launch of the WisdomTree India
ex-State-Owned Enterprises Fund (IXSE) on the NYSE Arca.
European Listed Product News
- In February 2019, we announced the launch of two enhanced
exchange-traded commodities products: the Boost Enhanced Industrial
Metals ETC and the Boost Enhanced Energy ETC, both listed on the
London Stock Exchange, the Deutsche Börse Xetra and the Borsa
Italiana.
- In March 2019, we launched our Investor Solutions program and
Digital Portfolio Developer (DPD) in Europe. Building on the
success of the Advisor Solutions program in the U.S., the program
aims to help investment managers to engage more effectively with
clients and prospects, and modernize portfolios to meet evolving
investor needs; and we launched the WisdomTree USD Floating Rate
Treasury Bond UCITS ETF (USFR) on the London Stock Exchange, making
U.S. floating rates notes available to European investors in an ETF
for the first time.
- In April 2019, we cross listed seven ETFs on the Swiss Stock
Exchange, bringing the total to 16 WisdomTree strategies now listed
on SIX Swiss Exchange.
Assets Under ManagementU.S. listed ETF assets
under management (“AUM”) was $39.4 billion at March 31, 2019, up
10.9% from December 31, 2018 primarily due to market
appreciation. International listed ETP AUM was $19.6 billion
at March 31, 2019, up 5.2% from December 31, 2018 due to market
appreciation and net inflows.
First Quarter Financial Discussion
The primary reason for the increase in our revenues and expenses
this quarter as compared to the first quarter of 2018 is due to our
acquisition of ETFS, which was completed in April 2018. We
refer to the acquisition throughout this press release as the ETFS
Acquisition.
Previously disclosed results for the first quarter of 2018
within our Consolidated Statements of Operations have been
reclassified to conform with our current presentation. These
reclassifications had no effect on previously reported net
income.
Operating Revenues
Advisory Fees
Advisory fees of $64.8 million increased 10.9% from the first
quarter of 2018 primarily due to the ETFS Acquisition, partly
offset by lower average AUM of our U.S. Business segment.
Advisory fees decreased 3.5% from the fourth quarter of 2018
primarily due to a lower average U.S. advisory fee and two fewer
revenue days in the current quarter, partly offset by higher
average AUM in our International Business segment.
Our average global advisory fee was 0.46%, 0.47% and 0.50%
during the first quarter of 2019, fourth quarter of 2018 and first
quarter of 2018, respectively. The change as compared to the
fourth quarter of 2018 was due to a change in product mix primarily
in our U.S. Business segment. The change as compared to
the first quarter of 2018 was due to the ETFS Acquisition and a
change in product mix.
Other Income
Other income of $0.6 million increased 44.0% from the first
quarter of 2018 primarily due to creation/redemption fees earned
from the ETFS exchange traded products. Other income was
essentially unchanged from the fourth quarter of 2018.
Margins
Gross margin for our U.S. Business segment was 80.4%1 in the
first quarter of 2019 as compared to 83.9%1 3 in the first quarter
of 2018 and 80.2%1 in the fourth quarter of 2018. The decline
as compared to the first quarter of 2018 was primarily due to lower
revenue capture and lower average AUM. Gross margin for our
International Business segment was 70.1%1 in the first quarter of
2019 as compared to 40.1%1 in the first quarter of 2018 and 69.1%1
in the fourth quarter of 2018. The change in gross margin for
our International Business segment from the first quarter of 2018
was due to the ETFS Acquisition. The increase from the fourth
quarter of 2018 was primarily due to higher average AUM.
Operating income margin on a consolidated basis was 16.3% in the
first quarter of 2019 (as adjusted 19.9%1) as compared to 22.4% in
the first quarter of 2018 (as adjusted 25.9%1) and 17.4% in the
fourth quarter of 2018 (as adjusted 21.9%1).
Operating Expenses
Total operating expenses were $54.8 million for the first
quarter of 2019, up 20.0% from the first quarter of 2018 and down
2.2% from the fourth quarter of 2018. Operating expenses
increased from the first quarter of 2018 primarily due to expenses
associated with the ETFS acquired business. The decrease from
the fourth quarter of 2018 was primarily due to lower
non-compensation expenses. Excluding severance and
acquisition-related costs, total expenses in the current quarter
were essentially flat compared to the fourth quarter of last
year.
- Compensation and benefits expense increased 13.1% from the
first quarter of 2018 to $21.3 million due to higher compensation
expense of our International Business segment associated with the
ETFS Acquisition and severance expense of $2.0 million, partly
offset by lower headcount costs. These expenses also
increased 13.1% from the fourth quarter of 2018 primarily due to
higher incentive compensation and seasonally higher payroll taxes
associated with bonus payments made in the first quarter of
2019. Headcount of our U.S. Business segment was 141, 153 and
157 and our International Business segment was 75, 75 and 34 at
March 31, 2019, December 31, 2018 and March 31, 2018,
respectively.
- Fund management and administration expense increased 39.0% from
the first quarter of 2018 to $15.2 million due to higher average
AUM of our International Business segment primarily associated with
the ETFS Acquisition. These expenses decreased 4.4% from the
fourth quarter of 2018 primarily due to lower average AUM of our
U.S. Business segment, two fewer revenue days in the current
quarter and seasonally higher costs in the prior quarter. We
had 77 U.S. listed ETFs and 457 International listed ETPs at the
end of the quarter.
- Marketing and advertising expense decreased 16.1% and 27.0%
from the first quarter of 2018 and fourth quarter of 2018,
respectively, to $2.7 million. The decrease from the first
quarter of 2018 was primarily due to lower spending of our U.S.
Business segment. Spending was reduced globally as compared
to the fourth quarter of 2018.
- Sales and business development expense increased 16.0% from the
first quarter of 2018 to $4.4 million due to sales related
activities of the ETFS acquired business. These expenses
decreased 12.2% from the fourth quarter of 2018 due to lower
spending on sales related activities globally.
- Contractual gold payments expense increased 6.2% from the
fourth quarter of 2018 to $3.1 million. This expense was
associated with the payment of 2,375 ounces of gold and was
calculated using an average daily spot price of $1,304 and $1,229
per ounce, during the first quarter of 2019 and fourth quarter of
2018, respectively.
