WisdomTree Investments Inc.

10/25/2024 | Press release | Distributed by Public on 10/25/2024 05:01

WisdomTree Announces Third Quarter 2024 Results

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

NEW YORK--(BUSINESS WIRE)-- 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 dividenddeclared, 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 Börse 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 Börse 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
[email protected]

Media Relations
Natasha Ramsammy
+1.917.267.3798
[email protected] / [email protected]

Source: WisdomTree, Inc.

Released October 25, 2024