Eleven consecutive quarters of net inflows
Annualized inflow rate of 21% across all products Termination of
contractual gold payments and operating leverage expands margin
WisdomTree, Inc. (NYSE: WT), a global financial innovator, today
reported financial results for the second quarter of 2023.
$54.3 million net income ($14.9(1) million net income, as
adjusted); including a non-cash gain of $41.4 million
associated with the revaluation and termination of our deferred
consideration—gold payments obligation.
$93.7 billion of ending AUM, an increase of 3.3% from the
previous quarter arising from net inflows and market
appreciation.
$2.3 billion of net inflows, primarily driven by inflows
into our international equity and fixed income products, partly
offset by outflows from our commodity products.
0.36% average advisory fee, unchanged from last
quarter.
$85.7 million of operating revenues, an increase of 4.5%
from the previous quarter primarily due to higher average AUM.
79.3% gross margin(1), a 0.2 point increase from the
previous quarter due to higher revenues.
21.2% operating income margin (26.9%(1) as adjusted), a 1
point increase (5.5 point increase, as adjusted(1)) compared to our
operating margin of 20.2% in the prior quarter due to higher
revenues and lower contractual gold payments (upon the termination
of our deferred consideration—gold payments obligation on May 10,
2023), partly offset by higher expenses incurred in response to an
activist campaign.
$60.0 million of cash paid and 1,037,288 shares of common
stock issued in connection with the maturity of $60.0 million
aggregate principal amount of 4.25% Convertible Senior Notes.
$50.0 million cash consideration paid and 13,087 shares of
Series C Non-Voting Convertible Preferred Stock, convertible into
13,087,000 shares of common stock, issued to terminate our
deferred consideration—gold payments obligation.
$0.03 quarterly dividend declared, payable on
August 23, 2023 to stockholders of record as of the close of
business on August 9, 2023.
Update from Jonathan Steinberg, WisdomTree
CEO
“WisdomTree’s momentum continued in the
second quarter with a 21% year-to-date pace of annualized organic
flow growth, best-in-class among our asset manager peers,
propelling our global AUM to record high levels. Additionally, we
launched WisdomTree Prime™ in 21 states at the end of June, with
near full coverage in the U.S. expected by year end. The personal
finance app empowers users to save, spend and invest, bringing
tokenization and blockchain-enabled finance to the center of the
consumer’s financial life. Whether it’s growing the platform
organically, leveraging B2B or B2B2C opportunities, or utilizing
our early-mover status in tokenization to pursue third party
distribution, we have significant opportunity and have opened many
paths to success. I’ve never been more excited about the road ahead
than I am today and expect our momentum will continue through 2023
and beyond.”
Update from Jarrett Lilien, WisdomTree COO
and President
“WisdomTree has had one of its strongest
first halves of a year in company history, with best-in-class flow
growth driven by deep and wide flow momentum, having gathered net
inflows in all 8 major product categories across our broad product
suite. Our differentiated models business is also gaining traction,
deepening penetration with current partners like Merrill Lynch and
Morgan Stanley, winning new mandates with key partners like LPL and
Corbu, and continuing to expand our models business with small
independent RIAs and broker-dealers, where our pipeline is strong.
And, after expanding operating margins by over 500bps through the
termination of our contractual gold payments obligation earlier
this quarter, we expect further margin expansion in the years ahead
as our business is scalable with high incremental
margins.”
OPERATING AND FINANCIAL HIGHLIGHTS
Three Months Ended
June 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sept. 30, 2022
June 30, 2022
Consolidated
Operating Highlights ($ in billions):
AUM—end of period
$
93.7
$
90.7
$
82.0
$
70.9
$
74.3
Net inflows
$
2.3
$
6.3
$
5.3
$
1.7
$
3.9
Average AUM
$
91.6
$
87.5
$
77.6
$
74.7
$
77.7
Average advisory fee
0.36
%
0.36
%
0.36
%
0.38
%
0.39
%
Consolidated
Financial Highlights ($ in millions, except per share
amounts):
Operating revenues
$
85.7
$
82.0
$
73.3
$
72.4
$
77.3
Net income/(loss)
$
54.3
$
16.2
$
(28.3
)
$
81.2
$
8.0
Diluted earnings/(loss) per share
$
0.32
$
0.10
$
(0.20
)
$
0.50
$
0.05
Operating income margin
21.2
%
20.2
%
16.0
%
20.5
%
20.5
%
As Adjusted
(Non-GAAP(1)):
Gross margin
79.3
%
79.1
%
76.9
%
77.5
%
79.2
%
Net income, as adjusted
$
14.9
$
11.2
$
7.0
$
9.3
$
11.3
Diluted earnings per share, as
adjusted
$
0.09
$
0.07
$
0.04
$
0.06
$
0.07
Operating income margin, as adjusted
26.9
%
21.4
%
16.0
%
20.5
%
23.1
%
RECENT BUSINESS DEVELOPMENTS
Company
News
- In May 2023, we closed a transaction resulting in the
termination of WisdomTree’s contractual gold payments obligation to
ETFS Capital Limited for approximately $137 million. The
transaction expands our operating margin by over 500 basis points,
is accretive to earnings per share and reduces volatility in our
quarterly GAAP financial results.