- Professional and consulting fees decreased 9.4% and 48.1% from
the first quarter of 2018 and fourth quarter of 2018, respectively,
to $1.5 million due to lower spending on corporate
consulting-related expenses.
- Occupancy, communications and equipment expense increased 18.7%
from the first quarter of 2018 to $1.6 million due to additional
office space associated with the ETFS Acquisition. These
expenses were essentially unchanged from the fourth quarter of
2018.
- Depreciation expense decreased 24.2% and 11.2% from the first
quarter of 2018 and fourth quarter of 2018, respectively, to $0.3
million primarily due to the closure of our office in Japan.
- Third-party distribution fees increased 39.1% and 32.4% from
the first quarter of 2018 and fourth quarter of 2018, respectively,
to $2.4 million primarily due to one-time fees for a platform
relationship.
- Acquisition-related costs decreased 84.8% and 68.9% from the
first quarter of 2018 and fourth quarter of 2018, respectively, to
$0.3 million as the integration of ETFS is essentially
complete.
- Other expenses increased 14.7% from the first quarter of 2018
to $2.1 million primarily due to higher International Business
segment office expenses associated with an increase in headcount
from the ETFS Acquisition. These expenses decreased 6.8% from
the fourth quarter of 2018 due to lower levels of miscellaneous
spending.
Other Income/(Expenses)
- Interest expense of $2.9 million was essentially unchanged from
the fourth quarter of 2018.
- We recognized a gain on revaluation of deferred consideration
of $4.4 million and a loss of ($5.4) million during the first
quarter of 2019 and fourth quarter of 2018, respectively. The
gain arose in the current quarter as the forward-looking gold curve
flattened when compared to the forward-looking gold curve on
December 31, 2018, the date on which the deferred consideration was
last measured. The magnitude of any gain or loss recognized
is highly correlated to the magnitude of the change in the
forward-looking price of gold.
- Interest income decreased 19.0% from the first quarter of 2018
to $0.8 million due to the maturity of our short-term investment
grade portfolio in the first quarter of 2018, partly offset by
paid-in-kind (“PIK”) interest on a note receivable from
AdvisorEngine Inc. Interest income was essentially unchanged
from the fourth quarter of 2018.
- We recognized an impairment of $0.6 million during the first
quarter of 2019 in connection with the termination of our Japan
office lease.
- Other gains/(losses), net were ($4.6) million, ($0.3) million
and $0.4 million during the first quarter of 2019, first quarter of
2018 and fourth quarter of 2018, respectively. Included in
the first quarter of 2019 is a charge of $4.3 million arising from
a release of a tax-related indemnification asset upon the
expiration of the statute of limitations. The indemnification
arose from tax exposures assumed in the ETFS Acquisition. An
equal and offsetting benefit has been recognized in income tax
expense. In addition, gains and losses generally arise from
the sale of gold earned from management fees paid by our
physically-backed gold ETPs, foreign exchange fluctuations,
securities owned and other miscellaneous items.
Income Taxes
We recorded an income tax benefit of $1.0 million (-13.5%
effective tax rate). Our adjusted effective income tax rate
was 26.9%1 which excludes the $4.3 million recognized in connection
with the release of the tax-related indemnification asset described
above, the non-taxable gain on revaluation of deferred
consideration and tax shortfalls associated with the vesting and
exercise of stock-based compensation awards.
Balance Sheet
As of March 31, 2019, we had total assets of $919.9 million
which consisted primarily of intangible assets and goodwill of
$689.1 million, and cash and securities owned of
$105.5 million. There were approximately
155.1 million shares of our common stock outstanding as of
March 31, 2019.
Quarterly Dividend and Buyback
Our Board of Directors declared a quarterly cash dividend of
$0.03 per share of our common stock. The dividend will be paid on
May 22, 2019 to stockholders of record as of the close of business
on May 8, 2019.
On April 24, 2019, our Board of Directors extended the term
of our share repurchase program for three years through
April 27, 2022. As of March 31, 2019, $83.7 million remained
under this program for future purchases, which will include
purchases to offset future equity grants made under our equity
plans and will be made in open market or privately negotiated
transactions. This authority may be exercised from time to time and
in such amounts as market conditions warrant, and subject to the
terms of our credit agreement and regulatory considerations. The
timing and actual number of shares repurchased will depend on a
variety of factors including price, corporate and regulatory
requirements, market conditions, and other corporate liquidity
requirements and priorities. The repurchase program may be
suspended or terminated at any time without prior notice.
Conference Call
WisdomTree will discuss its results and operational highlights
during a conference call on Friday, April 26, 2019 at 9:00 a.m. ET.
The call-in number will be (877) 303-7209. Anyone outside
the U.S. or Canada should call (970) 315-0420. The slides
used during the presentation will be available at
http://ir.wisdomtree.com. For those unable to join the conference
call at the scheduled time, an audio replay will be available on
http://ir.wisdomtree.com.
Cautionary Statement Regarding
Forward-Looking Statements
This press release contains forward-looking statements that are
based on our management’s beliefs and assumptions and on
information currently available to our management. Although we
believe that the expectations reflected in these forward-looking
statements are reasonable, these statements relate to future events
or our future financial performance, and involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievements expressed or implied by these
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “will,”
“should,” “expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “continue” or the negative of
these terms or other comparable terminology. These statements are
only predictions. You should not place undue reliance on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which are, in some cases,
beyond our control and which could materially affect results.
Factors that may cause actual results to differ materially from
current expectations include, among other 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;
- our ability to develop new products and services;
- our ability to maintain current vendors or find new vendors to
provide services to us at favorable costs;
- our ability to successfully operate and expand our business in
non-U.S. markets; and
- the effect of laws and regulations that apply to our
business.
Our business is subject to many risks and uncertainties,
including without limitation:
- Declining prices of securities, precious metals and other
commodities 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, may
negatively impact revenues and operating margins, and may impede
our ability to refinance our debt upon maturity, increase the cost
of borrowing or result in our debt being called prior to
maturity.
- Withdrawals or broad changes in investments in our ETPs by
investors with significant positions may negatively impact revenues
and operating margins.
- 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 the performance of these products and our
ability to maintain the AUM of these products, as well as investor
sentiment toward investing in the products’ strategies and
market-specific and political and economic risk.
- A significant portion of our AUM is held in ETFs that invest in
foreign securities and we therefore have substantial exposure to
foreign market conditions and are subject to currency exchange rate
risks.
