Record AUM of $112.6 Billion
850 bps of Operating Margin Expansion vs. YTD
September 30, 2023
Diluted Loss Per Share of -$0.13 and +$0.18
Earnings Per Share, as Adjusted
WisdomTree, Inc. (NYSE: WT), a global financial innovator, today
reported financial results for the third quarter of 2024.
($4.5) million of net loss ($28.8(1) million of net income,
as adjusted), including a loss on extinguishment of our
convertible notes of $30.6 million and a $4.0 million civil money
penalty in connection with a settlement with the U.S. Securities
and Exchange Commission (the “SEC”) regarding certain statements
about the ESG screening process for three ETFs advised by
WisdomTree Asset Management, Inc. (the “SEC ESG Settlement”). See
“Non-GAAP Financial Measurements” for additional information.
$112.6 billion of ending AUM, an increase of 2.6% from
the prior quarter arising from market appreciation, partly offset
by net outflows.
($2.4) billion of net outflows, primarily driven by
outflows from our international developed equity, fixed income and
commodity products.
0.37% average advisory fee, unchanged from the prior
quarter.
$113.2 million of operating revenues, an increase of 5.7%
from the prior quarter due to higher average AUM and the
recognition of $3.7 million of other revenue related to legal and
other related expenses incurred in connection with the SEC ESG
Settlement that are expected to be covered by insurance.
80.8% gross margin(1), a 0.4 point decrease from the
prior quarter due to higher expenses.
36.0% operating income margin, a 4.7 point increase
compared to our operating margin of 31.3% in the prior quarter
primarily due to higher revenues, as well as lower professional
fees incurred in connection with an activist campaign. Our adjusted
operating income margin of 37.3%(1) increased 2.0 points compared
to our adjusted operating income margin of 35.3% in the prior
quarter due to higher revenues.
$198.8 million of cash consideration paid to repurchase
(1) all 14,750 shares of our Series A Non-Voting Convertible
Preferred Stock (equivalent to 14.75 million shares of our common
stock) from ETFS Capital Limited and (2) approximately 5.7 million
shares of our common stock.
$345.0 million issuance of convertible senior notes due
2029 (the “2029 Notes”), bearing interest at a rate of 3.25%
and issued with a conversion price of $11.82 per share. Concurrent
with the issuance, we paid $132.7 million to repurchase $104.2
million aggregate principal amount of our 5.75% convertible senior
notes (conversion price of $9.54 per share) due 2028 (the “2028
Notes”).
$0.03 quarterly dividend declared, payable on
November 20, 2024 to stockholders of record as of the close of
business on November 6, 2024.
Update from Jonathan Steinberg, WisdomTree
CEO
“Our strong third-quarter results
demonstrate how we are capitalizing on key secular growth trends,
such as the expansion of our models business and our leadership in
tokenization. As demand for efficient portfolio solutions continues
to grow, we are broadening our reach in the advisor space while
positioning ourselves at the forefront of blockchain-enabled
finance. Platforms like WisdomTree Prime® and WisdomTree Connect™
are integral to our future growth strategy, offering innovative
solutions that meet the evolving needs of both retail and
institutional clients. We believe these initiatives will drive
substantial long-term value for our stakeholders.”
Update from Jarrett Lilien, WisdomTree COO
and President
“With record assets under management in
the third quarter, WisdomTree continues to deliver strong financial
performance. Our adjusted operating margin expanded by over 800
basis points to 37.3%, while adjusted earnings per share grew by
80% year-over-year. These results highlight the strength of our
scalable business model and our disciplined expense and capital
management. Recent strategic actions, including WisdomTree’s
repurchase of all of its outstanding Series A Non-Voting
Convertible Preferred Stock from ETFS Capital Limited and
additional common stock, underscore our commitment to delivering
shareholder value. These efforts demonstrate efficient execution
and the proactive steps we’re taking to ensure long-term
success.”
OPERATING AND FINANCIAL HIGHLIGHTS
Three Months Ended
Sept. 30, 2024
June 30, 2024
Mar. 31, 2024
Dec. 31, 2023
Sept. 30, 2023
Consolidated
Operating Highlights ($ in billions):
AUM—end of period
$
112.6
$
109.7
$
107.2
$
100.1
$
93.7
Net (outflows)/inflows
$
(2.4)
$
0.3
$
2.0
$
(0.3)
$
2.0
Average AUM
$
110.4
$
108.4
$
102.4
$
96.5
$
95.7
Average advisory fee
0.37%
0.37%
0.36%
0.36%
0.36%
Consolidated
Financial Highlights ($ in millions, except per share
amounts):
Operating revenues
$
113.2
$
107.0
$
96.8
$
90.8
$
90.4
Net (loss)/income
$
(4.5)
$
21.8
$
22.1
$
19.1
$
13.0
Diluted (loss)/earnings per share
$
(0.13)
$
0.13
$
0.13
$
0.16
$
0.07
Operating income margin
36.0%
31.3%
28.9%
28.7%
29.5%
As Adjusted
(Non-GAAP(1)):
Operating revenues, as adjusted
$
109.5
$
107.0
$
96.4
$
90.8
$
90.4
Gross margin
80.8%
81.2%
79.3%
79.7%
80.1%
Net income, as adjusted
$
28.8
$
27.1
$
20.3
$
18.6
$
18.0
Diluted earnings per share, as
adjusted
$
0.18
$
0.16
$
0.12
$
0.11
$
0.10
Operating income margin, as adjusted
37.3%
35.3%
29.7%
28.7%
29.5%
RECENT BUSINESS DEVELOPMENTS
Company
News
- In August 2024, we completed a private offering of $345.0
million in aggregate principal amount of our 2029 Notes and
concurrently repurchased (1) $104.2 million aggregate principal
amount of our 2028 Notes, (2) approximately 5.7 million shares of
our common stock in open market transactions and (3) all 14,750
shares of our Series A Non-Voting Convertible Preferred Stock
(equivalent to 14.75 million shares of our common stock) from ETFS
Capital Limited.
