Exhibit 99.1

 

LOGO

    

 

 

WisdomTree Announces Fourth Quarter 2019 Results – Diluted EPS of $0.02 ($0.06 as adjusted)

New York, NY – (GlobeNewswire) – January 31, 2020 – WisdomTree Investments, Inc. (NASDAQ: WETF) today reported financial results for the fourth quarter of 2019.

$4.3 million net income ($10.11 million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.

$63.6 billion of ending AUM, an increase of 6.1% resulting from market appreciation and net inflows for the quarter and an increase of 17.6% for the full year.

$368 million of net inflows ($560 million of net inflows excluding HEDJ/DXJ), driven by flows into our U.S. equity, fixed income and emerging markets products, partly offset by outflows from our commodity and international developed market equity products. For the full year, net inflows were $572 million or $3.3 billion excluding outflows from HEDJ/DXJ.

0.44% average global advisory fee, unchanged from the prior quarter.

$68.9 million of operating revenues, an increase of 1.8% primarily due to higher average AUM of our U.S. listed products.

81.2% gross margin1 for our U.S. Business, a 0.4 point increase due to higher revenues.

70.7% gross margin1 for our International Business, a 1.9 point decrease due to higher market making fees incurred in connection with transitioning to new arrangements as well as costs associated with preparing our products for Brexit.

21.5% operating income margin (22.0%1 as adjusted), a 2.3 point decrease (2.1 point decrease, as adjusted1) primarily due to higher non-compensation expenses, partly offset by higher revenues.

$6.0 million of available capital used to pay down debt, in connection with our capital management strategy.

$0.03 quarterly dividend declared, payable on February 26, 2020 to stockholders of record as of the close of business February 12, 2020.

We are currently pursuing an exit from our $58 million investment in AdvisorEngine Inc. While the process is not yet finalized, we estimate taking a non-cash impairment charge of $22.0 million to $30.0 million in the fourth quarter, which is not yet included in these unaudited financial results. The final impairment charge will be recognized and disclosed in our Form 10-K. We do not anticipate the exit of our investment will drive any asset attrition or change our organic growth outlook.

Update from Jonathan Steinberg, WisdomTree CEO

 

 

“WisdomTree exited 2019 with momentum building across our business. The performance track records of our funds remain excellent with thirty-five 4- or 5-star Morningstar rated funds across our ETF and UCITS product range. We’ve generated positive net flows in four of the past five quarters, adoption of our model portfolios by advisors is accelerating and we are excited by the recent launch of the Siegel-WisdomTree models.”

 

“As we look toward 2020, we are focused on capitalizing on the tailwinds that exist in our business, continuing to drive operating efficiencies and prudently investing to remain at the forefront of industry innovation. For example, in January we announced a strategic investment in Securrency, Inc., a blockchain-based financial services infrastructure company. Blockchain has the potential to be revolutionary in financial services and we believe we have the right vision and the right partner to be a global leader in digital assets. There are reasons to be optimistic, and I believe WisdomTree has reached an inflection point with top line and bottom line growth set to emerge.”

 

 

1


OPERATING AND FINANCIAL HIGHLIGHTS

 

     

 

Three Months Ended

 
      Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Consolidated Operating Highlights ($, in billions):

            

AUM

   $ 63.6     $ 60.0     $  60.4     $  59.1     $  54.1  

Net inflows/(outflows)

   $ 0.4     $ (0.7   $ 0.3     $ 0.6     $ 0.2  

Average AUM

   $ 61.9     $ 60.3     $ 58.6     $ 57.7     $ 56.4  

Average advisory fee

     0.44     0.44     0.45     0.46     0.47

Consolidated Financial Highlights ($, in millions, except per share amounts):

            

Operating revenues

   $ 68.9     $  67.7     $ 66.3     $ 65.5     $ 67.9  

Net income/(loss)

   $ 4.3     $ 4.2     $ 2.5     $ 8.8     $  (11.6)  

Diluted earnings/(loss) per share

   $  0.02     $ 0.02     $ 0.01     $ 0.05     $  (0.08)  

Operating income margin

     21.5     23.8     18.0     16.3     17.4

As Adjusted (Non-GAAP1):

            

Gross Margin – U.S. Business

     81.2     80.8     80.3     80.4     80.2

Gross Margin – International Business

     70.7     72.6     69.5     70.1     69.1

Net income, as adjusted

   $ 10.1     $ 10.6     $ 7.8     $ 7.7     $ 9.8  

Diluted earnings per share, as adjusted

   $ 0.06     $ 0.06     $ 0.05     $ 0.05     $ 0.06  

Operating income margin, as adjusted

 

    

 

22.0

 

 

   

 

24.1

 

 

   

 

20.2

 

 

   

 

19.9

 

 

   

 

21.9

 

 

RECENT BUSINESS DEVELOPMENTS

 

 

Company News

   
 

•  In November 2019, we entered into an agreement to sell our Canadian asset management business to CI Financial Corp. (TSX: CIX); and we were named as European Smart Beta Provider of the Year at the Funds Europe Awards 2019.

