WisdomTree Investments, Inc. (NASDAQ: WETF) today reported
financial results for the fourth quarter of 2020.
($13.5) million net loss
($9.21 million net income, as
adjusted), see “Non-GAAP Financial Measurements” for
additional information.
$22.4 million of non-cash charges, associated
with the revaluation of deferred consideration – gold payments.
$67.4 billion of ending AUM, an increase of
11.0% arising from market appreciation and net inflows.
$881 million of net inflows, driven by inflows
into our emerging markets equity and U.S. equity products, partly
offset by outflows from our fixed income, commodity, international
developed market equity and leveraged & inverse products.
0.41% average global advisory fee, a decrease
of 1 basis point due to AUM mix shift.
$67.1 million of operating revenues, an
increase of 3.7% primarily due to higher average AUM, partly offset
by a lower average global advisory fee.
75.6% gross
margin1, a 0.9 point decrease primarily
due to Brexit and fund rebalancing costs.
19.2% operating income margin, a 3.6 point
decrease primarily due to higher operating expenses, partly offset
by higher revenues.
$0.03 quarterly dividend
declared, payable on February 24, 2021 to
stockholders of record as of the close of business on February 10,
2021.
Update from Jonathan Steinberg,
WisdomTree CEO
“Our business has more than navigated the global pandemic, we have
emerged stronger. Not only have we adapted to the remote working
environment without missing a beat, but we also gleaned new
operating efficiencies and competitive strengths that represent
real value for shareholders. These strengths include: Our leading
European-listed Bitcoin ETP approaching an inflection point; the
building of a profitable, fast-growing and complementary UCITS
platform; and the achievement of true diversification, powered by a
leadership position in gold.“We ended the year with momentum which
we are carrying into the new year. Our digital assets initiatives
reinforce and expand upon our core business strengths, as
WisdomTree is aggressively pursuing and is well-positioned for
success in this growing space. In 2020, we set our strategy for
these initiatives, and we have been designing workflows and
engaging productively with regulators with a goal of launching
products later this year.” |
Update from Jarrett Lilien, WisdomTree
President and COO
“I am very excited about our business. We ended 2020 with strong
growth and momentum. That momentum is continuing in 2021, and we
are well positioned and have a strong 2021 growth plan. To date, we
have seen global organic growth of $630 million and now have global
assets under management at a new record, just shy of $70
billion. “For 2021, with our dividend strategies, our
leadership position in gold and commodities, our best-in-market
crypto ETP offering, our cloud computing, AI and battery products,
recent global cybersecurity launch, as well as our leading ESG
offerings, we could not be better positioned.“Lastly, remote
working has worked for us. We have transformed our operating model
and we are working as a global team better than ever before. With a
fresh perspective we have found new efficiencies adding scalability
to our model and giving us scope to make further investments in
future growth. Our vision is to continue with a remote-first
approach post pandemic, ensuring that these efficiencies are
permanent and carried into future years.” |
OPERATING AND FINANCIAL HIGHLIGHTS
|
Three Months Ended |
|
Dec. 31,2020 |
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
Consolidated Operating
Highlights ($ in billions): |
|
|
|
|
|
AUM |
$ |
67.4 |
|
$ |
60.7 |
|
$ |
57.7 |
|
$ |
50.3 |
|
$ |
63.6 |
|
Net inflows/(outflows) |
$ |
0.9 |
|
$ |
(0.5 |
) |
$ |
0.1 |
|
$ |
(0.5 |
) |
$ |
0.4 |
|
Average AUM |
$ |
64.1 |
|
$ |
61.2 |
|
$ |
55.7 |
|
$ |
60.2 |
|
$ |
61.9 |
|
Average advisory fee |
|
0.41 |
% |
|
0.42 |
% |
|
0.41 |
% |
|
0.42 |
% |
|
0.44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial
Highlights ($ in millions, except per share amounts): |
|
|
|
|
|
Operating revenues |
$ |
67.1 |
|
$ |
64.6 |
|
$ |
58.1 |
|
$ |
63.9 |
|
$ |
68.9 |
|
Net loss |
$ |
(13.5 |
) |
$ |
(0.3 |
) |
$ |
(13.3 |
) |
$ |
(8.6 |
) |
$ |
(25.9 |
) |
Diluted loss per share |
$ |
(0.10 |
) |
$ |
(0.01 |
) |
$ |
(0.09 |
) |
$ |
(0.06 |
) |
$ |
(0.17 |
) |
Operating income margin |
|
19.2 |
% |
|
22.8 |
% |
|
20.3 |
% |
|
24.5 |
% |
|
21.5 |
% |
As Adjusted (Non-GAAP1): |
|
|
|
|
|
Gross margin |
|
75.6 |
% |
|
76.5 |
% |
|
75.1 |
% |
|
77.3 |
% |
|
77.3 |
% |
Net income, as adjusted |
$ |
9.2 |
|
$ |
11.0 |
|
$ |
8.5 |
|
$ |
11.2 |
|
$ |
10.1 |
|
Diluted earnings per share, as adjusted |
$ |
0.06 |
|
$ |
0.07 |
|
$ |
0.05 |
|
$ |
0.07 |
|
$ |
0.06 |
|
Operating income margin, as adjusted |
|
19.2 |
% |
|
22.8 |
% |
|
20.4 |
% |
|
25.1 |
% |
|
22.0 |
% |
|
|
|
|
|
|
RECENT BUSINESS DEVELOPMENTS
Company News
- In November 2020, we
were named as “European Smart Beta Provider of the Year” for the
second consecutive year and “European Fund Launch of the Year” for
the WisdomTree Cloud Computing UCITS ETF (WCLD), at the Funds
Europe Awards 2020.
- In December 2020, we
were named as Pensions & Investments’ “Best Places to Work” in
Money Management 2020 in the category for managers with 100-499
employees.
- In January 2021, we
announced the appointment of Smita Conjeevaram to our Board of
Directors.
Product News
- In November 2020,
the splits and consolidations of certain classes of WisdomTree
Multi Asset Issuer ETP securities were made effective.
Consolidations: WisdomTree Brent Crude Oil 3x Daily
Short (3BRS), WisdomTree NASDAQ 100 3x Daily
Short (QQQS), WisdomTree Natural Gas 3x Daily
Leveraged (3NGL), WisdomTree S&P 500 VIX
Short-Term Futures 2.25x Daily Leveraged (VIXL). Splits:
WisdomTree NASDAQ 100 3x Daily Leveraged (QQQ3); and we
relaunched the short and leveraged oil products; WisdomTree WTI
Crude Oil 3x Daily Leveraged (3OIL), WisdomTree WTI Crude Oil 3x
Daily Short (3OIS) and WisdomTree Brent Crude Oil 3x Daily
Leveraged (3BRL).