- In September 2024, we announced the launch of WisdomTree
Connect, a new platform unlocking tokenized real-world assets (RWA)
access to a broader range of users, where over time, customers will
be able to interact with any WisdomTree-issued token, in any
wallet, across supported blockchains.
- In October 2024, we celebrated the 10-year anniversary of
WisdomTree in Europe. Since entering the region, we have been
delivering differentiated and value-add solutions to European
investors through a comprehensive range of exchange traded
products.
Product
News
- In August 2024, we launched WisdomTree Core Physical Silver
(WSLV), a new low-cost physically backed silver exchange-traded
commodity (ETC), on B�rse Xetra, the London Stock Exchange and
Borsa Italiana; we also cross-listed WisdomTree Energy Transition
Metals and Rare Earths Miners UCITS ETF (RARE) and WisdomTree
Quality Growth UCITS ETF (QGRW) on the Swiss stock exchange,
SIX.
- In September 2024, we launched WisdomTree European Natural Gas
(TTFW), the world’s first European natural gas ETC, on the London
Stock Exchange, Borsa Italiana and B�rse Xetra.
- In October 2024, we announced the ability for users of
WisdomTree Prime® to select the WisdomTree Government Money Market
Digital Fund (WTGXX) as a spending source for their WisdomTree
Prime Visa® Debit Card.
WISDOMTREE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
Sept. 30, 2024
June 30, 2024
Mar. 31, 2024
Dec. 31, 2023
Sept. 30, 2023
Sept. 30, 2024
Sept. 30, 2023
Operating Revenues:
Advisory fees
$
101,659
$
98,938
$
92,501
$
86,988
$
86,598
$
293,098
$
246,239
Other revenues
11,509
8,096
4,337
3,856
3,825
23,942
11,952
Total revenues
113,168
107,034
96,838
90,844
90,423
317,040
258,191
Operating Expenses:
Compensation and benefits
29,405
30,790
31,054
27,860
27,955
91,249
81,672
Fund management and administration
21,004
20,139
19,962
18,445
18,023
61,105
52,903
Marketing and advertising
4,897
5,110
4,408
4,951
3,833
14,415
12,305
Sales and business development
3,465
3,640
3,611
3,881
3,383
10,716
9,703
Contractual gold payments
—
—
—
—
—
—
6,069
Professional fees
6,315
6,594
3,630
3,201
3,719
16,539
15,768
Occupancy, communications and
equipment
1,397
1,314
1,210
1,208
1,203
3,921
3,476
Depreciation and amortization
447
418
383
335
307
1,248
537
Third-party distribution fees
2,983
2,687
2,307
2,549
2,694
7,977
6,828
Other
2,463
2,831
2,323
2,379
2,601
7,617
7,473
Total operating expenses
72,376
73,523
68,888
64,809
63,718
214,787
196,734
Operating income
40,792
33,511
27,950
26,035
26,705
102,253
61,457
Other Income/(Expenses):
Interest expense
(5,027)
(4,140)
(4,128)
(3,758)
(3,461)
(13,295)
(11,484)
Gain on revaluation/termination of
deferred
consideration—gold payments
—
—
—
—
—
—
61,953
Interest income
1,795
1,438
1,398
1,225
791
4,631
2,874
Impairments
—
—
—
(339)
(2,703)
—
(7,603)
Loss on extinguishment of convertible
notes
(30,632)
—
—
—
—
(30,632)
(9,721)
Other losses and gains, net
(3,062)
(1,283)
2,592
1,602
(2,512)
(1,753)
(3,233)
Income before income taxes
3,866
29,526
27,812
24,765
18,820
61,204
94,243
Income tax expense
8,351
7,767
5,701
5,688
5,836
21,819
10,774
Net (loss)/income
$
(4,485)
$
21,759
$
22,111
$
19,077
$
12,984
$
39,385
83,469
(Loss)/earnings per share—basic
$
(0.13)(2)
$
0.13(2)
$
0.14(2)
$
0.16(2)
$
0.07(2)
$
0.16(2)
$
0.50(2)
(Loss)/earnings per share—diluted
$
(0.13) (2)
$
0.13
$
0.13
$
0.16(2)
$
0.07
$
0.16(2)
$
0.49
Weighted average common shares—basic
143,929
146,896
146,464
145,310
145,284
145,756
144,505
Weighted average common shares—diluted
143,929
166,359
165,268
171,703
177,140
162,691
169,997
As Adjusted (Non-GAAP(1))
Total revenues
$
109,507
$
107,034
$
96,385
$
90,844
$
90,423
Total operating expenses
$
68,715
$
69,252
$
67,740
$
64,809
$
63,718
Operating income
$
40,792
$
37,782
$
28,645
$
26,035
$
26,705
Income before income taxes
$
37,187
$
36,083
$
26,987
$
23,908
$
23,902
Income tax expense
$
9,049
$
9,008
$
6,731
$
5,342
$
5,854
Net income
$
28,768
$
27,075
$
20,256
$
18,566
$
18,048
Earnings per share—diluted
$
0.18
$
0.16
$
0.12
$
0.11
$
0.10
Weighted average common shares—diluted
156,745
166,359
165,268
171,703
177,140
QUARTERLY HIGHLIGHTS
Operating Revenues
- Operating revenues increased 5.7% from the second quarter of
2024 due to higher average AUM and the recognition of $3.7 million
of other revenue related to legal and other related expenses
expected to be covered by insurance described above. Operating
revenues increased 25.2% from the third quarter of 2023 due to
higher average AUM and higher other revenues attributable to our
European listed exchange-traded products (“ETPs”).