 

•  In January 2020, we announced a strategic investment in Securrency, Inc. with plans to pursue the integration of blockchain technology into the ETF ecosystem; we announced the appointment of Ravinder Azad as Head of UK and Nordic Sales; and we announced the collaboration with Professor Jeremy Siegel to design and launch two model portfolios – The Siegel-WisdomTree Global Equity Model and the Siegel-WisdomTree Longevity Model.

 

Product News

   
 

•  In November 2019, we launched the Mortgage Plus Bond Fund (MTGP) in the U.S. on the NYSE Arca; the WisdomTree Artificial Intelligence UCITS ETF (WTAI) reached its one-year anniversary, and the WisdomTree Emerging Markets Equity Income UCITS ETF (DEM) and WisdomTree Emerging Markets Small Cap Dividend UCITS ETF (DGSG) reached their five-year anniversaries.

 

•  In December 2019, we declared final capital gains distributions for our U.S. ETFs; we announced the closing and liquidation of three ETFs in January 2020 – DYB, WBAL and RPUT; and we announced the launch of the WisdomTree Bitcoin ETP (BTCW) on the Swiss stock exchange (SIX).

 

•  In January 2020, we announced the unitholders’ approval of proposed change in manager for our Canadian ETFs.

 

 

2


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended     Years Ended  
     Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
    Dec. 31,
2019
    Dec. 31,
2018
 

Operating Revenues:

              

Advisory fees

   $ 68,179     $ 67,006     $ 65,627     $ 64,840     $ 67,191     $ 265,652     $ 271,104  

Other income

     728       712       666       645       676       2,751       3,012  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     68,907       67,718       66,293       65,485       67,867       268,403       274,116  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

              

Compensation and benefits

     19,280       18,880       21,300       21,301       18,838       80,761       74,515  

Fund management and administration

     15,650       15,110       15,576       15,166       15,861       61,502       56,686  

Marketing and advertising

     3,551       3,022       2,910       2,680       3,672       12,163       13,884  

Sales and business development

     5,329       4,354       4,171       4,422       5,036       18,276       17,153  

Contractual gold payments

     3,516       3,502       3,110       3,098       2,917       13,226       8,512  

Professional and consulting fees

     1,604       1,259       1,296       1,482       2,854       5,641       7,984  

Occupancy, communications and equipment

     1,587       1,549       1,548       1,618       1,544       6,302       6,203  

Depreciation and amortization

     253       259       264       269       303       1,045       1,301  

Third-party distribution fees

     1,146       1,503       1,919       2,400       1,813       6,968       6,611  

Acquisition and disposition-related costs

     366       190       33       313       1,008       902       11,454  

Other

     1,816       1,959       2,255       2,053       2,202       8,083       8,534  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     54,098       51,587       54,382       54,802       56,048       214,869       212,837  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     14,809       16,131       11,911       10,683       11,819       53,534       61,279  

Other Income/(Expenses):

              

Interest expense

     (2,606     (2,832     (2,910     (2,892     (2,859     (11,240     (7,962

(Loss)/gain on revaluation of deferred consideration – gold payments

     (5,354     (6,306     (4,037     4,404       (5,410     (11,293     12,220  

Interest income

     936       799       818       779       800       3,332       3,093  

Impairments

     —         —         —         (572     (17,386     (572     (17,386

Other gains and losses, net

     (2     843       284       (4,627     439       (3,502     (205
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) before income taxes

     7,783       8,635       6,066       7,775       (12,597     30,259       51,039  

Income tax expense/(benefit)

     3,525       4,483       3,587       (1,049     (1,033     10,546       14,406  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

   $ 4,258     $ 4,152     $ 2,479     $ 8,824     $ (11,564   $ 19,713     $ 36,633  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings/(loss) per share – basic

   $ 0.02     $ 0.02     $ 0.01     $ 0.05     $ (0.08   $ 0.12     $ 0.23  

Earnings/(loss) per share – diluted

   $ 0.02 2    $ 0.02     $ 0.01     $ 0.05     $ (0.08   $ 0.12     $ 0.23  

Weighted average common shares – basic

     151,948       151,897       151,818       151,625       151,083       151,823       146,645  

Weighted average common shares – diluted

     167,203       167,163       167,249       166,811       151,083       166,977       158,415  

As Adjusted (Non-GAAP1)

              

Compensation and benefits

   $ 19,280     $ 18,880     $ 19,825     $ 19,281     $ 16,824      

Total expenses

   $ 53,732     $ 51,397     $ 52,874     $ 52,469     $ 53,026      

Operating income

   $ 15,175     $ 16,321     $ 13,419     $ 13,016     $ 14,841      

Income before income taxes

   $ 13,503     $ 15,131     $ 11,611     $ 10,586     $ 13,221      

Income tax expense

   $ 3,396     $ 4,489     $ 3,798     $ 2,849     $ 3,392      

Net income

   $ 10,107     $ 10,642     $ 7,813     $ 7,737     $ 9,829      

Earnings per share – diluted

   $ 0.06     $ 0.06     $ 0.05     $ 0.05     $ 0.06      

 

3


QUARTERLY HIGHLIGHTS

Operating Revenues

 

   

Operating revenues increased 1.8% from the third quarter of 2019 primarily due to higher average AUM of our U.S. listed products arising from market appreciation and net inflows.