- In June 2023, stockholders elected five of WisdomTree’s six
nominees, including new director Shamla Naidoo, and one of three
nominees proposed by ETFS Capital Limited, Tonia Pankopf, to
WisdomTree’s Board of Directors; and Win Neuger was appointed Chair
of the Board.
- In July 2023, WisdomTree Prime™ became available in the Apple
App Store and Google Play for users across 21 states in the U.S.,
granting investors access to the blockchain-enabled financial app
built to save, spend, and invest in digital assets and WisdomTree
Digital Funds; our European business won ‘Best ETF Issuer’ at the
Online Money Awards, marking the 2nd consecutive year of winning
the award.
- Also in July 2023, new chairs and members were appointed to all
three committees of our Board of Directors.
Product
News
- In June 2023, we announced 2-for-1 forward share splits on the
WisdomTree Europe Hedged Equity Fund (HEDJ), the WisdomTree
Interest Rate Hedged U.S. Aggregate Bond Fund (AGZD) and the
WisdomTree Japan Hedged SmallCap Equity Fund (DXJS); we launched
the CORBU x WT PolyMacro Model Portfolios, a collaborative effort
with CORBU, a research intelligence and advisory platform, designed
for a rapidly changing global investment landscape; our
Siegel-WisdomTree Longevity and Siegel-WisdomTree Global Equity
Models became available on LPL Financial’s unified managed account
platform Model Wealth Portfolios (MWP); and we launched the
WisdomTree Renewable Energy UCITS ETF (WRNW) on the London Stock
Exchange, Borsa Italiana and B�rse Xetra.
- In July 2023, we expanded our range of UCITS ETFs on SIX, the
Swiss Stock Exchange, with the listing of the WisdomTree Broad
Commodities UCITS ETF (PCOM) and WisdomTree Enhanced Commodity
ex-Agriculture UCITS ETF (WXAG).
WISDOMTREE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sept. 30, 2022
June 30,
2022
June 30, 2023
June 30, 2022
Operating Revenues:
Advisory fees
$
82,004
$
77,637
$
70,913
$
70,616
$
75,586
$
159,641
$
152,103
Other income
3,720
4,407
2,397
1,798
1,667
8,127
3,518
Total revenues
85,724
82,044
73,310
72,414
77,253
167,768
155,621
Operating Expenses:
Compensation and benefits
26,319
27,398
24,831
23,714
24,565
53,717
49,352
Fund management and administration
17,727
17,153
16,906
16,285
16,076
34,880
31,570
Marketing and advertising.
4,465
4,007
4,240
3,145
3,894
8,472
7,917
Sales and business development
3,326
2,994
3,407
2,724
3,131
6,320
5,740
Contractual gold payments
1,583
4,486
4,107
4,105
4,446
6,069
8,896
Professional fees
8,334
3,715
2,666
2,367
4,308
12,049
8,767
Occupancy, communications and
equipment
1,172
1,101
1,110
986
1,049
2,273
1,802
Depreciation and amortization
121
109
104
58
53
230
100
Third-party distribution fees
1,881
2,253
1,793
1,833
1,818
4,134
4,030
Other
2,615
2,257
2,427
2,324
2,109
4,872
3,954
Total operating expenses
67,543
65,473
61,591
57,541
61,449
133,016
122,128
Operating income
18,181
16,571
11,719
14,873
15,804
34,752
33,493
Other Income/(Expenses):
Interest expense
(4,021
)
(4,002)
(3,736)
(3,734
)
(3,733)
(8,023
)
(7,465
)
Gain/(loss) on revaluation/termination of
deferred consideration—gold payments
41,361
20,592
(35,423)
77,895
2,311
61,953
(14,707
)
Interest income
1,000
1,083
945
811
770
2,083
1,564
Impairments
—
(4,900)
—
—
—
(4,900
)
—
Loss on extinguishment of convertible
notes
—
(9,721)
—
—
—
(9,721
)
—
Other gains and losses, net
1,286
(2,007)
(1,815)
(5,289
)
(4,474)
(721
)
(29,181
)
Income/(loss) before income taxes
57,807
17,616
(28,310)
84,556
10,678
75,423
(16,296
)
Income tax expense/(benefit)
3,555
1,383
(21)
3,327
2,673
4,938
(14,040
)
Net income/(loss)
$
54,252
$
16,233
$
(28,289)
$
81,229
$
8,005
$
70,485
$
(2,256
)
Earnings/(loss) per share—basic
$
0.32(2)
$
0.10(2)
$
(0.20)
$
0.50(2)
$
0.05(2)
$
0.43(2)
$
(0.02)(2)
Earnings/(loss) per share—diluted
$
0.32
$
0.10
$
(0.20)
$
0.50(2)
$
0.05
$
0.42(2)
$
(0.02
)
Weighted average common shares—basic
144,351
143,862
143,126
143,120
$
143,046
144,108
142,915
Weighted average common shares—diluted
170,672
159,887
143,126
158,953
158,976
165,468
142,915
As Adjusted (Non-GAAP(1))
Total operating expenses
$
62,630
$
64,506
$
61,591
$
57,541
$
59,425
Operating income
$
23,094
$
17,538
$
11,719
$
14,873
$
17,828
Income before income taxes
$
19,752
$
14,485
$
8,615
$
12,645
$
14,498
Income tax expense
$
4,833
$
3,287
$
1,588
$
3,323
$
3,241
Net income
$
14,919
$
11,198
$
7,027
$
9,322
$
11,257
Earnings per share—diluted
$
0.09
$
0.07
$
0.04
$
0.06
$
0.07
Weighted average common shares—diluted
170,672
159,887
159,478
158,953
158,976
QUARTERLY HIGHLIGHTS
Operating Revenues
- Operating revenues increased 4.5% and 11.0% from the first
quarter of 2023 and the second quarter of 2022, respectively,
primarily due to higher average AUM.