- Our average advisory fee was 0.37%, 0.37% and 0.36% during the
third quarter of 2024, the second quarter of 2024 and the third
quarter of 2023, respectively.
Operating Expenses
- Operating expenses decreased 1.6% from the second quarter of
2024 primarily due to lower incentive compensation, partly offset
by higher fund management and administration expenses.
- Operating expenses increased 13.6% from the third quarter of
2023 primarily due to higher professional fees, which is inclusive
of the legal and other related expected to be covered by insurance
described above, as well as higher fund management and
administration costs, incentive compensation and marketing
expenses.
Other Income/(Expenses)
- Interest expense increased 21.4% and 45.2% from the second
quarter of 2024 and third quarter of 2023, respectively, due to a
higher level of debt outstanding, partly offset by a lower average
interest rate. The increase from the third quarter of 2023 also is
due to the recognition of imputed interest on our obligation
payable to Gold Bullion Holdings (Jersey) Limited (“GBH”), a
subsidiary of the World Gold Council, in connection with our
repurchase in November 2023 of our Series C Non-Voting Convertible
Preferred Stock.
- Interest income increased 24.8% and 126.9% from the second
quarter of 2024 and the third quarter of 2023, respectively, due to
a higher level of interest-earning assets.
- During the third quarter of 2024, we recognized a loss on
extinguishment of convertible notes of $30.6 million arising from
the repurchase of $104.2 million aggregate principal amount of our
2028 Notes.
- Other losses and gains, net was a loss of $3.1 million for the
third quarter of 2024. This included a $4.0 million civil money
penalty in connection with the SEC ESG Settlement. Also included
are net gains of $0.8 million and $0.6 million on our financial
instruments owned and our investments, respectively. Gains and
losses also generally arise from the sale of gold and crypto earned
from management fees paid by our physically-backed gold and crypto
ETPs, foreign exchange fluctuations and other miscellaneous
items.
Income Taxes
- Our effective income tax rate for the third quarter of 2024 was
216.0%, resulting in income tax expense of $8.4 million. The
effective tax rate differs from the federal statutory rate of 21.0%
primarily due to non-deductible loss on extinguishment of
convertible notes, a non-deductible civil money penalty of $4.0
million and non-deductible executive compensation. These items were
partly offset by a lower tax rate on foreign earnings.
- Our adjusted effective income tax rate for the third quarter of
2024 was 23.9%(1).
NINE MONTH HIGHLIGHTS
- Operating revenues increased 22.8% as compared to 2023 due to
higher average AUM, higher other revenues attributable to our
European listed ETPs and the recognition of $4.1 million of other
revenue related to legal and other related expenses expected to be
covered by insurance described above.
- Operating expenses increased 9.2% as compared to 2023 primarily
due to higher incentive and stock-based compensation expense and
increased headcount, fund management and administration costs,
marketing expenses, sales and business development expenses,
third-party distribution fees, as well as higher depreciation and
amortization. Operating expenses during the nine months ended
September 30, 2024, also includes $4.1 million of legal and other
related expenses expected to be covered by insurance that were
incurred in connection with the SEC ESG Settlement. These increases
were partly offset by lower contractual gold payments.
- Significant items reported in other income/(expense) in 2024
include: a loss on extinguishment of convertible notes of $30.6
million arising from the repurchase of $104.2 million aggregate
principal amount of our 2028 Notes; a civil money penalty of $4.0
million in connection with the SEC ESG Settlement; an increase in
interest expense of 15.8% due to imputed interest on our obligation
payable to GBH and higher level of debt outstanding, partly offset
by a lower average interest rate; an increase in interest income of
61.1% due to an increase in our interest-earning assets; net gains
on our financial instruments owned of $2.6 million; and losses on
our investments of $0.6 million. Gains and losses also generally
arise from the sale of gold earned on management fees paid by our
physically-backed gold ETPs, foreign exchange fluctuations and
other miscellaneous items.
- Our effective income tax rate for 2024 was 35.6%, resulting in
an income tax expense of $21.8 million. Our tax rate differs from
the federal statutory rate of 21.0% primarily due to non-deductible
loss on extinguishment of convertible notes, a non-deductible civil
money penalty of $4.0 million and non-deductible executive
compensation. These items were partly offset by a lower tax rate on
foreign earnings.
CONFERENCE CALL DIAL-IN AND WEBCAST DETAILS
WisdomTree will discuss its results and operational highlights
during a live webcast on Friday, October 25, 2024 at 11:00 a.m. ET,
which can be accessed using the following link:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=kZrhyzrd.
Participants also can dial in using the following numbers: (877)
407-9210 or (201) 689-8049. Click here to access the participant
international toll-free access numbers. To avoid delays, we
encourage participants to log in or dial into the conference call
10 minutes ahead of the scheduled start time. All earnings
materials and the webcast can be accessed through WisdomTree’s
investor relations website at https://ir.wisdomtree.com. A replay
of the webcast will also be available shortly after the call.