 

   

Operating revenues increased 1.5% from the fourth quarter of 2018 primarily due to higher average AUM of our International listed products arising from market appreciation and net inflows, partly offset by a 3 basis point decline in our average global advisory fee due to AUM mix shift.

 

   

Our average global advisory fee was 0.44% during the third and fourth quarters of 2019 and 0.47% during the fourth quarter of 2018.

Operating Expenses

 

   

Operating expenses increased 4.9% from the third quarter of 2019 due to higher sales and business development expenses inclusive of costs associated with the launch of our Bitcoin ETP; higher fund management and administration costs due to higher market making fees in connection with transitioning to new arrangements, as well as costs associated with preparing our products for Brexit; and higher marketing and advertising expenses, compensation, and professional fees.

 

   

Operating expenses decreased 3.5% from the fourth quarter of 2018 largely due to lower professional fees, acquisition and disposition-related costs and third-party distribution fees.

Other Income/(Expenses)

 

   

We recognized a non-cash loss on revaluation of deferred consideration of ($5.4) million and ($6.3) million during the fourth and third quarters of 2019, and ($5.4) million during the fourth quarter of 2018. These losses arose due to an increase in forward-looking gold prices when compared to the previous periods forward-looking gold curves. The magnitude of any gain or loss recognized is highly correlated to the magnitude of the change in the forward-looking price of gold.

 

   

Interest expense decreased 8.0% from the third quarter of 2019 due to a lower level of debt outstanding. During the third and fourth quarters of 2019, we used $21.0 million of available capital to pay down our debt in connection with our capital management strategy.

Income Taxes

 

   

Our effective income tax rate for the fourth quarter of 45.3% resulted in income tax expense of $3.5 million. Our tax rate differs from the federal statutory tax rate of 21% primarily due to a non-deductible loss on revaluation of deferred consideration, a valuation allowance on foreign net operating losses, state and local taxes and non-deductible executive compensation, partly offset by a lower tax rate on foreign earnings.

Our adjusted effective income tax rate was 25.1%1.

ANNUAL HIGHLIGHTS

Our operating results for the current year are not directly comparable to the prior year due to our acquisition of ETFS, which was completed on April 11, 2018.

 

   

Operating revenues decreased 2.1% as compared to 2018 to a 3 basis point decline in our average global advisory fee and lower average AUM of our U.S. listed products due to AUM mix shift, partly offset by higher revenues earned from the ETFS acquired business, which were recognized for the entire year of 2019.

 

   

Operating expenses increased 1.0% as compared to 2018 due to expenses associated with the ETFS acquired business, which were recognized for the entire year of 2019, and higher compensation expenses. These items were partly offset by lower acquisition and disposition-related costs, professional fees, marketing and advertising expenses and fund management and administration costs associated with our U.S. listed products.

 

   

Significant changes in items reported in other income/(expenses) include a non-cash loss on revaluation of deferred consideration of ($11.3) million in 2019 as compared to a gain of $12.2 million in 2018; a 41.2% increase in interest expense as borrowing under our term loan commenced on April 11, 2018 and a $4.3 million non-cash charge arising from the release of a tax-related indemnification asset which arose from tax exposures assumed from the ETFS acquisition. This item was recognized upon the expiration of the statute of limitations which occurred in the first quarter of 2019 and an equal and offsetting benefit was recognized in income tax expense.

 

   

Our effective income tax rate for 2019 of 34.9% resulted in income tax expense of $10.5 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due to a valuation allowance on foreign net operating losses, a non-deductible loss on revaluation of deferred consideration, non-deductible executive compensation, state and local income taxes and tax shortfalls associated with the vesting and exercise of stock-based compensation awards, partly offset by a $4.3 million reduction in unrecognized tax benefits and a lower tax rate on foreign earnings.

 

4


CONFERENCE CALL

WisdomTree will discuss its results and operational highlights during a conference call on Friday, January 31, 2020 at 9:00 a.m. ET. The call-in number will be (877) 303-7209. Anyone outside the U.S. or Canada should call (970) 315-0420. The slides used during the presentation will be available at http://ir.wisdomtree.com. For those unable to join the conference call at the scheduled time, an audio replay will be available on http://ir.wisdomtree.com.

ABOUT WISDOMTREE

WisdomTree Investments, Inc., through its subsidiaries in the U.S., Europe and Canada (collectively, “WisdomTree”), is an ETF and ETP sponsor and asset manager headquartered in New York. WisdomTree offers products covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. WisdomTree currently has approximately $63.2 billion in assets under management globally.

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.

 

1

See “Non-GAAP Financial Measurements.”

2

Earnings per share calculated pursuant to the two-class method.

CONTACT INFORMATION:

 

Investor Relations

Jason Weyeneth, CFA

+1.917.267.3858

jweyeneth@wisdomtree.com

  

Media Relations

Jessica Zaloom

+1.917.267.3735

jzaloom@wisdomtree.com

 

5


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(in thousands)

(Unaudited)

The following tables set forth the pre-tax operating results for our U.S. Business and International Business segments.

