Drmicrocap
9 years ago
WisdomTree Announces First Quarter 2015 Results
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WisdomTree Investments, Inc.
29 minutes ago
GlobeNewswire
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Net income of $12.1 million or diluted EPS $0.09
Record $13.5 billion in net inflows for the quarter with AUM reaching record $55.8 billion
Net inflow market share of 23.8% for the quarter
Declares $0.08 quarterly dividend
NEW YORK, May 1, 2015 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (WETF), an exchange-traded fund ("ETF") and exchange-traded product ("ETP") sponsor and asset manager today reported net income of $12.1 million for the first quarter of 2015 or $0.09 per share on a fully diluted basis. This compares to $30.2 million in the first quarter of 2014 (which included a non-recurring tax benefit of $13.7 million) and $9.6 million in the fourth quarter of 2014. Included in the quarter was a loss of $1.8 million, or $0.01 per diluted EPS, associated with the Company`s European listed ETP business, which was acquired in April 2014.
WisdomTree CEO and President Jonathan Steinberg said, "We reported a record $13.5 billion in net inflows in the first quarter in the U.S., making WisdomTree one of the fastest-growing companies within the ETF and broader asset management industry in 2015 to date. WisdomTree`s industry-leading growth underscores our ability to identify and disseminate useful and differentiated investment solutions to an ever-growing ETF market. We also recorded record revenues and pre-tax earnings in the quarter."
"Now the sixth largest ETP sponsor in the world with $61.2 billion in AUM globally, we are continuing to experience strong organic growth in the second quarter, led by our currency hedged equity ETFs. Importantly, we are continuing to plant the seeds for future growth as we execute against the strategic growth initiatives we previously outlined for the year, including investments in people, products and technology."
Summary Operating and Financial Highlights
Three Months Ended Change From
Mar. 31, Dec. 31, Mar. 31, Dec. 31, Mar. 31,
Operating Highlights 2015 2014 2014 2014 2014
US listed ETFs ($, in billions):
AUM $55.8 $39.3 $33.9 41.9% 64.6%
Net inflows $13.5 $4.5 ($0.5) 200.7% n/a
Average AUM $46.4 $37.7 $33.9 23.1% 37.0%
Average advisory fee 0.52% 0.52% 0.51% -- +.01
Market share of industry inflows 23.8% 3.8% -- +20.0 --
European listed ETPs ($, in millions):
AUM $334.6 $181.2 -- 84.7% --
Net inflows $174.2 $98.2 -- 77.4% --
Average advisory fee 0.75% 0.73% -- +.02 --
Financial Highlights ($, in millions, except per share amounts):
Consolidated Results:
Total revenues $60.1 $49.6 $42.9 21.3% 40.1%
Pre-tax income $21.0 $16.7 $16.5 26.0% 27.6%
Net income $12.1 $9.6 $30.2 25.4% (60.1%)
Diluted earnings per share $0.09 $0.07 $0.22 0.02 (0.13)
Pre-tax margin 35.0% 33.6% 38.4% +1.4 -3.4
US listed ETFs:
Gross margin1 (non-GAAP) 83.2% 82.5% 78.6% +0.7 +4.6
Pre-tax margin 38.3% 37.8% 38.4% +0.5 -0.1
1 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
Recent Business Developments
•On February 17, 2015, the WisdomTree Europe Hedged Equity Fund (HEDJ) surpassed $10 billion in assets
•On March 4, 2015, the Company launched the Europe Hedged SmallCap Equity Fund (EUSC)
•On March 9, 2015, the Company surpassed $50 billion in assets under management
•On March 20, 2015, the WisdomTree Europe Hedged Equity Fund (HEDJ) received ETF.com award for `ETF of the Year`
•On April 9, 2015, the Company launched the Japan Hedged Dividend Growth Fund (JHDG)
•On April 16, 2015, the Company announced it named David Yates Chief Information Officer
•On April 20, 2015, the Company announced it named Alisa Maute Head of U.S. Sales
•WisdomTree Europe: •Listed six WisdomTree UCITS ETFs in Germany on the Deutsche Börse on February 15, 2015; listed six WisdomTree UCITS ETFs in Switzerland on the SIX Swiss Exchange on March 15, 2015; listed the ISEQ 20® UCITS ETF (WTIE) in Ireland on the Irish Stock Exchange on April 20, 2015 and in London on the London Stock Exchange on April 21, 2015; and announced it named Nizam Hamid Head of European Sales on April 23, 2015
•Listed seven Boost ETP ETCs in Italy on the Borsa Italiana on April 9, 2015
Assets Under Management and Net Inflows
US listed ETF assets under management ("AUM") reached a record $55.8 billion at March 31, 2015, up 42% from December 31, 2014, primarily due to record inflows of $13.5 billion. US listed AUM was up 65% from March 31, 2014.
European listed AUM was $334.6 million, up 85% from $181.2 million at December 31, 2014 primarily due to $174.2 million of net inflows, primarily in the company`s Boost branded ETPs.
Performance
In evaluating the performance of our US listed equity, fixed income and alternative ETFs against actively managed and index based mutual funds and ETFs, 90.2% of the $49.5 billion invested in our ETFs and 60% (31 of 52) of our ETFs outperformed their comparable Morningstar average since inception as of March 31, 2015.
For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.
First Quarter Financial Discussion
Revenues
Total revenues increased 40.1% from the first quarter of 2014 and 21.3% compared to the fourth quarter of 2014 to a record $60.1 million primarily due to higher average AUM from strong inflows. Revenues from our European listed ETPs, which were acquired in April 2014, increased to $0.6 million from $0.4 million in the fourth quarter of 2014 primarily due to higher inflows for the Boost branded ETPs. The average advisory fee for our US listed ETFs increased to 0.52% as compared to 0.51% for the first quarter of 2014 due to the change in the mix of our AUM and remained the same at 0.52% as compared to the fourth quarter of 2014.
Margins
Gross margin for our US listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 83.2% in the first quarter of 2015 as compared to 78.6% in the first quarter of 2014 and 82.5% in the fourth quarter of 2014. The increase was primarily due to beneficial pricing changes for our fund accounting, administration and custody services, which took effect in April 2014, as well as higher average AUM.
Consolidated pre-tax margin was 35.0% in the first quarter of 2015. Pre-tax margin for our U.S. listed ETFs was 38.3% on average U.S. listed AUM of $46.4 billion. The Company`s margins were compressed in the first quarter due to the timing difference between when the Company recorded higher compensation costs from record inflows levels versus when it recognizes the full impact of the revenues from these inflows.
Expenses
Total expenses increased 48.0% from the first quarter of 2014 and 18.8% compared to the fourth quarter of 2014 to $39.1 million. Included in the quarter was $2.4 million of expenses associated with our European listed ETPs.
•Compensation and benefits expense increased 110% from the first quarter of 2014 to $19.6 million due to higher accrued incentive compensation due to our record setting inflow levels experienced in the quarter as well as higher headcount related expenses to support our growth. Included in the quarter was $1.1 million in compensation costs for employees associated with our European listed ETPs. Our headcount was 109 in the US and 136 globally at the end of the quarter.
•Fund management and administration expense increased 10.9% from the first quarter of 2014 to $10.2 million. Fees associated with higher inflow levels, average AUM and number of ETFs increased, and were partly offset by lower fees as a result of changing our fund accounting, administration and custody service provider in April 2014. We also incurred additional costs for our European listed ETPs which were acquired in April 2014. This expense increased 13.8% compared to the fourth quarter of 2014 due to expenses associated with higher inflow levels and additional costs for the WisdomTree branded ETFs which were launched in Europe in the fourth quarter. We had 70 US listed ETFs and 63 European listed ETPs at the end of the quarter.
•Marketing and advertising expense increased 19.3% from the first quarter of 2014 and 7.2% from the fourth quarter to $3.1 million primarily due to higher levels of advertising related activities to support our growth.
•Sales and business development expense increased 46.0% from the first quarter of 2014 to $1.9 million primarily due to higher spending for sales related activities. This expense was relatively unchanged compared to the fourth quarter of 2014.
•Professional and consulting fees decreased 18.5% from the first quarter of 2014 to $1.5 million. In the first quarter of last year, we incurred advisory fees in connection with our acquisition of Boost. This expense decreased 42.9% compared to the fourth quarter of 2014 primarily due to lower fees relating to strategic consulting services.
•Occupancy, communication and equipment expense was essentially unchanged at $0.9 million as compared to the first and fourth quarters of last year.
•Depreciation and amortization expense was also relatively unchanged at $0.2 million as compared to the first and fourth quarters of last year.
•Third-party sharing arrangements expense increased to $0.3 million in the first quarter of 2015 as compared to the first quarter of 2014 primarily due to higher fees for our marketing agents in Latin America and listing our ETFs on a third party platform.
•Acquisition contingent payment expense was $0.3 million in the first quarter. This represents the current expense accrual for expected payments due to the former Boost shareholders related to our acquisition in April 2014 and is primarily driven by increased AUM derived from our European business.
•Income tax expense was $9.0 million for the first quarter of 2015. The effective tax rate on our US listed ETF business increased to 39.4% from 38.3% in the fourth quarter of last year due to state taxes. The Company`s overall effective tax rate was 42.6% due to the non-deductibility of losses in our European ETP business. These losses may be recognized in the future after the European business is profitable. The Company recorded a tax benefit of $13.7 million in the first quarter of last year related to its deferred tax asset, which previously had been recorded with a full valuation allowance.
Balance Sheet
As of March 31, 2015, the Company had total assets of $217.9 million which consisted primarily of cash and cash equivalents and investments of $173.3 million. There were approximately 135.6 million shares of common stock outstanding as of March 31, 2015. Fully diluted weighted average shares outstanding were 137.3 million for the first quarter.
Quarterly Dividend and Stock Buyback
The Company`s Board of Directors declared a quarterly cash dividend of $0.08 per share of the Company`s common stock. The dividend will be paid on May 27, 2015 to stockholders of record as of the close of business on May 13, 2015. In addition, during the quarter, the Company purchased approximately 773,000 shares for $14.1 million.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, May 1, 2015 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.
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;
•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 expand our business into non-U.S. markets;
•timing of payment of our cash income taxes;
•competition in our business; and
•the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
•Recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
•Challenging global market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing customers to sell their fund shares and trigger redemptions.
•Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
•We derive a substantial portion of our revenue from a limited number of products - in particular two funds, the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund - and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the AUM of those funds.
•Most of our AUM are held in our U.S. listed ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
•We derive a substantial portion of our revenue from international hedged equity ETFs and are exposed to the market-specific political and economic risks, as well as general investor sentiment regarding monetary policy of those markets.
•We derive a substantial portion of our revenue from products invested in securities of Japanese and European companies and are exposed to the market-specific political and economic risks, as well as general investor sentiment regarding future growth of those markets and currency fluctuations.
•We derive a significant portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
•Many of our ETPs and ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
•We depend on third parties to provide many critical services to operate our business and our ETPs and ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm our customers.
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, please see the section entitled "Risk Factors" in the Company`s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
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.
About WisdomTree
WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (collectively, "WisdomTree"), is an exchange-traded fund ("ETF") and exchange-traded product ("ETP") sponsor and asset manager headquartered in New York. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. WisdomTree currently has approximately $61.2 billion in assets under management globally.
WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended % Change From
Mar. 31, Dec. 31, Mar. 31, Dec. 31, Mar. 31,
2015 2014 2014 2014 2014
Revenues
Advisory fees $ 59,869 $ 49,327 $ 42,609 21.4% 40.5%
Other income 272 273 311 -0.4% -12.5%
Total revenues 60,141 49,600 42,920 21.3% 40.1%
Expenses
Compensation and benefits 19,601 14,099 9,355 39.0% 109.5%
Fund management and administration 10,168 8,932 9,168 13.8% 10.9%
Marketing and advertising 3,076 2,869 2,578 7.2% 19.3%
Sales and business development 1,900 1,914 1,301 -0.7% 46.0%
Professional and consulting fees 1,463 2,560 1,795 -42.9% -18.5%
Occupancy, communication and equipment 918 943 900 -2.7% 2.0%
Depreciation and amortization 220 221 192 -0.5% 14.6%
Third party sharing arrangements 283 282 10 0.4% 2730.0%
Acquisition contingent payment 257 -- -- n/a n/a
Other 1,235 1,101 1,142 12.2% 8.1%
Total expenses 39,121 32,921 26,441 18.8% 48.0%
Income before taxes 21,020 16,679 16,479 26.0% 27.6%
Income tax expense/(benefit) 8,958 7,057 (13,725) -- --
Net income $ 12,062 $ 9,622 $ 30,204 25.4% -60.1%
Income before taxes per share - basic $ 0.16 $ 0.13 $ 0.13
Income before taxes per share - diluted $ 0.15 $ 0.12 $ 0.12
Net income per share - basic $ 0.09 $ 0.07 $ 0.23
Net income per share - diluted $ 0.09 $ 0.07 $ 0.22
Weighted average common shares - basic 134,075 132,816 130,934
Weighted average common shares - diluted 137,311 138,787 138,667
WISDOMTREE INVESTMENTS, INC.