About WisdomTree
WisdomTree is a global financial innovator, offering a
well-diversified suite of exchange-traded products (ETPs), models,
solutions and products leveraging blockchain technology. We empower
investors and consumers to shape their future and support financial
professionals to better serve their clients and grow their
businesses. WisdomTree is leveraging the latest financial
infrastructure to create products that provide access, transparency
and an enhanced user experience. Building on our heritage of
innovation, we are also developing and have launched
next-generation digital products, services and structures,
including digital or blockchain-enabled mutual funds and tokenized
assets, as well as our blockchain-native digital wallet, WisdomTree
Prime® and institutional platform, WisdomTree Connect™.*
* The WisdomTree Prime digital wallet and digital asset services
and WisdomTree Connect institutional platform are made available
through WisdomTree Digital Movement, Inc., a federally registered
money services business, state-licensed money transmitter and
financial technology company (NMLS ID: 2372500) or WisdomTree
Digital Trust Company, LLC, in select U.S. jurisdictions and may be
limited where prohibited by law. WisdomTree Digital Trust Company,
LLC is chartered as a limited purpose trust company by the New York
State Department of Financial Services to engage in virtual
currency business. Visit https://www.wisdomtreeprime.com, the
WisdomTree Prime mobile app or https://wisdomtreeconnect.com for
more information.
WisdomTree currently has approximately $112.9 billion in assets
under management globally.
For more information about WisdomTree, WisdomTree Connect and
WisdomTree Prime, visit: https://www.wisdomtree.com.
Please visit us on X, at @WisdomTreeNews.
WisdomTree® is the marketing name for WisdomTree, Inc. and its
subsidiaries worldwide.
PRODUCTS AND SERVICES AVAILABLE VIA WISDOMTREE PRIME:
NOT FDIC INSURED | NO BANK GUARANTEE | NOT A BANK DEPOSIT |
MAY LOSE VALUE | NOT SIPC PROTECTED | NOT INSURED BY ANY GOVERNMENT
AGENCY
The products and services available through the WisdomTree Prime
app and WisdomTree Connect are not endorsed, indemnified or
guaranteed by any regulatory agency.
_________________________ (1)
(See “Non-GAAP Financial
Measurements.”
(2)
Earnings per share (“EPS”) is calculated
pursuant to the two-class method as it results in a lower EPS
amount as compared to the treasury stock method. In addition, the
three and nine months ended September 30, 2024 includes a loss of
$11,375 recognized upon the repurchase of our Series A Non-Voting
Convertible Preferred Stock convertible into approximately 14.75
million shares of common stock from ETFS Capital Limited and $1,868
of stock repurchase excise taxes. The three months ended December
31, 2023 includes a gain of $7,966 recognized upon the repurchase
of our Series C Non-Voting Convertible Preferred Stock convertible
into approximately 13.1 million shares of common stock from GBH.
These items are excluded from net income, but are required to be
added to net income to arrive at income available to common
stockholders in the calculation of EPS. These items are excluded
from our EPS when computed on a non-GAAP basis.
WISDOMTREE, INC. AND
SUBSIDIARIES
KEY OPERATING
STATISTICS
(Unaudited)
Three Months Ended
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
GLOBAL ETPs ($ in
millions)
Beginning of period assets
$
109,686
$
107,230
$
100,124
$
93,735
$
93,666
(Outflows)/inflows
(2,395)
340
1,990
(255)
1,983
Market appreciation/(depreciation)
5,286
2,116
5,116
6,644
(1,914)
End of period assets
$
112,577
$
109,686
$
107,230
$
100,124
$
93,735
Average assets during the period
$
110,369
$
108,392
$
102,360
$
96,533
$
95,743
Average advisory fee during the period
0.37%
0.37 %
0.36%
0.36%
0.36%
Revenue days
92
91
91
92
92
Number of ETPs—end of the period
352
350
338
337
344
U.S. LISTED ETFs ($ in
millions)
Beginning of period assets
$
79,722
$
78,087
$
72,486
$
68,018
$
65,903
(Outflows)/inflows
(1,650)
1,106
1,983
(67)
3,601
Market appreciation/(depreciation)
3,195
529
3,618
4,535
(1,486)
End of period assets
$
81,267
$
79,722
$
78,087
$
72,486
$
68,018
Average assets during the period
$
80,335
$
78,436
$
74,730
$
69,693
$
68,008
Number of ETFs—end of the period
78
78
77
76
80
EUROPEAN LISTED
ETPs ($ in millions)
Beginning of period assets
$
29,964
$
29,143
$
27,638
$
25,717
$
27,763
(Outflows)/inflows
(745)
(766)
7
(188)
(1,618)
Market appreciation/(depreciation)
2,091
1,587
1,498
2,109
(428)
End of period assets
$
31,310
$
29,964
$
29,143
$
27,638
$
25,717
Average assets during the period
$
30,034
$
29,956
$
27,630
$
26,840
$
27,735
Number of ETPs—end of the period
274
272
261
261
264
PRODUCT
CATEGORIES ($ in millions)
U.S. Equity
Beginning of period assets
$
31,834
$
31,670
$
29,156
$
25,643
$
26,001
Inflows
328
221
536
487
864
Market appreciation/(depreciation)
2,481
(57)
1,978
3,026
(1,222)
End of period assets
$
34,643
$
31,834
$
31,670
$
29,156
$
25,643
Average assets during the period
$
33,175
$
31,252
$
30,056
$
26,821
$
26,501
Commodity & Currency
Beginning of period assets
$
21,987
$
21,944
$
21,336
$
20,466
$
22,384
Outflows
(741)
(1,499)
(460)
(449)
(1,814)
Market appreciation/(depreciation)
1,788
1,542
1,068
1,319
(104)
End of period assets
$
23,034
$
21,987
$
21,944
$
21,336
$
20,466
Average assets during the period
$
22,016
$
22,437
$
20,837
$
21,254
$
22,278
Fixed Income
Beginning of period assets
$
21,430
$
21,218
$
21,197
$
21,797
$
20,215
(Outflows)/inflows
(897)
236
(14)
(715)
1,670