- Our average advisory fee was 0.36%, 0.36% and 0.39% during the
second quarter of 2023, the first quarter of 2023 and the second
quarter of 2022, respectively.
Operating Expenses
- Operating expenses increased 3.2% from the first quarter of
2023 primarily due to higher professional fees incurred in
connection with an activist campaign. This increase was partly
offset by lower contractual gold payments, as well as lower
compensation due to seasonal items occurring in the prior
quarter.
- Operating expenses increased 9.9% from the second quarter of
2022 primarily due to higher professional fees incurred in
connection with an activist campaign, incentive compensation and
headcount, and fund management and administration costs. These
increases were partly offset by lower contractual gold
payments.
Other Income/(Expenses)
- Interest expense was essentially unchanged from the first
quarter of 2023 and increased 7.7% from the second quarter of 2022
due to a higher average level of debt outstanding and a higher
effective interest rate.
- We recognized a non-cash gain on revaluation/termination of
deferred consideration of $41.4 million during the second quarter
of 2023. This obligation was terminated on May 10, 2023 for
aggregate consideration totaling approximately $137.0 million,
including $50.0 million in cash and the issuance of 13,087 shares
of Series C Non-Voting Convertible Preferred Stock (valued at $86.9
million) which are convertible into 13,087,000 shares of the
Company’s common stock.
- Interest income was essentially unchanged from the first
quarter of 2023 and increased 29.9% from the second quarter of
2022, respectively, due to rising interest rates.
- Other gains and losses, net was $1.3 million for the second
quarter of 2023. This quarter includes gains on our investments of
$3.1 million, partly offset by losses on our financial instruments
owned of $1.0 million. Gains and losses also generally arise from
the sale of gold earned from management fees paid by our
physically-backed gold exchange-traded products (“ETPs”), foreign
exchange fluctuations and other miscellaneous items.
Income Taxes
- Our effective income tax rate for the second quarter of 2023
was 6.1%, resulting in income tax expense of $3.6 million. The
effective tax rate differs from the federal statutory rate of 21%
primarily due to a non-taxable gain on revaluation/termination of
deferred consideration and a decrease in the deferred tax asset
valuation allowance on losses recognized on our investments. These
items were partly offset by non-deductible executive
compensation.
- Our adjusted effective income tax rate was 24.5%(1).
SIX MONTH HIGHLIGHTS
- Operating revenues increased 7.8% as compared to 2022 due to
higher average AUM and higher other income from large flows into
some of our European products, partly offset by a lower average
advisory fee.
- Operating expenses increased 8.9% as compared to 2022 primarily
due to higher incentive compensation and headcount, fund management
and administration costs and professional fees incurred in
connection with an activist campaign. These increases were partly
offset by lower contractual gold payments.
- Significant items reported in other income/(expense) in 2023
include: an increase in interest expense of 7.5% due to a higher
level of debt outstanding; an increase in interest income of 33.2%
due to an increase in our financial instruments owned; a non-cash
charge of $1.4 million arising from the release of tax-related
indemnification assets upon the expiration of the statute of
limitations (an equal and offsetting benefit was recognized in
income tax expense); gains on our financial instruments owned of
$0.9 million and losses on our investments of $0.8 million. Gains
and losses also generally arise from the sale of gold earned on
management fees paid by our physically-backed gold ETPs, foreign
exchange fluctuations and other miscellaneous items.
- Our effective income tax rate for 2023 was 6.5%, resulting in
an income tax expense of $4.9 million. Our tax rate differs from
the federal statutory rate of 21% primarily due to a non-taxable
gain on revaluation/termination of deferred consideration, a
reduction in unrecognized tax benefits associated with the release
of the tax-related indemnification asset described above and a
lower tax rate on foreign earnings. These items were partly offset
by a non-deductible loss on extinguishment of our convertible notes
during the first quarter of 2023, non-deductible executive
compensation and an increase in the deferred tax asset valuation
allowance on losses recognized on our investments.
CONFERENCE CALL DIAL-IN AND WEBCAST DETAILS
WisdomTree will discuss its results and operational highlights
during a live webcast on Friday, July 28, 2023 at 11:00 a.m. ET,
which can be accessed using the following link:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=G7ogAmF2.
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
and solutions. We empower investors 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 next-generation
digital products and structures, including digital funds and
tokenized assets, as well as our blockchain-native digital wallet,
WisdomTree Prime™.
WisdomTree currently has approximately $97.2 billion in assets
under management globally.
For more information about WisdomTree and WisdomTree PrimeTM,
visit: https://www.wisdomtree.com.