U.S. BUSINESS SEGMENT

 

     Three Months Ended     Years Ended  
     Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
    Dec. 31,
2019
    Dec. 31,
2018
 

Operating Revenues:

              

Advisory fees

   $ 42,952     $ 41,950     $ 43,070     $  42,517     $ 45,633     $ 170,489     $ 204,298  

Other income

     76       81       76       106       126       339       608  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     43,028       42,031       43,146       42,623       45,759       170,828       204,906  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

              

Compensation and benefits

     14,947       14,531       16,696       16,779       14,370       62,953       58,307  

Fund management and administration

     8,070       8,072       8,505       8,340       9,038       32,987       35,728  

Marketing and advertising

     2,745       2,411       2,336       2,162       2,704       9,654       11,003  

Sales and business development

     3,144       3,124       2,867       3,359       3,747       12,494       13,426  

Professional and consulting fees

     1,144       908       1,055       1,072       2,166       4,179       6,169  

Occupancy, communications and equipment

     1,235       1,215       1,211       1,283       1,205       4,944       5,162  

Depreciation and amortization

     235       238       242       246       280       961       1,215  

Third-party distribution fees

     914       1,404       1,867       2,338       1,789       6,523       6,457  

Acquisition and disposition-related costs

     170       —         —         11       72       181       8,289  

Other

     1,403       1,574       1,628       1,586       1,617       6,191       6,674  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     34,007       33,477       36,407       37,176       36,988       141,067       152,430  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     9,021       8,554       6,739       5,447       8,771       29,761       52,476  

Other Income/(Expenses):

              

Interest expense

     (197     (197     (194     (192     (197     (780     (566

Interest income

     936       793       818       779       800       3,326       3,093  

Impairments

     —         —         —         (572     (17,386     (572     (17,386

Other gains and losses, net

     (54     235       (54     145       266       272       292  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) before income taxes

   $ 9,706     $ 9,385     $ 7,309     $ 5,607     $  (7,746   $ 32,007     $ 37,909  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income margin

     21.0     20.4     15.6     12.8     19.2     17.4     25.6

 

6


INTERNATIONAL BUSINESS SEGMENT

 

     Three Months Ended     Years Ended  
     Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
    Dec. 31,
2019
    Dec. 31,
2018
 

Operating Revenues:

              

Advisory fees

   $ 25,227     $ 25,056     $ 22,557     $  22,323     $  21,558     $ 95,163     $  66,806  

Other income

     652       631       590       539       550       2,412       2,404  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     25,879       25,687       23,147       22,862       22,108       97,575       69,210  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

              

Compensation and benefits

     4,333       4,349       4,604       4,522       4,468       17,808       16,208  

Fund management and administration

     7,580       7,038       7,071       6,826       6,823       28,515       20,958  

Marketing and advertising

     806       611       574       518       968       2,509       2,881  

Sales and business development

     2,185       1,230       1,304       1,063       1,289       5,782       3,727  

Contractual gold payments

     3,516       3,502       3,110       3,098       2,917       13,226       8,512  

Professional and consulting fees

     460       351       241       410       688       1,462       1,815  

Occupancy, communications and equipment

     352       334       337       335       339       1,358       1,041  

Depreciation and amortization

     18       21       22       23       23       84       86  

Third-party distribution fees

     232       99       52       62       24       445       154  

Acquisition and disposition-related costs

     196       190       33       302       936       721       3,165  

Other

     413       385       627       467       585       1,892       1,860  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     20,091       18,110       17,975       17,626       19,060       73,802       60,407  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     5,788       7,577       5,172       5,236       3,048       23,773       8,803  

Other Income/(Expenses):

              

Interest expense

     (2,409     (2,635     (2,716     (2,700     (2,662     (10,460     (7,396

(Loss)/gain on revaluation of deferred consideration – gold payments

     (5,354     (6,306     (4,037     4,404       (5,410     (11,293     12,220  

Interest income

     —         6       —         —         —         6       —    

Other gains and losses, net

     52       608       338       (4,772     173       (3,774     (497
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss)/income before income taxes

   $ (1,923   $ (750   $ (1,243   $ 2,168     $  (4,851   $  (1,748   $ 13,130  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income margin

     22.4     29.5     22.3     22.9     13.8     24.4     12.7

 

7


WisdomTree Investments, Inc.

Key Operating Statistics (Unaudited)

 

     Three Months Ended  
     Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

GLOBAL ETPs (in millions)

          

Beginning of period assets

   $ 59,981     $ 60,389     $ 59,112     $ 54,094     $ 59,140  

Inflows/(outflows)

     368       (694     337       561       245  

Market appreciation/(depreciation)

     3,269       467       940       4,544       (5,291

Fund closures

     (3     (181     —         (87     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 63,615     $ 59,981     $ 60,389     $ 59,112     $ 54,094  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 61,858     $ 60,306     $ 58,575     $ 57,683     $ 56,423  

Average advisory fee during the period

     0.44     0.44     0.45     0.46     0.47

Revenue days

     92       92       91       90       92  

Number of ETFs – end of the period

     367       366       536       534       537  

U.S. LISTED ETFs (in millions)