Market appreciation/(depreciation)
234
(24)
35
115
(88)
End of period assets
$
20,767
$
21,430
$
21,218
$
21,197
$
21,797
Average assets during the period
$
21,135
$
21,277
$
21,082
$
21,889
$
20,965
Three Months Ended
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
International Developed Market
Equity
Beginning of period assets
$
19,385
$
18,103
$
15,103
$
13,902
$
13,423
(Outflows)/inflows
(1,391)
1,253
1,599
9
798
Market appreciation/(depreciation)
81
29
1,401
1,192
(319)
End of period assets
$
18,075
$
19,385
$
18,103
$
15,103
$
13,902
Average assets during the period
$
18,636
$
18,809
$
16,688
$
14,266
$
13,873
Emerging Market Equity
Beginning of period assets
$
11,875
$
11,189
$
10,726
$
9,569
$
9,191
(Outflows)/inflows
(20)
57
217
412
451
Market appreciation/(depreciation)
597
629
246
745
(73)
End of period assets
$
12,452
$
11,875
$
11,189
$
10,726
$
9,569
Average assets during the period
$
12,083
$
11,448
$
10,900
$
9,833
$
9,652
Leveraged & Inverse
Beginning of period assets
$
1,922
$
1,828
$
1,815
$
1,781
$
1,864
Inflows/(outflows)
71
(18)
(50)
(59)
(1)
Market appreciation/(depreciation)
89
112
63
93
(82)
End of period assets
$
2,082
$
1,922
$
1,828
$
1,815
$
1,781
Average assets during the period
$
1,962
$
1,905
$
1,792
$
1,803
$
1,894
Cryptocurrency
Beginning of period assets
$
838
$
874
$
414
$
243
$
248
Inflows
201
75
158
28
10
Market (depreciation)/appreciation
15
(111)
302
143
(15)
End of period assets
$
1,054
$
838
$
874
$
414
$
243
Average assets during the period
$
917
$
856
$
614
$
325
$
238
Alternatives
Beginning of period assets.
$
415
$
404
$
377
$
334
$
340
Inflows..
54
15
4
32
5
Market (depreciation)/appreciation
1
(4)
23
11
(11)
End of period assets
$
470
$
415
$
404
$
377
$
334
Average assets during the period
$
445
$
408
$
391
$
342
$
342
Headcount
314
304
300
303
299
Note: Previously issued statistics may be restated due to fund
closures and trade adjustments. Source: WisdomTree
WISDOMTREE, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands, except per
share amounts)
Sept 30, 2024
Dec. 31, 2023
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted
cash
$
176,483
$
129,305
Financial instruments owned, at fair
value
77,341
58,722
Accounts receivable
45,200
35,473
Prepaid expenses
6,968
5,258
Other current assets.
1,173
1,036
Total current assets
307,165
229,794
Fixed assets, net
389
427
Securities held-to-maturity
212
230
Deferred tax assets, net
8,568
11,057
Investments
8,764
9,684
Right of use assets—operating leases
1,220
563
Goodwill
86,841
86,841
Intangible assets, net
605,802
605,082
Other noncurrent assets
474
459
Total assets
$
1,019,435
$
944,137
LIABILITIES AND STOCKHOLDERS’
EQUITY
LIABILITIES
Current liabilities:
Fund management and administration
payable
$
30,200
$
30,085
Compensation and benefits payable
30,087
38,111
Payable to Gold Bullion Holdings (Jersey)
Limited (“GBH”)
14,804
14,804
Income taxes payable
5,798
3,866
Operating lease liabilities
950
578
Accounts payable and other liabilities
24,634
15,772
Total current liabilities
106,473
103,216
Convertible notes—long term
511,406
274,888
Payable to GBH
26,368
24,328
Operating lease liabilities—long term
270
—
Total liabilities
644,517
402,432
Preferred stock:
Series A Non-Voting Convertible, par value
$0.01; Zero and 14.750 shares authorized, issued and
outstanding at September 30, 2024 and
December 31, 2023, respectively
—
132,569
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01; 400,000
shares authorized:
Issued and outstanding: 146,104 and
150,330 at September 30, 2024 and December 31, 2023,
respectively
1,461
1,503
Additional paid-in capital
265,564
312,440
Accumulated other comprehensive
income/(loss)
995
(548)
Retained earnings
106,898
95,741
Total stockholders’ equity
374,918
409,136
Total liabilities and stockholders’
equity
$
1,019,435
$
944,137
WISDOMTREE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
2024
2023
Cash flows from operating
activities:
Net income
$
39,385
$
83,469
Adjustments to reconcile net income to net
cash provided by operating activities:
Advisory and license fees paid in gold,
other precious metals and cryptocurrency
(39,028)
(37,632)
Loss on extinguishment of convertible
notes
30,632
9,721
Stock-based compensation
15,952
12,422
(Gains)/losses on financial instruments
owned, at fair value
(2,575)
1,006
Deferred income taxes
2,103
1,282
Imputed interest on payable to GBH
2,039
—
Amortization of issuance costs—convertible
notes
1,266
1,443
Depreciation and amortization
1,248
537
Amortization of right of use asset
976
963
Losses on investments
619
1,245
Gain on revaluation/termination of
deferred consideration—gold payments
—
(61,953)
Impairments
—
7,603
Contractual gold payments
—
6,069
Other
—
(1,569)
Changes in operating assets and
liabilities:
Accounts receivable
(9,344)
(7,346)
Prepaid expenses
(1,635)
(1,826)
Gold and other precious metals
38,603
30,629
Other assets
(150)
356
Fund management and administration
payable
(6)
3,577
Compensation and benefits payable
(8,251)
(8,786)
Income taxes payable
1,919
2,802
Operating lease liabilities
(991)
(955)
Accounts payable and other liabilities
6,124
5,293
Net cash provided by operating
activities
78,886
48,350
Cash flows from investing
activities:
Purchase of financial instruments owned,
at fair value
(57,855)
(56,837)
Purchase of investments
—
(10,000)
Cash paid—software development
(1,790)
—
Purchase of fixed assets
(128)
(93)
Proceeds from the sale of financial
instruments owned, at fair value
42,388
102,276
Proceeds from the exit from investment in
Securrency, Inc.