NON-GAAP SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
US European
Listed Listed US Listed Business
Business Business Total % Change From
Q1/15 Q1/15 Q1/15 Q1/15 Q4/14 Q1/14 Q4/14 Q1/14
Revenues
Advisory fees $ 59,346 $ 523 $ 59,869 $ 59,346 $ 48,966 $ 42,609 21.2% 39.3%
Other income 234 38 272 234 243 311 -3.7% -24.8%
Total revenues 59,580 561 60,141 59,580 49,209 42,920 21.1% 38.8%
Expenses
Compensation and benefits 18,475 1,126 19,601 18,475 13,127 9,355 40.7% 97.5%
Fund management and administration 9,733 435 10,168 9,733 8,334 9,168 16.8% 6.2%
Marketing and advertising 2,952 124 3,076 2,952 2,696 2,578 9.5% 14.5%
Sales and business development 1,865 35 1,900 1,865 1,620 1,301 15.1% 43.4%
Professional and consulting fees 1,298 165 1,463 1,298 2,456 1,795 -47.1% -27.7%
Occupancy, communication and equipment 847 71 918 847 850 900 -0.4% -5.9%
Depreciation and amortization 219 1 220 219 219 192 0.0% 14.1%
Third party sharing arrangements 283 -- 283 283 282 10 0.4% 2730.0%
Acquisition contingent payment -- 257 257 -- -- -- n/a n/a
Other 1,091 144 1,235 1,091 1,007 1,142 8.3% -4.5%
Total expenses 36,763 2,358 39,121 36,763 30,591 26,441 20.2% 39.0%
Income/(loss) before taxes 22,817 (1,797) 21,020 22,817 18,618 16,479 22.6% 38.5%
Income tax expense/(benefit) 8,987 (30) 8,958 8,987 7,131 (13,725) 26.0% n/a
Net income/(loss) $ 13,830 $ (1,767) $ 12,062 $ 13,830 $ 11,487 $ 30,204 20.4% -54.2%
Pretax margin 38.3% 35.0%
Gross margin 83.2% 82.6%
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
March 31, December 31,
2015 2014
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 151,701 $ 165,284
Accounts receivable 24,600 18,176
Deferred tax asset, net 2,599 3,872
Other current assets 2,051 1,708
Total current assets 180,951 189,040
Fixed assets, net 10,153 10,356
Investments 21,629 13,990
Deferred tax asset, net 3,441 5,618
Goodwill 1,676 1,676
Other noncurrent assets 83 71
Total assets $ 217,933 $ 220,751
LIABILITIES AND STOCKHOLDERS` EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 12,648 $ 9,983
Compensation and benefits payable 11,070 14,333
Accounts payable and other liabilities 5,920 5,115
Total current liabilities 29,638 29,431
Other noncurrent liabilities:
Acquisition payable 2,014 1,757
Deferred rent payable 5,230 5,278
Total liabilities 36,882 36,466
STOCKHOLDERS` EQUITY
Common stock, par value $0.01; 250,000 shares authorized:
issued: 136,971 and 134,959 1,370 1,350
outstanding: 135,553 and 133,445
Additional paid-in capital 204,752 209,216
Accumulated other comprehensive loss (106) (53)
Accumulated deficit (24,965) (26,228)
Total stockholders` equity 181,051 184,285
Total liabilities and stockholders` equity $ 217,933 $ 220,751
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31, March 31,
2015 2014
Cash flows from operating activities
Net income $ 12,062 $ 30,204
Non-cash items included in net income:
Income tax expense/(benefit) 8,608 (13,725)
Depreciation and amortization 220 192
Stock-based compensation 2,344 2,015
Deferred rent (48) 643
Deferred acquisition contingent payment 257 --
Accretion to interest income and other 3 (111)
Changes in operating assets and liabilities:
Accounts receivable (6,356) (224)
Other assets (359) 18
Fund management and administration payable 2,640 1,358
Compensation and benefits payable (3,230) (11,473)
Accounts payable and other liabilities 796 537
Net cash provided by operating activities 16,937 9,434
Cash flows from investing activities
Purchase of fixed assets (20) (3,527)
Purchase of investments (8,449) (154)
Proceeds from the redemption of investments 808 61
Net cash used in investing activities (7,661) (3,620)
Cash flows from financing activities
Shares repurchased (14,070) (5,426)
Dividends paid (10,799) --
Proceeds from exercise of stock options 2,125 76
Net cash used in financing activities (22,744) (5,350)
Decrease in cash flows due to changes in foreign exchange rate (115) --
Net (decrease)/ increase in cash and cash equivalents (13,583) 464
Cash and cash equivalents - beginning of period 165,284 104,316
Cash and cash equivalents - end of period $ 151,701 $ 104,780
Supplemental disclosure of cash flow information
Cash paid for taxes $ 356 $ 14
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended
March 31, December 31, March 31,
2015 2014 2014
US LISTED ETFs
Total ETFs (in millions)
Beginning of period assets 39,281 35,823 34,884
Inflows/(outflows) 13,520 4,496 (502)
Market appreciation/(depreciation) 2,957 (1,038) (498)
End of period assets 55,758 39,281 33,884
Average assets during the period 46,391 37,680 33,859
Revenue Days 90 92 90
ETF Industry and Market Share (in billions)
ETF industry net inflows 56.7 119.7 14.5
WisdomTree market share of industry inflows 23.8% 3.8% 0.0%
International Hedged Equity ETFs (in millions)
Beginning of period assets 17,760 13,971 13,348
Inflows/(outflows) 13,440 4,580 (12)
Market appreciation/(depreciation) 2,725 (791) (724)
End of period assets 33,925 17,760 12,612
Average assets during the period 24,559 15,637 13,052
US Equity ETFs (in millions)
Beginning of period assets 9,390 7,939 7,181
Inflows 294 968 189
Market appreciation 64 483 135
End of period assets 9,748 9,390 7,505
Average assets during the period 9,770 8,833 7,176
Emerging Markets Equity ETFs (in millions)
Beginning of period assets 6,187 7,495 7,448
Outflows (165) (836) (632)
Market appreciation/(depreciation) 46 (472) (63)
End of period assets 6,068 6,187 6,753
Average assets during the period 6,147 7,092 6,775
International Developed Equity ETFs (in millions)
Beginning of period assets 3,988 4,494 3,864
Inflows/(outflows) 188 (305) 812
Market appreciation/(depreciation) 147 (201) 154
End of period assets 4,323 3,988 4,830
Average assets during the period 4,111 4,170 4,347
Fixed Income ETFs (in millions)
Beginning of period assets 1,152 1,379 1,906
Outflows (210) (164) (306)
Market appreciation/(depreciation) (38) (63) 10
End of period assets 904 1,152 1,610
Average assets during the period 1,018 1,294 1,747
Currency ETFs (in millions)
Beginning of period assets 599 362 979
Inflows/(outflows) (44) 232 (549)
Market appreciation/(depreciation) 10 5 (8)
End of period assets 565 599 422
Average assets during the period 571 456 611
Alternative Strategy ETFs (in millions)
Beginning of period assets 205 183 158
Inflows/(outflows) 17 21 (4)
Market appreciation/(depreciation) 3 1 (2)
End of period assets 225 205 152
Average assets during the period 215 198 151
Three Months Ended
March 31, December 31, March 31,
2015 2014 2014
Average ETF assets during the period
International hedged equity ETFs 53% 42% 39%
US equity ETFs 21% 23% 21%
Emerging markets equity ETFs 14% 19% 20%
International developed equity ETFs 9% 11% 13%
Fixed income ETFs 2% 3% 5%
Currency ETFs 1% 1% 2%
Alternative strategy ETFs 0% 1% 0%
Total 100% 100% 100%
Average ETF advisory fee during the period
Alternative strategy ETFs 0.95% 0.95% 0.94%
Emerging markets equity ETFs 0.71% 0.70% 0.66%
International developed equity ETFs 0.56% 0.56% 0.56%
International hedged equity ETFs 0.53% 0.51% 0.49%
Fixed income ETFs 0.52% 0.53% 0.55%
Currency ETFs 0.50% 0.49% 0.49%
US equity ETFs 0.35% 0.35% 0.35%
Blended total 0.52% 0.52% 0.51%
Number of ETFs - end of the period
International developed equity ETFs 17 17 16
US equity ETFs 13 13 13
International hedged equity ETFs 13 12 6
Fixed income ETFs 11 12 12
Emerging markets equity ETFs 8 8 7
Currency ETFs 6 6 6
Alternative strategy ETFs 2 2 2
Total 70 70 62
EUROPEAN LISTED ETPs
Total ETPs (in thousands)
Beginning of period assets 165,018 123,210
Inflows 145,381 82,175
Market depreciation (21,598) (40,367)
End of period assets 288,801 165,018
Average ETP advisory fee during the period 0.81% 0.78%
Number of ETPs - end of the period 57 50
Total UCITS ETFs (in thousands)
Beginning of period assets**** 16,179 --
Inflows 28,851 16,036
Market appreciation 816 143
End of period assets 45,846 16,179
Average ETP advisory fee during the period 0.40% 0.38%
Number of ETPs - end of the period 6 6
U.S. headcount 109 101 90
European headcount 27 23
Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree
****UCITS first launched October 24, 2014
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. The non-GAAP financial measurements included in this release include gross margin, gross margin percentage and our operating results for our US and European listed ETF businesses. 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. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues. We disclose the results of our US listed ETF business to allow investors to better compare our results to the prior year as in April 2014, we acquired Boost ETP, a UK based ETP sponsor.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
Three Months Ended
Mar. 31, Dec. 31, Mar. 31,
2015 2014 2014
GAAP total revenue $ 60,141 $ 49,600 $ 42,920
Fund management and administration (10,168) (8,932) (9,168)
Third party sharing arrangements (283) (282) (10)
Gross margin $ 49,690 $ 40,386 $ 33,742
Gross margin percentage 82.6% 81.4% 78.6%
US listed ETFs:
GAAP total revenue $ 59,580 $ 49,209 $ 42,920
Fund management and administration (9,733) (8,334) (9,168)
Third party sharing arrangements (283) (282) (10)
Gross margin $ 49,564 $ 40,593 $ 33,742
Gross margin percentage 83.2% 82.5% 78.6%
CONTACT: WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com
Drmicrocap
10 years ago
WisdomTree Announces Third Quarter 2014 Results
WisdomTree Investments, Inc. 3 hours ago GlobeNewswire
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$0.08 diluted net income EPS
Pre-tax income increases 35% and revenues increase 19% from year ago quarter
Declares $0.08 quarterly dividend and $100 million share buyback program
Lowers baseline U.S. tax rate to approximately 38%
NEW YORK, Oct. 31, 2014 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. ( WETF), an exchange-traded fund ("ETF") and exchange-traded product ("ETP") sponsor and asset manager, today reported net income of $10.6 million or $0.08 per diluted EPS in the third quarter. Pre-tax income was $20.3 million in the third quarter, an increase of 35.4% from the third quarter of 2013 and 0.6% from the second quarter of 2014. Pre-tax income is comparable to previous periods since prior to 2014, the Company did not record tax expense because of its net operating losses.
Included in the quarter was a loss of $1.5 million, or $0.01 per diluted EPS, associated with the Company's European listed ETP business, which was acquired in April 2014. The Company also lowered its U.S. income tax rate to approximately 38% from 45% (see "Income Taxes" for further discussion).
WisdomTree CEO and President Jonathan Steinberg said, "WisdomTree reported another quarter of record revenues and strong financial results. Despite the challenging market, net inflow levels increased from the second quarter to $748 million."
Mr. Steinberg continued, "The growing scale and positive momentum of our business is driving powerful cash generation. In addition, we are lowering our tax rate which will increase our earnings going forward, further propelling WisdomTree to a position of financial strength. As a result, we believe the time is right to institute a new component of our capital management program."
Capital Return Program - Quarterly Dividend and Share Buyback
The Company's Board of Directors declared a quarterly cash dividend of $0.08 per share of the Company's common stock. The dividend will be paid on November 26, 2014, to stockholders of record as of the close of business on November 12, 2014.
The Board also authorized the Company to purchase up to $100 million of its common stock over three years, including purchases to offset future equity grants made under the Company's equity plans. Purchases under this program will be made in open market or privately negotiated transactions. This authority may be exercised from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The repurchase program may be suspended or terminated at any time without prior notice.
"We have structured a capital management plan which reflects WisdomTree's strength, strategy and commitment to our shareholders. With $164 million in cash and investments, we are confident we can continue to profitably grow the business and reinvest aggressively for future growth while continuing to generate surplus cash," added Mr. Steinberg.
Summary Operating and Financial Highlights
Three Months Ended Change From
Sep. 30, Jun. 30, Sep. 30,
Jun. 30, Sep. 30,
Operating Highlights 2014 2014 2013 2014 2013
U.S. listed ETFs($, in billions):
AUM $35.8 $35.5 $31.4 0.9% 14.3%
Net inflows/(outflows) $0.7 $0.3 $1.2 124.0% (35.5%)
Average AUM $35.6 $34.1 $30.5 4.1% 16.7%
Average advisory fee 0.52% 0.51% 0.51% 0.01 0.01
Market share of industry inflows 1.5% 0.6% 2.2% 0.9 (0.7)
European listed ETPs($, in millions):
AUM $123.2 $113.2 -- 8.8% --
Net inflows/(outflows) $19.2 $17.7 -- 8.7% --
Average advisory fee 0.79% 0.82% -- (0.03) --
Financial Highlights($, in millions, except per share amounts):
Consolidated Results:
Total revenues $47.1 $44.1 $39.6 6.8% 18.9%
Pre-tax income $20.3 $20.1 $15.0 0.6% 35.4%
Net income $10.6 $10.6 $15.0 0.2% (29.0%)
Diluted earnings per share $0.08 $0.08 $0.11 -- ($0.03)
Pre-tax margin 43.0% 45.6% 37.8% (2.6) 5.2
U.S. listed ETFs:
Total revenues $46.9 $43.9 $39.6 6.7% 18.3%
Pre-tax income $21.8 $21.7 $15.0 0.6% 45.9%
Gross margin1 (non-GAAP) 82.2% 82.4% 76.9% (0.2) 5.3
Pre-tax margin 46.6% 49.4% 37.8% (2.8) 8.8
1 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
Recent Business Developments
• On September 18, 2014, WisdomTree announced six of its ETFs are available on Schwab ETF OneSource
• On August 12, 2014, WisdomTree announced a strategic alliance with leading Australian ETP provider BetaShares
• On October 24, 2014, WisdomTree Europe announced the launch of 4 UCITS ETFs on the London Stock Exchange (LSE)
Assets Under Management and Net Inflows
U.S. listed ETF assets under management ("AUM") were $35.8 billion at September 30, 2014, up 14.3% from September 30, 2013 primarily due to inflow levels. U.S. listed AUM was up 0.9% from June 30, 2014 primarily due to $0.7 billion of net inflows partly offset by $0.4 billion of negative market movement.
European listed AUM was $123.2 million, up 8.8% from $113.2 million at June 30, 2014 primarily due to $19.2 million of net inflows partly offset by $9.2 million of negative market movement.
Performance
In evaluating the performance of our U.S. listed equity, fixed income and alternative ETFs against actively managed and index based mutual funds and ETFs, 86% of the $35.3 billion invested in our ETFs and 56% (29 of 52) of our ETFs outperformed their comparable Morningstar average since inception as of September 30, 2014.
For more information about WisdomTree ETFs including standardized performance, pleaseclick here or visit www.wisdomtree.com.
Third Quarter Financial Discussion
Revenues
Total revenues increased 18.9% from the third quarter of 2013 and 6.8% compared to the second quarter of 2014 to $47.1 million primarily due to higher average AUM and average fee capture. Included in the third quarter was $0.2 million in revenues from our European listed ETPs, which were acquired in April 2014. Our average advisory fee for our U.S. listed ETFs was 0.52% as compared to 0.51% for the third quarter of 2013 and 0.51% in the second quarter of 2014.
Margins
Gross margin for our U.S. listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 82.2% in the third quarter of 2014 as compared to 76.9% in the third quarter of 2013 and 82.4% in the second quarter of 2014. The increase was primarily due to beneficial pricing changes for our fund accounting, administration and custody services, which took effect April 2014.
Pre-tax margin was 43.0% in the third quarter of 2014 as compared to 37.8% in the third quarter of 2013 and 45.6% in the second quarter of 2014. Pre-tax margin for our U.S. listed ETFs was 46.6% in the quarter.
Expenses
Total expenses increased 8.9% from the third quarter of 2013 and 11.9% compared to the second quarter of 2014 to $26.9 million. Included in the quarter was $1.8 million of expenses associated with our European listed ETPs.
• Compensation and benefits expense increased 3.5% from the third quarter of 2013 to $10.0 million as lower accrued incentive compensation due to our inflow levels were offset by higher headcount related expenses to support our growth. In addition, we incurred higher compensation costs due to our acquisition of Boost in April 2014. This expense increased 32.3% as compared to the second quarter of 2014 primarily due to higher accrued incentive compensation and headcount related expenses. Our global headcount was 114 at the end of the third quarter of 2014.
• Fund management and administration expense decreased 3.7% from the third quarter of 2013 to $8.5 million. This decrease was primarily due to the transfer of our fund accounting, administration and custody services to State Street, despite the higher average AUM. Partly offsetting this decrease was $0.3 million of expenses for our European listed ETPs. This expense increased 8.3% from the second quarter of 2014 primarily due to variable costs related to higher average AUM. We had 69 U.S. listed ETFs and 42 European listed ETPs at the end of the third quarter of 2014.
• Marketing and advertising expense increased 64.5% from the third quarter of 2013 and 22.6% from the second quarter of 2014 to $3.3 million primarily due to higher levels of advertising related activities to support our growth.
• Sales and business development expense decreased 2.0% from the third quarter of 2013 and 25.9% from the second quarter of 2014 to $1.3 million primarily due to lower spending for sales and product development related initiatives.
• Professional and consulting fees increased $0.8 million from the third quarter of 2013 to $1.4 million primarily due to higher strategic corporate consulting costs. This expense decreased 24.8% compared to the second quarter of 2014. The second quarter of 2014 included advisory and other costs associated with our transaction to acquire Boost, which we completed in April 2014.
• Occupancy, communication and equipment expense increased 22.0% from the third quarter of 2013 to $0.9 million primarily due to costs for new office space which we began to occupy in January 2014. This expense was relatively unchanged compared to the second quarter of 2014.
• Depreciation and amortization expense increased $0.1 million to $0.2 million from the third quarter of 2013 primarily due to amortization of leasehold improvements for our new office space. This expense was essentially unchanged compared to the second quarter of 2014.