- Net outflows in our two largest ETFs – the WisdomTree Europe
Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund –
have had, and in the future could continue to have, a negative
impact on our revenues.
- Over the last few years, we have expanded our business
globally. This expansion subjects us to increased operational,
regulatory, financial and other risks.
- Many of our ETPs and ETFs have a limited track record, and poor
investment performance could cause our revenues to decline.
- We depend on third parties to provide many critical services to
operate our business and our ETPs and ETFs. The failure of key
vendors to adequately provide such services could materially affect
our operating business and harm WisdomTree ETP investors.
Other factors, such as general economic conditions, including
currency exchange rate fluctuations, also may have an effect on the
results of our operations. For a more complete description of the
risks noted above and other risks that could cause our actual
results to differ from our current expectations, please see the
section entitled “Risk Factors” in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2018.
The forward-looking statements in this press release represent
our views as of the date of this press release. We anticipate
that subsequent events and developments may cause our views to
change. However, while we may elect to update these
forward-looking statements at some point in the future, we have no
current intention of doing so except to the extent required by
applicable law. Therefore, these forward-looking statements do
not represent our views as of any date other than the date of this
press release.
About WisdomTree
WisdomTree Investments, Inc., through its subsidiaries in the
U.S., Europe and Canada (collectively, “WisdomTree”), is an ETF and
ETP sponsor and asset manager headquartered in New
York. WisdomTree offers products covering equity, commodity,
fixed income, leveraged and inverse, currency and alternative
strategies. WisdomTree currently has approximately $59.3 billion in
assets under management globally.
WisdomTree® is the marketing name for WisdomTree Investments,
Inc. and its subsidiaries worldwide._____________
1 |
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|
See
“Non-GAAP Financial Measurements.” |
|
|
|
|
|
|
2 |
|
|
|
|
Adjusted
net income is now calculated excluding tax shortfalls and windfalls
upon the vesting and exercise of stock-based compensation
awards. Amounts previously reported as adjusted net income
have been restated to conform with our current presentation.
This change had no impact to previously reported adjusted earnings
per share for the first and fourth quarters of 2018. |
|
|
|
|
|
|
3 |
|
|
|
|
Gross
margin is now calculated as total operating revenues, less fund
management and administration expenses. Gross margin
percentage is calculated as gross margin divided by total operating
revenues. See “Non-GAAP Financial Measurements” below for
additional information. Amounts previously reported as gross
margin for the U.S. Business segment have been restated to conform
with our current presentation. |
Contact
Information: |
|
Investor Relations |
|
|
|
|
|
|
|
|
|
|
|
Media Relations |
WisdomTree Investments, Inc. |
|
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|
|
WisdomTree Investments, Inc. |
Jason Weyeneth, CFA |
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|
Jessica Zaloom |
+1.917.267.3858 |
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|
+1.917.267.3735 |
jweyeneth@wisdomtree.com |
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jzaloom@wisdomtree.com |
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WISDOMTREE INVESTMENTS, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share
amounts) (Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
% Change From |
|
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
|
Dec. 31, 2018 |
|
|
Mar. 31, 2018 |
Operating
Revenues: |
|
|
|
|
|
|
|
|
Advisory fees |
$ |
64,840 |
|
$ |
67,191 |
|
$ |
58,456 |
|
|
-3.5% |
|
|
10.9% |
Other
income |
|
645 |
|
|
676 |
|
|
448 |
|
|
-4.6% |
|
|
44.0% |
Total
revenues |
|
65,485 |
|
|
67,867 |
|
|
58,904 |
|
|
-3.5% |
|
|
11.2 % |
|
|
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
Compensation
and benefits |
|
21,301 |
|
|
18,838 |
|
|
18,832 |
|
|
13.1 % |
|
|
13.1 % |
Fund
management and administration |
|
15,166 |
|
|
15,861 |
|
|
10,912 |
|
|
-4.4% |
|
|
39.0 % |
Marketing
and advertising |
|
2,680 |
|
|
3,672 |
|
|
3,195 |
|
|
-27.0% |
|
|
-16.1% |
Sales and
business development |
|
4,422 |
|
|
5,036 |
|
|
3,813 |
|
|
-12.2% |
|
|
16.0 % |
Contractual
gold payments |
|
3,098 |
|
|
2,917 |
|
|
— |
|
|
6.2 % |
|
|
n/a |
Professional
and consulting fees |
|
1,482 |
|
|
2,854 |
|
|
1,636 |
|
|
-48.1% |
|
|
-9.4% |
Occupancy,
communications and equipment |
|
1,618 |
|
|
1,544 |
|
|
1,363 |
|
|
4.8 % |
|
|
18.7 % |
Depreciation
and amortization |
|
269 |
|
|
303 |
|
|
355 |
|
|
-11.2% |
|
|
-24.2% |
Third-party
distribution fees |
|
2,400 |
|
|
1,813 |
|
|
1,725 |
|
|
32.4 % |
|
|
39.1 % |
Acquisition-related costs |
|
313 |
|
|
1,008 |
|
|
2,062 |
|
|
-68.9% |
|
|
-84.8% |
Other |
|
2,053 |
|
|
2,202 |
|
|
1,790 |
|
|
-6.8% |
|
|
14.7 % |
Total
expenses |
|
54,802 |
|
|
56,048 |
|
|
45,683 |
|
|
-2.2% |
|
|
20.0 % |
Operating income |
|
10,683 |
|
|
11,819 |
|
|
13,221 |
|
|
-9.6% |
|
|
-19.2% |
Other
Income/(Expenses): |
|
|
|
|
|
|
|
|
Interest
expense |
|
(2,892) |
|
|
(2,859) |
|
|
— |
|
|
1.2 % |
|
|
n/a |
Gain/(loss)
on revaluation of deferred consideration – gold payments |
|
4,404 |
|
|
(5,410) |
|
|
— |
|
|
n/a |
|
|
n/a |
Interest
income |
|
779 |
|
|
800 |
|
|
962 |
|
|
-2.6% |
|
|
-19.0% |
Impairments |
|
(572) |
|
|
(17,386) |
|
|
— |
|
|
-96.7% |
|
|
n/a |
Other gains
and losses, net |
|
(4,627) |
|
|
439 |
|
|
(261) |
|
|
n/a |
|
|
n/a |
Income/(loss) before
taxes |
|
7,775 |
|
|
(12,597) |
|
|
13,922 |
|
|
n/a |
|
|
-44.2% |
Income tax
(benefit)/expense |
|
(1,049) |
|
|
(1,033) |
|
|
4,498 |
|
|
1.5 % |
|
|
n/a |
Net
income/(loss) |
$ |
8,824 |
|
$ |
(11,564) |
|
$ |
9,424 |
|
|
n/a |
|
|
-6.4% |
Earnings/(loss) per share
– basic |
$ |
0.05 |
|
$ |
(0.08) |
|
$ |
0.07 |
|
|
|
|
|
|
Earnings/(loss) per share
– diluted |
$ |
0.05 |
|
$ |
(0.08) |
|
$ |
0.07 |
|
|
|
|
|
|
Weighted average common
shares – basic |
|
151,625 |
|
|
151,083 |
|
|
135,329 |
|
|
|
|
|
|
Weighted average common
shares – diluted |
|
166,811 |
|
|
151,083 |
|
|
136,468 |
|
|
|
|
|
|
WISDOMTREE INVESTMENTS, INC. AND
SUBSIDIARIESSEGMENT
INFORMATION(in
thousands)(Unaudited)
The following tables set forth the pre-tax operating results for
the Company’s U.S. Business and International Business
segments.