Please visit us on Twitter at @WisdomTreeNews.
WisdomTree® is the marketing name for WisdomTree, Inc. and its
subsidiaries worldwide.
____________
(1)
See “Non-GAAP Financial Measurements.”
(2)
Earnings/(loss) per share (“EPS”) is calculated pursuant to
the two-class method as it results in a lower EPS amount as
compared to the treasury stock method.
WisdomTree, Inc.
Key Operating Statistics
(Unaudited)
Three Months Ended
June 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sept. 30, 2022
June 30, 2022
GLOBAL ETPs ($ in
millions)
Beginning of period assets
$
90,740
$
81,993
$
70,878
$
74,302
$
79,407
Inflows/(outflows)
2,327
6,341
5,264
1,747
3,852
Market appreciation/(depreciation)
599
2,406
5,851
(5,171
)
(8,953
)
Fund closures
—
—
—
—
(4
)
End of period assets
$
93,666
$
90,740
$
81,993
$
70,878
$
74,302
Average assets during the period
$
91,578
$
87,508
$
77,649
$
74,678
$
77,738
Average advisory fee during the period
0.36
%
0.36
%
0.36
%
0.38
%
0.39
%
Revenue days
91
90
92
92
91
Number of ETFs—end of the period
353
350
348
347
344
U.S. LISTED ETFs
($ in millions)
Beginning of period assets
$
61,283
$
55,973
$
48,043
$
47,255
$
48,622
Inflows/(outflows)
3,249
4,012
4,232
3,812
4,278
Market appreciation/(depreciation)
1,371
1,298
3,698
(3,024
)
(5,645
)
End of period assets
$
65,903
$
61,283
$
55,973
$
48,043
$
47,255
Average assets during the period
$
62,712
$
59,430
$
53,655
$
49,466
$
48,270
Number of ETFs—end of the period
80
80
79
78
77
EUROPEAN LISTED
ETPs ($ in millions)
Beginning of period assets
$
29,457
$
26,020
$
22,835
$
27,047
$
30,785
(Outflows)/inflows
(922
)
2,329
1,032
(2,065
)
(426
)
Market (depreciation)/appreciation
(772
)
1,108
2,153
(2,147
)
(3,308
)
Fund closures
—
—
—
—
(4
)
End of period assets
$
27,763
$
29,457
$
26,020
$
22,835
$
27,047
Average assets during the period
$
28,866
$
28,078
$
23,994
$
25,212
$
29,468
Number of ETPs—end of the period
273
270
269
269
267
PRODUCT
CATEGORIES ($ in millions)
U.S. Equity
Beginning of period assets
$
24,534
$
24,112
$
20,952
$
21,058
$
23,738
Inflows/(outflows)
414
(149
)
1,021
1,239
306
Market appreciation/(depreciation)
1,053
571
2,139
(1,345
)
(2,986
)
End of period assets
$
26,001
$
24,534
$
24,112
$
20,952
$
21,058
Average assets during the period
$
24,732
$
24,726
$
23,492
$
22,535
$
22,362
Commodity & Currency
Beginning of period assets
$
24,924
$
22,097
$
19,561
$
23,624
$
26,302
(Outflows)/inflows
(1,512
)
2,003
796
(2,179
)
(475
)
Market (depreciation)/appreciation
(1,028
)
824
1,740
(1,884
)
(2,203
)
End of period assets
22,384
$
24,924
$
22,097
$
19,561
$
23,624
Average assets during the period
$
24,033
$
23,806
$
20,345
$
21,625
$
25,767
Fixed Income
Beginning of period assets
$
18,708
$
15,273
$
11,695
$
9,192
$
5,418
Inflows/(outflows)
1,471
3,513
3,393
2,627
4,038
Market appreciation/(depreciation)
36
(78
)
185
(124
)
(264
)
End of period assets
$
20,215
$
18,708
$
15,273
$
11,695
$
9,192
Average assets during the period
$
19,185
$
17,176
$
13,962
$
10,077
$
7,426
Three Months Ended
June 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sept. 30, 2022
June 30, 2022
International Developed Market
Equity
Beginning of period assets
$
11,433
$
10,195
$
9,183
$
9,968
$
11,422
Inflows/(outflows)
1,592
450
40
(115
)
79
Market appreciation/(depreciation)
398
788
972
(670
)
(1,533
)
End of period assets
$
13,423
$
11,433
$
10,195
$
9,183
$
9,968
Average assets during the period
$
12,276
$
10,879
$
10,000
$
10,032
$
10,695
Emerging Market Equity
Beginning of period assets
$
8,811
$
8,116
$
7,495
$
8,386
$
9,991
Inflows/(outflows)
329
486
(53
)
114
(223
)
Market appreciation/(depreciation)
51
209
674
(1,005
)
(1,382
)
End of period assets
$
9,191
$
8,811
$
8,116
$
7,495
$
8,386
Average assets during the period
$
8,998
$
8,666
$
7,770
$
8,329
$
9,155
Leveraged & Inverse
Beginning of period assets
$
1,785
$
1,754
$
1,523
$
1,618
$
1,856
Inflows/(outflows)
12
43
59
45
90
Market appreciation/(depreciation)
67
(12
)
172
(140
)
(328
)
End of period assets
$
1,864
$
1,785
$
1,754
$
1,523
$
1,618
Average assets during the period
$
1,798
$
1,757
$
1,623
$
1,589
$
1,765
Alternatives
Beginning of period assets
$
306
$
310
$
306
$
305
$
293
Inflows/(outflows)
22
(18
)
12
16
34
Market appreciation/(depreciation)
12
14
(8
)
(15
)
(22
)
End of period assets
$
340
$
306
$
310
$
306
$
305
Average assets during the period