• Third-party sharing arrangements expense decreased 50.0% to $0.2 million in the third quarter of 2014 as compared to the third quarter of 2013 primarily due to lower fees to our third party marketing agent in Latin America. This expense was relatively unchanged as compared to the second quarter of 2014.
• Other expenses remained relatively unchanged as compared to the third quarter of 2013 and second quarter of 2014 at $1.1 million.
Income Taxes
The Company completed state tax planning which resulted in a reduction of its current baseline operating tax rate in the U.S. from 45% to approximately 38%. As a result, the Company recorded a charge to tax expense to reduce the value of its deferred tax asset, which had previously been recorded at a 45% rate. In addition, the Company accounted for non-deductible expenses associated with its acquisition of Boost in April 2014. As a result of these items, the Company recorded a charge of $1.3 million to tax expense. Management will discuss income taxes further on its conference call.
Balance Sheet
As of September 30, 2014, the Company had total assets of $202.2 million which consisted primarily of cash and cash equivalents of $151.3 million and investments of $12.2 million. There were approximately 131.9 million shares of common stock outstanding as of September 30, 2014. Fully diluted weighted average shares outstanding were 138.3 million for the third quarter.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, October 31, 2014 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.
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;
• our ability to develop new products and services;
• our ability to maintain current vendors or find new vendors to provide services to U.S. at favorable costs;
• our ability to successfully expand our business into non-U.S. markets;
• timing of payment of our cash income taxes;
• competition in our business; and
• the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
• We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
• Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing customers to sell their fund shares and trigger redemptions.
• Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
• Most of our assets under management are held in our U.S. listed ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
• We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
• We derive a substantial amount of our revenue from products invested in securities of Japanese companies and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets and currency fluctuations between the Japanese Yen and the U.S. Dollar.
• We derive a majority of our revenue from a limited number of products -- in particular one fund, WisdomTree Japan Hedged Equity Fund, that accounted for approximately 30% of our ETF AUM -- and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.
• Our ETPs and ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
• We depend on other third parties to provide many critical services to operate our business and our ETPs and ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm our customers.
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, please see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
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.
About WisdomTree
WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (collectively, "WisdomTree"), is an exchange-traded fund ("ETF") and exchange-traded product ("ETP") sponsor and asset manager headquartered in New York. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. WisdomTree currently has approximately $35.9 billion in assets under management globally.
WisdomTree(R) is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended % Change From Nine Months Ended
Sep. 30,
2014 Jun. 30,
2014 Sep. 30,
2013 Jun. 30,
2014 Sep. 30,
2013 Sep. 30,
2014 Sep. 30,
2013 %
Change
Revenues
Advisory fees $ 46,942 $ 43,938 $ 39,437 6.8% 19.0% $ 133,489 $ 105,691 26.3%
Other income 172 190 193 -9.5% -10.9% 673 611 10.1%
Total revenues 47,114 44,128 39,630 6.8% 18.9% 134,162 106,302 26.2%
Expenses
Compensation and benefits 9,990 7,551 9,648 32.3% 3.5% 26,896 26,577 1.2%
Fund management and administration 8,465 7,818 8,794 8.3% -3.7% 25,451 26,123 -2.6%
Marketing and advertising 3,341 2,726 2,031 22.6% 64.5% 8,645 6,164 40.2%
Sales and business development 1,279 1,727 1,305 -25.9% -2.0% 4,307 4,626 -6.9%
Professional and consulting fees 1,383 1,840 542 -24.8% 155.2% 5,018 1,812 176.9%
Occupancy, communication and equipment 882 853 723 3.4% 22.0% 2,635 1,691 55.8%
Depreciation and amortization 207 201 84 3.0% 146.4% 600 249 141.0%
Third party sharing arrangements 187 115 374 62.6% -50.0% 312 913 -65.8%
Other 1,123 1,164 1,164 -3.5% -3.5% 3,429 3,086 11.1%
Total expenses 26,857 23,995 24,665 11.9% 8.9% 77,293 71,241 8.5%
Income before taxes 20,257 20,133 14,965 0.6% 35.4% 56,869 35,061 62.2%
Income tax expense 9,634 9,531 -- -- -- 5,440 -- --
Net income $ 10,623 $ 10,602 $ 14,965 0.2% -29.0% $ 51,429 $ 35,061 46.7%
Income before taxes per share - basic $ 0.15 $ 0.15 $ 0.12
$ 0.43 $ 0.28
Income before taxes per share - diluted $ 0.15 $ 0.15 $ 0.11
$ 0.41 $ 0.25
Net income per share - basic $ 0.08 $ 0.08 $ 0.12
$ 0.39 $ 0.28
Net income per share - diluted $ 0.08 $ 0.08 $ 0.11
$ 0.37 $ 0.25
Weighted average common shares - basic 131,778 131,533 126,509
131,418 125,909
Weighted average common shares - diluted 138,346 138,258 140,097
138,476 139,805
WISDOMTREE INVESTMENTS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
U.S. Listed Business
U.S.
Listed
Business European
Listed
Business
Total
% Change From
Q3/14 Q3/14 Q3/14 Q3/14 Q2/14 Q3/13 Q2/14 Q3/13
Revenues
Advisory fees $ 46,659 $ 283 $ 46,942 $ 46,659 $ 43,753 $ 39,437 6.6% 18.3%
Other income 224 (52) 172 224 182 193 23.1% 16.1%
Total revenues 46,883 231 47,114 46,883 43,935 39,630 6.7% 18.3%
Expenses
Compensation and benefits 9,250 740 9,990 9,250 7,026 9,648 31.7% -4.1%
Fund management and administration 8,139 326 8,465 8,139 7,625 8,794 6.7% -7.4%
Marketing and advertising 3,244 97 3,341 3,244 2,675 2,031 21.3% 59.7%
Sales and business development 1,185 94 1,279 1,185 1,653 1,305 -28.3% -9.2%
Professional and consulting fees 945 438 1,383 945 1,026 542 -7.9% 74.4%
Occupancy, communication and equipment 809 73 882 809 807 723 0.2% 11.9%
Depreciation and amortization 206 1 207 206 199 84 3.5% 145.2%
Third party sharing arrangements 187 -- 187 187 115 374 62.6% -50.0%
Other 1,088 35 1,123 1,088 1,105 1,164 -1.5% -6.5%
Total expenses 25,053 1,804 26,857 25,053 22,231 24,665 12.7% 1.6%
Income/(loss) before taxes 21,830 (1,573) 20,257 21,830 21,704 14,965 0.6% 45.9%
Income tax expense/(benefit) 9,662 (28) 9,634 9,662 9,873 -- -2.1% n/a
Net income/(loss) $ 12,168 $ (1,545) $ 10,623 $ 12,168 $ 11,831 $ 14,965 2.8% -18.7%
Pretax margin 46.6%
43.0%
Gross margin 82.2%
81.6%
WISDOMTREE INVESTMENTS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
U.S. Listed Business
U.S.
Listed
Business European
Listed
Business
Total
%
9M/14 9M/14 9M/14 9M/14 9M/13 Change
Revenues
Advisory fees $ 133,021 $ 468 $ 133,489 $ 133,021 $ 105,691 26%
Other income 717 (44) 673 717 611 17%
Total revenues 133,738 424 134,162 133,738 106,302 26%
Expenses
Compensation and benefits 25,631 1,265 26,896 25,631 26,577 -4%
Fund management and administration 24,932 519 25,451 24,932 26,123 -5%
Marketing and advertising 8,497 148 8,645 8,497 6,164 38%
Sales and business development 4,139 168 4,307 4,139 4,626 -11%
Professional and consulting fees 3,766 1,252 5,018 3,766 1,812 108%
Occupancy, communication and equipment 2,516 119 2,635 2,516 1,691 49%
Depreciation and amortization 597 3 600 597 249 140%
Third party sharing arrangements 312 -- 312 312 913 -66%
Other 3,335 94 3,429 3,335 3,086 8%
Total expenses 73,725 3,568 77,293 73,725 71,241 3%
Income/(loss) before taxes 60,013 (3,144) 56,869 60,013 35,061 71%
Income tax expense/(benefit) 5,810 (370) 5,440 5,810 -- n/a
Net income/(loss) $ 54,203 $ (2,774) $ 51,429 $ 54,203 $ 35,061 55%
Pretax margin 44.9%
42.4%
Gross margin 81.1%
80.8%
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
September 30,
2014 December 31,
2013
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 151,287 $ 104,316
Accounts receivable 16,268 18,100
Other current assets 2,208 1,320
Total current assets 169,763 123,736
Fixed assets, net 10,263 6,252
Investments 12,224 11,748
Deferred tax asset, net 8,253 --
Goodwill 1,676 --
Other noncurrent assets 56 55
Total assets $ 202,235 $ 141,791
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 8,833 $ 10,394
Compensation and benefits payable 7,062 14,278
Accounts payable and other liabilities 4,956 4,384
Total current liabilities 20,851 29,056
Other noncurrent liabilities:
Acquisition payable 1,757 --
Deferred rent payable 5,326 3,706
Total liabilities 27,934 32,762
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares authorized: issued: 133,516 and 132,247 outstanding: 131,947 and 130,350 1,335 1,322
Additional paid-in capital 198,040 184,201
Accumulated other comprehensive loss (9) --
Accumulated deficit (25,065) (76,494)
Total stockholders' equity 174,301 109,029
Total liabilities and stockholders' equity $ 202,235 $ 141,791
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
2014 September 30,
2013
Cash flows from operating activities
Net income $ 51,429 $ 35,061
Non-cash items included in net income:
Income tax expense 5,396 --
Depreciation and amortization 600 249
Stock-based compensation 6,122 5,186
Deferred rent 1,620 111
Accretion to interest income and other (76) 108
Changes in operating assets and liabilities:
Accounts receivable 2,049 (3,683)
Other assets (811) (720)
Fund management and administration payable (1,579) 3,697
Compensation and benefits payable (7,510) 7,235
Accounts payable and other liabilities (590) 471
Net cash provided by operating activities 56,650 47,715
Cash flows from investing activities
Purchase of fixed assets (4,580) (1,118)
Purchase of investments (1,384) (3,358)
Cash acquired on acquisition 1,349 --
Proceeds from the redemption of investments 868 2,693
Net cash used in investing activities (3,747) (1,783)
Cash flows from financing activities
Shares repurchased (6,259) (1,413)
Proceeds from exercise of stock options 341 1,349
Net cash used in financing activities (5,918) (64)
Decrease in cash flows due to changes in foreign exchange rate (14) --
Net increase in cash and cash equivalents 46,971 45,868
Cash and cash equivalents - beginning of period 104,316 41,246
Cash and cash equivalents - end of period $ 151,287 $ 87,114
Supplemental disclosure of cash flow information
Cash paid for taxes $ 66 $ 33
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended Nine Months Ended
September 30,
2014 June 30,
2014 September 30,
2013 September 30,
2014 September 30,
2013
U.S. LISTED ETFs
Total ETFs (in millions)
Beginning of period assets 35,500 33,884 28,975 34,884 18,286
Inflows/(outflows) 748 334 1,160 580 12,015
Market appreciation/(depreciation) (425) 1,282 1,217 359 1,051
End of period assets 35,823 35,500 31,352 35,823 31,352
Average assets during the period 35,554 34,141 30,473 34,518 26,932
Revenue Days 92 91 92 273 273
ETF Industry and Market Share (in billions)
ETF industry net inflows 48.5 57.7 53.7 120.7 121.3
WisdomTree market share of industry inflows 1.5% 0.6% 2.2% 0.5% 9.9%
International Hedged Equity ETFs (in millions)
Beginning of period assets 12,557 12,612 10,270 13,348 1,258
Inflows/(outflows) 799 (502) 752 285 9,199
Market appreciation/(depreciation) 615 447 459 338 1,024
End of period assets 13,971 12,557 11,481 13,971 11,481
Average assets during the period 12,654 12,189 11,175 12,631 7,744
US Equity ETFs (in millions)
Beginning of period assets 8,052 7,505 5,777 7,181 4,371
Inflows/(outflows) 84 221 273 494 1,111
Market appreciation/(depreciation) (197) 326 221 264 789
End of period assets 7,939 8,052 6,271 7,939 6,271
Average assets during the period 8,067 7,721 6,214 7,655 5,502
Emerging Markets Equity ETFs (in millions)
Beginning of period assets 7,606 6,753 7,172 7,448 7,332
Inflows/(outflows) 270 388 286 26 1,111
Market appreciation/(depreciation) (381) 465 245 21 (740)
End of period assets 7,495 7,606 7,703 7,495 7,703
Average assets during the period 7,878 7,088 7,289 7,247 7,719
International Developed Equity ETFs (in millions)
Beginning of period assets 5,340 4,830 2,633 3,864 2,474
Inflows/(outflows) (452) 518 205 878 401
Market appreciation/(depreciation) (394) (8) 312 (248) 275
End of period assets 4,494 5,340 3,150 4,494 3,150
Average assets during the period 5,016 5,135 2,888 4,833 2,782
Fixed Income ETFs (in millions)
Beginning of period assets 1,376 1,610 2,437 1,906 2,118
Inflows/(outflows) 69 (278) (320) (515) 266
Market appreciation/(depreciation) (66) 44 (22) (12) (289)
End of period assets 1,379 1,376 2,095 1,379 2,095
Average assets during the period 1,385 1,435 2,246 1,522 2,466
Currency ETFs (in millions)
Beginning of period assets 406 422 547 979 611
Inflows/(outflows) (35) (21) (48) (605) (98)
Market appreciation/(depreciation) (9) 5 3 (12) (11)
End of period assets 362 406 502 362 502
Average assets during the period 380 413 515 468 586
Alternative Strategy ETFs (in millions)
Beginning of period assets 163 152 139 158 122
Inflows/(outflows) 13 8 12 17 25
Market appreciation/(depreciation) 7 3 (1) 8 3
End of period assets 183 163 150 183 150
Average assets during the period 174 160 146 162 133
Average ETF assets during the period
International hedged equity ETFs 36% 36% 37% 37% 29%
US equity ETFs 23% 23% 20% 22% 20%
Emerging markets equity ETFs 22% 21% 24% 21% 29%
International developed equity ETFs 14% 15% 9% 14% 10%
Fixed income ETFs 4% 4% 7% 4% 9%
Currency ETFs 1% 1% 2% 1% 2%
Alternative strategy ETFs 0% 0% 1% 1% 1%
Total 100% 100% 100% 100% 100%
Average ETF advisory fee during the period
Alternative strategy ETFs 0.94% 0.94% 0.94% 0.94% 0.94%
Emerging markets equity ETFs 0.68% 0.67% 0.66% 0.67% 0.66%
International developed equity ETFs 0.56% 0.57% 0.56% 0.56% 0.56%
Fixed income ETFs 0.55% 0.55% 0.55% 0.55% 0.55%
International hedged equity ETFs 0.50% 0.50% 0.49% 0.50% 0.49%
Currency ETFs 0.49% 0.49% 0.50% 0.49% 0.50%
US equity ETFs 0.35% 0.35% 0.35% 0.35% 0.35%
Blended total 0.52% 0.51% 0.51% 0.52% 0.52%
Number of ETFs - end of the period
International developed equity ETFs 17 17 16 17 16
US equity ETFs 13 13 13 13 13
Fixed income ETFs 12 12 6 12 6
International hedged equity ETFs 12 12 4 12 4
Emerging markets equity ETFs 7 7 7 7 7
Currency ETFs 6 6 5 6 5
Alternative strategy ETFs 2 2 2 2 2
Total 69 69 53 69 53
EUROPEAN LISTED ETPs
Total ETPs (in thousands)
Beginning of period assets*** 113,244 96,817
96,817
Inflows/(outflows) 19,192 17,658
36,850
Market appreciation/(depreciation) (9,226) (1,231)
(10,457)
End of period assets 123,210 113,244
123,210
Average ETP advisory fee during the period 0.79% 0.82%
0.80%
Number of ETPs - end of the period 42 38
42
Global headcount 114 103 84 114 84
Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree
***Q1 and 9 month stats began April 16, 2014
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. The non-GAAP financial measurements included in this release include gross margin, gross margin percentage and our operating results for our U.S. listed ETF business. 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. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues. We disclose the results of our U.S. listed ETF business to allow investors to better compare our results to the prior year as in April 2014, we acquired Boost ETP, a UK based ETP sponsor.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
Three Months Ended For the Nine Months Ended
Sep. 30,
2014 Jun. 30,
2014 Sep. 30,
2013 Sep. 30,
2014 Sep. 30,
2013
GAAP total revenue $ 47,114 $ 44,128 $ 39,630 $ 134,162 $ 106,302
Fund management and administration (8,465) (7,818) (8,794) (25,451) (26,123)
Third party sharing arrangements (187) (115) (374) (312) (913)
Gross margin $ 38,462 $ 36,195 $ 30,462 $ 108,399 $ 79,266
Gross margin percentage 81.6% 82.0% 76.9% 80.8% 74.6%
U.S. listed ETFs:
GAAP total revenue $ 46,883 $ 43,935
Fund management and administration (8,139) (7,625)
Third party sharing arrangements (187) (115)
Gross margin $ 38,557 $ 36,195
Gross margin percentage 82.2% 82.4%
FinanceInvestment & Company Information
Contact:
WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com
Drmicrocap
10 years ago
WisdomTree Announces First Quarter 2014 Results
GlobeNewswire WisdomTree Investments, Inc.