U.S. Business Segment
|
Three Months Ended |
% Change From |
|
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Mar. 31, 2018 |
Operating
Revenues: |
|
|
|
|
|
|
Advisory fees |
$ |
42,517 |
|
$ |
45,633 |
|
$ |
55,518 |
|
|
-6.8% |
|
-23.4% |
Other
income |
|
106 |
|
|
126 |
|
|
147 |
|
|
-15.9% |
|
-27.9% |
Total
revenues |
|
42,623 |
|
|
45,759 |
|
|
55,665 |
|
|
-6.9% |
|
-23.4% |
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
|
Compensation
and benefits |
|
16,779 |
|
|
14,370 |
|
|
16,371 |
|
|
16.8% |
|
2.5% |
Fund
management and administration |
|
8,340 |
|
|
9,038 |
|
|
8,973 |
|
|
-7.7% |
|
-7.1% |
Marketing
and advertising |
|
2,162 |
|
|
2,704 |
|
|
2,843 |
|
|
-20.0% |
|
-24.0% |
Sales and
business development |
|
3,359 |
|
|
3,747 |
|
|
3,455 |
|
|
-10.4% |
|
-2.8% |
Professional
and consulting fees |
|
1,072 |
|
|
2,166 |
|
|
1,325 |
|
|
-50.5% |
|
-19.1% |
Occupancy,
communications and equipment |
|
1,283 |
|
|
1,205 |
|
|
1,225 |
|
|
6.5% |
|
4.7% |
Depreciation
and amortization |
|
246 |
|
|
280 |
|
|
339 |
|
|
-12.1% |
|
-27.4% |
Third-party
distribution fees |
|
2,338 |
|
|
1,789 |
|
|
1,649 |
|
|
30.7% |
|
41.8% |
Acquisition-related costs |
|
11 |
|
|
72 |
|
|
1,197 |
|
|
-84.7% |
|
-99.1% |
Other |
|
1,586 |
|
|
1,617 |
|
|
1,653 |
|
|
-1.9% |
|
-4.1% |
Total
expenses |
|
37,176 |
|
|
36,988 |
|
|
39,030 |
|
|
0.5% |
|
-4.8% |
Operating income |
|
5,447 |
|
|
8,771 |
|
|
16,635 |
|
|
-37.9% |
|
-67.3% |
Other
Income/(Expenses): |
|
|
|
|
|
|
Interest
expense |
|
(192) |
|
|
(197) |
|
|
— |
|
|
-2.5% |
|
n/a |
Interest
income |
|
779 |
|
|
800 |
|
|
962 |
|
|
-2.6% |
|
-19.0% |
Impairments |
|
(572) |
|
|
(17,386) |
|
|
— |
|
|
-96.7% |
|
n/a |
Other gains
and losses, net |
|
145 |
|
|
266 |
|
|
(226) |
|
|
-45.5% |
|
n/a |
Income/(loss) before
taxes |
$ |
5,607 |
|
$ |
(7,746) |
|
$ |
17,371 |
|
|
n/a |
|
-67.7% |
Operating income
margin |
|
12.8% |
|
|
19.2% |
|
|
29.9% |
|
|
|
|
|
International Business Segment
|
Three Months Ended |
% Change From |
|
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Mar. 31, 2018 |
Operating
Revenues: |
|
|
|
|
|
|
Advisory fees |
$ |
22,323 |
|
$ |
21,558 |
|
$ |
2,938 |
|
|
3.5% |
|
659.8% |
Other
income |
|
539 |
|
|
550 |
|
|
301 |
|
|
-2.0% |
|
79.1% |
Total
revenues |
|
22,862 |
|
|
22,108 |
|
|
3,239 |
|
|
3.4% |
|
605.8% |
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
and benefits |
|
4,522 |
|
|
4,468 |
|
|
2,461 |
|
|
1.2% |
|
83.7% |
Fund
management and administration |
|
6,826 |
|
|
6,823 |
|
|
1,939 |
|
|
0.0% |
|
252.0% |
Marketing
and advertising |
|
518 |
|
|
968 |
|
|
352 |
|
|
-46.5% |
|
47.2% |
Sales and
business development |
|
1,063 |
|
|
1,289 |
|
|
358 |
|
|
-17.5% |
|
196.9% |
Contractual
gold payments |
|
3,098 |
|
|
2,917 |
|
|
— |
|
|
6.2% |
|
n/a |
Professional
and consulting fees |
|
410 |
|
|
688 |
|
|
311 |
|
|
-40.4% |
|
31.8% |
Occupancy,
communications and equipment |
|
335 |
|
|
339 |
|
|
138 |
|
|
-1.2% |
|
142.8% |
Depreciation
and amortization |
|
23 |
|
|
23 |
|
|
16 |
|
|
0.0% |
|
43.8% |
Third-party
distribution fees |
|
62 |
|
|
24 |
|
|
76 |
|
|
158.3% |
|
-18.4% |
Acquisition-related costs |
|
302 |
|
|
936 |
|
|
865 |
|
|
-67.7% |
|
-65.1% |
Other |
|
467 |
|
|
585 |
|
|
137 |
|
|
-20.2% |
|
240.9% |
Total
expenses |
|
17,626 |
|
|
19,060 |
|
|
6,653 |
|
|
-7.5% |
|
164.9% |
Operating income |
|
5,236 |
|
|
3,048 |
|
|
(3,414) |
|
|
71.8% |
|
-253.4% |
Other
Income/(Expenses): |
|
|
|
|
|
|
Interest
expense |
|
(2,700) |
|
|
(2,662) |
|
|
— |
|
|
1.4% |
|
n/a |
Gain/(loss)
on revaluation of deferred consideration – gold payments |
|
4,404 |
|
|
(5,410) |
|
|
— |
|
|
n/a |
|
n/a |
Other gains
and losses, net |
|
(4,772) |
|
|
173 |
|
|
(35) |
|
|
n/a |
|
n/a |
Income/(loss) before
taxes |
$ |
2,168 |
|
$ |
(4,851) |
|
$ |
(3,449) |
|
|
n/a |
|
n/a |
Operating income
margin |
|
22.9% |
|
|
13.8% |
|
|
n/a |
|
|
|
|
|
WISDOMTREE INVESTMENTS, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
|
|
|
|
Mar. 31, 2019 |
December 31, 2018 |
|
(Unaudited) |
|
ASSETS |
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$ |
78,942 |
|
$ |
77,784 |
|
Securities
owned, at fair value |
|
6,419 |
|
|
8,873 |
|
Accounts
receivable |
|
28,136 |
|
|
25,834 |
|
Income taxes
receivable |
|
1,770 |
|
|
1,181 |
|
Prepaid
expenses |
|
4,037 |
|
|
4,441 |
|
Other
current assets |
|
164 |
|
|
163 |
|
Total
current assets |
|
119,468 |
|
|
118,276 |
|
Fixed assets, net |
|
8,863 |
|
|
9,122 |
|
Note receivable |
|
29,317 |
|
|
28,722 |
|
Securities
