$11 Billion of Year-to-Date Inflows and
900bps of Margin Improvement vs. Q3 2022 Diluted Earnings
Per Share of $0.07 ($0.10, as Adjusted)
12 consecutive quarters of global net inflows
17% annualized organic growth rate across all products
WisdomTree, Inc. (NYSE: WT), a global financial innovator, today
reported financial results for the third quarter of 2023.
$13.0 million net income ($18.0(1) million net income, as
adjusted), see “Non-GAAP Financial Measurements” for additional
information.
$93.7 billion of ending AUM, unchanged from the prior
quarter.
$2.0 billion of net inflows, primarily driven by inflows
into our fixed income, U.S. equity, international equity and
emerging markets products, partly offset by outflows from our
commodity products.
0.36% average advisory fee, unchanged from the prior
quarter.
$90.4 million of operating revenues, an increase of 5.5%
from the prior quarter primarily due to higher average AUM.
80.1% gross margin(1), a 0.8 point increase from the
prior quarter due to higher revenues.
29.5% operating income margin, an 8.3 point increase
compared to our operating income margin in the prior quarter due to
higher revenues, as well as lower professional fees incurred in
connection with an activist campaign. Our adjusted operating income
margin increased 2.6 points compared to our adjusted operating
margin of 26.9%(1) in the prior quarter due to higher revenues.
$0.03 quarterly dividend declared, payable on
November 22, 2023 to stockholders of record as of the close of
business on November 8, 2023.
Update from Jonathan Steinberg, WisdomTree
CEO
“WisdomTree’s results for the third
quarter confirm our progress as we continue to successfully drive
organic growth and margin expansion. At 17% year-to-date, our pace
of organic growth remains the best among all our publicly traded
U.S. asset manager peers. The benefits of our scale and an active,
disciplined approach to managing margin has generated 900 basis
points of operating margin expansion in the third quarter versus
the same period last year. Even as we remain focused on organic
growth and margin expansion, we are making steady progress in
rolling out WisdomTree Prime™ across the U.S, with 12 states added
in the third quarter, coupled with enhanced products and features
and new digital funds on track to be launched in the fourth
quarter. Taken together, these steps solidify WisdomTree’s position
as an early mover with a multi-year head start on the industry
shift toward tokenization and blockchain-enabled
finance.”
Update from Jarrett Lilien, WisdomTree COO
and President
“We are executing against our strategy and
consistently delivering results, garnering nearly $2 billion of net
inflows this quarter – our 12th consecutive quarter of positive
flows. This momentum over the past three years is proving to be
sustainable, and we have confidence that it will continue.
On the client side, both new and existing
relationships are becoming larger, broader and deeper, as many
continue to grow in average size while also utilizing more of our
products and services, such as our WisdomTree managed model
portfolios. Our managed models are currently available to over
65,000 advisors in the U.S., and we have seen significant
year-over-year traction at both the large distribution networks as
well as in the RIA and independent broker-dealer channels. We are
well-positioned to drive continued organic growth in the coming
quarters and years.”
OPERATING AND FINANCIAL HIGHLIGHTS
Three Months
Ended
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Consolidated
Operating Highlights ($ in billions):
AUM—end of period
$
93.7
$
93.7
$
90.7
$
82.0
$
70.9
Net inflows
$
2.0
$
2.3
$
6.3
$
5.3
$
1.7
Average AUM
$
95.7
$
91.6
$
87.5
$
77.6
$
74.7
Average advisory fee
0.36%
0.36%
0.36%
0.36%
0.38%
Consolidated
Financial Highlights ($ in millions, except per share
amounts):
Operating revenues
$
90.4
$
85.7
$
82.0
$
73.3
$
72.4
Net income/(loss)
$
13.0
$
54.3
$
16.2
$
(28.3)
$
81.2
Diluted earnings/(loss) per share
$
0.07
$
0.32
$
0.10
$
(0.20)
$
0.50
Operating income margin
29.5%
21.2%
20.2%
16.0%
20.5%
As Adjusted
(Non-GAAP(1)):
Gross margin
80.1%
79.3%
79.1%
76.9%
77.5%
Net income, as adjusted
$
18.0
$
14.9
$
11.2
$
7.0
$
9.3
Diluted earnings per share, as
adjusted
$
0.10
$
0.09
$
0.07
$
0.04
$
0.06
Operating income margin, as adjusted
29.5%
26.9%
21.4%
16.0%
20.5%
RECENT BUSINESS DEVELOPMENTS
Company
News
- In August 2023, we appointed Rilla Delorier to our Board of
Directors, having received the full support of the Board.