          

Beginning of period assets

   $ 37,592     $ 39,220     $ 39,366     $ 35,486     $ 41,556  

Inflows/(outflows)

     563       (1,198     (166     147       (894

Market appreciation/(depreciation)

     2,448       (430     20       3,820       (5,176

Fund closures

     (3     —         —         (87     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 40,600     $ 37,592     $ 39,220     $ 39,366     $ 35,486  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 39,094     $ 37,857     $ 38,945     $ 38,061     $ 38,246  

Average advisory fee during the period

     0.44     0.44     0.44     0.45     0.47

Number of ETFs – end of the period

     80       80       79       77       85  

INTERNATIONAL LISTED ETPs (in millions)

          

Beginning of period assets

   $ 22,389     $ 21,169     $ 19,746     $ 18,608     $ 17,584  

Inflows/(outflows)

     (195     504       503       414       1,139  

Market appreciation/(depreciation)

     821       897       920       724       (115

Fund closures

     —         (181     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 23,015     $ 22,389     $ 21,169     $ 19,746     $ 18,608  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 22,764     $ 22,449     $ 19,630     $ 19,622     $ 18,177  

Average advisory fee during the period

     0.44     0.44     0.46     0.47     0.47

Number of ETPs – end of the period

     287       286       457       457       452  

PRODUCT CATEGORIES (in millions)

          

Commodity & Currency

          

Beginning of period assets

   $ 19,954     $ 18,446     $ 16,978     $ 16,213     $ 14,998  

Inflows/(outflows)

     (267     534       563       227       988  

Market appreciation/(depreciation)

     639       974       905       538       227  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 20,326     $ 19,954     $ 18,446     $ 16,978     $ 16,213  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 20,146     $ 19,796     $ 16,912     $ 16,995     $ 15,620  

U.S. Equity

          

Beginning of period assets

   $ 16,416     $ 16,021     $ 15,880     $ 13,335     $ 15,186  

Inflows/(outflows)

     468       242       103       632       393  

Market appreciation/(depreciation)

     1,002       153       38       1,913       (2,244
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 17,886     $ 16,416     $ 16,021     $ 15,880     $ 13,335  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 17,112     $ 16,004     $ 15,808     $ 14,947     $ 14,291  

International Developed Market Equity

          

Beginning of period assets

   $ 12,541     $ 13,687     $ 14,414     $ 14,508     $ 19,385  

Inflows/(outflows)

     (122     (1,001     (729     (1,530     (2,216

Market appreciation/(depreciation)

     1,006       (145     2       1,436       (2,661
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 13,425     $ 12,541     $ 13,687     $ 14,414     $ 14,508  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 13,001     $ 12,747     $ 13,957     $ 14,506     $ 16,869  

 

8


     Three Months Ended  
     Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Emerging Market Equity

          

Beginning of period assets

   $ 5,814     $ 6,090     $ 5,730     $ 5,278     $ 5,346  

Inflows/(outflows)

     193       173       367       (84     232  

Market appreciation/(depreciation)

     516       (449     (7     536       (300
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 6,523     $ 5,814     $ 6,090     $ 5,730     $ 5,278  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 6,111     $ 5,851     $ 5,785     $ 5,502     $ 5,148  

Fixed Income

          

Beginning of period assets

   $ 3,655     $ 4,258     $ 4,023     $ 2,570     $ 1,720  

Inflows/(outflows)

     220       (582     208       1,418       880  

Market appreciation/(depreciation)

     34       (21     27       35       (30
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 3,909     $ 3,655     $ 4,258     $ 4,023     $ 2,570  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 3,856     $ 4,050     $ 4,119     $ 3,511     $ 2,140  

Leveraged & Inverse

          

Beginning of period assets

   $ 1,130     $ 1,149     $ 1,226     $ 1,083     $ 1,250  

Inflows/(outflows)

     (55     11       (63     83       (18

Market appreciation/(depreciation)

     71       (30     (14     60       (149
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 1,146     $ 1,130     $ 1,149     $ 1,226     $ 1,083  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 1,186     $ 1,154     $ 1,199     $ 1,213     $ 1,193  

Alternatives

          

Beginning of period assets

   $ 468     $ 514     $ 628     $ 755     $ 674  

Inflows/(outflows)

     (69     (48     (108     (141     178  

Market appreciation/(depreciation)

     1       2       (6     14       (97
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 400     $ 468     $ 514     $ 628     $ 755  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 443     $ 490     $ 574     $ 666     $ 712  

Closed ETPs

          

Beginning of period assets

   $ 3     $ 224     $ 233     $ 352     $ 581  

Inflows/(outflows)

     —         (23     (4     (44     (192

Market appreciation/(depreciation)

     —         (17     (5     12       (37

Fund closures

     (3     (181     —         (87     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ —       $ 3     $ 224     $ 233     $ 352  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 3     $ 214     $ 221     $ 343     $ 450  
          

Headcount – U.S. Business segment

     137       142       143       141       153  

Headcount – International Business segment

     71       70       71       75       75  

Note: Previously issued statistics may be restated due to fund closures and trade adjustments