May 2, 2014 7:00 AM
Pre-Tax Income of $16.5 Million; Doubles From Year Ago Quarter
$0.12 Diluted Pretax EPS
Revenues Increase 46% From Year Ago Quarter
NEW YORK, May 2, 2014 (GLOBE NEWSWIRE) --WisdomTree Investments, Inc. (WETF), an exchange-traded product ("ETP") sponsor and asset manager, today reported pre-tax income of $16.5 million or $0.12 per share on a fully diluted basis. This compares to $7.9 million in the first quarter of 2013 and $16.5 million in the fourth quarter of 2013. Included in the quarter were $1.3 million, or $0.01 per diluted EPS, of costs associated with our acquisition of U.K.-based ETP provider Boost and non-recurring costs for transitioning our fund accounting and administration services. The Company also recorded a non-recurring tax benefit of $13.7 million resulting in net income of $30.2 million for the first quarter of 2014.1
WisdomTree CEO and President Jonathan Steinberg said, "WisdomTree's powerful operating model produced strong financial results in the first quarter on a base of $33.9 billion in average ETF assets. Even against the backdrop of a challenging market environment for some of our largest exposures, we increased revenues and earnings year over year, demonstrating the scale and strength of our business."
Mr. Steinberg continued, "We completed important initiatives, including a seamless transition in back office fund accounting, administration and custody services. We also completed our investment to establish WisdomTree Europe and look forward to building out a platform of Boost and WisdomTree products for the world's second largest ETF market. We continue to invest strategically to make WisdomTree even more competitive for the future."
Summary Operating and Financial Highlights
Three Months Ended Change From
Mar. 31, Dec. 31, Mar. 31, Dec. 31, Mar. 31,
Operating Highlights ($, in billions): 2014 2013 2013 2013 2013
ETF AUM $33.9 $34.9 $25.1 (2.9%) 35.0%
ETF net inflows/(outflows) ($0.5) $2.3 $5.9 ($2.8) ($6.4)
Average ETF AUM $33.9 $33.1 $21.9 2.3% 54.4%
Average ETF advisory fee 0.51% 0.51% 0.54% -- (0.03)
Market share of industry inflows -- 3.9% 11.3% (3.9) (11.3)
Revenue days 90 92 90 (2.0) --
Financial Highlights ($, in millions, except per share amounts):
Total revenues $42.9 $43.2 $29.3 (0.6%) 46.3%
Pre-tax income $16.5 $16.5 $7.9 0.0% 109.8%
Net income $30.2 $16.5 $7.9 83.3% 284.6%
Diluted pre-tax earnings per share $0.12 $0.12 $0.06 -- $0.06
Gross margin2 (non-GAAP) 78.6% 78.2% 71.6% +0.4 +7.0
Pre-tax margin 38.4% 38.2% 26.8% +0.2 +11.6
1 Please see section titled "Taxes."
2 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
Recent Business Developments
On May 1, 2014, WisdomTree announced the WisdomTree MidCap Dividend Fund (DON) surpassed $1 billion in assets
On April 29, 2014, WisdomTree announced 10 additional ETFs became available for sale in Japan
On April 21, 2014, WisdomTree announced the Mexican pension funds investment regulator approved 6 WisdomTree ETFs for sale to Mexican pension funds
On April 17, 2014, WisdomTree announced it completed an investment to create WisdomTree Europe
On April 8, 2014, WisdomTree announced the launch of a suite of currency hedged Japan Sector ETFs
On April 7, 2014, WisdomTree announced the WisdomTree Europe Hedged Equity Fund (HEDJ) surpassed $1 billion in assets
On March 20, 2014, WisdomTree announced it received three awards from ETF.com: "Most innovative ETF issuer of the year," "ETF of the year" (WisdomTree Japan Hedged Equity Fund (DXJ)) and "Best new currency ETF of 2013"(WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU))
On February 26, 2014, WisdomTree announced the Peruvian pension funds investment regulator approved 12 WisdomTree ETFs for sale to Peruvian pension funds
On February 17, 2014, WisdomTree announced the WisdomTree Europe SmallCap Dividend Fund (DFE) surpassed $1 billion in assets
On February 2, 2014, WisdomTree announced the launch of the WisdomTree Bloomberg Floating Rate Treasury Fund (USFR)
Assets Under Management and Net Inflows
ETF assets under management ("AUM") were $33.9 billion at March 31, 2014, up 35.0% from $25.1 billion at March 31, 2013, and down 2.9% from $34.9 billion at December 31, 2013. AUM decreased from December 31, 2013 due to net outflows of $0.5 billion primarily in our emerging markets equity, currency and fixed income focused ETFs as well as in our Japan Hedged Equity ETF (DXJ). We also had negative market movement of $0.5 billion, primarily in those same funds.
Performance
In evaluating the performance of our Equity, Fixed Income and Alternatives ETFs against actively managed and index based mutual funds and ETFs, 85% of the $33.4 billion invested in our ETFs and 58% (29 of 50) of our ETFs outperformed their comparable Morningstar average since inception as of March 31, 2014.
For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.
First Quarter Financial Discussion
Revenues
Total revenues increased 46.3% to $42.9 million as compared to the first quarter of 2013 primarily due to higher average AUM. Revenues decreased 0.6% compared to the fourth quarter of 2013 due to two less revenue days in the first quarter. Our average advisory fee was 0.51% as compared to 0.54% for the first quarter of 2013 and 0.51% in the fourth quarter of 2013 due to a change in mix of our ETFs.
Margins
Our gross margin, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 78.6% in the first quarter of 2014 as compared to 71.6% in the first quarter of 2013 and 78.2% in the fourth quarter of 2013.
Our pre-tax margin was 38.4% in the first quarter of 2014 as compared to 26.8% in the first quarter of 2013 and 38.2% in the fourth quarter of 2013.
Expenses
Total expenses increased 23.1% to $26.4 million from $21.5 million in the first quarter of 2013. Total expenses decreased 0.9% from $26.7 million in the fourth quarter of 2013. Included in the quarter was $0.8 million of costs associated with our acquisition of Boost and $0.5 million in non-recurring costs for transitioning our fund accounting and administration services.
Compensation and benefits expense increased 25.0% to $9.4 million compared to the first quarter of 2013. This increase was primarily due to higher headcount related expenses to support our growth as well as higher payroll taxes associated with 2013 bonus payments.
Compensation and benefits expense decreased 2.9% as compared to the fourth quarter of 2013 primarily due to lower accrued incentive compensation partly offset by higher payroll taxes and stock based compensation associated with 2013 bonus awards.
Our headcount at the end of the first quarter of 2014 was 90 compared to 72 at the end of the first quarter of 2013 and 87 at the end of 2013.
Fund management and administration expenses increased 11.5% to $9.2 million compared to the first quarter of 2013. Higher average AUM resulted in a $0.6 million increase in variable fees charged by our third party service providers associated with AUM. In addition, we incurred a non-recurring charge of $0.5 million for transitioning our fund accounting and administration services.
Fund management and administration expenses increased 2.4% compared to the fourth quarter of 2013 primarily due to the transition cost referred to above. Partly offsetting this increase was a decrease in regulatory fees associated with net inflow levels and certain variable fees associated with a decrease in our emerging markets AUM.
We had 62 ETFs at the end of the first quarter of 2014 compared to 47 at the end of the first quarter of 2013 and 61 at the end of 2013.
Marketing and advertising expenses increased to $2.6 million representing an increase of 33.1% from the first quarter and 20.2% from the fourth quarter of last year primarily due to higher levels of advertising related activities to support our growth.
Sales and business development expenses decreased to $1.3 million representing a decrease of 27.8% from the first quarter and 29.6% from the fourth quarter of last year primarily due to lower levels of spending for sales related initiatives.
Professional and consulting fees increased to $1.8 million representing an increase of 192.8% from the first quarter and 91.8% from the fourth quarter of last year primarily due to advisory and other costs associated with our transaction to acquire Boost. In addition, corporate legal fees increased as well as technology consulting expenses associated with our office relocation.
Occupancy, communication and equipment expense increased to $0.9 million in the first quarter of 2014 representing a 138.7% increase from the first quarter of last year primarily due to costs for new office space which we began to occupy in January 2014. This expense decreased 17.7% compared to the fourth quarter of 2013 primarily due to the expiration in January 2014 of the lease for our previous office space. From September 2013 to January 2014, we recognized rent expense for the new office space we were preparing to occupy while continuing to recognize rent expense for the old space we were occupying at the time.
Depreciation and amortization expense increased to $0.2 million in the first quarter of 2014 representing a 134.1% increase from the first quarter of last year primarily due to amortization of leasehold improvements for our new office space. This expense was essentially unchanged compared to the fourth quarter of 2013.
Third-party sharing arrangements expense decreased to $0.01 million representing a decrease of 91.0% from the first quarter and 97.8% from the fourth quarter of last year primarily due to lower levels of inflows from our third party marketing agent in Latin America.
Other expenses increased 32.6% to $1.1 million compared to the first quarter of 2013 primarily due to higher independent director fees as well as higher general and administrative expenses. This expense decreased 20.5% compared to the fourth quarter of 2013 primarily due to lower overhead related expenses.
Taxes
The Company recorded a non-recurring tax benefit of $13.7 million in the first quarter to recognize the Company's deferred tax asset, which previously had been reserved with a 100% valuation allowance. The Company expects to record GAAP taxes beginning in the second quarter at a rate of 45%; however, for some time it will not be paying cash taxes due to the size of its net operating losses. The Company will discuss this topic on its conference call.
Balance Sheet
As of March 31, 2014, the Company had total assets of $159.7 million which consisted primarily of cash and cash equivalents of $104.8 million and investments of $11.8 million. There were approximately 131.5 million shares of common stock outstanding as of March 31, 2014. Fully diluted weighted average shares outstanding were approximately 138.7 million for the first quarter.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, May 2, 2014 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.
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;
anticipated levels of inflows into and outflows out of our exchange traded funds;
our ability to deliver favorable rates of return to investors;
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;
competition in our business; and
the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETF shareholders to sell their fund shares and trigger redemptions.
Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
Most of our assets under management are held in ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
We derive a substantial amount of our revenue from products invested in securities of Japanese companies and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets and currency fluctuations between the Japanese Yen and the U.S. Dollar.
We derive a majority of our revenue from a limited number of products--in particular one fund, WisdomTree Japan Hedged Equity Fund, that accounted for approximately one third of our ETF AUM--and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.
The WisdomTree ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
We depend on other third parties to provide many critical services to operate our business and the WisdomTree ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.
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, please see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
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.
About WisdomTree
WisdomTree Investments, Inc., through its subsidiaries in the U.S. and the U.K. (collectively, "WisdomTree"), is an exchange-traded product ("ETP") sponsor and asset manager headquartered in New York. WisdomTree offers ETPs covering equity, fixed income, currency, alternatives and commodity asset classes. WisdomTree currently has approximately $33.3 billion in assets under management globally.