- In September 2023, the WisdomTree Siegel Strategic Value Index™
(BBG Ticker: CIBQWS6E) won the FIA Index of the Year Award by
Structured Retail Products (SRP). The Siegel Index was developed by
Professor Jeremy Siegel, Senior Economist to WisdomTree, and
recognizes innovative quantitative investment strategy and strength
of ongoing partnership with Annexus, CIBC and WisdomTree.
Product News
- In August 2023, we activated staking in WisdomTree Physical
Ethereum (ETHW), helping to secure the blockchain network and
participate in the validation of transactions; we launched GBP and
EUR Hedged share classes for the WisdomTree US Quality Dividend
Growth UCITS ETF (DGRA) on the London Stock Exchange, Borsa
Italiana and B�rse Xetra; we launched the WisdomTree EURO STOXX
Banks 3x Daily Short (3BAS) on London Stock Exchange, Borsa
Italiana and B�rse Xetra; and we launched the WisdomTree CAC 40 3x
Daily Leveraged (3CAC) and WisdomTree CAC 40 3x Daily Short (3CAS)
on Euronext Paris and B�rse Xetra.
- In September 2023, we cross-listed 13 Delta-1 and
short-and-leveraged ETPs on Euronext Paris.
- In October 2023, we cross-listed our first seven UCITS ETFs on
Euronext Paris; and we launched the WisdomTree US Efficient Core
UCITS ETF (NTSX) on the London Stock Exchange, Borsa Italiana and
B�rse Xetra.
WISDOMTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share amounts) (Unaudited)
Three Months Ended
Nine Months Ended
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Sept. 30,
2023
Sept. 30,
2022
Operating Revenues:
Advisory fees
$
86,598
$
82,004
$
77,637
$
70,913
$
70,616
$
246,239
$
222,719
Other income
3,825
3,720
4,407
2,397
1,798
11,952
5,316
Total revenues
90,423
85,724
82,044
73,310
72,414
258,191
228,035
Operating Expenses:
Compensation and benefits
27,955
26,319
27,398
24,831
23,714
81,672
73,066
Fund management and administration
18,023
17,727
17,153
16,906
16,285
52,903
47,855
Marketing and advertising
3,833
4,465
4,007
4,240
3,145
12,305
11,062
Sales and business development
3,383
3,326
2,994
3,407
2,724
9,703
8,464
Contractual gold payments
—
1,583
4,486
4,107
4,105
6,069
13,001
Professional fees
3,719
8,334
3,715
2,666
2,367
15,768
11,134
Occupancy, communications and
equipment
1,203
1,172
1,101
1,110
986
3,476
2,788
Depreciation and amortization
307
121
109
104
58
537
158
Third-party distribution fees
2,694
1,881
2,253
1,793
1,833
6,828
5,863
Other
2,601
2,615
2,257
2,427
2,324
7,473
6,278
Total operating expenses
63,718
67,543
65,473
61,591
57,541
196,734
179,669
Operating income
26,705
18,181
16,571
11,719
14,873
61,457
48,366
Other Income/(Expenses):
Interest expense
(3,461
)
(4,021
)
(4,002
)
(3,736
)
(3,734
)
(11,484
)
(11,199
)
Gain/(loss) on revaluation/termination of
deferred consideration—gold payments
—
41,361
20,592
(35,423
)
77,895
61,953
63,188
Interest income
791
1,000
1,083
945
811
2,874
2,375
Impairments
(2,703
)
—
(4,900
)
—
—
(7,603
)
—
Loss on extinguishment of convertible
notes
—
—
(9,721
)
—
—
(9,721
)
—
Other losses and gains, net
(2,512
)
1,286
(2,007
)
(1,815
)
(5,289
)
(3,233
)
(34,470
)
Income/(loss) before income taxes
18,820
57,807
17,616
(28,310
)
84,556
94,243
68,260
Income tax expense/(benefit)
5,836
3,555
1,383
(21
)
3,327
10,774
(10,713
)
Net income/(loss)
$
12,984
$
54,252
$
16,233
$
(28,289
)
$
81,229
$
83,469
$
78,973
Earnings/(loss) per share—basic
$
0.07(2)
$
0.32(2)
$
0.10(2)
$
(0.20
)
$
0.50(2)
$
0.50(2)
$
0.49(2)
Earnings/(loss) per share—diluted
$
0.07
$
0.32
$
0.10
$
(0.20
)
$
0.50(2)
$
0.49
$
0.49(2)
Weighted average common shares—basic
145,284
144,351
143,862
143,126
$
143,120
144,505
142,984
Weighted average common shares—diluted
177,140
170,672
159,887
143,126