$
320
$
308
$
305
$
313
$
299
Cryptocurrency
Beginning of period assets
$
239
$
136
$
163
$
151
$
383
(Outflows)/inflows
(1
)
13
(4
)
—
3
Market appreciation/(depreciation)
10
90
(23
)
12
(235
)
End of period assets
$
248
$
239
$
136
$
163
$
151
Average assets during the period
$
236
$
190
$
152
$
178
$
265
Closed ETPs
Beginning of period assets
$
—
$
—
$
—
$
—
$
4
Fund closures
$
—
$
—
$
—
$
—
$
(4
)
End of period assets
$
—
$
—
$
—
$
—
$
—
Average assets during the period
—
—
—
—
4
Headcount
291
279
273
274
264
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)
June 30, 2023
Dec. 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
83,735
$
132,101
Financial instruments owned, at fair
value
65,492
126,239
Accounts receivable
34,208
30,549
Prepaid expenses
8,161
4,684
Income taxes receivable
894
—
Other current assets
376
390
Total current assets
192,866
293,963
Fixed assets, net
487
544
Indemnification receivable
—
1,353
Securities held-to-maturity
245
259
Deferred tax assets, net
7,626
10,536
Investments
40,002
35,721
Right of use assets—operating leases
849
1,449
Goodwill
86,841
85,856
Intangible assets, net
604,407
603,567
Other noncurrent assets
454
571
Total assets
$
933,777
$
1,033,819
LIABILITIES AND STOCKHOLDERS’
EQUITY
LIABILITIES
Current liabilities:
Fund management and administration
payable
$
30,635
$
36,521
Compensation and benefits payable
17,800
24,121
Operating lease liabilities
849
1,125
Convertible notes—current
—
59,197
Deferred consideration—gold payments
—
16,796
Income taxes payable
—
1,599
Accounts payable and other liabilities
18,997
9,075
Total current liabilities
68,281
148,434
Convertible notes—long term
274,140
262,019
Deferred consideration—gold payments
—
183,494
Operating lease liabilities
—
339
Other noncurrent liabilities
—
1,353
Total liabilities
342,421
595,639
Preferred stock:
Series A Non-Voting Convertible, par value
$0.01; 14.750 shares authorized, issued and outstanding
132,569
132,569
STOCKHOLDERS’ EQUITY
Preferred stock:
Series C Non-Voting Convertible, par value
$0.01; 13.087 shares authorized, issued and
outstanding
—
—
Common stock, par value $0.01; 400,000
shares authorized:
Issued and outstanding: 150,343 and
146,517 at June 30, 2023 and December 31, 2022, respectively
1,503
1,465
Additional paid-in capital
383,621
291,847
Accumulated other comprehensive loss
(693
)
(1,420
)
Retained earnings
74,356
13,719
Total stockholders’ equity
458,787
305,611
Total liabilities and stockholders’
equity
$
933,777
$
1,033,819
WISDOMTREE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended June
30,
2023
2022
Cash flows from operating
activities:
Net income/(loss)
$
70,485
$
(2,256
)
Adjustments to reconcile net income/(loss)
to net cash used in operating activities:
(Gain)/loss on revaluation/termination of
deferred consideration—gold payments
(61,953
)
14,707
Advisory and license fees paid in gold,
other precious metals and cryptocurrency
(25,692
)
(31,511
)
Loss on extinguishment of convertible
notes
9,721
—
Stock-based compensation
8,506
5,368
Contractual gold payments
6,069
8,896
Impairments
4,900
—
Deferred income taxes
2,964
3,378
Amortization of issuance costs—convertible
notes
1,069
1,293
(Gains)/losses on financial instruments
owned, at fair value
(947
)
9,322
Losses on investments
819
—
Amortization of right of use asset
640
332
Depreciation and amortization
230
100
Other
—
120
Changes in operating assets and
liabilities:
Accounts receivable
(5,254
)
(3,718
)
Prepaid expenses
(3,425
)
(3,613
)
Gold and other precious metals
18,441
23,743
Other assets
347
(241
)
Intangibles—software development
(946
)
(724
)
Fund management and administration
payable
6,419
423
Compensation and benefits payable
(18,941
)
(13,537
)
Income taxes receivable/payable
(2,523
)
(5,235
)
Operating lease liabilities
(652
)
(348
)
Accounts payable and other liabilities
9,752
2,043
Net cash provided by operating
activities
20,029
8,542
Cash flows from investing
activities:
Purchase of financial instruments owned,
at fair value
(40,532
)
(32,488
)
Purchase of investments
(10,000
)
(11,863
)
Cash paid—acquisition of Securrency
Transfers, Inc. (net of cash acquired)
(985
)
—
Purchase of fixed assets
(58
)
(205
)
Proceeds from the sale of financial
instruments owned, at fair value
102,020
21,455
Receipt of contingent consideration—Sale
of Canadian ETF business.