- In December 2020, we
declared final year-end U.S. capital gains distributions; we
announced the reorganization of the WisdomTree Enhanced Commodity
Strategy Fund (GCC) – previously the WisdomTree Continuous
Commodity Index Fund – with an updated approach to broad-based
commodity investing; we applied an ESG screen and introduced the
WisdomTree Composite Risk Score to WisdomTree US Quality Dividend
Growth UCITS ETF (DGRW), and WisdomTree US Equity Income UCITS ETF
(DHS); we implemented a number of volatility proofing measures for
four energy ETPs: WisdomTree WTI Crude Oil Pre-roll (WTID),
WisdomTree Brent Crude Oil Pre-roll (BRND), WisdomTree Natural Gas
3x Daily Short (3NGS) and WisdomTree Brent Crude Oil 3x Daily Short
(3BRS); and we listed the WisdomTree Core Physical Gold ETP (WGLD)
on the London Stock Exchange.
- In January 2021, we
introduced eNav (estimated NAV) in collaboration with Virtu
Financial to financial professionals available on WisdomTree’s
website; we announced the global launch of the WisdomTree Cyber
Security Fund (WCBR) on the NASDAQ, and the UCITS ETF on the London
Stock Exchange, Borsa Italiana and Börse Xetra; and we applied
an ESG screen to WisdomTree ex-State-Owned Enterprises Fund (XSOE),
WisdomTree China ex-State-Owned Enterprises Fund (CXSE) and India
ex-State-Owned Enterprises Fund (IXSE).
|
|
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Years Ended |
|
Dec. 31,2020 |
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
|
|
Dec. 31,2020 |
Dec. 31,2019 |
Operating
Revenues: |
|
|
|
|
|
|
|
Advisory fees |
$ |
66,105 |
|
|
$ |
63,919 |
|
|
$ |
57,208 |
|
|
$ |
62,950 |
|
|
$ |
68,179 |
|
|
$ |
250,182 |
|
|
$ |
265,652 |
|
Other income |
|
954 |
|
|
|
721 |
|
|
|
918 |
|
|
|
924 |
|
|
|
728 |
|
|
|
3,517 |
|
|
|
2,751 |
|
Total revenues |
|
67,059 |
|
|
|
64,640 |
|
|
|
58,126 |
|
|
|
63,874 |
|
|
|
68,907 |
|
|
|
253,699 |
|
|
|
268,403 |
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
20,827 |
|
|
|
19,098 |
|
|
|
17,455 |
|
|
|
17,295 |
|
|
|
19,280 |
|
|
|
74,675 |
|
|
|
80,761 |
|
Fund management and administration |
|
16,350 |
|
|
|
15,219 |
|
|
|
14,461 |
|
|
|
14,485 |
|
|
|
15,650 |
|
|
|
60,515 |
|
|
|
61,502 |
|
Marketing and advertising |
|
3,715 |
|
|
|
2,996 |
|
|
|
1,949 |
|
|
|
2,468 |
|
|
|
3,551 |
|
|
|
11,128 |
|
|
|
12,163 |
|
Sales and business development |
|
2,595 |
|
|
|
2,386 |
|
|
|
2,181 |
|
|
|
3,417 |
|
|
|
5,329 |
|
|
|
10,579 |
|
|
|
18,276 |
|
Contractual gold payments |
|
4,449 |
|
|
|
4,539 |
|
|
|
4,063 |
|
|
|
3,760 |
|
|
|
3,516 |
|
|
|
16,811 |
|
|
|
13,226 |
|
Professional and consulting fees |
|
1,322 |
|
|
|
950 |
|
|
|
1,357 |
|
|
|
1,273 |
|
|
|
1,604 |
|
|
|
4,902 |
|
|
|
5,641 |
|
Occupancy, communications and equipment |
|
1,622 |
|
|
|
1,611 |
|
|
|
1,643 |
|
|
|
1,551 |
|
|
|
1,587 |
|
|
|
6,427 |
|
|
|
6,302 |
|
Depreciation and amortization |
|
261 |
|
|
|
253 |
|
|
|
251 |
|
|
|
256 |
|
|
|
253 |
|
|
|
1,021 |
|
|
|
1,045 |
|
Third-party distribution fees |
|
1,291 |
|
|
|
1,233 |
|
|
|
1,340 |
|
|
|
1,355 |
|
|
|
1,146 |
|
|
|
5,219 |
|
|
|
6,968 |
|
Acquisition and disposition-related costs |
|
— |
|
|
|
— |
|
|
|
33 |
|
|
|
383 |
|
|
|
366 |
|
|
|
416 |
|
|
|
902 |
|
Other |
|
1,720 |
|
|
|
1,611 |
|
|
|
1,596 |
|
|
|
1,997 |
|
|
|
1,816 |
|
|
|
6,924 |
|
|
|
8,083 |
|
Total operating expenses |
|
54,152 |
|
|
|
49,896 |
|
|
|
46,329 |
|
|
|
48,240 |
|
|
|
54,098 |
|
|
|
198,617 |
|
|
|
214,869 |
|
Operating income |
|
12,907 |
|
|
|
14,744 |
|
|
|
11,797 |
|
|
|
15,634 |
|
|
|
14,809 |
|
|
|
55,082 |
|
|
|
53,534 |
|
Other
Income/(Expenses): |
|
|
|
|
|
|
|
Interest expense |
|
(2,694 |
) |
|
|
(2,511 |
) |
|
|
(2,044 |
) |
|
|
(2,419 |
) |
|
|
(2,606 |
) |
|
|
(9,668 |
) |
|
|
(11,240 |
) |
Loss on revaluation of deferred consideration – gold payments |
|
(22,385 |
) |
|
|
(8,870 |
) |
|
|
(23,358 |
) |
|
|
(2,208 |
) |
|
|
(5,354 |
) |
|
|
(56,821 |
) |
|
|
(11,293 |
) |
Interest income |
|
351 |
|
|
|
111 |
|
|
|
119 |
|
|
|
163 |
|
|
|
936 |
|
|
|
744 |
|
|
|
3,332 |
|
Impairments |
|
— |
|
|
|
(3,080 |
) |
|
|
— |
|
|
|
(19,672 |
) |
|
|
(30,138 |
) |
|
|
(22,752 |
) |
|
|
(30,710 |
) |
Loss on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
(2,387 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,387 |
) |
|
|
— |
|
Other gains and losses, net |
|
524 |
|
|
|
744 |
|
|
|
1,819 |
|
|
|
(2,507 |
) |
|
|
(2 |
) |
|
|
580 |
|
|
|
(3,502 |
) |
(Loss)/income before income
taxes |
|
(11,297 |
) |
|
|
1,138 |
|
|
|
(14,054 |
) |
|
|
(11,009 |
) |
|
|
(22,355 |
) |
|
|
(35,222 |
) |
|
|
121 |
|
Income tax expense/(benefit) |
|
2,200 |
|
|
|
1,408 |
|
|
|
(804 |
) |
|
|
(2,371 |
) |
|
|
3,525 |
|
|
|
433 |
|
|
|
10,546 |
|
Net loss |
$ |
(13,497 |
) |
|
$ |
(270 |
) |
|
$ |
(13,250 |
) |
|
$ |
(8,638 |
) |
|
$ |
(25,880 |
) |
|
$ |
(35,655 |
) |
|
$ |
(10,425 |
) |
Loss per share – basic |
|
($0.10 |
)2 |
|
($0.01 |
)2 |
|
($0.09 |
) |
|
($0.06 |
) |
|
($0.17 |
) |
|
($0.25 |
)2 |
|
($0.08 |
)2 |
Loss per share – diluted |
($0.10 |
)2 |
|
($0.01 |
)2 |
|
($0.09 |
) |
|
($0.06 |
) |
|
($0.17 |
) |
|
($0.25 |
)2 |
|
($0.08 |
)2 |
Weighted average common shares –
basic |
|
145,096 |
|
|
|
145,564 |
|
|
|
151,623 |
|
|
|
152,519 |
|
|
|
151,948 |