held-to-maturity |
|
20,159 |
|
|
20,180 |
|
Deferred tax assets,
net |
|
3,998 |
|
|
7,042 |
|
Investments, carried at
cost |
|
28,080 |
|
|
28,080 |
|
Right of use assets –
operating leases |
|
19,446 |
|
|
— |
|
Goodwill |
|
85,856 |
|
|
85,856 |
|
Intangible assets |
|
603,251 |
|
|
603,209 |
|
Other noncurrent
assets |
|
1,486 |
|
|
2,155 |
|
Total assets |
$ |
919,924 |
|
$ |
902,642 |
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
LIABILITIES |
|
|
Current liabilities: |
|
|
Fund
management and administration payable |
$ |
26,921 |
|
$ |
22,508 |
|
Compensation
and benefits payable |
|
9,214 |
|
|
18,453 |
|
Deferred
consideration – gold payments |
|
11,857 |
|
|
11,765 |
|
Securities
sold, but not yet purchased, at fair value |
|
1,338 |
|
|
1,698 |
|
Operating
lease liabilities |
|
3,651 |
|
|
— |
|
Accounts
payable and other liabilities |
|
9,772 |
|
|
8,377 |
|
Total
current liabilities |
|
62,753 |
|
|
62,801 |
|
Long-term
debt |
|
195,174 |
|
|
194,592 |
|
Deferred
consideration – gold payments |
|
145,290 |
|
|
149,775 |
|
Operating
lease liabilities |
|
20,704 |
|
|
— |
|
Deferred
rent payable |
|
— |
|
|
4,570 |
|
Total liabilities |
|
423,921 |
|
|
411,738 |
|
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; 250,000 shares authorized: |
|
|
Issued and
outstanding: 155,056 and 153,202 at March 31, 2019 and
December 31, 2018, respectively |
|
1,551 |
|
|
1,532 |
|
Additional paid-in
capital |
|
364,717 |
|
|
363,655 |
|
Accumulated other
comprehensive income |
|
758 |
|
|
467 |
|
Accumulated deficit |
|
(3,592) |
|
|
(7,319) |
|
Total stockholders’
equity |
|
363,434 |
|
|
358,335 |
|
Total liabilities and
stockholders’ equity |
$ |
919,924 |
|
$ |
902,642 |
|
WISDOMTREE INVESTMENTS, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH
FLOWS (in thousands)
(Unaudited)
|
|
|
|
Three Months Ended |
|
Mar. 31, 2019 |
Mar. 31, 2018 |
Cash flows from
operating activities: |
|
|
Net income |
$ |
8,824 |
|
$ |
9,424 |
|
Adjustments
to reconcile net income to net cash provided by/(used in) operating
activities: |
|
|
Advisory
fees received in gold and other precious metals |
|
(11,389) |
|
|
— |
|
Gain on
revaluation of deferred consideration – gold payments |
|
(4,404) |
|
|
— |
|
Contractual
gold payments |
|
3,098 |
|
|
— |
|
Stock-based
compensation |
|
3,072 |
|
|
3,309 |
|
Deferred
income taxes |
|
3,048 |
|
|
(136) |
|
Amortization
of right of use asset |
|
798 |
|
|
— |
|
Amortization
of credit facility issuance costs |
|
711 |
|
|
— |
|
Paid-in-kind
interest income |
|
(595) |
|
|
(416) |
|
Impairment |
|
572 |
|
|
— |
|
Depreciation
and amortization |
|
269 |
|
|
355 |
|
Other |
|
3 |
|
|
661 |
|
Changes in
operating assets and liabilities: |
|
|
Securities
owned, at fair value |
|
2,454 |
|
|
1,106 |
|
Accounts
receivable |
|
(1,939) |
|
|
606 |
|
Income taxes
receivable/payable |
|
(604) |
|
|
4,297 |
|
Prepaid
expenses |
|
419 |
|
|
(360) |
|
Gold and
other precious metals |
|
7,975 |
|
|
— |
|
Other
assets |
|
182 |
|
|
160 |
|
Fund
management and administration payable |
|
4,274 |
|
|
(1,744) |
|
Compensation
and benefits payable |
|
(9,250) |
|
|
(22,003) |
|
Securities
sold, but not yet purchased, at fair value |
|
(360) |
|
|
(950) |
|
Operating
lease liabilities |
|
(881) |
|
|
— |
|
Accounts
payable and other liabilities |
|
1,575 |
|
|
855 |
|
Net cash
provided by/(used in) operating activities |
|
7,852 |
|
|
(4,836) |
|
|
|
|
Cash flows from
investing activities: |
|
|
Purchase of
fixed assets |
|
(7) |
|
|
(17) |
|
Proceeds
from held-to-maturity securities maturing or called prior to
maturity |
|
18 |
|
|
32 |
|
Proceeds
from sales and maturities of debt securities
available-for-sale |
|
— |
|
|
60,498 |
|
Net cash
provided by investing activities |
|
11 |
|
|
60,513 |
|
|
|
|
Cash flows from
financing activities: |
|
|
Dividends
paid |
|
(5,097) |
|
|
(4,132) |
|
Shares
repurchased |
|
(2,005) |
|
|
(734) |
|
Proceeds
from exercise of stock options |
|
14 |
|
|
54 |
|
Net cash
used in financing activities |
|
(7,088) |
|
|
(4,812) |
|
Increase in cash flows due
to changes in foreign exchange rate |
|
383 |
|
|
593 |
|
Net increase in cash and
cash equivalents |
|
1,158 |
|
|
51,458 |
|
Cash and cash equivalents
– beginning of period |
|
77,784 |
|
|
54,193 |
|
Cash and cash equivalents
– end of period |
$ |
78,942 |
|
$ |
105,651 |
|
|
|
|
Supplemental
disclosure of cash flow information: |
|
|
Cash paid
for taxes |
$ |
707 |
|
$ |
339 |
|
Cash paid
for interest |
$ |
2,224 |
|
$ |
— |
|
WisdomTree Investments, Inc.