158,953
169,997
158,741
As Adjusted (Non-GAAP(1))
Total operating expenses
$
63,718
$
62,630
$
64,506
$
61,591
$
57,541
Operating income
$
26,705
$
23,094
$
17,538
$
11,719
$
14,873
Income before income taxes
$
23,902
$
19,752
$
14,485
$
8,615
$
12,645
Income tax expense
$
5,854
$
4,833
$
3,287
$
1,588
$
3,323
Net income
$
18,048
$
14,919
$
11,198
$
7,027
$
9,322
Earnings per share—diluted
$
0.10
$
0.09
$
0.07
$
0.04
$
0.06
Weighted average common shares—diluted
177,140
170,672
159,887
159,478
158,953
QUARTERLY HIGHLIGHTS
Operating Revenues
- Operating revenues increased 5.5% and 24.9% from the second
quarter of 2023 and the third quarter of 2022, respectively,
primarily due to higher average AUM.
- Our average advisory fee was 0.36%, 0.36% and 0.38% during the
third quarter of 2023, the second quarter of 2023 and the third
quarter of 2022, respectively.
Operating Expenses
- Operating expenses decreased 5.7% from the second quarter of
2023 primarily due to lower professional fees, the termination of
our deferred consideration—gold payments obligation on May 10, 2023
and lower marketing expenses. These decreases were partly offset by
higher incentive compensation and third-party distribution
fees.
- Operating expenses increased 10.7% from the third quarter of
2022 primarily due to higher stock-based compensation and
headcount, fund management and administration costs, professional
fees, third-party distribution fees, marketing expenses and sales
and business development expenses. These increases were partly
offset by the termination of our deferred consideration—gold
payments obligation.
Other Income/(Expenses)
- Interest expense decreased 13.9% from the second quarter of
2023 due to a lower average level of debt outstanding. Interest
expense decreased 7.3% from the third quarter of 2022 due to a
lower level of debt outstanding, partly offset by a higher
effective interest rate.
- Interest income decreased 20.9% from the second quarter of 2023
due to lower average levels of financial instruments owned and was
essentially unchanged from the third quarter of 2022.
- During the third quarter of 2023, we recognized a non-cash
impairment charge of $2.7 million, primarily on our investment in
Securrency, Inc., as we marked our investment to estimated
realizable value in connection with Securrency entering into an
agreement to be acquired by an unrelated third party.
- Other losses and gains, net was a loss of $2.5 million for the
third quarter of 2023. This quarter includes losses on our
financial instruments of $2.0 million and other losses on our
investments of $0.4 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 third quarter of 2023 was
31.0%, resulting in income tax expense of $5.8 million. The
effective tax rate differs from the federal statutory rate of 21%
primarily due to an increase in the deferred tax asset valuation
allowance on losses recognized on the Company’s investments and
non-deductible executive compensation.
- Our adjusted effective income tax rate was 24.5%(1).
NINE MONTH HIGHLIGHTS
- Operating revenues increased 13.2% as compared to 2022 due to
higher average AUM and higher other income from large flows from
some of our European products, partly offset by a lower average
advisory fee.
- Operating expenses increased 9.5% as compared to 2022 primarily
due to higher stock-based compensation and headcount, fund
management and administration costs, professional fees, marketing
expenses, sales and business development expenses, third-party
distribution fees and other expenses. These increases were partly
offset by the termination of our deferred consideration—gold
payments obligation on May 10, 2023.