|
|
|
148,682 |
|
|
|
151,823 |
|
Weighted average common shares –
diluted |
|
145,096 |
|
|
|
145,564 |
|
|
|
151,623 |
|
|
|
152,519 |
|
|
|
151,948 |
|
|
|
148,682 |
|
|
|
151,823 |
|
|
|
|
|
|
|
|
|
As Adjusted
(Non-GAAP1) |
|
|
|
|
|
|
|
Total operating expenses |
$ |
54,152 |
|
|
$ |
49,896 |
|
|
$ |
46,296 |
|
|
$ |
47,857 |
|
|
$ |
53,732 |
|
|
|
|
Operating income |
$ |
12,907 |
|
|
$ |
14,744 |
|
|
$ |
11,830 |
|
|
$ |
16,017 |
|
|
$ |
15,175 |
|
|
|
|
Income before income taxes |
$ |
11,504 |
|
|
$ |
13,242 |
|
|
$ |
10,911 |
|
|
$ |
14,358 |
|
|
$ |
13,503 |
|
|
|
|
Income tax expense |
$ |
2,281 |
|
|
$ |
2,205 |
|
|
$ |
2,417 |
|
|
$ |
3,134 |
|
|
$ |
3,396 |
|
|
|
|
Net income |
$ |
9,223 |
|
|
$ |
11,037 |
|
|
$ |
8,494 |
|
|
$ |
11,224 |
|
|
$ |
10,107 |
|
|
|
|
Earnings per share – diluted |
$ |
0.06 |
|
|
$ |
0.07 |
|
|
$ |
0.05 |
|
|
$ |
0.07 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
QUARTERLY HIGHLIGHTS
Operating Revenues
- Operating revenues increased 3.7% from
the third quarter of 2020 due to higher average global AUM arising
from market appreciation and net inflows, partly offset by a 1
basis point decrease in our average global advisory fee due to AUM
mix shift.
- Operating revenues decreased 2.7% from
the fourth quarter of 2019 due to a 3 basis point decline in our
average global advisory fee arising from AUM mix shift,
notwithstanding the increase in our average AUM.
- Our average global advisory fee was
0.41%, 0.42% and 0.44% during the fourth quarter of 2020, the third
quarter of 2020 and the fourth quarter of 2019, respectively.
Operating Expenses
- Operating expenses increased 8.5% from
the third quarter of 2020 due to higher incentive compensation,
higher fund management and administration costs arising from Brexit
and fund rebalances, as well as higher marketing expenses and
professional fees.
- Operating expenses were essentially
unchanged from the fourth quarter of 2019.
Other Income/(Expenses)
- We recognized a non-cash loss on
revaluation of deferred consideration of ($22.4) million, ($8.9)
million and ($5.4) million during the fourth quarter of 2020, third
quarter of 2020 and fourth quarter of 2019, respectively. The loss
in the fourth quarter of 2020 arose primarily from a reduction in
the discount rate used to compute the present value of the annual
payment obligations. The prior quarter losses arose due to an
increase in forward-looking gold prices. 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 expense increased 7.3% from
the third quarter of 2020 to $2.7 million primarily due to higher
levels of debt outstanding. This expense increased 3.4% from the
fourth quarter of 2019 due to a higher effective interest rate,
partly offset by lower levels of debt outstanding.
- Other gains and losses, net, were $0.5
million, $0.7 million and $0.0 million for the fourth quarter of
2020, third quarter of 2020 and fourth quarter of 2019,
respectively. The third quarter of 2020 includes a gain of $0.2
million from the exit of our investment in AdvisorEngine Inc. Gains
and losses also 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
- Our effective income tax rate for the
fourth quarter of 2020 of negative 19.5% resulted in income tax
expense of $2.2 million. Our tax rate differs from the federal
statutory tax rate of 21% primarily due to a non-deductible loss on
revaluation of deferred consideration, partly offset by a lower tax
rate on foreign earnings.
- Our adjusted effective income tax rate
was 19.8%1.
ANNUAL HIGHLIGHTS
- Operating revenues decreased 5.5% as
compared to 2019 due to a 4 basis point decline in our average
global advisory fee arising from AUM mix shift, notwithstanding the
increase in our average AUM.
- Operating expenses decreased 7.6% as
compared to 2019 due to lower incentive compensation accruals as
well as $3.5 million of severance expense included in the prior
year, lower sales and business development costs, third party
distribution costs, marketing expenses and other expenses, as well
as lower fund management and administration costs primarily due to
the sale of our Canadian ETF business. These declines were partly
offset by higher contractual gold payments due to higher average
gold prices.
- Significant changes in items reported
in other income/(expenses) include a decrease in interest expense
of 14.0% due to a lower level of debt outstanding; non-cash losses
on revaluation of deferred consideration of ($56.8) million and
($11.3) million in 2020 and 2019, respectively; a decrease in
interest income of 77.7% as the prior year included accrued
paid-in-kind interest income on our former AdvisorEngine
investment; non-cash impairment charges of $22.8 million and $30.7
million recorded in 2020 and 2019, respectively; a loss on
extinguishment of debt of $2.4 million in 2020; non-cash charges of
$6.0 million and $4.3 million in 2020 and 2019, respectively,
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 a
gain of $1.1 million in 2020 arising from an adjustment to the
estimated fair value of consideration received from the exit of our
investment in AdvisorEngine.
- Our effective income tax rate for 2020
of negative 1.2% resulted in income tax expense of $0.4 million.