465
—
Proceeds from held-to-maturity securities
maturing or called prior to maturity
18
22
Receipt of contingent consideration—Sale
of Canadian ETF business
—
1,477
Acquisition of Securrency Transfers, Inc.
(net of cash acquired)
—
(985)
Net cash (used in)/provided by investing
activities
(16,902)
35,860
Cash flows from financing
activities:
Repurchase of Series A Non-Voting
Convertible Preferred Stock
(143,812)
—
Repurchase and maturity of convertible
notes
(132,713)
(184,272)
Common stock repurchased
(62,870)
(3,570)
Dividends paid
(14,745)
(14,897)
Issuance costs—convertible notes
(7,667)
(3,548)
Repurchase costs—Series A Non-Voting
Convertible Preferred Stock
(132)
—
Proceeds from the issuance of convertible
notes
345,000
130,000
Termination of deferred consideration—gold
payments
—
(50,005)
Issuance costs—Series C Non-Voting
Convertible Preferred Stock
—
(97)
Net cash used in financing activities
(16,939)
(126,389)
Increase/(decrease) in cash flow due to
changes in foreign exchange rate
2,133
(441)
Net increase/(decrease) in cash, cash
equivalents and restricted cash
47,178
(42,620)
Cash, cash equivalents and restricted
cash—beginning of year
129,305
132,101
Cash, cash equivalents and restricted
cash—end of period
$
176,483
$
89,481
Supplemental disclosure of cash flow
information:
Cash paid for income taxes
$
17,807
$
8,069
Cash paid for interest
$
9,913
$
8,272
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 Revenues, Operating Income, Operating Expenses,
Income Before Income Taxes, Income Tax Expense, Net Income and
Diluted Earnings per Share
We disclose adjusted revenues, operating income, operating
expenses, income before income taxes, income tax expense, net
income and diluted earnings per share as non-GAAP financial
measurements in order to report our results exclusive of items that
are non-recurring or not core to our operating business. We believe
presenting these non-GAAP financial measurements provides investors
with a consistent way to analyze our performance. These non-GAAP
financial measurements exclude the following:
Legal and other related expenses expected to be covered by
insurance: We have incurred $4.1 million of legal and other
related expenses in connection with the SEC ESG Settlement that are
expected to be covered by insurance. GAAP requires that such
covered expenses be reported gross in the income statement such
that revenues are recorded to offset expenses incurred. We offset
the revenues and related expenses when calculating our non-GAAP
financial measurements as the gross presentation serves to
overstate our revenues and expenses recognized in the ordinary
course of business.
Gains or losses on financial instruments owned: We
account for our financial instruments owned as trading securities,
which requires these instruments to be measured at fair value with
gains and losses reported in net income. We exclude these items
when calculating our non-GAAP financial measurements as the gains
and losses introduce volatility in earnings and are not core to our
operating business.
Tax windfalls and shortfalls upon vesting of stock-based
compensation awards: GAAP requires the recognition of tax
windfalls and shortfalls within income tax expense. These items
arise upon the vesting of stock-based compensation awards and the
magnitude is directly correlated to the number of awards
vesting/exercised as well as the difference between the price of
our stock on the date the award was granted and the date the award
vested or was exercised. We exclude these items when calculating
our non-GAAP financial measurements as they introduce volatility in
earnings and are not core to our operating business.
Imputed interest on our payable to the Gold Bullion Holdings
(Jersey) Limited (“GBH”): During the fourth quarter of 2023, we
repurchased our Series C Non-Voting Convertible Preferred Stock,
which was convertible into approximately 13.1 million shares of
WisdomTree common stock, from GBH, a subsidiary of the World Gold
Council, for aggregate cash consideration of approximately $84.4
million. Under the terms of the transaction, we paid GBH $40.0
million on the closing date, with the remainder of the purchase
price payable in equal annual installments on the first, second and
third anniversaries of the closing date, with no requirement to pay
interest. Under US GAAP, the obligation is recorded at its present
value utilizing a market rate of interest on the closing date of
7.0% and the corresponding discount is amortized as interest
expense pursuant to the effective interest method of accounting
over the life of the obligation. We exclude this item when
calculating our non-GAAP financial measurements as recognition of
interest expense is non-cash and contrary to the stated terms of
our obligation.