1,477
—
Proceeds from held-to-maturity securities
maturing or called prior to maturity
14
31
Net cash provided by/(used in) investing
activities
51,936
(23,070
)
Cash flows from financing
activities:
Repurchase and maturity of convertible
notes
(184,272
)
—
Termination of deferred consideration—gold
payments
(50,005
)
—
Dividends paid
(9,647
)
(9,679
)
Issuance costs—Convertible notes
(3,548
)
—
Shares repurchased
(3,540
)
(3,394
)
Issuance costs—Series C Preferred
Stock
(97
)
—
Proceeds from the issuance of convertible
notes
130,000
—
Net cash used in financing activities
(121,109
)
(13,073
)
Increase/(decrease) in cash flow due to
changes in foreign exchange rate
778
(3,372
)
Net decrease in cash and cash
equivalents
(48,366
)
(30,973
)
Cash and cash equivalents—beginning of
year
132,101
140,709
Cash and cash equivalents—end of
period
83,735
109,736
Supplemental disclosure of cash flow
information:
Cash paid for income taxes
$
5,900
$
7,724
Cash paid for interest
$
4,514
$
6,156
Non-GAAP Financial Measurements
In an effort to provide additional information regarding our
results as determined by GAAP, we also disclose certain non-GAAP
information which we believe provides useful and meaningful
information. Our management reviews these non-GAAP financial
measurements when evaluating our financial performance and results
of operations; therefore, we believe it is useful to provide
information with respect to these non-GAAP measurements so as to
share this perspective of management. Non-GAAP measurements do not
have any standardized meaning, do not replace nor are superior to
GAAP financial measurements and are unlikely to be comparable to
similar measures presented by other companies. These non-GAAP
financial measurements should be considered in the context with our
GAAP results. The non-GAAP financial measurements contained in this
press release include:
Adjusted Operating Income, Operating Expenses, Income Before
Income Taxes, Income Tax Expense, Net Income and Diluted Earnings
per Share
We disclose adjusted operating income, operating expenses,
income before income taxes, income tax expense, net income and
diluted earnings per share as non-GAAP financial measurements in
order to report our results exclusive of items that are
non-recurring or not core to our operating business. We believe
presenting these non-GAAP financial measurements provides investors
with a consistent way to analyze our performance. These non-GAAP
financial measurements exclude the following:
Unrealized gains or losses on revaluation/termination of
deferred consideration: Deferred consideration was an
obligation we assumed in connection with the ETFS acquisition that
was carried at fair value. This item represented 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 have
had 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 was
not core to our operating business. The item was 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.
During the second quarter of 2023, we terminated this obligation
for aggregate consideration totaling approximately $137.0
million.
Gains or losses on financial instruments owned: We
account for our financial instruments owned as trading securities,
which requires these instruments to be measured at fair value with
gains and losses reported in net income. We exclude these items
when calculating our non-GAAP financial measurements as the gains
and losses introduce volatility in earnings and are not core to our
operating business.
Tax windfalls and shortfalls upon vesting and exercise of
stock-based compensation awards: GAAP requires the recognition
of tax windfalls and shortfalls within income tax expense. These
items arise upon the vesting and exercise of stock-based
compensation awards and the magnitude is directly correlated to the
number of awards vesting/exercised as well as the difference
between the price of our stock on the date the award was granted
and the date the award vested or was exercised. We exclude these
items when calculating our non-GAAP financial measurements as they
introduce volatility in earnings and are not core to our operating
business.
Other items: Loss on extinguishment of our convertible
notes, impairments, remeasurement of contingent consideration
payable to us from the sale of our former Canadian ETF business,
unrealized gains and losses recognized on our investments, changes
in deferred tax asset valuation allowance, expenses incurred in
response to an activist campaign and litigation expenses associated
with certain provisions of our Stockholder Rights Agreement dated
as of March 17, 2023, as amended with Continental Stock Transfer
& Trust Company, as Rights Agent, are excluded when calculating
our non-GAAP financial measurements.
Adjusted Effective Income Tax Rate
We disclose our adjusted effective income tax rate as a non-GAAP
financial measurement in order to report our effective income tax
rate exclusive of items that are non-recurring or not core to our
operating business. We believe reporting our adjusted effective
income tax rate provides investors with a consistent way to analyze
our income taxes. Our adjusted effective income tax rate is
calculated by dividing adjusted income tax expense by adjusted
income before income taxes. See above for information regarding the
items that are excluded.
Gross Margin and Gross Margin Percentage
We disclose our gross margin and gross margin percentage as
non-GAAP financial measurements because we believe they provide
investors with a consistent way to analyze the amount we retain
after paying third-party service providers to operate our ETPs.
These measures also assist us in analyzing the profitability of our
products. We define gross margin as total operating revenues less
fund management and administration expenses. Gross margin
percentage is calculated as gross margin divided by total operating
revenues.