WisdomTree(R) is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiary, WisdomTree Asset Management, Inc., a registered investment adviser and investment adviser to the WisdomTree Trust and each of its series. The WisdomTree Trust is a registered open-end management investment company.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended % Change From
Mar. 31, Dec. 31, Mar. 31, Dec. 31, Mar. 31,
2014 2013 2013 2013 2013
Revenues
ETF advisory fees $ 42,609 $ 42,903 $ 29,153 -0.7% 46.2%
Other income 311 263 188 18.3% 65.4%
Total revenues 42,920 43,166 29,341 -0.6% 46.3%
Expenses
Compensation and benefits 9,355 9,633 7,482 -2.9% 25.0%
Fund management and administration 9,168 8,953 8,223 2.4% 11.5%
Marketing and advertising 2,578 2,145 1,937 20.2% 33.1%
Sales and business development 1,301 1,848 1,801 -29.6% -27.8%
Professional and consulting fees 1,795 936 613 91.8% 192.8%
Occupancy, communication and equipment 900 1,093 377 -17.7% 138.7%
Depreciation and amortization 192 190 82 1.1% 134.1%
Third party sharing arrangements 10 455 111 -97.8% -91.0%
Other 1,142 1,437 861 -20.5% 32.6%
Total expenses 26,441 26,690 21,487 -0.9% 23.1%
Income before taxes 16,479 16,476 7,854 0.0% 109.8%
Income tax benefit (13,725) -- -- -- --
Net income $ 30,204 $ 16,476 $ 7,854 83.3% 284.6%
Income before taxes per share - basic $ 0.13 $ 0.13 $ 0.06
Income before taxes per share - diluted $ 0.12 $ 0.12 $ 0.06
Net income per share - basic $ 0.23 $ 0.13 $ 0.06
Net income per share - diluted $ 0.22 $ 0.12 $ 0.06
Weighted average common shares - basic 130,934 128,851 125,436
Weighted average common shares - diluted 138,667 140,065 139,650
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
March 31, December 31,
2014 2013
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 104,780 $ 104,316
Accounts receivable 17,815 18,100
Other current assets 1,927 1,320
Total current assets 124,522 123,736
Fixed assets, net 9,587 6,252
Investments 11,835 11,748
Deferred income taxes 13,725 --
Other noncurrent assets 56 55
Total assets $ 159,725 $ 141,791
LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES
Current liabilities:
Fund management and administration payable $ 11,752 $ 10,394
Compensation and benefits payable 2,805 14,278
Accounts payable and other liabilities 4,921 4,384
Total current liabilities 19,478 29,056
Other noncurrent liabilities 4,349 3,706
Total liabilities 23,827 32,762
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares authorized: issued: 133,265 and 132,247 outstanding: 131,525 and 130,350 1,332 1,322
Additional paid-in capital 180,856 184,201
Accumulated deficit (46,290) (76,494)
Total stockholders' equity 135,898 109,029
Total liabilities and stockholders' equity $ 159,725 $ 141,791
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31, March 31,
2014 2013
Cash flows from operating activities
Net income $ 30,204 $ 7,854
Non-cash items included in net income:
Income tax benefit (13,725) --
Depreciation and amortization 192 82
Stock-based compensation 2,015 1,714
Deferred rent 643 (34)
Accretion to interest income and other (111) 39
Changes in operating assets and liabilities:
Accounts receivable 285 (1,750)
Other assets (491) (256)
Fund management and administration payable 1,358 2,589
Compensation and benefits payable (11,473) 457
Accounts payable and other liabilities 537 (451)
Net cash provided by operating activities 9,434 10,244
Cash flows from investing activities
Purchase of fixed assets (3,527) (10)
Purchase of investments (154) (1,314)
Proceeds from the redemption of investments 61 1,633
Net cash (used in)/provided by investing activities (3,620) 309
Cash flows from financing activities
Shares repurchased (5,426) (249)
Proceeds from exercise of stock options 76 747
Net cash (used in)/provided by financing activities (5,350) 498
Net increase in cash and cash equivalents 464 11,051
Cash and cash equivalents - beginning of period 104,316 41,246
Cash and cash equivalents - end of period $ 104,780 $ 52,297
Supplemental disclosure of cash flow information
Cash paid for taxes $ 14 $ 34
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended
March 31, December 31, March 31,
2014 2013 2013
Total ETFs (in millions)
Beginning of period assets 34,884 31,352 18,286
Inflows/(outflows) (498) 2,308 5,893
Market appreciation/(depreciation) (502) 1,224 924
End of period assets 33,884 34,884 25,103
Average assets during the period 33,859 33,091 21,934
Revenue Days 90 92 90
ETF Industry and Market Share (in billions)
ETF industry net inflows 14.6 58.6 52.2
WisdomTree market share of industry inflows -- 3.9% 11.3%
International Hedged Equity ETFs (in millions)
Beginning of period assets 13,348 11,481 1,258
Inflows/(outflows) (12) 1,243 4,071
Market appreciation/(depreciation) (724) 624 468
End of period assets 12,612 13,348 5,797
Average assets during the period 13,052 11,848 3,432
US Equity ETFs (in millions)
Beginning of period assets 7,181 6,271 4,371
Inflows/(outflows) 189 367 291
Market appreciation/(depreciation) 135 543 499
End of period assets 7,505 7,181 5,161
Average assets during the period 7,176 6,771 4,749
Emerging Markets Equity ETFs (in millions)
Beginning of period assets 7,448 7,703 7,332
Inflows/(outflows) (632) (246) 876
Market appreciation/(depreciation) (63) (9) (137)
End of period assets 6,753 7,448 8,071
Average assets during the period 6,775 7,891 7,905
International Developed Equity ETFs (in millions)
Beginning of period assets 3,864 3,150 2,474
Inflows/(outflows) 812 565 139
Market appreciation/(depreciation) 154 149 115
End of period assets 4,830 3,864 2,728
Average assets during the period 4,347 3,490 2,640
Fixed Income ETFs (in millions)
Beginning of period assets 1,906 2,095 2,118
Inflows/(outflows) (302) (144) 508
Market appreciation/(depreciation) 6 (45) (26)
End of period assets 1,610 1,906 2,600
Average assets during the period 1,747 2,008 2,453
Currency ETFs (in millions)
Beginning of period assets 979 502 611
Inflows/(outflows) (549) 515 12
Market appreciation/(depreciation) (8) (38) 3
End of period assets 422 979 626
Average assets during the period 611 933 637
Alternative Strategy ETFs (in millions)
Beginning of period assets 158 150 122
Inflows/(outflows) (4) 8 (4)
Market appreciation/(depreciation) (2) -- 2
End of period assets 152 158 120
Average assets during the period 151 150 118
Average ETF assets during the period
International hedged equity ETFs 39% 36% 15%
US equity ETFs 21% 20% 22%
Emerging markets equity ETFs 20% 24% 36%
International developed equity ETFs 13% 11% 12%
Fixed income ETFs 5% 6% 11%
Currency ETFs 2% 3% 3%
Alternative strategy ETFs 0% 0% 1%
Total 100% 100% 100%
Average ETF advisory fee during the period
Alternative strategy ETFs 0.94% 0.94% 0.94%
Emerging markets equity ETFs 0.66% 0.66% 0.67%
International developed equity ETFs 0.56% 0.56% 0.56%
Fixed income ETFs 0.55% 0.55% 0.55%
International hedged equity ETFs 0.49% 0.49% 0.49%
Currency ETFs 0.49% 0.48% 0.51%
US equity ETFs 0.35% 0.35% 0.35%
Blended total 0.51% 0.51% 0.54%
Number of ETFs - end of the period
International developed equity ETFs 16 16 16
US equity ETFs 13 13 11
Fixed income ETFs 12 11 6
Emerging markets equity ETFs 7 7 5
International hedged equity ETFs 6 6 2
Currency ETFs 6 6 5
Alternative strategy ETFs 2 2 2
Total 62 61 47
Headcount 90 87 72
Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree
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. The non-GAAP financial measurements included in this release include gross margin and gross margin percentage. 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. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
Three Months Ended
Mar. 31, Dec. 31, Mar. 31,
2014 2013 2013
GAAP total revenue $ 42,920 $ 43,166 $ 29,341
Fund management and administration (9,168) (8,953) (8,223)
Third party sharing arrangements (10) (455) (111)
Gross margin $ 33,742 $ 33,758 $ 21,007
Gross margin percentage 78.6% 78.2% 71.6%
Contact:
WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com
Drmicrocap
10 years ago
WisdomTree Announces Fourth Quarter and Year End 2013 Results
GlobeNewswire WisdomTree Investments, Inc.
2 hours ago
Record net income more than triples from year ago quarter and for the year
Diluted EPS $0.12 for the quarter and $0.37 for the year
Record revenues up 83% from year ago quarter and 76% for the year
$2.3 billion net inflows in quarter and record $14.3 billion for the year
NEW YORK, Jan. 31, 2014 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (WETF), an exchange-traded fund ("ETF") sponsor and asset manager, today reported net income of $16.5 million for the fourth quarter of 2013, or $0.12 per share on a fully diluted basis. This compares to $5.3 million in the fourth quarter of 2012 and $15.0 million in the third quarter of 2013. For the full year, net income was $51.5 million, or $0.37 per share on a fully diluted basis. This compares to $11.0 million in 2012.
WisdomTree CEO and President Jonathan Steinberg commented, "2013 was a year of transformational growth, stellar operating performance and record financial results for WisdomTree. Powered by $14.3 billion in net inflows, our revenues are up 76% for the year, and with the growth of our business we are demonstrating the scale, efficiency and earnings power of our operating model."
Mr. Steinberg continued, "We also continued to invest in our business to position WisdomTree for future growth. During the course of the year we bolstered our product set in important categories like domestic equities, domestic fixed income and currency hedged equities. In total, 15 new products launched in 2013 provide investment solutions for a strengthening U.S. dollar, as well as rising interest rates."
Mr. Steinberg concluded, "We also made important strides at the business level, including the announcement last quarter of a new fund administration and custody services relationship with State Street Bank and Trust Company, a global leader with the infrastructure to support our growth. Today, we announced expansion plans for the European ETF market. As we continue into 2014 with strong momentum, I am excited about the significant opportunities for WisdomTree's expansion and development."
Summary Operating and Financial Highlights
Three Months Ended Change From
Dec. 31, Sep. 30, Dec. 31, Sep. 30, Dec. 31,
Operating Highlights ($, in billions): 2013 2013 2012 2013 2012
ETF AUM $34.9 $31.4 $18.3 11.3% 90.8%
ETF net inflows $2.3 $1.2 $1.1 99.0% 117.9%
Average ETF AUM $33.1 $30.5 $17.1 8.6% 93.9%
Average ETF advisory fee 0.51% 0.51% 0.54% -- (0.03)
Market share of industry inflows 3.9% 2.2% 1.9% +1.7 +2.0
Financial Highlights ($, in millions, except per share amounts):
Total revenues $43.2 $39.6 $23.6 8.9% 83.1%
Net income $16.5 $15.0 $5.3 10.1% 213.6%
Diluted earnings per share $0.12 $0.11 $0.04 $0.01 $0.08
Gross margin1 (non-GAAP) 78% 77% 68% +.10 +10.0
Pre-tax margin 38% 38% 22% -- +16.0
Year Ended
Dec. 31, Dec. 31,
Operating Highlights ($, in billions): 2013 2012 Change
ETF AUM $34.9 $18.3 90.8%
ETF net inflows $14.3 $4.7 202.7%
Average ETF AUM $28.5 $15.6 83.1%
Average ETF advisory fee 0.52% 0.54% (0.02)
Market share of industry inflows 8.0% 2.6% +5.4
Financial Highlights ($, in millions, except per share amounts):
Total revenues $149.5 $84.8 76.3%
Net income $51.5 $11.0 367.2%
Diluted earnings per share $0.37 $0.08 $0.29
Gross margin1 (non-GAAP) 76% 66% +10.0
Pre-tax margin 34% 17% +17.0
[1] Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
Recent Business Developments
On November 4, 2013 WisdomTree announced the Chilean pension regulator approved the sale of three additional WisdomTree ETFs in Chile
On November 7, 2013, WisdomTree announced the launch of the WisdomTree Korea Hedged Equity Fund (DXKW)
On December 4, 2013, WisdomTree announced the WisdomTree SmallCap Dividend Fund (DES) surpassed $1 billion in assets
On December 18, 2013, WisdomTree announced the launch of the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU)
On December 18, 2013, WisdomTree announced the launch of the WisdomTree Japan Interest Rate Strategy Fund (JGBB)
On December 18, 2013, WisdomTree announced the launch of Rising Rates Bond ETFs based on leading Fixed Income benchmarks: WisdomTree Barclays U.S. Aggregate Bond Zero Duration Fund (AGZD), WisdomTree Barclays U.S. Aggregate Bond Negative Duration Fund (AGND), WisdomTree BofA Merrill Lynch High Yield Bond Zero Duration Fund (HYZD), WisdomTree BofA Merrill Lynch High Yield Bond Negative Duration Fund (HYND)
On January 31, 2014, WisdomTree announced the launch of a platform for European ETF operations through a majority investment in Boost ETP, expected to close in the first half of 2014
Assets Under Management, Net Inflows and Market Share
ETF assets under management ("AUM") were $34.9 billion at December 31, 2013, up 90.8% from $18.3 billion at December 31, 2012, and up 11.3% from $31.4 billion at September 30, 2013. Net inflows for the fourth quarter of 2013 were $2.3 billion as compared to $1.1 billion in the fourth quarter of 2012 and $1.2 billion in the third quarter of 2013. For the year, net inflows were $14.3 billion as compared to $4.7 billion in 2012. WisdomTree's market share of industry net inflows was 3.9% in the fourth quarter of 2013 as compared to 1.9% in the fourth quarter of 2012 and 2.2% in the third quarter of 2013. For the full year, WisdomTree's market share was 8.0% as compared to 2.6% in 2012.
Performance
In evaluating the performance of our Equity, Fixed Income and Alternatives ETFs against actively managed and index based mutual funds and ETFs, 85% of the $33.9 billion invested in our ETFs and 56% (28 of 50) of our ETFs outperformed their comparable Morningstar average since inception as of December 31, 2013.
For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.
Fourth Quarter Financial Discussion
Revenues
Total revenues increased 83.1% to a record $43.2 million as compared to the fourth quarter of 2012 and 8.9% compared to the third quarter of 2013 primarily due to higher average AUM as a result of positive net inflows into our ETFs and market appreciation. Our average advisory fee earned was 0.51% as compared to 0.54% for the fourth quarter of 2012 and 0.51% in the third quarter of 2013 due to the majority of our inflows going to our Japan hedged equity ETF (DXJ), which has an expense ratio of 0.48%.
Margins
Our gross margin, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 78% in the fourth quarter of 2013 as compared to 68% in the fourth quarter of 2012 and 77% in the third quarter of 2013.
Our pre-tax margin was 38% in the third and fourth quarters of 2013 as compared to 22% in the fourth quarter of 2012.
Expenses
Total expenses increased 45.7% to $26.7 million from $18.3 million in the fourth quarter of 2012. Included in the prior year quarter was $0.2 million of net costs related to patent litigation and offering costs. Total expenses increased 8.2% from $24.7 million in the third quarter of 2013.
Compensation and benefits expense increased 56.3% to $9.6 million compared to the fourth quarter of 2012. This increase was primarily due to higher accrued incentive compensation due to our record level of net inflows in 2013 and higher headcount related expenses to support our growth.
Compensation and benefits expense was essentially unchanged from the third quarter of 2013 as higher accrued incentive compensation was partly offset by lower stock based compensation.
Our headcount at the end of 2013 was 87 compared to 70 at the end of 2012 and 84 at the end of the third quarter of 2013.
Fund management and administration expenses increased 41.1% to $9.0 million compared to the fourth quarter of 2012. At the end of 2012, we ended our joint venture with BNY Mellon. As a result, we began to record certain operating costs related to our currency and fixed income ETFs, which were previously recognized by BNY Mellon as part of the joint venture. This resulted in approximately $0.5 million in higher costs this quarter, while eliminating the expense of the third-party sharing arrangement. Higher average AUM resulted in a $1.9 million increase in variable fees charged by our third party service providers associated with AUM.
Fund management and administration expenses increased 1.8% compared to the third quarter of 2013 primarily due to higher average AUM as well as costs associated with new ETFs.
We have 61 ETFs at the end of the year compared to 46 at the end of 2012 and 53 at the end of the third quarter of 2013.
Marketing and advertising expenses increased to $2.1 million representing an increase of 31.8% from the fourth quarter of last year and 5.6% from the third quarter of 2013 primarily due to higher levels of advertising related activities to support our growth.
Sales and business development expenses increased to $1.8 million representing an increase of 75.5% from the fourth quarter of last year and 41.6% from the third quarter of 2013 primarily due to higher levels of spending for sales related initiatives.
Professional and consulting fees increased to $0.9 million representing an increase of 18.8% from the fourth quarter of last year and 72.7% from the third quarter of 2013 primarily due advisory costs associated with our transaction to acquire a majority stake in Boost ETP.
Occupancy, communication and equipment expense increased to $1.1 million in the fourth quarter of 2013 representing a 196.2% increase from the fourth quarter of last year and 51.2% from the third quarter of 2013 primarily due to costs for new office space which we began to occupy in January 2014.
Third-party sharing arrangements expense decreased 65.0% to $0.5 million compared to the fourth quarter of 2012 due to the end of our joint venture with BNY Mellon discussed above.
Third-party sharing arrangements expense increased 21.7% compared to the third quarter of 2013 due to higher inflow levels by our marketing agent in Latin America.
Other expenses increased 87.8% to $1.4 million compared to the fourth quarter of 2012 and increased 23.5% compared to the third quarter of 2013 primarily due to higher general and administrative expenses.
Balance Sheet
As of December 31, 2013, WisdomTree had total assets of $141.8 million which consisted primarily of cash and cash equivalents of $104.3 million and investments of $11.7 million. There were approximately 130.4 million shares of common stock outstanding as of December 31, 2013. Fully diluted weighted average shares outstanding were approximately 140.0 million for the fourth quarter and full year.
Net Operating Loss
The Company's pretax net operating loss carryforward (NOL) was $136.5 million at December 31, 2012. The Company estimates its NOL has increased to approximately $143.0 million as of December 31, 2013. The increase was primarily due to the tax benefit the Company receives when its employees exercise options or vest in restricted stock. The Company will discuss the treatment of its NOL further on its earnings call.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, January 31, 2014 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.
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;
anticipated levels of inflows into and outflows out of our exchange-traded funds;
our ability to deliver favorable rates of return to investors;
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;
competition in our business; and
the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETF shareholders to sell their fund shares and trigger redemptions.
Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
Most of our assets under management are held in ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
We derive a substantial amount of our revenue from products invested in securities of Japanese companies and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets and currency fluctuations between the Japanese Yen and the U.S. Dollar.
We derive a majority of our revenue from a limited number of products--in particular one fund, WisdomTree Japan Hedged Equity Fund, that accounted for more than one third of our ETF AUM--and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.