Other items: Losses on extinguishment of convertible
notes, a civil money penalty in connection with the SEC ESG
Settlement, gains and losses recognized on our investments, changes
in deferred tax asset valuation allowance, expenses incurred in
response to an activist campaign and impairments 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 adjusted operating
revenues less fund management and administration expenses. Gross
margin percentage is calculated as gross margin divided by total
adjusted operating revenues.
GAAP to NON-GAAP RECONCILIATION
(CONSOLIDATED) (in thousands) (Unaudited)
Three Months Ended
Adjusted Net Income and Diluted
Earnings per Share:
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
Net loss, as reported
$
(4,485)
$
21,759
$
22,111
$
19,077
$
12,984
Add back: Loss on extinguishment of
convertible notes, net of
income taxes
30,128
—
—
—
—
Add back: Civil money penalty in
connection with SEC ESG
Settlement
4,000
—
—
—
—
(Deduct)/add back: (Gains)/losses on
financial instruments
owned, net of income taxes
(607)
220
(1,562)
(370)
1,479
Add back: Imputed interest on payable to
GBH, net of income
taxes
528
513
504
224
—
(Deduct)/add back: (Gains)/losses
recognized on investments,
net of income taxes
(436)
998
(93)
(336)
323
(Deduct)/add back: (Decrease)/increase in
deferred tax asset
valuation allowance on financial
instruments owned and
investments
(335)
391
(531)
(280)
1,234
(Deduct)/add back: Tax
(windfalls)/shortfalls upon vesting of
stock-based compensation awards
(25)
(40)
(699)
(6)
(18)
Add back: Expenses incurred in response to
an activist
campaign, net of income taxes
—
3,234
526
—
—
Add back: Impairments, net of income
taxes
—
—
—
257
2,046
Adjusted net income
$
28,768
$
27,075
$
20,256
$
18,566
$
18,048
Weighted average common shares—diluted
156,745
166,359
165,268
171,703
177,140
Adjusted earnings per share—diluted
$
0.18
$
0.16
$
0.12
$
0.11
$
0.10
Three Months Ended
Gross Margin and Gross Margin
Percentage:
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
Operating revenues
$
113,168
$
107,034
$
96,838
$
90,844
$
90,423
Less: Legal and other related expenses
expected to be covered
by insurance
(3,661)
—
(453)
—
—
Operating revenues, as adjusted
$
109,507
$
107,034
$
96,385
$
90,844
$
90,423
Less: Fund management and
administration
(21,004)
(20,139)
(19,962)
(18,445)
(18,023)
Gross margin
$
88,503
$
86,895
$
76,423
$
72,399
$
72,400
Gross margin percentage
80.8%
81.2%
79.3%
79.7%
80.1%
Three Months Ended
Adjusted Operating Revenues, Operating
Income and Adjusted Operating Income Margin:
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
Operating revenues
$
113,168
$
107,034
$
96,838
$
90,844
$
90,423
Deduct: Legal and other related expenses
expected to be
covered by insurance
(3,661)
—
(453)
—
—
Operating revenues, as adjusted
$
109,507
$
107,034
$
96,385
$
90,844
$
90,423
Operating income
$
40,792
$
33,511
$
27,950
$
26,035
$
26,705
Add back: Expenses incurred in response to
an activist
campaign
—
4,271
695
—
—
Adjusted operating income
$
40,792
$
37,782
$
28,645
$
26,035
$
26,705
Adjusted operating income margin
37.3%
35.3%
29.7%
28.7%
29.5%
Three Months Ended
Adjusted Total Operating
Expenses:
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
Total operating expenses
$
72,376
$
73,523
$
68,888
$
64,809
$
63,718
Deduct: Legal and other related expenses
expected to be
covered by insurance
(3,661)
—
(453)
—
—
Deduct: Expenses incurred in response to
an activist campaign
—
(4,271)
(695)
—
—
Adjusted total operating expenses
$
68,715
$
69,252
$
67,740
$
64,809
$
63,718
Three Months Ended
Adjusted Income Before Income
Taxes:
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
Income before income taxes
$
3,866
$
29,526
$
27,812
$
24,765
$
18,820
Add back: Loss on extinguishment of
convertible notes
30,632
—
—
—
—
Add back: Civil money penalty in
connection with SEC ESG
Settlement
4,000
—
—
—
—
(Deduct)/add back: (Gains)/losses on
financial instruments
owned
(802)
291
(2,063)
(489)
1,953
Add back: Imputed interest on payable to
GBH
697
677
666
296
—
(Deduct)/add back: (Gains)/losses
recognized on investments
(576)
1,318
(123)
(1,003)
426
Add back: Expenses incurred in response to
an activist
campaign
—
4,271
695
—
—
Add back: Impairments
—
—
—
339
2,703
Adjusted income before income taxes
$
37,817
$
36,083
$
26,987
$
23,908
$
23,902
Three Months Ended
Adjusted Income Tax Expense and
Adjusted Effective Income Tax Rate:
Sept. 30,
2024
June 30,
2024
Mar. 31,
2024
Dec. 31,
2023
Sept. 30,
2023
Adjusted income before income taxes
(above)
$
37,817
$
36,083
$
26,987
$
23,908
$
23,902
Income tax expense
$
8,351
$
7,767
$
5,701
$
5,688
$
5,836
Add back: Tax benefit arising from
extinguishment of
convertible notes
504
—
—
—
—
Add back/(deduct): Decrease/(increase) in
deferred tax asset
valuation allowance on financial
instruments owned and
investments
335
(391)
531
280
(1,234)
(Deduct)/add back: Tax (expense)/benefit
arising from
losses/(gains) on financial instruments
owned
(195)
71
(501)
(119)
474
Add back: Tax benefit on imputed
interest
169
164
162
72
—
(Deduct)/add back: Tax (expense)/benefit
on losses/(gains) on
investments
(140)
320
(30)
(667)
103
Add back/(deduct): Tax
windfalls/(shortfalls) upon vesting of
stock-based compensation awards
25
40
699
6
18
Add back: Tax benefit arising from
expenses incurred in
response to an activist campaign
—
1,037
169
—
—
Add back: Tax benefit arising from
impairments
—
—
—
82
657
Adjusted income tax expense
$
9,049
$
9,008
$
6,731
$
5,342
$
5,854
Adjusted effective income tax rate
23.9%
25.0%
24.9%
22.3%
24.5%
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements that are
based on our management’s beliefs and assumptions and on
information currently available to our management. Although we
believe that the expectations reflected in these forward-looking
statements are reasonable, these statements relate to future events