- Significant items reported in other income/(expense) in 2023
include: a non-cash gain on revaluation/termination of deferred
consideration of $62.0 million during the first and second quarter;
loss on extinguishment of convertible notes of $9.7 million arising
from the repurchase of $115.0 million in aggregate principal amount
of our 4.25% Convertible Senior Notes (the “2020 Notes”) in the
first quarter; non-cash impairment charges totaling $7.6 million,
primarily on our investments in Securrency, Inc.; losses on our
financial instruments owned of $1.0 million and other losses on our
investments of $1.2 million; and 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 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 11.4%, resulting in
income tax expense of $10.8 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, a reduction in unrecognized tax benefits associated
with the release of the tax-related indemnification asset described
above and a lower tax rate on foreign earnings. These items were
partly offset by a non-deductible loss on extinguishment of the
2020 Notes during the first quarter of 2023, an increase in the
deferred tax asset valuation allowance on losses recognized on our
investments and non-deductible executive compensation.
CONFERENCE CALL DIAL-IN AND WEBCAST DETAILS
WisdomTree will discuss its results and operational highlights
during a live webcast on Friday, October 27, 2023 at 11:00 a.m. ET,
which can be accessed using the following link:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=wtCKhqvm.
Participants also can dial in using the following numbers: (877)
407-9210 or (201) 689-8049. Click here to access the Participant
international toll-free access numbers. To avoid delays, we
encourage participants to log in or dial into the conference call
10 minutes ahead of the scheduled start time. All earnings
materials and the webcast can be accessed through WisdomTree’s
investor relations website at https://ir.wisdomtree.com. A replay
of the webcast will also be available shortly after the call.
About WisdomTree
WisdomTree is a global financial innovator, offering a
well-diversified suite of exchange-traded products (ETPs), models,
solutions and products leveraging blockchain-enabled technology. We
empower investors and consumers to shape their future and support
financial professionals to better serve their clients and grow
their businesses. WisdomTree is leveraging the latest financial
infrastructure to create products that provide access, transparency
and an enhanced user experience. Building on our heritage of
innovation, we are also developing and have launched
next-generation digital products, services and structures,
including digital or blockchain-enabled mutual funds and tokenized
assets, as well as our blockchain-native digital wallet, WisdomTree
Prime™.
WisdomTree currently has approximately $94 billion in assets
under management globally.
For more information about WisdomTree and WisdomTree Prime™,
visit: https://www.wisdomtree.com.
Please visit us on X, formerly known as Twitter, at
@WisdomTreeNews.
WisdomTree® is the marketing name for WisdomTree, Inc. and its
subsidiaries worldwide.
_______________ (1)
See “Non-GAAP Financial Measurements.”
(2)
Earnings/(loss) per share (“EPS”) is calculated pursuant to the
two-class method as it results in a lower EPS amount as compared to
the treasury stock method.
WisdomTree, Inc.
Key Operating Statistics
(Unaudited)
Three Months Ended
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
GLOBAL ETPs ($ in
millions)
Beginning of period assets
$
93,666
$
90,740
$
81,993
$
70,878
$
74,302
Inflows/(outflows)
1,983
2,327
6,341
5,264
1,747
Market (depreciation)/appreciation
(1,907
)
599
2,406
5,851
(5,171
)
Fund closures
(7
)
—
—
—
—
End of period assets
$
93,735
$
93,666
$
90,740
$
81,993
$
70,878
Average assets during the period
$
95,743
$
91,578
$
87,508