Source: WisdomTree

 

9


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

     Dec. 31,
2019
    Dec. 31,
2018
 
     (Unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 74,972     $ 77,784  

Securities owned, at fair value

     17,319       8,873  

Accounts receivable

     26,838       25,834  

Income taxes receivable

     —         1,181  

Prepaid expenses

     3,724       4,441  

Other current assets

     207       163  
  

 

 

   

 

 

 

Total current assets

     123,060       118,276  

Fixed assets, net

     8,127       9,122  

Notes receivable

     33,310       28,722  

Securities held-to-maturity

     16,863       20,180  

Deferred tax assets, net

     7,398       7,042  

Investments, carried at cost

     36,192       28,080  

Right of use assets – operating leases

     18,161       —    

Goodwill

     85,856       85,856  

Intangible assets

     603,294       603,209  

Other noncurrent assets

     983       2,155  
  

 

 

   

 

 

 

Total assets

   $ 933,244     $ 902,642  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

LIABILITIES

    

Current liabilities:

    

Fund management and administration payable

   $ 22,021     $ 22,508  

Compensation and benefits payable

     26,501       18,453  

Deferred consideration – gold payments

     13,953       11,765  

Securities sold, but not yet purchased, at fair value

     582       1,698  

Operating lease liabilities

     3,682       —    

Income taxes payable

     3,372       —    

Accounts payable and other liabilities

     8,930       8,377  
  

 

 

   

 

 

 

Total current liabilities

     79,041       62,801  

Debt

     175,956       194,592  

Deferred consideration – gold payments

     159,071       149,775  

Operating lease liabilities

     19,057       —    

Deferred rent payable

     —         4,570  
  

 

 

   

 

 

 

Total liabilities

     433,125       411,738  

Preferred stock – Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding

     132,569       132,569  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock, par value $0.01; 250,000 shares authorized:

    

Issued and outstanding: 155,264 and 153,202 at December 31, 2019 and December 31, 2018, respectively

     1,553       1,532  

Additional paid-in capital

     373,043       363,655  

Accumulated other comprehensive income

     945       467  

Accumulated deficit

     (7,991     (7,319
  

 

 

   

 

 

 

Total stockholders’ equity

     367,550       358,335  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 933,244     $ 902,642  
  

 

 

   

 

 

 

 

10


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

     Years Ended  
     Dec. 31,
2019
    Dec. 31,
2018
 

Cash flows from operating activities:

    

Net income

   $ 19,713     $ 36,633  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Advisory fees received in gold and other precious metals

     (49,887     (32,238

Contractual gold payments

     13,226       8,512  

Stock-based compensation

     11,590       13,255  

Loss/(gain) on revaluation of deferred consideration – gold payments

     11,293       (12,220

Amortization of right of use asset

     3,174       —    

Amortization of credit facility issuance costs

     2,888       2,087  

Paid-in-kind interest income

     (2,498     (1,974

Depreciation and amortization

     1,045       1,301  

Impairments

     572       17,386  

Deferred income taxes

     (349     (6,083

Other

     (173     798  

Changes in operating assets and liabilities:

    

Securities owned, at fair value

     (8,446     (7,182

Accounts receivable

     (19     3,804  

Income taxes receivable/payable

     4,524       5,706  

Prepaid expenses

     738       427  

Gold and other precious metals

     35,886       25,604  

Other assets

     172       984  

Fund management and administration payable

     (476     221  

Compensation and benefits payable

     7,885       (16,050

Securities sold, but not yet purchased, at fair value

     (1,116     748  

Operating lease liabilities

     (3,587     —    

Accounts payable and other liabilities

     677       (4,251
  

 

 

   

 

 

 

Net cash provided by operating activities

     46,832       37,468  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of fixed assets

     (47     (71

Purchase of investments

     (8,112     —    

Funding of notes receivable

     (2,090     (8,000

Proceeds from held-to-maturity securities maturing or called prior to maturity

     3,244       1,107  

Proceeds from sales and maturities of debt securities available-for-sale

     —         64,498  

Cash paid for acquisition, net of cash acquired

     —         (239,313
  

 

 

   

 

 

 

Net cash used in investing activities

     (7,005     (181,779
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Dividends paid

     (20,385     (19,236

Repayment of debt

     (21,000     —    

Shares repurchased

     (2,341     (2,885

Credit facility issuance costs

     —         (8,690

Preferred stock issuance costs

     —         (181

Proceeds from the issuance of debt

     —         200,000  

Proceeds from exercise of stock options

     160       191  
  

 

 

   

 

 

 

Net cash (used in)/provided by financing activities

     (43,566     169,199  
  

 

 

   

 

 

 

Increase/(decrease) in cash flows due to changes in foreign exchange rate

     927       (1,297
  

 

 

   

 

 

 

(Decrease)/increase in cash and cash equivalents

     (2,812     23,591  

Cash and cash equivalents – beginning of year

     77,784       54,193  
  

 

 

   

 

 

 

Cash and cash equivalents – year

   $ 74,972     $ 77,784  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for taxes

   $ 10,060     $ 14,398  
  

 

 

   

 