Our tax rate differs from the federal statutory rate of 21%
primarily due to a non-deductible loss on revaluation of deferred
consideration, a valuation allowance on capital losses and tax
shortfalls associated with the vesting and exercise of stock-based
compensation awards. These items were partly offset by a tax
benefit of $6.0 million recognized in connection with the release
of the tax-related indemnification asset described above, a $2.9
million non-taxable gain recognized upon sale of our Canadian ETF
business in the first quarter, a tax benefit of $2.6 million
recognized in connection with the release of a deferred tax asset
valuation allowance on interest carryforwards arising from our debt
previously held in the United Kingdom and a lower tax rate on
foreign earnings.
CONFERENCE CALL
WisdomTree will discuss its results and operational highlights
during a conference call on Friday, January 29, 2021 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.
ABOUT WISDOMTREE
WisdomTree Investments, Inc., through its subsidiaries in the
U.S. and Europe (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 $69.2 billion in
assets under management globally.
WisdomTree® is the marketing name for WisdomTree Investments,
Inc. and its subsidiaries
worldwide._____________________________1 See “Non-GAAP
Financial Measurements.”2 Earnings/(loss) per share (“EPS”) is
calculated pursuant to the two-class method as it results in a
lower EPS amount as compared to the treasury stock method.
Contact Information: Media
Relations Jessica Zaloom
+1.917.267.3735jzaloom@wisdomtree.com
WisdomTree
Investments, Inc. |
|
|
|
|
|
|
Key Operating
Statistics (Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
Dec. 31,2020 |
|
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
GLOBAL ETPs ($ in
millions) |
|
|
|
|
|
|
Beginning of period assets |
$ |
60,710 |
|
|
$ |
57,666 |
|
|
$ |
50,347 |
|
|
$ |
63,615 |
|
|
$ |
59,981 |
|
Assets sold |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(778 |
) |
|
|
— |
|
Inflows/(outflows) |
|
881 |
|
|
|
(477 |
) |
|
|
126 |
|
|
|
(536 |
) |
|
|
390 |
|
Market appreciation/(depreciation) |
|
5,898 |
|
|
|
3,567 |
|
|
|
7,489 |
|
|
|
(11,934 |
) |
|
|
3,247 |
|
Fund closures |
|
(97 |
) |
|
|
(46 |
) |
|
|
(296 |
) |
|
|
(20 |
) |
|
|
(3 |
) |
End of period assets |
$ |
67,392 |
|
|
$ |
60,710 |
|
|
$ |
57,666 |
|
|
$ |
50,347 |
|
|
$ |
63,615 |
|
Average assets during the period |
$ |
64,125 |
|
|
$ |
61,216 |
|
|
$ |
55,708 |
|
|
$ |
60,189 |
|
|
$ |
61,858 |
|
Average advisory fee during the period |
|
0.41 |
% |
|
|
0.42 |
% |
|
|
0.41 |
% |
|
|
0.42 |
% |
|
|
0.44 |
% |
Revenue days |
|
92 |
|
|
|
92 |
|
|
|
91 |
|
|
|
91 |
|
|
|
92 |
|
Number of ETFs – end of the period |
|
309 |
|
|
|
305 |
|
|
|
311 |
|
|
|
331 |
|
|
|
349 |
|
|
|
|
|
|
|
|
U.S. LISTED ETFs ($ in
millions) |
|
|
|
|
|
|
Beginning of period assets |
$ |
33,310 |
|
|
$ |
31,362 |
|
|
$ |
28,920 |
|
|
$ |
40,600 |
|
|
$ |
37,592 |
|
Inflows/(outflows) |
|
919 |
|
|
|
575 |
|
|
|
(1,474 |
) |
|
|
(1,273 |
) |
|
|
563 |
|
Market appreciation/(depreciation) |
|
4,385 |
|
|
|
1,373 |
|
|
|
4,030 |
|
|
|
(10,397 |
) |
|
|
2,448 |
|
Fund closures |
|
(97 |
) |
|
|
— |
|
|
|
(114 |
) |
|
|
(10 |
) |
|
|
(3 |
) |
End of period assets |
$ |
38,517 |
|
|
$ |
33,310 |
|
|
$ |
31,362 |
|
|
$ |
28,920 |
|
|
$ |
40,600 |
|
Average assets during the period |
$ |
36,002 |
|
|
$ |
32,984 |
|
|
$ |
30,626 |
|
|
$ |
36,940 |
|
|
$ |
39,094 |
|
Average advisory fee during the period |
|
0.40 |
% |
|
|
0.41 |
% |
|
|
0.41 |
% |
|
|
0.43 |
% |
|
|
0.44 |
% |
Number of ETFs – end of the period |
|
67 |
|
|
|
67 |
|
|
|
67 |
|
|
|
77 |
|
|
|
80 |
|
|
|
|
|
|
|
|
INTERNATIONAL LISTED ETPs
($ in millions) |
|
|
|
|
|
|
Beginning of period assets |
$ |
27,400 |
|
|
$ |
26,304 |
|
|
$ |
21,427 |
|
|
$ |
23,015 |
|
|
$ |
22,389 |
|
Assets sold |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(778 |
) |
|
|
— |
|
Inflows/(outflows) |
|
(38 |
) |
|
|
(1,052 |
) |
|
|
1,600 |
|
|
|
737 |
|
|
|
(173 |
) |
Market appreciation/(depreciation) |
|
1,513 |
|
|
|
2,194 |
|
|
|
3,459 |
|
|
|
(1,537 |
) |
|
|
799 |
|
Fund closures |
|
— |
|
|
|
(46 |
) |
|
|
(182 |
) |
|
|
(10 |
) |
|
|
— |
|
End of period assets |
$ |
28,875 |
|
|
$ |
27,400 |
|
|
$ |
26,304 |
|
|
$ |
21,427 |
|
|
$ |
23,015 |
|
Average assets during the period |
$ |
28,123 |
|
|
$ |
28,232 |
|
|
$ |
25,082 |
|
|
$ |
23,249 |
|
|
$ |
22,764 |
|
Average advisory fee during the period |
|
0.42 |
% |
|
|
0.42 |
% |
|
|
0.41 |
% |
|
|
0.40 |
% |
|
|
0.44 |
% |
Number of ETPs – end of the period |
|
242 |
|
|
|
238 |
|
|
|
244 |
|
|
|
254 |
|
|
|
269 |
|
|
|
|
|
|
|
|
PRODUCT CATEGORIES ($ in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity &
Currency |
|
|
|
|
|
|
Beginning of period assets |
$ |
25,122 |
|
|
$ |
24,191 |
|
|
$ |
19,748 |
|
|
$ |
19,947 |
|
|
$ |
19,599 |
|
Inflows/(outflows) |
|
(254 |
) |
|
|
(1,106 |
) |
|
|
1,325 |
|
|
|
622 |
|
|
|
(250 |
) |
Market appreciation/(depreciation) |
|
1,179 |
|
|
|
2,037 |
|
|
|
3,118 |
|
|
|
(821 |
) |
|
|
598 |
|
End of period assets |
$ |
26,047 |
|
|
$ |
25,122 |
|
|
$ |
24,191 |
|
|
$ |
19,748 |
|
|
$ |
19,947 |
|
Average assets during the period |
$ |
25,676 |
|
|
$ |
25,878 |
|