Key Operating Statistics
(Unaudited) |
|
|
|
|
Three Months Ended |
|
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
U.S. LISTED ETFs
(in millions) |
|
|
|
Beginning of period
assets |
$ |
35,486 |
|
$ |
41,556 |
|
$ |
46,827 |
|
Inflows/(outflows) |
|
147 |
|
|
(893) |
|
|
(2,167) |
|
Market
appreciation/(depreciation) |
|
3,820 |
|
|
(5,177) |
|
|
(1,729) |
|
Fund
closures |
|
(87) |
|
|
— |
|
|
(45) |
|
End of
period assets |
$ |
39,366 |
|
$ |
35,486 |
|
$ |
42,886 |
|
Average
assets during the period |
$ |
38,061 |
|
$ |
38,246 |
|
$ |
45,618 |
|
Average ETF
advisory fee during the period |
|
0.45% |
|
|
0.47% |
|
|
0.49% |
|
Revenue
days |
|
90 |
|
|
92 |
|
|
90 |
|
Number of
ETFs – end of the period |
|
77 |
|
|
85 |
|
|
81 |
|
|
|
|
|
INTERNATIONAL
LISTED ETPs (in millions) |
|
|
|
Beginning of
period assets |
$ |
18,608 |
|
$ |
17,587 |
|
$ |
2,110 |
|
Inflows/(outflows) |
|
414 |
|
|
1,138 |
|
|
(47) |
|
Market
appreciation/(depreciation) |
|
545 |
|
|
(117) |
|
|
12 |
|
End of
period assets |
$ |
19,567 |
|
$ |
18,608 |
|
$ |
2,075 |
|
Average
assets during the period |
$ |
19,616 |
|
$ |
18,175 |
|
$ |
2,106 |
|
Average ETP
advisory fee during the period |
|
0.47% |
|
|
0.47% |
|
|
0.57% |
|
Number of
ETPs – end of the period |
|
457 |
|
|
452 |
|
|
99 |
|
|
|
|
|
PRODUCT CATEGORIES
(in millions) |
|
|
|
|
|
|
|
Commodity &
Currency |
|
|
|
Beginning of
period assets |
$ |
16,251 |
|
$ |
15,039 |
|
$ |
445 |
|
Inflows/(outflows) |
|
227 |
|
|
984 |
|
|
(28) |
|
Market
appreciation/(depreciation) |
|
358 |
|
|
228 |
|
|
(1) |
|
End of
period assets |
$ |
16,836 |
|
$ |
16,251 |
|
$ |
416 |
|
Average
assets during the period |
$ |
17,027 |
|
$ |
15,658 |
|
$ |
426 |
|
|
|
|
|
U.S.
Equity |
|
|
|
Beginning of
period assets. |
$ |
13,334 |
|
$ |
15,187 |
|
$ |
14,234 |
|
Inflows/(outflows) |
|
632 |
|
|
394 |
|
|
47 |
|
Market
appreciation/(depreciation) |
|
1,914 |
|
|
(2,247) |
|
|
(922) |
|
End of
period assets |
$ |
15,880 |
|
$ |
13,334 |
|
$ |
13,359 |
|
Average
assets during the period |
$ |
14,947 |
|
$ |
14,291 |
|
$ |
14,122 |
|
|
|
|
|
International
Developed Market Equity |
|
|
|
Beginning of
period assets |
$ |
14,532 |
|
$ |
19,590 |
|
$ |
25,950 |
|
Inflows/(outflows) |
|
(1,553) |
|
|
(2,384) |
|
|
(2,704) |
|
Market
appreciation/(depreciation) |
|
1,438 |
|
|
(2,674) |
|
|
(814) |
|
End of
period assets |
$ |
14,417 |
|
$ |
14,532 |
|
$ |
22,432 |
|
Average
assets during the period |
$ |
14,525 |
|
$ |
16,962 |
|
$ |
24,435 |
|
|
|
|
|
Emerging Market
Equity |
|
|
|
Beginning of
period assets |
$ |
5,278 |
|
$ |
5,346 |
|
$ |
5,887 |
|
Inflows/(outflows) |
|
(84) |
|
|
233 |
|
|
425 |
|
Market
appreciation/(depreciation) |
|
536 |
|
|
(301) |
|
|
(23) |
|
End of
period assets |
$ |
5,730 |
|
$ |
5,278 |
|
$ |
6,289 |
|
Average
assets during the period |
$ |
5,502 |
|
$ |
5,148 |
|
$ |
6,259 |
|
|
|
|
|
Fixed
Income |
|
|
|
Beginning of
period assets |
$ |
2,570 |
|
$ |
1,721 |
|
$ |
862 |
|
Inflows/(outflows) |
|
1,418 |
|
|
880 |
|
|
253 |
|
Market
appreciation/(depreciation) |
|
35 |
|
|
(31) |
|
|
(14) |
|
End of
period assets |
$ |
4,023 |
|
$ |
2,570 |
|
$ |
1,101 |
|
Average
assets during the period |
$ |
3,511 |
|
$ |
2,140 |
|
$ |
1,014 |
|
|
|
|
|
Leveraged &
Inverse |
|
|
|
Beginning of
period assets |
$ |
1,282 |
|
$ |
1,445 |
|
$ |
930 |
|
Inflows/(outflows) |
|
67 |
|
|
(1) |
|
|
(135) |
|
Market
appreciation/(depreciation |
|
70 |
|
|
(162) |
|
|
77 |
|
End of
period assets |
$ |
1,419 |
|
$ |
1,282 |
|
$ |
872 |
|
Average
assets during the period |
$ |
1,408 |
|
$ |
1,393 |
|
$ |
877 |
|
|
|
|
|
Alternatives |
|
|
|
Beginning of
period assets |
$ |
755 |
|
$ |
674 |
|
$ |
582 |
|
Inflows/(outflows) |
|
(141) |
|
|
178 |
|
|
(70) |
|
Market
appreciation/(depreciation) |
|
14 |
|
|
(97) |
|
|
(20) |
|
End of
period assets |
$ |
628 |
|
$ |
755 |
|
$ |
492 |
|
Average
assets during the period |
$ |
666 |
|
$ |
712 |
|
$ |
547 |
|
|
|
|
|
Closed
ETPs |
|
|
|
Beginning of
period assets |
$ |
92 |
|
$ |
141 |
|
$ |
47 |
|
Inflows/(outflows) |
|
(5) |
|
|
(39) |
|
|
(2) |
|
Market
appreciation/(depreciation) |
|
— |
|
|
(10) |
|
|
— |
|
Fund
closures |
|
(87) |
|
|
— |
|
|
(45) |
|
End of
period assets |
$ |
— |
|
$ |
92 |
|
$ |
— |
|
Average