$
77,649
$
74,677
Average advisory fee during the period
0.36%
0.36%
0.36%
0.36%
0.38%
Revenue days
92
91
90
92
92
Number of ETFs—end of the period
353
353
350
348
347
U.S. LISTED ETFs
($ in millions)
Beginning of period assets
$
65,903
$
61,283
$
55,973
$
48,043
$
47,255
Inflows/(outflows)
3,601
3,249
4,012
4,232
3,812
Market (depreciation)/appreciation
(1,486
)
1,371
1,298
3,698
(3,024
)
Fund closures
—
—
—
—
—
End of period assets
$
68,018
$
65,903
$
61,283
$
55,973
$
48,043
Average assets during the period
$
68,008
$
62,712
$
59,430
$
53,655
$
49,466
Number of ETFs—end of the period
80
80
80
79
78
EUROPEAN LISTED
ETPs ($ in millions)
Beginning of period assets
$
27,763
$
29,457
$
26,020
$
22,835
$
27,047
(Outflows)/inflows
(1,618
)
(922
)
2,329
1,032
(2,065
)
Market (depreciation)/appreciation
(421
)
(772
)
1,108
2,153
(2,147
)
Fund closures
(7
)
—
—
—
—
End of period assets
$
25,717
$
27,763
$
29,457
$
26,020
$
22,835
Average assets during the period
$
27,735
$
28,866
$
28,078
$
23,994
$
25,211
Number of ETPs—end of the period
273
273
270
269
269
PRODUCT
CATEGORIES ($ in millions)
U.S. Equity
Beginning of period assets
$
26,001
$
24,534
$
24,112
$
20,952
$
21,058
Inflows/(outflows)
864
414
(149
)
1,021
1,239
Market (depreciation)/appreciation
(1,222
)
1,053
571
2,139
(1,345
)
End of period assets
$
25,643
$
26,001
$
24,534
$
24,112
$
20,952
Average assets during the period
$
26,502
$
24,732
$
24,725
$
23,492
$
22,534
Fixed Income
Beginning of period assets
$
20,204
$
18,696
$
15,259
$
11,683
$
9,178
Inflows/(outflows)
1,675
1,472
3,516
3,392
2,628
Market (depreciation)/appreciation
(82
)
36
(79
)
184
(123
)
End of period assets
$
21,797
$
20,204
$
18,696
$
15,259
$
11,683
Average assets during the period
$
20,955
$
19,173
$
17,164
$
13,949
$
10,065
Commodity & Currency
Beginning of period assets
$
22,384
$
24,924
$
22,097
$
19,561
$
23,624
(Outflows)/inflows
(1,815
)
(1,513
)
2,003
796
(2,179
)
Market (depreciation)/appreciation
(103
)
(1,027
)
824
1,740
(1,884
)
End of period assets
$
20,466
$
22,384
$
24,924
$
22,097
$
19,561
Average assets during the period
$
22,278
$
24,033
$
23,806
$
20,345
$
21,625
Three Months Ended
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept 30,
2022
International Developed Market
Equity
Beginning of period assets
$
13,423
$
11,433
$
10,195
$
9,183
$
9,968
Inflows/(outflows)
798
1,592
450
40
(115
)
Market (depreciation)/appreciation
(319
)
398
788
972
(670
)
End of period assets
$
13,902
$
13,423
$
11,433
$
10,195
$
9,183
Average assets during the period
$
13,873
$
12,276
$
10,879
$
10,000
$
10,032
Emerging Market Equity
Beginning of period assets
$
9,191
$
8,811
$
8,116
$
7,495
$
8,386
Inflows/(outflows)
451
329
486
(53
)
114
Market (depreciation)/appreciation
(73
)
51
209
674
(1,005
)
End of period assets
$
9,569
$
9,191
$
8,811
$
8,116
$
7,495
Average assets during the period
$
9,652
$
8,998
$
8,666
$
7,770
$
8,329
Leveraged & Inverse
Beginning of period assets
$
1,864
$
1,785
$
1,754
$
1,523
$
1,618
(Outflows)/inflows
(1
)
12
43
59
45
Market (depreciation)/appreciation
(82
)
67
(12
)
172
(140
)
End of period assets
$
1,781
$
1,864
$
1,785
$
1,754
$
1,523
Average assets during the period
$
1,894
$
1,798
$
1,757
$
1,623
$
1,589
Alternatives
Beginning of period assets
$
340
$
306
$
310
$
306
$
305
Inflows/(outflows)
5
22
(18
)
12
16
Market (depreciation)/appreciation
(11
)
12
14
(8
)
(15
)
End of period assets
$
334
$
340
$
306
$
310
$
306
Average assets during the period
$
342
$
320
$
308
$
305
$
313
Cryptocurrency
Beginning of period assets
$
248
$
239
$
136
$
163
$
151
Inflows/(outflows)
10
(1
)
13
(4
)
—
Market (depreciation)/appreciation
(15
)
10
90
(23
)
12
End of period assets
$
243
$
248
$
239
$
136
$
163
Average assets during the period
$
238
$
236
$
190
$
152
$
178
Closed ETPs
Beginning of period assets
$
11
$
12
$
14
$
12
$
14
(Outflows)/inflows
(4
)
—
(3
)
1
(1
)