|
$ |
22,964 |
|
|
$ |
20,302 |
|
|
$ |
19,770 |
|
|
|
|
|
|
|
|
U.S. Equity |
|
|
|
|
|
|
Beginning of period assets |
$ |
15,612 |
|
|
$ |
13,997 |
|
|
$ |
12,151 |
|
|
$ |
17,732 |
|
|
$ |
16,281 |
|
Inflows/(outflows) |
|
395 |
|
|
|
897 |
|
|
|
(241 |
) |
|
|
(285 |
) |
|
|
460 |
|
Market appreciation/(depreciation) |
|
2,360 |
|
|
|
718 |
|
|
|
2,087 |
|
|
|
(5,296 |
) |
|
|
991 |
|
End of period assets |
$ |
18,367 |
|
|
$ |
15,612 |
|
|
$ |
13,997 |
|
|
$ |
12,151 |
|
|
$ |
17,732 |
|
Average assets during the period |
$ |
17,050 |
|
|
$ |
15,141 |
|
|
$ |
13,302 |
|
|
$ |
16,011 |
|
|
$ |
16,969 |
|
|
|
|
|
|
|
|
International Developed
Market Equity |
|
|
|
|
|
|
Beginning of period assets |
$ |
8,621 |
|
|
$ |
8,839 |
|
|
$ |
8,659 |
|
|
$ |
13,011 |
|
|
$ |
12,169 |
|
Inflows/(outflows) |
|
(191 |
) |
|
|
(587 |
) |
|
|
(965 |
) |
|
|
(1,097 |
) |
|
|
(135 |
) |
Market appreciation/(depreciation) |
|
984 |
|
|
|
369 |
|
|
|
1,145 |
|
|
|
(3,255 |
) |
|
|
977 |
|
End of period assets |
$ |
9,414 |
|
|
$ |
8,621 |
|
|
$ |
8,839 |
|
|
$ |
8,659 |
|
|
$ |
13,011 |
|
Average assets during the period |
$ |
8,930 |
|
|
$ |
8,835 |
|
|
$ |
8,779 |
|
|
$ |
11,453 |
|
|
$ |
12,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Dec. 31, 2020 |
|
Sept. 30,2020 |
June 30,2020 |
Mar. 30,2020 |
Dec. 31,2019 |
|
|
|
|
|
|
|
Emerging Market
Equity |
|
|
|
|
|
|
Beginning of period assets |
$ |
5,979 |
|
|
$ |
5,413 |
|
|
$ |
4,600 |
|
|
$ |
6,400 |
|
|
$ |
5,699 |
|
Inflows/(outflows) |
|
1,399 |
|
|
|
257 |
|
|
|
(25 |
) |
|
|
69 |
|
|
|
195 |
|
Market appreciation/(depreciation) |
|
1,161 |
|
|
|
309 |
|
|
|
838 |
|
|
|
(1,869 |
) |
|
|
506 |
|
End of period assets |
$ |
8,539 |
|
|
$ |
5,979 |
|
|
$ |
5,413 |
|
|
$ |
4,600 |
|
|
$ |
6,400 |
|
Average assets during the period |
$ |
7,249 |
|
|
$ |
5,917 |
|
|
$ |
5,129 |
|
|
$ |
5,919 |
|
|
$ |
5,991 |
|
|
|
|
|
|
|
|
Fixed
Income |
|
|
|
|
|
|
Beginning of period assets |
$ |
3,630 |
|
|
$ |
3,530 |
|
|
$ |
3,527 |
|
|
$ |
3,585 |
|
|
$ |
3,337 |
|
Inflows/(outflows) |
|
(330 |
) |
|
|
76 |
|
|
|
(53 |
) |
|
|
21 |
|
|
|
218 |
|
Market appreciation/(depreciation) |
|
24 |
|
|
|
24 |
|
|
|
56 |
|
|
|
(79 |
) |
|
|
30 |
|
End of period assets |
$ |
3,324 |
|
|
$ |
3,630 |
|
|
$ |
3,530 |
|
|
$ |
3,527 |
|
|
$ |
3,585 |
|
Average assets during the period |
$ |
3,472 |
|
|
$ |
3,605 |
|
|
$ |
3,523 |
|
|
$ |
3,653 |
|
|
$ |
3,540 |
|
|
|
|
|
|
|
|
Leveraged &
Inverse |
|
|
|
|
|
|
Beginning of period assets |
$ |
1,430 |
|
|
$ |
1,350 |
|
|
$ |
896 |
|
|
$ |
1,138 |
|
|
$ |
1,121 |
|
Inflows/(outflows) |
|
(118 |
) |
|
|
(9 |
) |
|
|
312 |
|
|
|
12 |
|
|
|
(22 |
) |
Market appreciation/(depreciation) |
|
175 |
|
|
|
89 |
|
|
|
142 |
|
|
|
(254 |
) |
|
|
39 |
|
End of period assets |
$ |
1,487 |
|
|
$ |
1,430 |
|
|
$ |
1,350 |
|
|
$ |
896 |
|
|
$ |
1,138 |
|
Average assets during the period |
$ |
1,436 |
|
|
$ |
1,482 |
|
|
$ |
1,169 |
|
|
$ |
1,147 |
|
|
$ |
1,178 |
|
|
|
|
|
|
|
|
Alternatives |
|
|
|
|
|
|
Beginning of period assets |
$ |
229 |
|
|
$ |
225 |
|
|
$ |
244 |
|
|
$ |
358 |
|
|
$ |
418 |
|
Inflows/(outflows) |
|
(26 |
) |
|
|
(4 |
) |
|
|
(29 |
) |
|
|
(66 |
) |
|
|
(61 |
) |
Market appreciation/(depreciation) |
|
11 |
|
|
|
8 |
|
|
|
10 |
|
|
|
(48 |
) |
|
|
1 |
|
End of period assets |
$ |
214 |
|
|
$ |
229 |
|
|
$ |
225 |
|
|
$ |
244 |
|
|
$ |
358 |
|
Average assets during the period |
$ |
224 |
|
|
$ |
226 |
|
|
$ |
226 |
|
|
$ |
328 |
|
|
$ |
398 |
|
|
|
|
|
|
|
|
Closed ETPs |
|
|
|
|
|
|
Beginning of period assets |
$ |
87 |
|
|
$ |
121 |
|
|
$ |
522 |
|
|
$ |
1,444 |
|
|
$ |
1,357 |
|
Assets sold |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(778 |
) |
|
|
— |
|
Inflows/(outflows) |
|
6 |
|
|
|
(1 |
) |
|
|
(198 |
) |
|
|
188 |
|
|
|
(15 |
) |
Market appreciation/(depreciation) |
|
4 |
|
|
|
13 |
|
|
|
93 |
|
|
|
(312 |
) |
|
|
105 |
|
Fund closures |
|
(97 |
) |
|
|
(46 |
) |
|
|
(296 |
) |
|
|
(20 |
) |
|
|
(3 |
) |
End of period assets |
$ |
— |
|
|
$ |
87 |
|
|
$ |
121 |
|
|
$ |
522 |
|
|
$ |
1,444 |
|
Average assets during the period |
$ |
88 |
|
|
$ |
132 |
|
|
$ |
616 |
|
|
$ |
1,376 |
|
|
$ |
1,405 |
|
|
|
|
|
|
|
|
Headcount |
|
217 |
|
|
|
211 |
|
|
|
214 |
|
|
|
210 |
|
|
|
208 |
|
Note: Previously issued statistics may be restated due to fund
closures and trade adjustments Source: WisdomTree
|
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
Dec. 31,2020 |
|
Dec. 31,2019 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
73,425 |
|
|
$ |
74,972 |
|
Securities owned, at fair value |
|
34,895 |
|
|
|
17,319 |
|
Accounts receivable |
|
29,455 |
|
|
|
26,838 |
|
Prepaid expenses |
|
3,827 |
|
|
|
3,724 |
|
Other current assets |
|
259 |
|
|
|
207 |
|
Total current assets |
|
141,861 |
|
|
|
123,060 |
|
Fixed assets, net |
|
7,579 |
|
|
|
8,127 |
|
Notes receivable |
|
— |
|
|
|
28,172 |
|
Securities held-to-maturity |
|
451 |
|
|
|
16,863 |
|
Deferred tax assets, net |
|
8,063 |
|
|
|
7,398 |
|
Investments |
|
8,112 |
|
|
|
11,192 |
|
Right of use assets – operating
leases |
|
16,327 |
|
|
|
18,161 |
|
Goodwill |
|
85,856 |
|
|
|
85,856 |
|
Intangible assets |
|
601,247 |
|
|
|
603,294 |
|
Other noncurrent assets |
|
180 |
|
|
|
983 |
|
Total assets |
$ |
869,676 |
|
|
$ |