assets during the period |
$ |
91 |
|
$ |
117 |
|
$ |
44 |
|
|
|
|
|
Headcount – U.S.
Business segment |
|
141 |
|
|
153 |
|
|
157 |
|
Headcount –
International Business segment |
|
75 |
|
|
75 |
|
|
34 |
|
Note: Previously issued statistics may be restated due to fund
closures and trade adjustments Source: WisdomTree
Non-GAAP Financial Measurements
In an effort to provide additional information regarding our
results as determined by GAAP, we also disclose certain non-GAAP
information which we believe provides useful and meaningful
information. Our management reviews these non-GAAP financial
measurements when evaluating our financial performance and results
of operations; therefore, we believe it is useful to provide
information with respect to these non-GAAP measurements so as to
share this perspective of management. Non-GAAP measurements do not
have any standardized meaning, do not replace nor are superior to
GAAP financial measurements and are unlikely to be comparable to
similar measures presented by other companies. These non-GAAP
financial measurements should be considered in the context with our
GAAP results. The non-GAAP financial measurements contained in this
release include:
- Adjusted net income and adjusted diluted earnings per
share. We disclose adjusted net income and adjusted 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 measures provides investors with a consistent
way to analyze our performance. These non-GAAP financial
measures exclude the following:
- Unrealized gains or losses on the revaluation of deferred
consideration: Deferred consideration is an obligation we
assumed in connection with the ETFS Acquisition that is carried at
fair value. This item represents the present value of an
obligation to pay fixed ounces of gold into perpetuity and is
measured using forward-looking gold prices. Changes in the
forward-looking price of gold may have a material impact on the
carrying value of the deferred consideration and our reported net
income. We exclude this item when arriving at adjusted net
income and adjusted diluted earnings per share as it is not core to
our operating business. The item is not adjusted for income
taxes as the obligation was assumed by a wholly-owned subsidiary of
ours that is based in Jersey, a jurisdiction where we are subject
to a zero percent tax rate.
- Tax shortfalls and windfalls 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 determining adjusted net income and adjusted
diluted earnings per share as they introduce volatility in earnings
and are not core to our operating business.
- Non-recurring items: Severance expense of $2.0 million
(or $1.5 million after-tax) for both the first quarter of 2019 and
fourth quarter of 2018, acquisition-related costs of $0.3 million,
$1.0 million and $2.1 million (or $0.3 million, $0.8 million and
$1.9 million after-tax) for the first quarter of 2019, fourth
quarter of 2018 and first quarter of 2018, respectively, and
impairments of $0.6 million and $17.4 million (or $0.6 million and
$14.0 million after-tax) for the first quarter of 2019 and fourth
quarter of 2018, respectively, are excluded when determining
adjusted net income and adjusted earnings per share.
- 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. Income tax expense and
income before income taxes has been adjusted for the $4.3 million
reduction in unrecognized tax benefits and offsetting reduction of
a tax-related indemnification asset. In addition, see
“adjusted net income and adjusted diluted earnings per share” above
for information regarding the other items that are
excluded.
- Gross margin and gross margin percentage. We disclose our
gross margin and gross margin percentage as non-GAAP financial
measurements for our U.S. Business segment and International
Business segment 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
ratios 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.
- Adjusted operating income margin. We disclose adjusted
operating income margin as a non-GAAP financial measurement on a
consolidated basis, as well as for our U.S. Business segment and
International Business segment in order to report our operating
income margin exclusive of items that are non-recurring or not core
to our operating business.