Market (depreciation)/appreciation
—
(1
)
1
1
(1
)
Fund closures
(7
)
—
—
—
—
End of period assets
$
—
$
11
$
12
$
14
$
12
Average assets during the period
$
9
$
12
$
13
$
13
$
12
Headcount
299
291
279
273
274
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,
2023
Dec. 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
89,481
$
132,101
Financial instruments owned, at fair
value
78,950
126,239
Accounts receivable
35,868
30,549
Prepaid expenses
6,511
4,684
Other current assets
1,004
390
Total current assets
211,814
293,963
Fixed assets, net
457
544
Indemnification receivable
—
1,353
Securities held-to-maturity
237
259
Deferred tax assets, net
9,508
10,536
Investments
36,873
35,721
Right of use assets—operating leases
866
1,449
Goodwill
86,841
85,856
Intangible assets, net
604,781
603,567
Other noncurrent assets
447
571
Total assets
$
951,824
$
1,033,819
LIABILITIES AND STOCKHOLDERS’
EQUITY
LIABILITIES
Current liabilities:
Fund management and administration
payable
$
27,655
$
36,521
Compensation and benefits payable
27,792
24,121
Income taxes payable
4,365
1,599
Operating lease liabilities
889
1,125
Convertible notes—current
—
59,197
Deferred consideration—gold payments
—
16,796
Accounts payable and other liabilities
14,660
9,075
Total current liabilities
75,361
148,434
Convertible notes—long term
274,514
262,019
Deferred consideration—gold payments
—
183,494
Operating lease liabilities
—
339
Other noncurrent liabilities
—
1,353
Total liabilities
349,875
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: 150,335 and
146,517 at September 30, 2023 and December 31, 2022,
respectively
1,503
1,465
Additional paid-in capital
387,507
291,847
Accumulated other comprehensive loss
(1,637
)
(1,420
)
Retained earnings
82,007
13,719
Total stockholders’ equity
469,380
305,611
Total liabilities and stockholders’
equity
$
951,824
$
1,033,819
WISDOMTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(Unaudited)
Nine Months Ended
Sept. 30,
2023
2022
Cash flows from operating
activities:
Net income
$
83,469
$
78,973
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on revaluation/termination of
deferred consideration—gold payments
(61,953
)
(63,188
)
Advisory and license fees paid in gold,
other precious metals and cryptocurrency
(37,632
)
(44,886
)
Stock-based compensation
12,422
7,822
Loss on extinguishment of convertible
notes
9,721
—
Impairments
7,603
—
Contractual gold payments
6,069
13,001
Amortization of issuance costs—convertible
notes
1,443
1,941
Deferred income taxes
1,282
2,233
Losses on investments
1,245
—
Losses on financial instruments owned, at
fair value
1,006
15,633
Amortization of right of use asset
963
648
Depreciation and amortization
537
158
Other
—
(223
)
Changes in operating assets and
liabilities:
Accounts receivable
(7,346
)
4,076
Prepaid expenses
(1,826
)
(2,356
)
Gold and other precious metals
30,629
33,598
Other assets
356
(503
)
Intangibles—software development
(1,569
)
(1,958
)
Fund management and administration
payable
3,577
1,369
Compensation and benefits payable
(8,786
)
(4,990
)
Income taxes payable
2,802
(1,822
)
Operating lease liabilities
(955
)
(644
)
Accounts payable and other liabilities
5,293
4,231
Net cash provided by operating
activities
48,350
43,113
Cash flows from investing
activities:
Purchase of financial instruments owned,
at fair value
(56,837
)
(41,240
)
Purchase of investments
(10,000
)
(11,863
)
Cash paid—acquisition of Securrency
Transfers, Inc. (net of cash acquired)
(985
)
—
Purchase of fixed assets
(93
)
(211
)
Proceeds from the sale of financial
instruments owned, at fair value
102,276
27,650
Receipt of contingent consideration—Sale
of Canadian ETF business
1,477
—
Proceeds from held-to-maturity securities
maturing or called prior to maturity
22
38
Net cash provided by/(used in) investing
activities
35,860
(25,626
)
Cash flows from financing
activities:
Repurchase and maturity of convertible