903,106 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Fund management and administration payable |
$ |
19,564 |
|
|
$ |
22,021 |
|
Compensation and benefits payable |
|
22,803 |
|
|
|
26,501 |
|
Deferred consideration – gold payments |
|
17,374 |
|
|
|
13,953 |
|
Securities sold, but not yet purchased, at fair value |
|
— |
|
|
|
582 |
|
Operating lease liabilities |
|
3,135 |
|
|
|
3,682 |
|
Income taxes payable |
|
916 |
|
|
|
3,372 |
|
Accounts payable and other liabilities |
|
10,207 |
|
|
|
8,930 |
|
Total current liabilities |
|
73,999 |
|
|
|
79,041 |
|
Convertible notes |
|
166,646 |
|
|
|
— |
|
Debt |
|
— |
|
|
|
175,956 |
|
Deferred consideration – gold
payments |
|
212,763 |
|
|
|
159,071 |
|
Operating lease liabilities |
|
17,434 |
|
|
|
19,057 |
|
Total liabilities |
|
470,842 |
|
|
|
433,125 |
|
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: 148,716 and 155,264 at December 31, 2020
and December 31, 2019, respectively |
|
1,487 |
|
|
|
1,553 |
|
Additional paid-in capital |
|
317,075 |
|
|
|
352,658 |
|
Accumulated other comprehensive
income |
|
1,102 |
|
|
|
945 |
|
Accumulated deficit |
|
(53,399 |
) |
|
|
(17,744 |
) |
Total stockholders’ equity |
|
266,265 |
|
|
|
337,412 |
|
Total liabilities and
stockholders’ equity |
$ |
869,676 |
|
|
$ |
903,106 |
|
|
|
|
|
|
|
|
|
|
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands) |
(Unaudited) |
|
|
|
|
|
Years Ended |
|
Dec. 31,2020 |
|
Dec. 31,2019 |
Cash flows from operating
activities: |
|
|
Net loss |
$ |
(35,655 |
) |
|
$ |
(10,425 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
Advisory fees received in gold and other precious metals |
|
(62,416 |
) |
|
|
(49,887 |
) |
Loss on revaluation of deferred consideration – gold payments |
|
56,821 |
|
|
|
11,293 |
|
Impairments |
|
22,752 |
|
|
|
30,710 |
|
Contractual gold payments |
|
16,811 |
|
|
|
13,226 |
|
Stock-based compensation |
|
11,706 |
|
|
|
11,590 |
|
Amortization of right of use asset |
|
3,182 |
|
|
|
3,174 |
|
Gain on sale –Canadian ETF business |
|
(2,877 |
) |
|
|
— |
|
Loss on extinguishment of debt |
|
2,387 |
|
|
|
— |
|
Deferred income taxes |
|
(2,192 |
) |
|
|
(349 |
) |
Amortization of issuance costs - convertible notes |
|
1,710 |
|
|
|
— |
|
Amortization of issuance costs - former credit facility |
|
1,328 |
|
|
|
2,888 |
|
Depreciation and amortization |
|
1,021 |
|
|
|
1,045 |
|
Paid-in-kind interest income |
|
— |
|
|
|
(2,498 |
) |
Other |
|
(1,169 |
) |
|
|
(173 |
) |
Changes in operating assets and
liabilities: |
|
|
Securities owned, at fair value |
|
(17,576 |
) |
|
|
(8,446 |
) |
Accounts receivable |
|
(193 |
) |
|
|
(19 |
) |
Prepaid expenses |
|
(159 |
) |
|
|
738 |
|
Gold and other precious metals |
|
45,087 |
|
|
|
35,886 |
|
Other assets |
|
107 |
|
|
|
172 |
|
Fund management and administration payable |
|
(2,264 |
) |
|
|
(476 |
) |
Compensation and benefits payable |
|
(3,804 |
) |
|
|
7,885 |
|
Income taxes payable |
|
(2,441 |
) |
|
|
4,524 |
|
Securities sold, but not yet purchased, at fair value |
|
(582 |
) |
|
|
(1,116 |
) |
Operating lease liabilities |
|
(3,517 |
) |
|
|
(3,587 |
) |
Accounts payable and other liabilities |
|
1,328 |
|
|
|
677 |
|
Net cash provided by operating activities |
|
29,395 |
|
|
|
46,832 |
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
Purchase of fixed assets |
|
(472 |
) |
|
|
(47 |
) |
Proceeds from held-to-maturity securities maturing or called prior
to maturity |
|
16,488 |
|
|
|
3,244 |
|
Proceeds from the sale of our financial interests in
AdvisorEngine |
|
9,592 |
|
|
|
— |
|
Proceeds from sale of Canadian ETF business, net |
|
2,774 |
|
|
|
— |
|
Purchase of investments |
|
— |
|
|
|
(8,112 |
) |
Funding of notes receivable |
|
— |
|
|
|
(2,090 |
) |
Net cash provided by/(used in) investing activities |
|
28,382 |
|
|
|
(7,005 |
) |
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
Repayment of debt |
|
(179,000 |
) |
|
|
(21,000 |
) |
Shares repurchased |
|
(31,197 |
) |
|
|
(2,341 |
) |
Dividends paid |
|
(20,113 |
) |
|
|
(20,385 |
) |
Convertible notes issuance costs |
|
(5,411 |
) |
|
|
— |
|
Proceeds from the issuance of convertible notes |
|
175,250 |
|
|
|
— |
|
Proceeds from exercise of stock options |
|
292 |
|
|
|
160 |
|
Net cash used in financing activities |
|
(60,179 |
) |
|
|
(43,566 |
) |
Increase in cash flows due to
changes in foreign exchange rate |
|
855 |
|
|
|
927 |
|
Decrease in cash and cash
equivalents |
|
(1,547 |
) |
|
|
(2,812 |
) |
Cash and cash equivalents –
beginning of year |
|
74,972 |
|
|
|
77,784 |
|
Cash and cash equivalents – end
of year |
$ |
73,425 |
|
|
$ |
74,972 |
|
Supplemental disclosure
of cash flow information: |
|
|
|
|
|
|
|
Cash paid for taxes |
$ |
10,131 |
|
|
$ |
10,060 |
|
Cash paid for interest |
$ |
7,088 |
|
|
$ |
8,037 |
|
|
|
|
|
|
|
|
|
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 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 and changes in the discount rate used
to compute the present value of the annual payment obligations may
have a material impact on the carrying value of the deferred
consideration and our reported financial results. We exclude this
item when calculating our non-GAAP financial measurements 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 calculating our non-GAAP financial measurements as