 

 

Cash paid for interest

   $ 8,037     $ 5,577  
  

 

 

   

 

 

 

 

11


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 release include:

 

   

Adjusted compensation, operating income, total expenses, income before income taxes, income tax expense, net income and diluted earnings per share. We disclose adjusted compensation, operating income, total expenses, income before income taxes, income tax expense, net income and diluted earnings per share as non-GAAP financial measurements in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting these non-GAAP financial measures provides investors with a consistent way to analyze our performance. These non-GAAP financial measures exclude the following:

 

   

Unrealized gains or losses on the revaluation of deferred consideration: Deferred consideration is an obligation we assumed in connection with the ETFS acquisition that is carried at fair value. This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices. Changes in the forward-looking price of gold may have a material impact on the carrying value of the deferred consideration and our reported financial results. We exclude this item when calculating our non-GAAP financial measurements as it is not core to our operating business. The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.

 

   

Tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards: GAAP requires the recognition of tax windfalls and shortfalls within income tax expense. These items arise upon the vesting and exercise of stock-based compensation awards and the magnitude is directly correlated to the number of awards vesting/exercised as well as the difference between the price of our stock on the date the award was granted and the date the award vested or was exercised. We exclude these items when calculating our non-GAAP financial measurements as they introduce volatility in earnings and are not core to our operating business.

 

   

Other items: Impairment charges, severance expense and acquisition and disposition-related costs are excluded when calculating our non-GAAP financial measurements.

 

   

Adjusted effective income tax rate. We disclose our adjusted effective income tax rate as a non-GAAP financial measurement in order to report our effective income tax rate exclusive of items that are non-recurring or not core to our operating business. We believe reporting our adjusted effective income tax rate provides investors with a consistent way to analyze our income taxes. Our adjusted effective income tax rate is calculated by dividing adjusted income tax expense by adjusted income before income taxes. See above for information regarding the items that are excluded.

 

   

Gross margin and gross margin percentage. We disclose our gross margin and gross margin percentage as non-GAAP financial measurements for our U.S. Business segment and International Business segment 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 ratios also assist us in analyzing the profitability of our products. We define gross margin as total operating revenues less fund management and administration expenses. Gross margin percentage is calculated as gross margin divided by total operating revenues.

 

   

Adjusted operating income margin. We disclose adjusted operating income margin as a non-GAAP financial measurement on a consolidated basis, as well as for our U.S. Business segment and International Business segment in order to report our operating income margin exclusive of items that are non-recurring or not core to our operating business.

 

12


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATION (CONSOLIDATED)

(in thousands)

(Unaudited)

 

     Three Months Ended  
Adjusted Net Income and Diluted Earnings per Share:    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Net income/(loss), as reported

   $ 4,258     $ 4,152     $ 2,479     $ 8,824     $ (11,564

Add back/(deduct): Unrealized loss/(gain) on revaluation of deferred consideration

     5,354       6,306       4,037       (4,404     5,410  

Add back: Severance expense, net of income taxes

     —         —         1,194       1,521       1,526  

Add back/(deduct): Tax shortfalls/(windfalls) upon vesting and exercise of stock-based compensation awards

     142       30       76       971       (403

Add back: Impairments, net of income taxes

     —         —         —         572       14,048  

Add back: Acquisition and disposition-related costs, net of income taxes

     353       154       27       253       812  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 10,107     $ 10,642     $ 7,813     $ 7,737     $ 9,829  

Weighted average common shares—diluted

     167,203       167,163       167,249       166,811       166,686  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings per share—diluted

   $ 0.06     $ 0.06     $ 0.05     $ 0.05     $ 0.06  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Operating Income and Adjusted Operating Income Margin:    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Operating revenues

   $ 68,907     $ 67,718     $ 66,293     $ 65,485     $ 67,867  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 14,809     $ 16,131     $ 11,911     $ 10,683     $ 11,819  

Add back: Severance expense, before income taxes

     —         —         1,475       2,020       2,014  

Add back: Acquisition and disposition-related costs, before income taxes

     366       190       33       313       1,008  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 15,175     $ 16,321     $ 13,419     $ 13,016     $ 14,841  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income margin

     22.0     24.1     20.2     19.9     21.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Compensation:    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Compensation expense

   $ 19,280     $ 18,880     $ 21,300     $ 21,301     $ 18,838  

Deduct: Severance expense, before income taxes

     —         —         (1,475     (2,020     (2,014
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted compensation expense

   $ 19,280     $ 18,880     $ 19,825     $ 19,281     $ 16,824  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Total Operating Expenses:    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Total operating expenses

   $ 54,098     $ 51,587     $ 54,382     $ 54,802     $ 56,048  

Deduct: Severance expense, before income taxes

     —         —         (1,475     (2,020     (2,014

Deduct: Acquisition and disposition-related costs, before income taxes

     (366     (190     (33     (313     (1,008
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating expenses

   $ 53,732     $ 51,397     $ 52,874     $ 52,469     $ 53,026  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

13


     Three Months Ended  
Adjusted Income Before Income Taxes:    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Income/(loss) before income taxes