WISDOMTREE, INC. AND
SUBSIDIARIES
GAAP to NON-GAAP
RECONCILIATION (CONSOLIDATED)
(in thousands)
(Unaudited)
Three Months Ended
Adjusted Net Income and Diluted
Earnings per Share:
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Net income/(loss), as reported
$
54,252
$
16,233
$
(28,289
)
$
81,229
$
8,005
(Deduct)/add back: (Gain)/loss on
revaluation/termination of deferred consideration — gold
payments
(41,361
)
(20,592
)
35,423
(77,895
)
(2,311
)
Add back: Expenses incurred in response to
an activist campaign, net of income taxes
3,720
732
—
—
1,532
(Deduct)/add back: Unrealized (gain)/loss
recognized on our investments, net of income taxes
(2,346
)
2,966
469
(248
)
(55
)
Add back/(deduct): Losses/(gains) on
financial instruments owned, net of income taxes
762
(1,479
)
669
4,778
3,165
(Deduct)/add back: (Decrease)/increase in
deferred tax asset valuation allowance on financial instruments
owned and investments
(508
)
477
364
1,454
901
Add back: Litigation expenses associated
with certain provisions of the Stockholder Rights Agreement, net of
income taxes
367
—
—
—
—
Add back/(deduct): Tax
shortfalls/(windfalls) upon vesting and exercise of stock-based
compensation awards
33
(185
)
—
4
20
Add back: Loss on extinguishment of
convertible notes, net of income taxes
—
9,623
—
—
—
Add back: Impairments
—
4,900
—
—
—
Deduct: Remeasurement of contingent
consideration—sale of former Canadian ETF business
—
(1,477
)
—
—
—
Deduct: Decrease in deferred tax asset
valuation allowance on net operating losses of a European
subsidiary
—
—
(1,609
)
—
—
Adjusted net income
$
14,919
$
11,198
$
7,027
$
9,322
$
11,257
Weighted average common shares—diluted
170,672
159,887
159,478
158,953
158,976
Adjusted earnings per share—diluted
$
0.09
$
0.07
$
0.04
$
0.06
$
0.07
Three Months Ended
Gross Margin and Gross Margin
Percentage:
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Operating revenues
$
85,724
$
82,044
$
73,310
$
72,414
$
77,253
Less: Fund management and
administration
(17,727
)
(17,153
)
(16,906
)
(16,285
)
(16,076
)
Gross margin
$
67,997
$
64,891
$
56,404
$
56,129
$
61,177
Gross margin percentage
79.3
%
79.1
%
76.9
%
77.5
%
79.2
%
Three Months Ended
Adjusted Operating Income and Adjusted
Operating
Income Margin:
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Operating revenues
$
85,724
$
82,044
$
73,310
$
72,414
$
77,253
Operating income
$
18,181
$
16,571
$
11,719
$
14,873
$
15,804
Add back: Expenses incurred in response to
an activist campaign
4,913
967
—
—
2,024
Adjusted operating income
$
23,094
$
17,538
$
11,719
$
14,873
$
17,828
Adjusted operating income margin
26.9
%
21.4
%
16.0
%
20.5
%
23.1
%
Three Months Ended
Adjusted Total Operating
Expenses:
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Total operating expenses
$
67,543
$
65,473
$
61,591
$
57,541
$
61,449
Deduct: Expenses incurred in response to
an activist campaign
(4,913
)
(967
)
—
—
(2,024
)
Adjusted total operating expenses
$
62,630
$
64,506
$
61,591
$
57,541
$
59,425
Three Months Ended
Adjusted Income Before Income
Taxes:
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Income/(loss) before income taxes
$
57,807
$
17,616
$
(28,310
)
$
84,556
$
10,678
(Deduct)/add back: (Gain)/loss on
revaluation/termination of deferred consideration — gold
payments
(41,361
)
(20,592
)
35,423
(77,895
)
(2,311
)
Add back: Expenses incurred in response to
an activist campaign
4,913
967
—
—
2,024
(Deduct)/add back: Unrealized (gain)/loss
recognized on investments
(3,099
)
3,918
619
(327
)
(73
)
Add back/(deduct): Losses/(gains) on
financial instruments owned
1,007
(1,954
)
883
6,311
4,180
Add back: Litigation expenses associated
with certain provisions of the Stockholder Rights Agreement
485
—
—
—
—
Add back: Loss on extinguishment of
convertible notes
—
9,721
—
—
—
Add back: Impairments
—
4,900
—
—
—
Deduct: Remeasurement of contingent
consideration—sale of former Canadian ETF business
—
(1,477
)
—
—
—
Add back: Loss recognized upon reduction
of a tax-related indemnification asset
—
1,386
—
—
—
Adjusted income before income taxes
$
19,752
$
14,485
$
8,615
$
12,645
$
14,498
Three Months Ended
Adjusted Income Tax Expense and
Adjusted Effective Income Tax Rate:
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Adjusted income before income taxes
(above)
$
19,752
$
14,485
$
8,615
$
12,645
$
14,498
Income tax expense/(benefit)
$
3,555
$
1,383
$
(21
)
$
3,327
$
2,673
Add back: Tax benefit arising from
expenses incurred in response to an activist campaign
1,193
235
—
—
492
(Deduct)/add back: Tax (expense)/benefit
on unrealized gains and losses on investments
(753
)
952
150
(79
)
(18
)
Add back/(deduct): Tax benefit/(expense)
arising from losses/(gains) on financial instruments owned
245
(475
)
214
1,533
1,015
Add back: Tax benefit arising from
litigation expenses associated with certain provisions of the
Stockholder Rights Agreement.