they introduce volatility in earnings and are not core to our
operating business.
- Interest expense from the amortization
of discount arising from the bifurcation of the conversion option
embedded in the convertible notes: GAAP requires convertible
instruments to be separated into their liability and equity
components by allocating the issuance proceeds to each of these
components. The liability component for convertible instruments
that qualify for a derivative scope exception (applicable to our
convertible notes) is allocated proceeds equal to the estimated
fair value of similar debt without the conversion option. The
difference between the gross proceeds received from the issuance of
the convertible instrument and the proceeds allocated to the
liability component represents the residual amount that is
classified in equity. The discount arising from the recognition of
the residual amount classified in equity is amortized as interest
expense over the life of the instrument. We exclude this item when
calculating our non-GAAP financial measurements as it is non-cash
and distorts our actual cost of borrowing. In addition, in August
2020, the FASB issued Accounting Standards Update 2020-06, Debt –
Debt with Conversion and Other Options, Cash Conversion which
includes the elimination of the requirement to bifurcate conversion
options qualifying for a derivative scope exception. Once
effective, this interest expense will no longer be recognized.
- Other items: Loss on
extinguishment of debt, the release of a deferred tax asset
valuation allowance recognized on interest carryforwards arising
from our debt previously outstanding in the United Kingdom, a gain
arising from an adjustment to the estimated fair value of
consideration received from the exit of our investment in
AdvisorEngine, impairment charges, a gain recognized upon sale of
our Canadian ETF business and acquisition and disposition-related
costs 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.
• Adjusted operating income margin. We disclose adjusted
operating income margin as a non-GAAP financial measurement 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
(CONSOLIDATED) |
(in thousands) |
(Unaudited) |
|
|
Three Months Ended |
Adjusted Net Income
and Diluted Earnings per Share: |
Dec. 31,2020 |
|
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
Net loss, as reported |
$ |
(13,497 |
) |
|
$ |
(270 |
) |
|
$ |
(13,250 |
) |
|
$ |
(8,638 |
) |
|
$ |
(25,880 |
) |
Add back: Loss on revaluation of deferred consideration |
|
22,385 |
|
|
|
8,870 |
|
|
|
23,358 |
|
|
|
2,208 |
|
|
|
5,354 |
|
Add back: Interest expense from the amortization of discount
arising from the bifurcation of the conversion option
embedded in the convertible notes, net of income taxes |
|
314 |
|
|
|
286 |
|
|
|
42 |
|
|
|
— |
|
|
|
— |
|
Add back: Tax shortfalls upon vesting and exercise of stock-based
compensation awards |
|
21 |
|
|
|
50 |
|
|
|
119 |
|
|
|
501 |
|
|
|
142 |
|
Add back: Impairments, net of income taxes |
|
— |
|
|
|
2,326 |
|
|
|
— |
|
|
|
19,672 |
|
|
|
30,138 |
|
Deduct: Gain arising from an adjustment to the estimated fair value
of consideration received from the exit of investment
in AdvisorEngine |
|
— |
|
|
|
(225 |
) |
|
|
(868 |
) |
|
|
— |
|
|
|
— |
|
Add back: Loss on extinguishment of debt, net of income taxes |
|
— |
|
|
|
— |
|
|
|
1,910 |
|
|
|
— |
|
|
|
— |
|
Deduct: Release of a deferred tax asset valuation allowance
recognized on interest carryforwards arising from debt
previously outstanding in the United Kingdom |
|
— |
|
|
|
— |
|
|
|
(2,842 |
) |
|
|
— |
|
|
|
— |
|
Deduct: Gain recognized upon sale of Canadian ETF business |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,877 |
) |
|
|
— |
|
Add back: Acquisition and disposition-related costs, net of income
taxes |
|
— |
|
|
|
— |
|
|
|
25 |
|
|
|
358 |
|
|
|
353 |
|
Adjusted net income |
$ |
9,223 |
|
|
$ |
11,037 |
|
|
$ |
8,494 |
|
|
$ |
11,224 |
|
|
$ |
10,107 |
|
Weighted average common shares -
diluted |
|
161,138 |
|
|
|
160,876 |
|
|
|
166,634 |
|
|
|
167,561 |
|
|
|
167,203 |
|
Adjusted earnings per share -
diluted |
$ |
0.06 |
|
|
$ |
0.07 |
|
|
$ |
0.05 |
|
|
$ |
0.07 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Gross Margin and Gross
Margin Percentage: |
Dec. 31,2020 |
|
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
Operating revenues |
$ |
67,059 |
|
|
$ |
64,640 |
|
|
$ |
58,126 |
|
|
$ |
63,874 |
|
|
$ |
68,907 |
|
Less: Fund management and administration |
|
(16,350 |
) |
|
|
(15,219 |
) |
|
|
(14,461 |
) |
|
|
(14,485 |
) |
|
|
(15,650 |
) |
Gross margin |
$ |
50,709 |
|
|
$ |
49,421 |
|
|
$ |
43,665 |
|
|
$ |
49,389 |
|
|
$ |
53,257 |
|
Gross margin percentage |
|
75.6 |
% |
|
|
76.5 |
% |
|
|
75.1 |
% |
|
|
77.3 |
% |
|
|
77.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Adjusted Operating
Income and Adjusted OperatingIncome
Margin: |
Dec. 31,2020 |
|
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
Operating revenues |
$ |
67,059 |
|
|
$ |
64,640 |
|
|
$ |
58,126 |
|
|
$ |
63,874 |
|
|
$ |
68,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
$ |
12,907 |
|
|
$ |
14,744 |
|
|
$ |
11,797 |
|
|
$ |
15,634 |
|
|
$ |
14,809 |