The WisdomTree ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
We depend on other third parties to provide many critical services to operate our business and the WisdomTree ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.
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, please see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2013.
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.
About WisdomTree
WisdomTree Investments, Inc. is a New York-based exchange-traded fund ("ETF") sponsor and asset manager. WisdomTree currently offers 61 ETFs across Equities, Fixed Income, Currency Income and Alternatives asset classes. WisdomTree also licenses its indexes to third parties for proprietary products and promotes the use of WisdomTree ETFs in 401(k) plans. WisdomTree currently has approximately $33.7 billion in ETF assets under management. For more information, please visit www.wisdomtree.com.
WisdomTree(R) is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiary WisdomTree Asset Management, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended % Change From Year Ended
Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, %
2013 2013 2012 2013 2012 2013 2012 Change
(Audited)
Revenues
ETF advisory fees $ 42,903 $ 39,437 $ 23,379 8.8% 83.5% $ 148,594 $ 84,024 76.8%
Other income 263 193 195 36.3% 34.9% 874 774 12.9%
Total revenues 43,166 39,630 23,574 8.9% 83.1% 149,468 84,798 76.3%
Expenses
Compensation and benefits 9,633 9,648 6,165 -0.2% 56.3% 36,210 23,233 55.9%
Fund management and administration 8,953 8,794 6,343 1.8% 41.1% 35,076 23,020 52.4%
Marketing and advertising 2,145 2,031 1,627 5.6% 31.8% 8,309 5,363 54.9%
Sales and business development 1,848 1,305 1,053 41.6% 75.5% 6,474 3,586 80.5%
Professional and consulting fees 936 542 788 72.7% 18.8% 2,748 4,603 -40.3%
Occupancy, communication and equipment 1,093 723 369 51.2% 196.2% 2,784 1,419 96.2%
Depreciation and amortization 190 84 82 126.2% 131.7% 439 307 43.0%
Third party sharing arrangements 455 374 1,300 21.7% -65.0% 1,368 5,468 -75.0%
Other 1,437 1,164 765 23.5% 87.8% 4,523 2,976 52.0%
ETF shareholder proxy -- -- -- -- -- -- 3,264 --
Patant litigation, net -- -- (524) -- -- -- 176 --
Offering costs -- -- 353 -- -- -- 353 --
Total expenses 26,690 24,665 18,321 8.2% 45.7% 97,931 73,768 32.8%
Income before provision for income taxes 16,476 14,965 5,253 10.1% 213.6% 51,537 11,030 367.2%
Provision for income taxes -- -- -- -- -- -- -- --
Net income $ 16,476 $ 14,965 $ 5,253 10.1% 213.6% $ 51,537 $ 11,030 367.2%
Net income per share - basic $ 0.13 $ 0.12 $ 0.04
$ 0.41 $ 0.09
Net income per share - diluted $ 0.12 $ 0.11 $ 0.04
$ 0.37 $ 0.08
Weighted average common shares - basic 128,851 126,509 124,202
126,651 122,138
Weighted average common shares - diluted 140,065 140,097 138,417
139,797 137,968
WISDOMTREE INVESTMENTS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2013 2013 2012 2013 2012
Revenues
ETF advisory fees $ 42,903 $ 39,437 $ 23,379 $ 148,594 $ 84,024
Other income 263 193 195 874 774
Total revenues 43,166 39,630 23,574 149,468 84,798
Operating expenses
Compensation and benefits 9,633 9,648 6,165 36,210 23,233
Fund management and administration 8,953 8,794 6,343 35,076 23,020
Marketing and advertising 2,145 2,031 1,627 8,309 5,363
Sales and business development 1,848 1,305 1,053 6,474 3,586
Professional and consulting fees 936 542 788 2,748 4,603
Occupancy, communication and equipment 1,093 723 369 2,784 1,419
Depreciation and amortization 190 84 82 439 307
Third party sharing arrangements 455 374 1,300 1,368 5,468
Other 1,437 1,164 765 4,523 2,976
Total proforma operating expenses 26,690 24,665 18,492 97,931 69,975
Proforma operating income 16,476 14,965 5,082 51,537 14,823
ETF shareholder proxy -- -- -- -- 3,264
Patant litigation, net -- -- (524) -- 176
Offering costs -- -- 353 -- 353
Income before provision for income taxes 16,476 14,965 5,253 51,537 11,030
Provision for income taxes -- -- -- -- --
Net income $ 16,476 $ 14,965 $ 5,253 $ 51,537 $ 11,030
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
December 31, December 31,
2013 2012
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 104,316 $ 41,246
Accounts receivable 18,100 9,348
Other current assets 1,320 1,273
Total current assets 123,736 51,867
Fixed assets, net 6,252 480
Investments 11,748 11,036
Other noncurrent assets 55 42
Total assets $ 141,791 $ 63,425
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 10,394 $ 6,924
Compensation and benefits payable 14,278 2,156
Accounts payable and other liabilities 4,384 3,272
Total current liabilities 29,056 12,352
Other noncurrent liabilities 3,706 13
Total liabilities 32,762 12,365
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares authorized:
issued: 132,247 and 126,554 1,322 1,265
outstanding: 130,350 and 125,272
Additional paid-in capital 184,201 177,826
Accumulated deficit (76,494) (128,031)
Total stockholders' equity 109,029 51,060
Total liabilities and stockholders' equity $ 141,791 $ 63,425
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Twelve Months Ended
December 31, December 31,
2013 2012
(Unaudited)
Cash flows from operating activities
Net income $ 51,537 $ 11,030
Non-cash items included in net income:
Depreciation and amortization 439 307
Stock-based compensation 6,459 7,437
Deferred rent 706 (140)
Accretion to interest income and other 116 194
Changes in operating assets and liabilities:
Accounts receivable (5,529) (3,723)
Other assets (70) 337
Fund management and administration payable 3,470 (3,111)
Compensation and benefits payable 12,122 (2,012)
Accounts payable and other liabilities 875 915
Net cash provided by operating activities 70,125 11,234
Cash flows from investing activities
Purchase of fixed assets (6,211) (190)
Purchase of investments (3,597) (10,004)
Proceeds from the redemption of investments 2,781 7,836
Net cash used in investing activities (7,027) (2,358)
Cash flows from financing activities
Net proceeds from sale of common stock -- 4,329
Shares repurchased (1,614) (2,261)
Proceeds from exercise of stock options 1,586 4,672
Net cash (used in)/provided by financing activities (28) 6,740
Net increase in cash and cash equivalents 63,070 15,616
Cash and cash equivalents - beginning of period 41,246 25,630
Cash and cash equivalents - end of period $ 104,316 $ 41,246
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 38 $ 33
Non-cash investing and financing activities:
Cashless exercise of stock options $ 267 $ --
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended For the Year Ended
December 31, September 30, December 31, December 31, December 31,
2013 2013 2012 2013 2012
Total ETFs (in millions)
Beginning of period assets 31,352 28,975 16,783 18,286 12,182
Inflows/(outflows) 2,308 1,160 1,059 14,323 4,732
Market appreciation/(depreciation) 1,224 1,217 444 2,275 1,372
End of period assets 34,884 31,352 18,286 34,884 18,286
Average assets during the period 33,091 30,473 17,068 28,472 15,554
ETF Industry and Market Share (in billions)
ETF industry net inflows 58.6 53.7 55.4 179.9 185.4
WisdomTree market share of industry inflows 3.9% 2.2% 1.9% 8.0% 2.6%
International Hedged Equity ETFs (in millions)
Beginning of period assets 11,481 10,270 569 1,258 418
Inflows/(outflows) 1,243 752 588 10,441 757
Market appreciation/(depreciation) 624 459 101 1,649 83
End of period assets 13,348 11,481 1,258 13,348 1,258
Average assets during the period 11,848 11,175 662 8,770 600
Emerging Markets Equity ETFs (in millions)
Beginning of period assets 7,703 7,172 6,542 7,332 3,613
Inflows/(outflows) (246) 286 515 865 3,111
Market appreciation/(depreciation) (9) 245 275 (749) 608
End of period assets 7,448 7,703 7,332 7,448 7,332
Average assets during the period 7,891 7,289 6,767 7,762 5,715
US Equity ETFs (in millions)
Beginning of period assets 6,271 5,777 4,640 4,371 3,429
Inflows/(outflows) 367 273 (205) 1,477 610
Market appreciation/(depreciation) 543 221 (64) 1,333 332
End of period assets 7,181 6,271 4,371 7,181 4,371
Average assets during the period 6,771 6,214 4,522 5,819 4,252
International Developed Equity ETFs (in millions)
Beginning of period assets 3,150 2,633 2,327 2,474 1,989
Inflows/(outflows) 565 205 32 967 243
Market appreciation/(depreciation) 149 312 115 423 242
End of period assets 3,864 3,150 2,474 3,864 2,474
Average assets during the period 3,490 2,888 2,360 2,959 2,254
Fixed Income ETFs (in millions)
Beginning of period assets 2,095 2,437 1,904 2,118 1,506
Inflows/(outflows) (144) (320) 190 121 491
Market appreciation/(depreciation) (45) (22) 24 (333) 121
End of period assets 1,906 2,095 2,118 1,906 2,118
Average assets during the period 2,008 2,246 1,990 2,352 1,770
Currency ETFs (in millions)
Beginning of period assets 502 547 654 611 950
Inflows/(outflows) 515 (48) (37) 418 (351)
Market appreciation/(depreciation) (38) 3 (6) (50) 12
End of period assets 979 502 611 979 611
Average assets during the period 933 515 632 673 772
Alternative Strategy ETFs (in millions)
Beginning of period assets 150 139 147 122 277
Inflows/(outflows) 8 12 (24) 34 (129)
Market appreciation/(depreciation) -- (1) (1) 2 (26)
End of period assets 158 150 122 158 122
Average assets during the period 150 146 135 137 191
Average ETF assets during the period
International hedged equity ETFs 36% 37% 4% 31% 4%
Emerging markets equity ETFs 24% 24% 39% 27% 37%
US equity ETFs 20% 20% 26% 20% 27%
International developed equity ETFs 11% 9% 14% 11% 15%
Fixed income ETFs 6% 7% 12% 8% 11%
Currency ETFs 3% 2% 4% 2% 5%
Alternative strategy ETFs 0% 1% 1% 1% 1%
Total 100% 100% 100% 100% 100%
Average ETF advisory fee during the period
Alternative strategy ETFs 0.94% 0.94% 0.94% 0.94% 0.95%
Emerging markets equity ETFs 0.66% 0.66% 0.67% 0.66% 0.67%
International developed equity ETFs 0.56% 0.56% 0.56% 0.56% 0.56%
Fixed income ETFs 0.55% 0.55% 0.55% 0.55% 0.55%
International hedged equity ETFs 0.49% 0.49% 0.49% 0.49% 0.49%
Currency ETFs 0.48% 0.50% 0.50% 0.49% 0.50%
US equity ETFs 0.35% 0.35% 0.35% 0.35% 0.35%
Blended total 0.51% 0.51% 0.54% 0.52% 0.54%
Number of ETFs - end of the period
International developed equity ETFs 16 16 16 16 16
US equity ETFs 13 13 11 13 11
Fixed income ETFs 11 6 5 11 5
Emerging markets equity ETFs 7 7 5 7 5
International hedged equity ETFs 6 4 2 6 2
Currency ETFs 6 5 5 6 5
Alternative strategy ETFs 2 2 2 2 2
Total 61 53 46 61 46
Headcount 87 84 70 87 70
Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree
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. The non-GAAP financial measurements included in this release include proforma operating income, proforma operating expenses, proforma pre-tax operating margin, gross margin and gross margin percentage. 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. We have disclosed our results excluding certain non-operating items including (1) our patent litigation with Research Affiliates LLC; (2) expenses for the WisdomTree ETF shareholder proxy solicitation; and (3) advisory and other related fees associated with the secondary offering of our common stock in November 2012. Management excludes these items when measuring our financial performance as they are not directly related to our core business of being an ETF sponsor and asset manager. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
Three Months Ended For the Year Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2013 2013 2012 2013 2012
GAAP total expenses $ 26,690 $ 24,665 $ 18,321 $ 97,931 $ 73,768
ETF shareholder proxy -- -- -- -- (3,264)
Patent litigation, net -- -- 524 -- (176)
Offering costs -- -- (353) -- (353)
Proforma operating expenses $ 26,690 $ 24,665 $ 18,492 $ 97,931 $ 69,975
GAAP net income $ 16,476 $ 14,965 $ 5,253 $ 51,537 $ 11,030
ETF shareholder proxy -- -- -- -- 3,264
Patent litigation, net -- -- (524) -- 176
Offering costs -- -- 353 -- 353
Proforma operating income $ 16,476 $ 14,965 $ 5,082 $ 51,537 $ 14,823
GAAP net income $ 16,476 $ 14,965 $ 5,253 $ 51,537 $ 11,030
Divide GAAP total revenue 43,166 39,630 23,574 149,468 84,798
GAAP pre-tax margin 38.2% 37.8% 22.3% 34.5% 13.0%
Proforma operating income $ 16,476 $ 14,965 $ 5,082 $ 51,537 $ 14,823
Divide GAAP total revenue 43,166 39,630 23,574 149,468 84,798
Proforma operating margin 38.2% 37.8% 21.6% 34.5% 17.5%
GAAP total revenue $ 43,166 $ 39,630 $ 23,574 $ 149,468 $ 84,798
Fund management and administration (8,953) (8,794) (6,343) (35,076) (23,020)
Third party sharing arrangements (455) (374) (1,300) (1,368) (5,468)
Gross margin $ 33,758 $ 30,462 $ 15,931 $ 113,024 $ 56,310
Gross margin percentage 78.2% 76.9% 67.6% 75.6% 66.4%
Contact:
WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com
Drmicrocap
11 years ago
WisdomTree Announces Third Quarter 2013 Results
GlobeNewswirePress Release: WisdomTree Investments, Inc. – Fri, Oct 25, 2013 7:00 AM EDT..
Record net income $15.0 million up 230% from year ago quarter; Diluted EPS $0.11
Record revenues, up 83% from year ago quarter
$1.2 billion net inflows in quarter; Net inflow market share 2.1% in third quarter, 9.8% YTD
NEW YORK, Oct. 25, 2013 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (WETF), an exchange-traded fund ("ETF") sponsor and asset manager, today reported net income of $15.0 million for the third quarter of 2013, or $0.11 per share on a fully diluted basis. This compares to $4.5 million in the third quarter of 2012 and $12.2 million in the second quarter of 2013.
WisdomTree CEO and President Jonathan Steinberg commented, "WisdomTree continues to drive top line growth with $1.2 billion in net inflows in the quarter, comprised by balanced inflows across domestic, international and emerging market equity ETFs; as well as continued strength in our franchise-leading yen hedged Japan fund. We are effectively capitalizing on the greater awareness of our currency hedged equity family which is translating into significant asset growth in sister products. Importantly, we continue to position the company for future growth and have launched eight new ETFs so far this year."
Mr. Steinberg added, "As we continue to grow and reach economies of scale, we are demonstrating the powerful operating leverage in our business. WisdomTree's pre-tax margins reached 38% on a base of $30.5 billion in average assets under management."
Assets Under Management, Net Inflows and Market Share
ETF assets under management ("AUM") were $31.4 billion at September 30, 2013, up 86.8% from $16.8 billion at September 30, 2012, and up 8.2% from $29.0 billion at June 30, 2013. Net inflows for the third quarter of 2013 were $1.2 billion as compared to $1.0 billion in the third quarter of 2012 and $5.0 billion in the second quarter of 2013. WisdomTree's market share of industry net inflows was 2.1% in the third quarter of 2013 as compared to 2.0% in the third quarter of 2012 and 32.2% in the second quarter of 2013. For the first nine months of 2013, WisdomTree's market share was 9.8% as compared to 2.8% in the same period last year.