118
—
—
—
—
Add back/(deduct): Decrease/(increase) in
deferred tax asset valuation allowance on financial instruments
owned and investments
508
(477
)
(364
)
(1,454
)
(901
)
(Deduct)/add back: Tax
(shortfalls)/windfalls upon vesting and exercise of stock-based
compensation awards
(33
)
185
—
(4
)
(20
)
Add back: Decrease in deferred tax asset
valuation allowance on net operating losses of a European
subsidiary
—
—
1,609
—
—
Add back: Tax benefit arising from
extinguishment of convertible notes
—
98
—
—
—
Add back: Tax benefit arising from
reduction of a tax-related indemnification asset
—
1,386
—
—
—
Adjusted income tax expense
$
4,833
$
3,287
$
1,588
$
3,323
$
3,241
Adjusted effective income tax rate
24.5
%
22.7
%
18.4
%
26.3
%
22.4
%
Cautionary Statement Regarding
Forward-Looking Statements
This press release contains forward-looking statements that are
based on our management’s beliefs and assumptions and on
information currently available to our management. Although we
believe that the expectations reflected in these forward-looking
statements are reasonable, these statements relate to future events
or our future financial performance, and involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievements expressed or implied by these
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “will,”
“should,” “expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “continue” or the negative of
these terms or other comparable terminology. These statements are
only predictions. You should not place undue reliance on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which are, in some cases,
beyond our control and which could materially affect results.
Factors that may cause actual results to differ materially from
current expectations include, among other things, the risks
described below. If one or more of these or other risks or
uncertainties occur, or if our underlying assumptions prove to be
incorrect, actual events or results may vary significantly from
those implied or projected by the forward-looking statements. No
forward-looking statement is a guarantee of future performance. You
should read this press release completely and with the
understanding that our actual future results may be materially
different from any future results expressed or implied by these
forward-looking statements.
In particular, forward-looking statements in this press release
may include statements about:
- anticipated trends, conditions and investor sentiment in the
global markets and ETPs;
- anticipated levels of inflows into and outflows out of our
ETPs;
- our ability to deliver favorable rates of return to
investors;
- competition in our business;
- whether we will experience future growth;
- our ability to develop new products and services and their
potential success;
- our ability to maintain current vendors or find new vendors to
provide services to us at favorable costs;
- our ability to successfully implement our strategy relating to
digital assets and blockchain-enabled financial services, including
WisdomTree Prime™, and achieve its objectives;
- our ability to successfully operate and expand our business in
non-U.S. markets;
- the effect of laws and regulations that apply to our business;
and
- actions of activist stockholders.
Our business is subject to many risks and uncertainties,
including without limitation:
- declining prices of securities, gold and other precious metals
and other commodities and changes in interest rates and general
market conditions can adversely affect our business by reducing the
market value of the assets we manage or causing WisdomTree ETP
investors to sell their fund shares and trigger redemptions;
- fluctuations in the amount and mix of our AUM, whether caused
by disruptions in the financial markets or otherwise, including but
not limited to a pandemic event such as COVID-19, or the war in
Ukraine, may negatively impact revenues and operating margins, and
may impede our ability to refinance our debt upon maturity or,
increase the cost of borrowing upon a refinancing;
- competitive pressures could reduce revenues and profit
margins;
- we derive a substantial portion of our revenues from a limited
number of products, and as a result, our operating results are
particularly exposed to investor sentiment toward investing in the
products’ strategies and our ability to maintain the AUM of these
products, as well as the performance of these products and
market-specific and political and economic risk;
- a significant portion of our AUM is held in products with
exposure to U.S. and international developed markets, and we
therefore have exposure to domestic and foreign market conditions
and are subject to currency exchange rate risks;
- withdrawals or broad changes in investments in our ETPs by
investors with significant positions may negatively impact revenues
and operating margins;
- we face increased operational, regulatory, financial and other
risks as a result of conducting our business internationally;
- many of our ETPs have a limited track record, and poor
investment performance could cause our revenues to decline;
- we depend on third parties to provide many critical services to
operate our business and our ETPs. The failure of key vendors to
adequately provide such services could materially affect our
operating business and harm WisdomTree ETP investors; and
- actions of activist stockholders against us, which have been
costly and may be disruptive and cause uncertainty about the
strategic direction of our business.
Other factors, such as general economic conditions, including
currency exchange rate fluctuations, also may have an effect on the
results of our operations. For a more complete description of the
risks noted above and other risks that could cause our actual
results to differ from our current expectations, see “Risk Factors”
in our Annual Report on Form 10-K for the year ended December 31,
2022.
The forward-looking statements in this press release represent
our views as of the date of this press release. We anticipate that
subsequent events and developments may cause our views to change.
However, while we may elect to update these forward-looking
statements at some point in the future, we have no current
intention of doing so except to the extent required by applicable
law. Therefore, these forward-looking statements do not represent
our views as of any date other than the date of this press
release.
Category: Business Update
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230728135124/en/
Investor Relations Jeremy Campbell +1.646.522.2602
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