notes
(184,272
)
—
Termination of deferred consideration—gold
payments
(50,005
)
—
Dividends paid
(14,897
)
(14,521
)
Shares repurchased
(3,570
)
(3,418
)
Issuance costs—Convertible notes
(3,548
)
—
Issuance costs—Series C Preferred
Stock
(97
)
—
Proceeds from the issuance of convertible
notes
130,000
—
Net cash used in financing activities
(126,389
)
(17,939
)
Decrease in cash flow due to changes in
foreign exchange rate
(441
)
(7,557
)
Net decrease in cash and cash
equivalents
(42,620
)
(8,009
)
Cash and cash equivalents—beginning of
year
132,101
140,709
Cash and cash equivalents—end of
period
$
89,481
$
132,700
Supplemental disclosure of cash flow
information:
Cash paid for income taxes
$
8,069
$
8,769
Cash paid for interest
$
8,272
$
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—gold payments: Deferred
consideration—gold payments 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:
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Net income/(loss), as reported
$
12,984
$
54,252
$
16,233
$
(28,289
)
$
81,229
Add back: Impairments, net of income
taxes
2,046
—
3,710
—
—
Add back/(deduct): Losses/(gains) on
financial instruments owned, net of income taxes
1,479
762
(1,479
)
669
4,778
Add back/(deduct): Increase/(decrease) in
deferred tax asset valuation allowance on financial instruments
owned and investments
1,234
(508
)
1,667
364
1,454
Add back/(deduct): Unrealized
losses/(gains) recognized on our investments, net of income
taxes
323
(2,346
)
2,966
469
(248
)
(Deduct)/add back: Tax
(windfalls)/shortfalls upon vesting and exercise of stock-based
compensation awards
(18
)
33
(185
)
—
4
(Deduct)/add back: (Gain)/loss on
revaluation/termination of deferred consideration—gold payments
—
(41,361
)
(20,592
)
35,423
(77,895
)
Add back: Expenses incurred in response to
an activist campaign, net of income taxes
—
3,720
732
—
—
Add back: Litigation expenses associated
with certain provisions of the Stockholder Rights Agreement, net of
income taxes
—
367
—
—
—
Add back: Loss on extinguishment of
convertible notes, net of income taxes
—
—
9,623
—
—
Deduct: Remeasurement of contingent
consideration—sale of former Canadian ETF business
—
—
(1,477
)
—
—
Deduct: Decrease in deferred tax asset
valuation allowance on net operating losses of a European
subsidiary
—
—
—
(1,609
)
—
Adjusted net income
$
18,048
$
14,919
$
11,198
$
7,027
$
9,322
Weighted average common shares—diluted
177,140
170,672
159,887
159,478
158,953
Adjusted earnings per share—diluted
$
0.10
$
0.09
$
0.07
$
0.04
$
0.06
Three Months Ended
Gross Margin and Gross Margin
Percentage:
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Operating revenues
$
90,423
$
85,724
$
82,044
$
73,310
$
72,414
Less: Fund management and
administration
(18,023
)
(17,727
)
(17,153
)
(16,906
)
(16,285
)
Gross margin
$
72,400
$
67,997
$
64,891
$
56,404
$
56,129
Gross margin percentage
80.1%
79.3%
79.1%
76.9%
77.5%
Three Months Ended
Adjusted Operating Income and Adjusted
Operating
Income Margin:
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Operating revenues
$
90,423
$
85,724
$
82,044
$
73,310
$
72,414
Operating income
$
26,705
$
18,181
$
16,571
$
11,719
$
14,873
Add back: Expenses incurred in response to
an activist campaign
—
4,913
967
—
—
Adjusted operating income
$
26,705
$
23,094
$
17,538
$
11,719
$
14,873
Adjusted operating income margin
29.5%
26.9%
21.4%
16.0%
20.5%
Three Months Ended
Adjusted Total Operating
Expenses:
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Total operating expenses
$
63,718
$
67,543
$
65,473
$
61,591
$
57,541
Deduct: Expenses incurred in response to
an activist campaign
—
(4,913
)
(967
)
—
—
Adjusted total operating expenses
$
63,718
$
62,630
$
64,506
$
61,591
$
57,541
Three Months Ended
Adjusted Income Before Income
Taxes:
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Income/(loss) before income taxes
$
18,820
$
57,807
$
17,616
$
(28,310