Summary Operating and Financial Highlights
Three Months Ended Change From
Operating Highlights ($, in billions): Sep. 30,
2013 Jun. 30,
2013 Sep. 30,
2012 Jun. 30,
2013 Sep. 30,
2012
ETF AUM $31.4 $29.0 $16.8 8.2% 86.8%
ETF net inflows $1.2 $5.0 $1.0 (76.6%) 12.0%
Average ETF AUM $30.5 $28.4 $15.8 7.3% 93.2%
Average ETF advisory fee 0.51% 0.52% 0.54% (.01) (0.3)
Market share of industry inflows 2.1% 32.2% 2.0% (30.1) +0.1
Financial Highlights ($, in millions, except per share amounts):
Total revenues $39.6 $37.3 $21.7 6.2% 83.0%
Net income $15.0 $12.2 $4.5 22.2% 230.1%
Diluted earnings per share $0.11 $0.09 $0.03 22.2% 266.7%
Proforma operating income (non-GAAP) $15.0 $12.2 $4.8 22.2% 214.9%
Gross margin1 (non-GAAP) 77% 74% 68% +3 +9
Pre-tax margin 38% 33% 21% +5 +17
Proforma pre-tax margin (non-GAAP) 38% 33% 22% +5 +16
Nine Months Ended
Operating Highlights ($, in billions): Sep. 30,
2013 Sep. 30,
2012
Change
ETF AUM $31.4 $16.8 86.8%
ETF net inflows $12.0 $3.7 227.1%
Average ETF AUM $26.9 $15.1 78.9%
Average ETF advisory fee 0.52% 0.54% (0.02)
Market share of industry inflows 9.8% 2.8% +7.0
Financial Highlights ($, in millions, except per share amounts):
Total revenues $106.3 $61.2 73.6%
Net income $35.1 $5.8 na
Diluted earnings per share $0.25 $0.04 na
Proforma operating income (non-GAAP) $35.1 $9.7 259.9%
Gross margin1 (non-GAAP) 75% 66% +9
Pre-tax margin 33% 9% +24
Proforma pre-tax margin (non-GAAP) 33% 16% +17
1 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
Recent Business Developments
• On July 25, 2013, WisdomTree announced the launch of the WisdomTree U.S. SmallCap Dividend Growth Fund (DGRS)
• On August 1, 2013, WisdomTree announced the launch of the WisdomTree Emerging Markets Dividend Growth Fund (DGRE)
• On September 12, 2013, WisdomTree announced the WisdomTree Japan Hedged SmallCap Equity Fund (DXJS) filed a notification with the Financial Services Agency of Japan and is now available for sale in Japan through Japanese securities companies
• On September 27, 2013, WisdomTree announced the launch of the WisdomTree Emerging Markets Consumer Growth Fund (EMCG)
• In September 2013, WisdomTree entered agreements to change fund administration and custody services from Bank of New York Mellon to State Street Bank and Trust Company, effective April 1, 2014
• On October 17, 2013, WisdomTree announced the launch of the WisdomTree Germany Hedged Equity Fund (DXGE)
Performance
In evaluating the performance of our equity approach, 41% of the $28.6 billion invested in our equity ETFs and 53% (21 of 40) of our equity ETFs outperformed their capitalization-weighted or competitive benchmarks since their respective inceptions as of September 30, 2013.
In evaluating the performance of our Equity, Fixed Income and Alternatives ETFs against actively managed and indexed based mutual funds and ETFs, 85% of the $30.8 billion invested in our ETFs and 55% (26 of 47) of our ETFs outperformed their comparable Morningstar average since inception as of September 30, 2013.
For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.
Third Quarter Financial Discussion
Revenues
Total revenues increased 83.0% to a record $39.6 million as compared to the third quarter of 2012 and 6.2% compared to the second quarter of 2013 primarily due to higher average AUM as a result of positive net inflows into our ETFs and market appreciation. Our average advisory fee earned was 0.51% as compared to 0.54% for the third quarter of 2012 and 0.52% in the second quarter of 2013 due to the majority of our inflows going to our Japan hedged equity ETF (DXJ), which has an expense ratio of 0.48%.
Margins
Our gross margin, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 77% in the third quarter of 2013 as compared to 68% in the third quarter of 2012 and 74% in the second quarter of 2013.
Our pre-tax margin was 38% in the third quarter of 2013 as compared to 21% (or 22% proforma) in the third quarter of 2012 and 33% in the second quarter of 2013 reflecting the operating scale in our business model.
Expenses
Total expenses increased 44.0% to $24.7 million from $17.1 million in the third quarter of 2012. Included in the prior year quarter was $0.2 million of net costs related to patent litigation. Excluding this cost, total expenses increased 45.9% compared to the third quarter of 2012. Total expenses decreased 1.7% from $25.1 million in the second quarter of 2013.
• Compensation and benefits expense increased 68.3% to $9.6 million compared to the third quarter of 2012. This increase was primarily due to higher accrued incentive compensation due to our record level of net inflows on a year-to-date basis in 2013; higher headcount related expenses to support our growth; and higher stock based compensation expense due to equity awards granted to our employees as part of 2012 year-end compensation.
Compensation and benefits expense increased 2.1% compared to the second quarter of 2013 primarily due to payroll taxes as a result of option exercises as well as increased headcount. Partly offsetting these increases, was lower accrued incentive compensation due to our lower level of net inflows in the third quarter as compared to the second quarter of 2013.
Our headcount at the end of the third quarter of 2013 was 84 compared to 70 at the end of the third quarter of 2012 and 79 at the end of the second quarter of 2013.
• Fund management and administration expenses increased 55.1% to $8.8 million compared to the third quarter of 2012. At the end of 2012, we ended our joint venture with BNY Mellon. As a result, we began to record certain operating costs related to our currency and fixed income ETFs, which were previously recognized by BNY Mellon as part of the joint venture. This resulted in approximately $0.5 million in higher costs this quarter, while eliminating the expense of the third-party sharing arrangement. Higher average AUM resulted in a $2.3 million increase in variable fees charged by our third party service providers associated with AUM.
Fund management and administration expenses decreased 3.4% compared to the second quarter of 2013 primarily due to variable regulatory fees associated with net inflow levels. We also incurred higher expenses in the second quarter due to the annual rebalancing of our international equity ETFs.
• Marketing and advertising expenses increased $1.2 million to $2.0 million compared to the third quarter of 2012 primarily due to higher levels of advertising related activities to support our growth. This expense decreased 7.5% compared to the second quarter of 2013 due to lower levels of advertising related activities.
• Sales and business development expenses increased 57.0% to $1.3 million compared to the second quarter of 2012 primarily due to new product development related activities as well as higher levels of spending for sales related initiatives.
Sales and business development expenses decreased 14.1% compared to the second quarter of 2013 primarily due to lower level of sales related spending.
• Professional and consulting fees decreased 58.5% to $0.5 million compared to the third quarter of 2012 primarily due to lower variable stock based compensation, which ended as of the end of 2012. Professional and consulting fees decreased 17.5% compared to the second quarter of 2013 due to lower level of spending for business consultants.
• Occupancy, communication and equipment expense increased 93.3% to $0.7 million compared to the third quarter of 2012 and increased 22.3% compared to the second quarter of 2013. This increase was primarily due to costs for new office space which we will occupy in January 2014 as well as expense related to commercial rent tax.
• Third-party sharing arrangements expense decreased 68.7% to $0.4 million compared to the third quarter of 2012 due to the end of our joint venture with BNY Mellon discussed above.
Third-party sharing arrangements expense decreased 12.6% compared to the second quarter of 2013 due to lower inflow levels by our marketing agent in Latin America.
• Other expenses increased 35.5% to $1.2 million compared to the third quarter of 2012 and increased 9.7% compared to the second quarter of 2013 primarily due to higher general and administrative expenses.
Balance Sheet
As of September 30, 2013, WisdomTree had total assets of $118.3 million which consisted primarily of cash and cash equivalents of $87.1 million and investments of $11.6 million. There were approximately 129.4 million shares of common stock issued as of September 30, 2013. Fully diluted weighted average shares outstanding was approximately 140.0 million.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, October 25, 2013 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.
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;
• anticipated levels of inflows into and outflows out of our exchange traded funds;
• our ability to deliver favorable rates of return to investors;
• 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;
• competition in our business; and
• the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
• We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
• Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETF shareholders to sell their fund shares and trigger redemptions.
• Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
• Most of our assets under management are held in ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
• We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
• We derive a substantial amount of our revenue from products invested in securities of Japanese companies and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets and currency fluctuations between the Japanese Yen and the U.S. Dollar.
• We derive a majority of our revenue from a limited number of products--in particular one fund, WisdomTree Japan Hedged Equity Fund, that accounted for more than one third of our ETF AUM at September 30, 2013--and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.
• The WisdomTree ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
• We depend on other third parties to provide many critical services to operate our business and the WisdomTree ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.
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, please see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013.
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.
About WisdomTree
WisdomTree Investments, Inc. is a New York-based exchange-traded fund ("ETF") sponsor and asset manager. WisdomTree currently offers 54 ETFs across Equities, Fixed Income, Currency Income and Alternatives asset classes. WisdomTree also licenses its indexes to third parties for proprietary products and promotes the use of WisdomTree ETFs in 401(k) plans. WisdomTree currently has approximately $32.8 billion in ETF assets under management. For more information, please visit www.wisdomtree.com.
WisdomTree(R) is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiary WisdomTree Asset Management, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended % Change From Nine Months Ended
Sept. 30,
2013 Jun. 30,
2013 Sept. 30,
2012 Jun. 30,
2013 Sept. 30,
2012 Sept. 30,
2013 Sept. 30,
2012 %
Change
Revenues
ETF advisory fees $ 39,437 $ 37,101 $ 21,440 6.3% 83.9% $ 105,691 $ 60,645 74.3%
Other income 193 230 221 -16.1% -12.7% 611 579 5.5%
Total revenues 39,630 37,331 21,661 6.2% 83.0% 106,302 61,224 73.6%
Expenses
Compensation and benefits 9,648 9,447 5,734 2.1% 68.3% 26,577 17,068 55.7%
Fund management and administration 8,794 9,106 5,671 -3.4% 55.1% 26,123 16,677 56.6%
Marketing and advertising 2,031 2,196 862 -7.5% 135.6% 6,164 3,736 65.0%
Sales and business development 1,305 1,520 831 -14.1% 57.0% 4,626 2,533 82.6%
Professional and consulting fees 542 657 1,305 -17.5% -58.5% 1,812 3,815 -52.5%
Occupancy, communication and equipment 723 591 374 22.3% 93.3% 1,691 1,050 61.0%
Depreciation and amortization 84 83 79 1.2% 6.3% 249 225 10.7%
Third party sharing arrangements 374 428 1,194 -12.6% -68.7% 913 4,168 -78.1%
Other 1,164 1,061 859 9.7% 35.5% 3,086 2,211 39.6%
ETF shareholder proxy -- -- -- n/a n/a -- 3,264 n/a
Patent litigation, net -- -- 219 n/a n/a -- 700 n/a
Total expenses 24,665 25,089 17,128 -1.7% 44.0% 71,241 55,447 28.5%
Income before provision for income taxes 14,965 12,242 4,533 22.2% n/a 35,061 5,777 n/a
Provision for income taxes -- -- --
-- --
Net income $ 14,965 $ 12,242 $ 4,533 22.2% n/a $ 35,061 $ 5,777 n/a
Net income per share - basic $ 0.12 $ 0.10 $ 0.04
$ 0.28 $ 0.05
Net income per share - diluted $ 0.11 $ 0.09 $ 0.03
$ 0.25 $ 0.04
Weighted average common shares - basic 126,509 125,771 123,214
125,909 121,445
Weighted average common shares - diluted 140,097 140,081 138,458
139,805 137,878
WISDOMTREE INVESTMENTS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30,
2013 Jun. 30,
2013 Sept. 30,
2012 Sept. 30,
2013 Sept. 30,
2012
Revenues
ETF advisory fees $ 39,437 $ 37,101 $ 21,440 $ 105,691 $ 60,645
Other income 193 230 221 611 579
Total revenues 39,630 37,331 21,661 106,302 61,224
Operating expenses
Compensation and benefits 9,648 9,447 5,734 26,577 17,068
Fund management and administration 8,794 9,106 5,671 26,123 16,677
Marketing and advertising 2,031 2,196 862 6,164 3,736
Sales and business development 1,305 1,520 831 4,626 2,533
Professional and consulting fees 542 657 1,305 1,812 3,815
Occupancy, communication and equipment 723 591 374 1,691 1,050
Depreciation and amortization 84 83 79 249 225
Third party sharing arrangements 374 428 1,194 913 4,168
Other 1,164 1,061 859 3,086 2,211
Total proforma operating expenses 24,665 25,089 16,909 71,241 51,483
Proforma operating income 14,965 12,242 4,752 35,061 9,741
ETF shareholder proxy -- -- -- -- 3,264
Patent litigation, net -- -- 219 -- 700
Income before provision for income taxes 14,965 12,242 4,533 35,061 5,777
Provision for income taxes -- -- -- -- --
Net income $ 14,965 $ 12,242 $ 4,533 $ 35,061 $ 5,777
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
September 30,
2013 December 31,
2012
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 87,114 $ 41,246
Accounts receivable 16,254 9,348
Other current assets 1,975 1,273
Total current assets 105,343 51,867
Fixed assets, net 1,349 480
Investments 11,603 11,036
Other noncurrent assets 50 42
Total assets $ 118,345 $ 63,425
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 10,621 $ 6,924
Compensation and benefits payable 9,391 2,156
Accounts payable and other liabilities 4,026 3,272
Total current liabilities 24,038 12,352
Other noncurrent liabilities 3,063 13
Total liabilities 27,101 12,365
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares authorized:
issued: 129,410 and 126,554 1,294 1,265
outstanding: 127,461 and 125,272
Additional paid-in capital 182,920 177,826
Accumulated deficit (92,970) (128,031)
Total stockholders' equity 91,244 51,060
Total liabilities and stockholders' equity $ 118,345 $ 63,425
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
2013 September 30,
2012
Cash flows from operating activities
Net income $ 35,061 $ 5,777
Non-cash items included in net income:
Depreciation and amortization 249 225
Stock-based compensation 5,186 5,903
Deferred rent 111 (106)
Accretion to interest income and other 108 89
Changes in operating assets and liabilities:
Accounts receivable (3,683) (3,759)
Other assets (720) (185)
Fund management and administration payable 3,697 (736)
Compensation and benefits payable 7,235 (933)
Accounts payable and other liabilities 471 1,251
Net cash provided by operating activities 47,715 7,526
Cash flows from investing activities
Purchase of fixed assets (1,118) (182)
Purchase of investments (3,358) (6,098)
Proceeds from the redemption of investments 2,693 5,657
Net cash used in investing activities (1,783) (623)
Cash flows from financing activities
Net proceeds from sale of common stock -- 4,329
Shares repurchased (1,413) (1,169)
Proceeds from exercise of stock options 1,349 3,910
Net cash (used in)/provided by financing activities (64) 7,070
Net increase in cash and cash equivalents 45,868 13,973