WISDOMTREE INVESTMENTS, INC. AND
SUBSIDIARIES GAAP to NON-GAAP
RECONCILIATION (in thousands)
(Unaudited) Consolidated
|
|
|
|
|
|
|
Three Months Ended |
|
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
Adjusted Net Income
and Diluted Earnings per Share: |
|
2019 |
2018 |
2018 |
Net income/(loss), as
reported |
|
$ |
8,824 |
|
$ |
(11,564) |
|
$ |
9,424 |
Add
back/(deduct): Unrealized loss/(gain) on revaluation of deferred
consideration |
|
|
(4,404) |
|
|
5,410 |
|
|
— |
Add back:
Severance expense, net of income taxes |
|
|
1,521 |
|
|
1,526 |
|
|
— |
Add
back/(deduct): Tax shortfalls/(windfalls) upon vesting and exercise
of stock-based compensation awards |
|
|
971 |
|
|
(403) |
|
|
(269) |
Add back:
Impairments, net of income taxes |
|
|
572 |
|
|
14,048 |
|
|
— |
Add back:
Acquisition-related costs, net of income taxes |
|
|
253 |
|
|
812 |
|
|
1,851 |
Adjusted net income |
|
$ |
7,737 |
|
$ |
9,829 |
|
$ |
11,006 |
Weighted average common
shares - diluted |
|
|
166,811 |
|
|
166,686 |
|
|
136,468 |
Adjusted earnings per
share - diluted |
|
$ |
0.05 |
|
$ |
0.06 |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
Adjusted Operating Income Margin: |
|
2019 |
2018 |
2018 |
Operating revenues |
|
$ |
65,485 |
|
$ |
67,867 |
|
$ |
58,904 |
Operating income |
|
$ |
10,683 |
|
$ |
11,819 |
|
$ |
13,221 |
Add back:
Severance expense, before income taxes |
|
|
2,020 |
|
|
2,014 |
|
|
— |
Add back:
Acquisition-related costs, before income taxes |
|
|
313 |
|
|
1,008 |
|
|
2,062 |
Adjusted operating
income |
|
$ |
13,016 |
|
$ |
14,841 |
|
$ |
15,283 |
Adjusted operating income
margin |
|
|
19.9% |
|
|
21.9% |
|
|
25.9% |
|
|
Three Months Ended |
|
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
Adjusted Effective
Income Tax Rate: |
|
2019 |
2018 |
2018 |
Income/(loss) before
income taxes |
|
$ |
7,775 |
|
$ |
(12,597) |
|
$ |
13,922 |
Add
back/(deduct): Unrealized loss/(gain) on revaluation of deferred
consideration |
|
|
(4,404) |
|
|
5,410 |
|
|
— |
Add back:
Loss recognized upon reduction of a tax-related indemnification
asset |
|
|
4,310 |
|
|
— |
|
|
— |
Add back:
Severance expense, before income taxes |
|
|
2,020 |
|
|
2,014 |
|
|
— |
Add back:
Impairments, before income taxes |
|
|
572 |
|
|
17,386 |
|
|
— |
Add back:
Acquisition-related costs, before income taxes |
|
|
313 |
|
|
1,008 |
|
|
2,062 |
Adjusted income before
income taxes |
|
$ |
10,586 |
|
$ |
13,221 |
|
$ |
15,984 |
|
|
|
|
|
|
|
|
|
|
Income tax
(benefit)/expense |
|
$ |
(1,049) |
|
$ |
(1,033) |
|
$ |
4,498 |
Add back:
Tax benefit arising from impairments |
|
|
— |
|
|
3,338 |
|
|
— |
Add back:
Tax benefit arising from reduction in unrecognized tax
benefits |
|
|
4,310 |
|
|
— |
|
|
— |
Add
back/(deduct): Tax windfalls/(shortfalls) upon vesting and exercise
of stock-based compensation awards |
|
|
(971) |
|
|
403 |
|
|
269 |
Add back:
Tax benefit arising from severance expense |
|
|
499 |
|
|
488 |
|
|
— |
Add back:
Tax benefit arising from acquisition-related costs |
|
|
60 |
|
|
196 |
|
|
211 |
Adjusted income tax
expense |
|
$ |
2,849 |
|
$ |
3,392 |
|
$ |
4,978 |
Adjusted effective income
tax rate |
|
|
26.9% |
|
|
25.7% |
|
|
31.1% |
U.S. Business Segment |
|
|
|
|
|
|
Three Months Ended |
|
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
Gross Margin and
Gross Margin Percentage: |
|
2019 |
2018 |
2018 |
Operating revenues |
|
$ |
42,623 |
|
$ |
45,759 |
|
$ |
55,665 |
Less: Fund
management and administration |
|
|
(8,340) |
|
|
(9,038) |
|
|
(8,973) |
Gross margin |
|
$ |
34,283 |
|
$ |
36,721 |
|
$ |
46,692 |
Gross margin
percentage |
|
|
80.4% |
|
|
80.2% |
|
|
83.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
Adjusted Operating Income Margin: |
|
|
2019 |
|
|
2018 |
|
2018 |
Operating revenues |
|
$ |
42,623 |
|
$ |
45,759 |
|
$ |
55,665 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
5,447 |
|
$ |
8,771 |
|
$ |
16,635 |
Add back:
Severance expense, before income taxes |
|
|
2,020 |
|
|
2,014 |
|
|
— |
Add back:
Acquisition-related costs, before income taxes |
|
|
11 |
|
|
72 |
|
|
1,197 |
|
|
|
|
|
Adjusted operating
income |
|
$ |
7,478 |
|
$ |
10,857 |
|
$ |
17,832 |
Adjusted operating income
margin |
|
|
17.5% |
|
|
23.7% |
|
|
32.0% |
International Business Segment
|
|
|
|
|
|
|
Three Months Ended |
|
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
Gross Margin and
Gross Margin Percentage: |
|
|
2019 |
|
|
2018 |
|
2018 |
Operating revenues |
|
$ |
22,862 |
|
$ |
22,108 |
|
$ |
3,239 |
Less: Fund
management and administration |
|
|
(6,826) |
|
|
(6,823) |
|
|
(1,939) |
Gross margin |
|
$ |
16,036 |
|
$ |
15,285 |
|
$ |
1,300 |
Gross margin
percentage |
|
|
70.1% |
|
|
69.1% |
|
|
40.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
Adjusted Operating Income Margin: |
|
|
2019 |
|
|
2018 |
|
2018 |
Operating revenues |
|
$ |
22,862 |
|
$ |
22,108 |
|
n/a |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
5,236 |
|
$ |
3,048 |
|
n/a |
Add back:
Acquisition-related costs, before income taxes |
|
|
302 |
|
|
936 |
|
n/a |
Adjusted operating
income |
|
$ |
5,538 |
|
$ |
3,984 |
|
n/a |
Adjusted operating income
margin |
|
|
24.2% |
|
|
18.0% |
|
n/a |
|
|
|
|
|
|
|
|
|
|
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