|
Add back: Acquisition and disposition-related costs, before income
taxes |
|
— |
|
|
|
— |
|
|
|
33 |
|
|
|
383 |
|
|
|
366 |
|
Adjusted operating income |
$ |
12,907 |
|
|
$ |
14,744 |
|
|
$ |
11,830 |
|
|
$ |
16,017 |
|
|
$ |
15,175 |
|
Adjusted operating income
margin |
|
19.2 |
% |
|
|
22.8 |
% |
|
|
20.4 |
% |
|
|
25.1 |
% |
|
|
22.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Adjusted Total
Operating Expenses: |
Dec. 31,2020 |
|
|
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
Total operating expenses |
$ |
54,152 |
|
|
$ |
49,896 |
|
|
$ |
46,329 |
|
|
$ |
48,240 |
|
|
$ |
54,098 |
|
Deduct: Acquisition and disposition-related costs, before income
taxes |
|
— |
|
|
|
— |
|
|
|
(33 |
) |
|
|
(383 |
) |
|
|
(366 |
) |
Adjusted total operating
expenses |
$ |
54,152 |
|
|
$ |
49,896 |
|
|
$ |
46,296 |
|
|
$ |
47,857 |
|
|
$ |
53,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Adjusted Income Before
Income Taxes: |
Dec. 31,2020 |
|
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
(Loss)/income before income
taxes |
$ |
(11,297 |
) |
|
$ |
1,138 |
|
|
$ |
(14,054 |
) |
|
$ |
(11,009 |
) |
|
$ |
(22,355 |
) |
Add back: Loss on revaluation of deferred
consideration |
|
22,385 |
|
|
|
8,870 |
|
|
|
23,358 |
|
|
|
2,208 |
|
|
|
5,354 |
|
Add back: Interest expense from the amortization of discount
arising from the bifurcation of the conversion option
embedded in the convertible notes, before income
taxes |
|
416 |
|
|
|
379 |
|
|
|
55 |
|
|
|
— |
|
|
|
— |
|
Add back: Impairments, before income
taxes |
|
— |
|
|
|
3,080 |
|
|
|
— |
|
|
|
19,672 |
|
|
|
30,138 |
|
Deduct: Gain arising from an adjustment to the estimated fair value
of consideration received from the exit of investment
in
AdvisorEngine |
|
— |
|
|
|
(225 |
) |
|
|
(868 |
) |
|
|
— |
|
|
|
— |
|
Add back: Loss on extinguishment of
debt |
|
— |
|
|
|
— |
|
|
|
2,387 |
|
|
|
— |
|
|
|
— |
|
Add back: Loss recognized upon reduction of a tax-related
indemnification
asset |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,981 |
|
|
|
— |
|
Deduct: Gain recognized upon sale of Canadian ETF
business |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,877 |
) |
|
|
— |
|
Add back: Acquisition and disposition-related costs, before income
taxes |
|
— |
|
|
|
— |
|
|
|
33 |
|
|
|
383 |
|
|
|
366 |
|
Adjusted income before income
taxes |
$ |
11,504 |
|
|
$ |
13,242 |
|
|
$ |
10,911 |
|
|
$ |
14,358 |
|
|
$ |
13,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Adjusted Income Tax
Expense and Adjusted Effective Income Tax Rate: |
Dec. 31,2020 |
|
Sept. 30,2020 |
June 30,2020 |
Mar. 31,2020 |
Dec. 31,2019 |
Adjusted income before income taxes (above) |
$ |
11,504 |
|
|
$ |
13,242 |
|
|
$ |
10,911 |
|
|
$ |
14,358 |
|
|
$ |
13,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit) |
$ |
2,200 |
|
|
$ |
1,408 |
|
|
$ |
(804 |
) |
|
$ |
(2,371 |
) |
|
$ |
3,525 |
|
Add back: Tax benefit arising from the amortization of discount
associated with the bifurcation of the conversion option
embedded in the convertible notes |
|
102 |
|
|
|
93 |
|
|
|
13 |
|
|
|
— |
|
|
|
— |
|
Deduct: Tax shortfalls upon vesting and exercise of stock-based
compensation awards |
|
(21 |
) |
|
|
(50 |
) |
|
|
(119 |
) |
|
|
(501 |
) |
|
|
(142 |
) |
Add back: Tax benefit arising from impairments |
|
— |
|
|
|
754 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Add back: Tax benefit arising from loss on extinguishment of
debt |
|
— |
|
|
|
— |
|
|
|
477 |
|
|
|
— |
|
|
|
— |
|
Add back: Release of a deferred tax asset valuation allowance
recognized on interest carryforwards arising from debt
previously outstanding in the United Kingdom |
|
— |
|
|
|
— |
|
|
|
2,842 |
|
|
|
— |
|
|
|
— |
|
Add back: Tax benefit arising from reduction of a tax-related
indemnification asset |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,981 |
|
|
|
— |
|
Add back: Tax benefit arising from acquisition and
disposition-related costs |
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
25 |
|
|
|
13 |
|
Adjusted income tax expense |
$ |
2,281 |
|
|
$ |
2,205 |
|
|
$ |
2,417 |
|
|
$ |
3,134 |
|
|
$ |
3,396 |
|
Adjusted effective income tax
rate |
|
19.8 |
% |
|
|
16.7 |
% |
|
|
22.2 |
% |
|
|
21.8 |
% |
|
|
25.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
- the ultimate duration of the COVID-19 pandemic and its
short-term and long-term impact on our business and the global
economy;
- anticipated trends, conditions and investor sentiment in the
global markets and 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, gold and other 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, including but
not limited to a pandemic event such as COVID-19, 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;
- 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;
- 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 have a limited track record, and poor
investment performance could cause our revenues to decline;
and
- 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.
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, 2019 and Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2020 and June 30, 2020.
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.
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