   $ 7,783     $ 8,635     $ 6,066     $ 7,775     $ (12,597

Add back/(deduct): Unrealized loss/(gain) on revaluation of deferred consideration

     5,354       6,306       4,037       (4,404     5,410

Add back: Loss recognized upon reduction of a tax-related indemnification asset

     —         —         —         4,310       —    

Add back: Severance expense, before income taxes

     —         —         1,475       2,020       2,014

Add back: Impairments, before income taxes

     —         —         —         572       17,386

Add back: Acquisition and disposition-related costs, before income taxes

     366       190       33       313       1,008  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income before income taxes

   $ 13,503     $ 15,131     $ 11,611     $ 10,586     $ 13,221  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate:    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Adjusted income before income taxes (above)

   $ 13,503     $ 15,131     $ 11,611     $ 10,586     $ 13,221  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense/(benefit)

   $ 3,525     $ 4,483     $ 3,587     $ (1,049   $ (1,033

Add back: Tax benefit arising from reduction of a tax-related indemnification asset

     —         —         —         4,310       —    

Add back: Tax benefit arising from severance expense

     —         —         281       499       488  

Add back: Tax benefit arising from impairments

     —         —         —         —         3,338  

Add back/(deduct): Tax windfalls/(shortfalls) upon vesting and exercise of stock-based compensation awards

     (142     (30     (76     (971     403  

Add back: Tax benefit arising from acquisition and disposition-related costs

     13       36       6       60       196  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income tax expense

   $ 3,396     $ 4,489     $ 3,798     $ 2,849     $ 3,392  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted effective income tax rate

     25.1     29.7     32.7     26.9     25.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

14


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATION (SEGMENTS)

(in thousands)

(Unaudited)

 

     Three Months Ended  
Gross Margin and Gross Margin Percentage (U.S. Business):    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Operating revenues

   $ 43,028     $ 42,031     $ 43,146     $ 42,623     $ 45,759  

Less: Fund management and administration

     (8,070     (8,072     (8,505     (8,340     (9,038
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 34,958     $ 33,959     $ 34,641     $ 34,283     $ 36,721  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin percentage (U.S. Business)

     81.2     80.8     80.3     80.4     80.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Operating Income Margin (U.S. Business):    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Operating revenues

   $ 43,028     $ 42,031     $ 43,146     $ 42,623     $ 45,759  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 9,021     $ 8,554     $ 6,739     $ 5,447     $ 8,771  

Add back: Severance expense, before income taxes

     —         —         1,366       2,020       2,014  

Add back: Acquisition and disposition-related costs, before income taxes

     170       —         —         11       72  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 9,191     $ 8,554     $ 8,105     $ 7,478     $ 10,857  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income margin (U.S. Business)

     21.4     20.4     18.8     17.5     23.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Gross Margin and Gross Margin Percentage (International):    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Operating revenues

   $ 25,879     $ 25,687     $ 23,147     $ 22,862     $ 22,108  

Less: Fund management and administration

     (7,580     (7,038     (7,071     (6,826     (6,823
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 18,299     $ 18,649     $ 16,076     $ 16,036     $ 15,285  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin percentage (International)

     70.7     72.6     69.5     70.1     69.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Operating Income Margin (International):    Dec. 31,
2019
    Sept. 30,
2019
    June 30,
2019
    Mar. 31,
2019
    Dec. 31,
2018
 

Operating revenues

   $ 25,879     $ 25,687     $ 23,147     $ 22,862     $ 22,108  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 5,788     $ 7,577     $ 5,172     $ 5,236     $ 3,048  

Add back: Severance expense, before income taxes

     —         —         109       —         —    

Add back: Acquisition and disposition-related costs, before income taxes

     196       190       33       302       936  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 5,984     $ 7,767     $ 5,314     $ 5,538     $ 3,984  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income margin (International)

     23.1     30.2     23.0     24.2     18.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

15


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;

 

   

our ability to develop new products and services;

 

   

our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;

 

   

our ability to successfully operate and expand our business in non-U.S. markets; and

 

   

the effect of laws and regulations that apply to our business.

Our business is subject to many risks and uncertainties, including without limitation:

 

   

declining prices of securities, precious metals and other commodities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETP investors to sell their fund shares and trigger redemptions;

 

   

fluctuations in the amount and mix of our AUM, whether caused by disruptions in the financial markets or otherwise, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity, increase the cost of borrowing or result in our debt being called prior to maturity;

 

   

withdrawals or broad changes in investments in our ETPs by investors with significant positions may negatively impact revenues and operating margins;

 

   

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 ETPs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks;

 

   

net outflows in our two largest currency hedged ETPs – the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund – have had, and in the future could continue to have, a negative impact on our revenues;

 

   

over the last few years, we have expanded our business globally. This expansion subjects us to increased operational, regulatory, financial and other risks;

 

   

many of our ETPs have a limited track record, and poor investment performance could cause our revenues to decline; and

 

   

we depend on third parties to provide many critical services to operate our business and our ETPs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETP investors.

Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. For a more complete description of the risks noted above and other risks that could cause our actual results to differ from our current expectations, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.

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.

 

16

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