)
$
84,556
Add back: Impairments
2,703
—
4,900
—
—
Add back/(deduct): Losses/(gains) on
financial instruments owned
1,953
1,007
(1,954
)
883
6,311
Add back/(deduct): Unrealized
losses/(gains) recognized on investments
426
(3,099
)
3,918
619
(327
)
(Deduct)/add back: (Gain)/loss on
revaluation/termination of deferred consideration—gold payments
—
(41,361
)
(20,592
)
35,423
(77,895
)
Add back: Expenses incurred in response to
an activist campaign
—
4,913
967
—
—
Add back: Litigation expenses associated
with certain provisions of the Stockholder Rights Agreement
—
485
—
—
—
Add back: Loss on extinguishment of
convertible notes
—
—
9,721
—
—
Deduct: Remeasurement of contingent
consideration—sale of former Canadian ETF business
—
—
(1,477
)
—
—
Add back: Loss recognized upon reduction
of a tax-related indemnification asset
—
—
1,386
—
—
Adjusted income before income taxes
$
23,902
$
19,752
$
14,485
$
8,615
$
12,645
Three Months Ended
Adjusted Income Tax Expense and
Adjusted Effective Income Tax Rate:
Sept. 30,
2023
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
Adjusted income before income taxes
(above)
$
23,902
$
19,752
$
14,485
$
8,615
$
12,645
Income tax expense/(benefit)
$
5,836
$
3,555
$
1,383
$
(21
)
$
3,327
(Deduct)/add back: (Increase)/decrease in
deferred tax asset valuation allowance on financial instruments
owned and investments
(1,234
)
508
(1,667
)
(364
)
(1,454
)
Add back: Tax benefit arising from
impairments
657
—
1,190
—
—
Add back/(deduct): Tax benefit/(expense)
arising from losses/(gains) on financial instruments owned
474
245
(475
)
214
1,533
Add back/(deduct): Tax benefit/(expense)
on unrealized losses and gains on investments
103
(753
)
952
150
(79
)
Add back/(deduct): Tax
windfalls/(shortfalls) upon vesting and exercise of stock-based
compensation awards
18
(33
)
185
—
(4
)
Add back: Tax benefit arising from
expenses incurred in response to an activist campaign
—
1,193
235
—
—
Add back: Tax benefit arising from
litigation expenses associated with certain provisions of the
Stockholder Rights Agreement
—
118
—
—
—
Add back: Decrease in deferred tax asset
valuation allowance on net operating losses of a European
subsidiary
—
—
—
1,609
—
Add back: Tax benefit arising from
extinguishment of convertible notes
—
—
98
—
—
Add back: Tax benefit arising from
reduction of a tax-related indemnification asset
—
—
1,386
—
—
Adjusted income tax expense
$
5,854
$
4,833
$
3,287
$
1,588
$
3,323
Adjusted effective income tax rate
24.5%
24.5%
22.7%
18.4%
26.3%
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 for success;
- our ability to maintain current vendors or find new vendors to
provide services to us at favorable costs;
- our ability to successfully implement our strategy relating to
digital assets and blockchain-enabled financial services, including
WisdomTree Prime™, and achieve its objectives;
- our ability to successfully operate and expand our business in
non-U.S. markets;
- the effect of laws and regulations that apply to our business;
and
- actions of activist stockholders.
Our business is subject to many risks and uncertainties,
including without limitation:
- declining prices of securities, gold and other precious metals
and other commodities and changes in interest rates and general
market conditions can adversely affect our business by reducing the
market value of the assets we manage or causing WisdomTree ETP
investors to sell their fund shares and trigger redemptions;
- fluctuations in the amount and mix of our AUM, whether caused
by disruptions in the financial markets or otherwise, including but
not limited to a pandemic 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/20231027133474/en/
Investor Relations Jeremy Campbell +1.646.522.2602
Jeremy.campbell@wisdomtree.com
Corporate Communications Jessica Zaloom +1.917.267.3735
jzaloom@wisdomtree.com
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