or our future financial performance, and involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievements expressed or implied by these
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “will,”
“should,” “expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “continue” or the negative of
these terms or other comparable terminology. These statements are
only predictions. You should not place undue reliance on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which are, in some cases,
beyond our control and could materially affect results. Factors
that may cause actual results to differ materially from current
expectations include, among other things, the risks described
below. If one or more of these or other risks or uncertainties
occur, or if our underlying assumptions prove to be incorrect,
actual events or results may vary significantly from those implied
or projected by the forward-looking statements. No forward-looking
statement is a guarantee of future performance. You should read
this press release completely and with the understanding that our
actual future results may be materially different from any future
results expressed or implied by these forward-looking
statements.
In particular, forward-looking statements in this press release
may include statements about:
- anticipated trends, conditions and investor sentiment in the
global markets and ETPs;
- anticipated levels of inflows into and outflows out of our
ETPs;
- our ability to deliver favorable rates of return to
investors;
- competition in our business;
- whether we will experience future growth;
- our ability to develop new products and services and their
potential for success;
- our ability to maintain current vendors or find new vendors to
provide services to us at favorable costs;
- our ability to successfully implement our strategy relating to
digital assets and blockchain-enabled financial services, including
WisdomTree Prime® and WisdomTree Connect™, and achieve its
objectives;
- our ability to successfully operate and expand our business in
non-U.S. markets;
- the effect of laws and regulations that apply to our business;
and
- actions of activist stockholders.
Our business is subject to many risks and uncertainties,
including without limitation:
- declining prices of securities, gold and other precious metals
and other commodities and changes in interest rates and general
market conditions can adversely affect our business by reducing the
market value of the assets we manage or causing WisdomTree ETP
investors to sell their fund shares and trigger redemptions;
- fluctuations in the amount and mix of our AUM, whether caused
by disruptions in the financial markets or otherwise, including but
not limited to events such as a pandemic or war, geopolitical
conflicts, political events, acts of terrorism and other matters
beyond our control, may negatively impact revenues and operating
margins, and may impede our ability to refinance our debt upon
maturity or increase the cost of borrowing upon a refinancing;
- competitive pressures could reduce revenues and profit
margins;
- we derive a substantial portion of our revenues from a limited
number of products, and, as a result, our operating results are
particularly exposed to investor sentiment toward investing in the
products’ strategies and our ability to maintain the AUM of these
products, as well as the performance of these products and
market-specific and political and economic risk;
- a significant portion of our AUM is held in products with
exposure to U.S. and international developed markets, and we
therefore have exposure to domestic and foreign market conditions
and are subject to currency exchange rate risks;
- withdrawals or broad changes in investments in our ETPs by
investors with significant positions may negatively impact revenues
and operating margins;
- we face increased operational, regulatory, financial and other
risks as a result of conducting our business internationally, and
as we expand our digital assets product offerings and services
beyond our existing ETP business;
- many of our ETPs have a limited track record, and poor
investment performance could cause our revenues to decline;
- we depend on third parties to provide many critical services to
operate our business and our ETPs. The failure of key vendors to
adequately provide such services could materially affect our
operating business and harm WisdomTree ETP investors; and
- actions of activist stockholders against us, which have been
costly and may be disruptive and cause uncertainty about the
strategic direction of our business.
Other factors, such as general economic conditions, including
currency exchange rate fluctuations, also may have an effect on the
results of our operations. For a more complete description of the
risks noted above and other risks that could cause our actual
results to differ from our current expectations, see “Risk Factors”
in our Annual Report on Form 10-K for the year ended December 31,
2023, and in subsequent reports filed with or furnished to the
SEC.
The forward-looking statements in this press release represent
our views as of the date of this press release. We anticipate that
subsequent events and developments may cause our views to change.
However, while we may elect to update these forward-looking
statements at some point in the future, we have no current
intention of doing so except to the extent required by applicable
law. Therefore, these forward-looking statements do not represent
our views as of any date other than the date of this press
release.
Category: Business Update
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241025121692/en/
Investor Relations Jeremy Campbell +1.917.267.3859
jeremy.campbell@wisdomtree.com
Media Relations Natasha Ramsammy +1.917.267.3798
nramsammy@wisdomtree.com / wisdomtree@fullyvested.com
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