Cash and cash equivalents - beginning of period 41,246 25,630
Cash and cash equivalents - end of period $ 87,114 $ 39,603
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 33 $ 29
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended Nine Months Ended
September 30,
2013 June 30,
2013 September 30,
2012 September 30,
2013 September 30,
2012
Total ETFs (in millions)
Beginning of period assets 28,975 25,103 15,004 18,286 12,182
Inflows/(outflows) 1,160 4,962 1,036 12,015 3,673
Market appreciation/(depreciation) 1,217 (1,090) 743 1,051 928
End of period assets 31,352 28,975 16,783 31,352 16,783
Average assets during the period 30,473 28,390 15,769 26,932 15,051
ETF Industry and Market Share (in billions)
ETF industry net inflows 55.4 15.4 51.8 123.0 130.0
WisdomTree market share of industry inflows 2.1% 32.2% 2.0% 9.8% 2.8%
International Developed Equity ETFs (in millions)
Beginning of period assets 12,903 8,525 2,846 3,732 2,407
Inflows/(outflows) 957 4,433 (58) 9,600 381
Market appreciation/(depreciation) 771 (55) 108 1,299 108
End of period assets 14,631 12,903 2,896 14,631 2,896
Average assets during the period 14,063 11,444 2,859 10,526 2,798
Emerging Markets Equity ETFs (in millions)
Beginning of period assets 7,172 8,071 5,430 7,332 3,613
Inflows/(outflows) 286 (51) 736 1,111 2,596
Market appreciation/(depreciation) 245 (848) 376 (740) 333
End of period assets 7,703 7,172 6,542 7,703 6,542
Average assets during the period 7,289 7,964 5,915 7,719 5,365
US Equity ETFs (in millions)
Beginning of period assets 5,777 5,161 4,094 4,371 3,429
Inflows/(outflows) 273 547 363 1,111 815
Market appreciation/(depreciation) 221 69 183 789 396
End of period assets 6,271 5,777 4,640 6,271 4,640
Average assets during the period 6,214 5,541 4,393 5,502 4,161
Fixed Income ETFs (in millions)
Beginning of period assets 2,437 2,600 1,698 2,118 1,506
Inflows/(outflows) (320) 78 148 266 301
Market appreciation/(depreciation) (22) (241) 58 (289) 97
End of period assets 2,095 2,437 1,904 2,095 1,904
Average assets during the period 2,246 2,700 1,749 2,466 1,697
Currency ETFs (in millions)
Beginning of period assets 547 626 769 611 950
Inflows/(outflows) (48) (62) (129) (98) (315)
Market appreciation/(depreciation) 3 (17) 14 (11) 19
End of period assets 502 547 654 502 654
Average assets during the period 515 607 694 586 819
Alternative Strategy ETFs (in millions)
Beginning of period assets 139 120 167 122 277
Inflows/(outflows) 12 17 (24) 25 (105)
Market appreciation/(depreciation) (1) 2 4 3 (25)
End of period assets 150 139 147 150 147
Average assets during the period 146 134 159 133 211
Average ETF assets during the period
International developed equity ETFs 46% 40% 18% 39% 19%
Emerging markets equity ETFs 24% 28% 38% 29% 36%
US equity ETFs 20% 20% 28% 20% 28%
Fixed income ETFs 7% 10% 11% 9% 11%
Currency ETFs 2% 2% 4% 2% 5%
Alternative strategy ETFs 1% 0% 1% 1% 1%
Total 100% 100% 100% 100% 100%
Average ETF advisory fee during the period
Alternative strategy ETFs 0.94% 0.94% 0.94% 0.94% 0.95%
Emerging markets equity ETFs 0.66% 0.66% 0.67% 0.66% 0.67%
Fixed income ETFs 0.55% 0.55% 0.55% 0.55% 0.55%
Currency ETFs 0.50% 0.51% 0.50% 0.50% 0.50%
International developed equity ETFs 0.50% 0.50% 0.54% 0.51% 0.54%
US equity ETFs 0.35% 0.35% 0.35% 0.35% 0.35%
Blended total 0.51% 0.52% 0.54% 0.52% 0.54%
Number of ETFs - end of the period
International developed equity ETFs 20 20 18 20 18
US equity ETFs 13 12 12 13 12
Emerging markets equity ETFs 7 5 5 7 5
Fixed income ETFs 6 6 5 6 5
Currency ETFs 5 5 7 5 7
Alternative strategy ETFs 2 2 2 2 2
Total 53 50 49 53 49
Headcount 84 79 70 84 70
Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree
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. The non-GAAP financial measurements included in this release include proforma operating income, proforma expenses, proforma pre-tax operating margin and gross margin. 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. We have disclosed our results excluding certain non-operating items including (1) our patent litigation with Research Affiliates LLC; and (2) expenses for the WisdomTree ETF shareholder proxy solicitation. Management excludes these items when measuring our financial performance as they are not directly related to our core business of being an ETF sponsor and asset manager. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30,
2013 Jun. 30,
2013 Sept. 30,
2012 Sept. 30,
2013 Sept. 30,
2012
GAAP total expenses $ 24,665 $ 25,089 $ 17,128 $ 71,241 $ 55,447
ETF shareholder proxy -- -- -- -- (3,264)
Patent litigation, net -- -- (219) -- (700)
Proforma operating expenses $ 24,665 $ 25,089 $ 16,909 $ 71,241 $ 51,483
GAAP net income $ 14,965 $ 12,242 $ 4,533 $ 35,061 $ 5,777
ETF shareholder proxy -- -- -- -- 3,264
Patent litigation, net -- -- 219 -- 700
Proforma operating income $ 14,965 $ 12,242 $ 4,752 $ 35,061 $ 9,741
GAAP net income $ 14,965 $ 12,242 $ 4,533 $ 35,061 $ 5,777
Divide GAAP total revenue 39,630 37,331 21,661 106,302 61,224
GAAP pre-tax margin 37.8% 32.8% 20.9% 33.0% 9.4%
Proforma pre-tax net income $ 14,965 $ 12,242 $ 4,752 $ 35,061 $ 9,741
Divide GAAP total revenue 39,630 37,331 21,661 106,302 61,224
Proforma pre-tax operating margin 37.8% 32.8% 21.9% 33.0% 15.9%
GAAP total revenue $ 39,630 $ 37,331 $ 21,661 $ 106,302 $ 61,224
Fund management and administration (8,794) (9,106) (5,671) (26,123) (16,677)
Third party sharing arrangements (374) (428) (1,194) (913) (4,168)
Gross margin $ 30,462 $ 27,797 $ 14,796 $ 79,266 $ 40,379
Gross margin percentage 76.9% 74.5% 68.3% 74.6% 66.0%
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Contact:.
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WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com
Drmicrocap
11 years ago
WisdomTree Announces Second Quarter 2013 Results
GlobeNewswirePress Release: WisdomTree Investments, Inc. – Fri, Jul 26, 2013 7:00 AM EDT..
$5.0 Billion Net Inflows in Quarter
Net Inflow Market Share 29% in Second Quarter, 15% First Half
Record Revenues, Up 83% From Year Ago Quarter
Record Net Income $12.2 Million, Up 56% From Prior Quarter
Diluted EPS $0.09
NEW YORK, July 26, 2013 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (WETF), an exchange-traded fund ("ETF") sponsor and asset manager, today reported net income of $12.2 million for the second quarter of 2013, or $0.09 per share on a fully diluted basis. This compares to $0.1 million in the second quarter of 2012 and $7.9 million in the first quarter of 2013.
WisdomTree CEO and President Jonathan Steinberg commented, "With $5.0 billion in net inflows for the quarter and nearly $11 billion in the first half of 2013, we continued our positive momentum from the first quarter to achieve a strong second quarter with record market share gains. WisdomTree was the third best asset gatherer across all U.S. mutual fund and ETF complexes in the second quarter according to Morningstar."
Mr. Steinberg continued, "WisdomTree's innovative ETF strategies are powering our top-line growth, with our currency hedged equity and domestic equity families leading our net inflows in the second quarter. While growing our existing funds, we are also seeking to bolster and expand upon the success of these strategies by launching new funds. In the second quarter, we listed two new currency hedged equity funds and our first dividend growth ETF.
Mr. Steinberg concluded, "Our robust asset growth is translating into excellent financial results with record revenues and net income in the second quarter. While we believe the ETF industry is still in its early innings of growth, WisdomTree is already proving the efficiency and scale of our business model: we achieved a 33% pre-tax margin on a base of $28.4 billion in average assets."
Assets Under Management, Net Inflows and Market Share
ETF assets under management ("AUM") were $29.0 billion at June 30, 2013, up 93.1% from $15.0 billion at June 30, 2012, and up 15.4% from $25.1 billion at March 31, 2013. Net inflows for the second quarter of 2013 were $5.0 billion as compared to $0.3 billion in the second quarter of 2012 and $5.9 billion in the first quarter of 2013. WisdomTree's market share of industry net inflows was 29.4% in the second quarter of 2013 as compared to 1.4% in the second quarter of 2012 and 10.8% in the first quarter of 2013. For the first six months of 2013, WisdomTree's market share was 15.2% as compared to 3.4% for the first six months of 2012.
Summary Operating and Financial Highlights
Three Months Ended
Change From
Jun. 30, Mar. 31, Jun. 30, Mar. 31, Jun. 30,
Operating Highlights (in billions): 2013 2013 2012 2013 2012
ETF AUM $29.0 $25.1 $15.0 15.4% 93.1%
ETF net inflows $5.0 $5.9 $0.3 (15.8%) nm
Average ETF AUM $28.4 $21.9 $15.1 29.4% 87.8%
Average ETF advisory fee 0.52% 0.54% 0.54% (0.02) (0.02)
Market share of industry inflows 29.4% 10.8% 1.4% +18.6 +28.0
Financial Highlights (in millions):
Total revenues $37.3 $29.3 $20.4 27.2% 83.1%
Net income $12.2 $7.9 $0.1 55.9% nm
Proforma operating income (non-GAAP) $12.2 $7.9 $3.1 55.9% 290.4%
Gross margin1 74% 72% 67% +2 +7
Pre-tax margin 33% 27% 1% +6 +32
Proforma pre-tax margin (non-GAAP) 33% 27% 15% +6 +18
Six Months Ended
Jun. 30, Jun. 30,
Operating Highlights (in billions): 2013 2012 Change
ETF AUM $29.0 $15.0 93.1%
ETF net inflows $10.9 $2.6 311.6%
Average ETF AUM $25.2 $14.7 71.3%
Average ETF advisory fee 0.53% 0.54% (0.01)
Market share of industry inflows 15.2% 3.4% +11.8
Financial Highlights (in millions):
Total revenues $66.7 $39.6 68.5%
Net income $20.1 $1.2 nm
Proforma operating income (non-GAAP) $20.1 $5.0 302.8%
Gross margin1 73% 65% +8
Pre-tax margin 30% 3% +27
Proforma pre-tax margin (non-GAAP) 30% 13% +17
1 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
Recent Business Developments
• On May 1, 2013, WisdomTree announced the appointment of Ryan Louvar as General Counsel for WisdomTree Funds
• On May 22, 2013, WisdomTree announced the launch of the WisdomTree U.S. Dividend Growth Fund (DGRW)
• On June 13, 2013, WisdomTree announced the listing of 12 additional ETFs on Bolsa Mexicana de Valores
• On June 28, 2013, WisdomTree announced the launch of the WisdomTree Japan Hedged SmallCap Equity Fund (DXJS) and the WisdomTree United Kingdom Hedged Equity Fund (DXPS)
• On July 9, 2013, WisdomTree announced 6 ETFs filed notifications with the Financial Services Agency of Japan
• On July 16, 2013, WisdomTree announced the WisdomTree Emerging Markets Local Debt Fund (ELD) received an NAIC Designation
• On July 24, 2013, WisdomTree announced Win Neuger joined the Board of Directors
• On July 25, 2013, WisdomTree announced the launch of the WisdomTree U.S. SmallCap Dividend Growth Fund (DGRS)
Performance
40% of the $25.8 billion invested in our 35 equity ETFs on June 30, 2013 were in funds that, since their respective inceptions, outperformed their capitalization-weighted or competitive benchmarks through that date. 51%, or 18 of our 35 equity ETFs, outperformed their capitalization-weighted or competitive benchmarks since their respective inceptions through June 30, 2013. For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.
Second Quarter Financial Discussion
Revenues
Total revenues increased 83.1% to a record $37.3 million as compared to the second quarter of 2012 and 27.2% compared to the first quarter of 2013 primarily due to higher average AUM as a result of $5.0 billion of net inflows into our ETFs.
Our average advisory fee earned was 0.52% as compared to 0.54% for the second quarter of 2012 and first quarter of 2013 due to the majority of our inflows arising from our Japan Hedged Equity Fund (DXJ), which is priced at 0.48%.
Margins
Our gross margin, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 74% in the second quarter of 2013 as compared to 67% in the second quarter of 2012 and 72% in the first quarter of 2013. Higher AUM and the end of our joint venture with BNY Mellon were the primary drivers for the higher gross margin.
Our pre-tax margin was 33% in the second quarter of 2013 as compared to 1% (or 15% proforma) in the second quarter of 2012 and 27% in the first quarter of 2013 reflecting the operating scale in our business model.
Expenses
Total expenses increased 23.8% to $25.1 million from $20.3 million in the second quarter of 2012 and increased 16.8% from $21.5 million in the first quarter of 2013. Included in the prior periods were non-operating items related to patent litigation and ETF shareholder proxy.
Three Months Ended Change from
(in thousands) Jun. 30, Mar. 31, Jun. 30, Mar. 31, Jun. 30,
2013 2013 2012 2013 2012
Total expenses $25,089 $21,487 $20,264 16.8% 23.8%
Patent litigation, net -- -- 191
ETF shareholder proxy -- -- (3,198)
Proforma operating expenses (non-GAAP) $25,089 $21,487 $17,257 16.8% 45.4%
• Compensation and benefits expense increased 72.5% to $9.4 million compared to the second quarter of 2012. This increase was primarily due to higher accrued incentive compensation due to our record level of net inflows. In addition, we incurred higher stock based compensation due to equity awards granted to our employees as part of year-end compensation. Lastly, we incurred higher headcount related expenses. Our headcount at the end of the second quarter of 2013 was 79 compared to 66 at the end of the second quarter of 2012.
Compensation and benefits expense increased 26.3% compared to the first quarter of 2013 primarily due to higher accrued incentive compensation due to our strong results.
• Fund management and administration expenses increased 63.6% to $9.1 million compared to the second quarter of 2012. At the end of 2012, we ended our joint venture with BNY Mellon. As a result, we began to record certain operating costs related to our currency and fixed income ETFs, which were previously recognized by BNY Mellon as part of the joint venture. This resulted in approximately $0.6 million in higher costs, while eliminating the expense of the third-party sharing arrangement. Higher average AUM resulted in a $2.7 million increase in portfolio management, fund administration, accounting, index licensing, regulatory and distribution fees. We also incurred $0.3 million in higher printing related fees due to an increase in the number of holders of our ETFs.
Fund management and administration expenses increased 10.7% compared to the first quarter of 2013 primarily due to higher average AUM.
• Marketing and advertising expenses increased 41.9% to $2.2 million compared to the second quarter of 2012 and increased 13.4% compared to the first quarter of 2013 primarily due to higher levels of advertising related activities to support our growth.
• Sales and business development expenses increased 80.5% to $1.5 million compared to the second quarter of 2012 primarily due to new product development related activities as well as higher levels of spending for sales related initiatives.
Sales and business development expenses decreased 15.6% compared to the first quarter of 2013 primarily due to lower level of sales related spending.
• Professional and consulting fees decreased 53.1% to $0.7 million compared to the second quarter of 2012 primarily due to lower variable stock based compensation, which ended as of the end of 2012, partly offset by higher corporate consulting related fees. Professional and consulting fees increased slightly compared to the first quarter of 2013.
• Occupancy, communication and equipment expense increased 57.6% to $0.6 million compared to the second quarter of 2012 and increased 56.8% compared to the first quarter of 2013. This increase was primarily due to $0.2 million in commercial rent tax expense payable to NYC on our office space since 2008.
• Third-party sharing arrangements expense declined 65.2% to $0.4 million compared to the second quarter of 2012 due to the end of our joint venture with BNY Mellon discussed above.
Third-party sharing arrangements expense increased $0.3 million compared to the first quarter of 2013 primarily due to higher inflows raised by our marketing agent in Latin America.
• Other expenses increased 42.8% to $1.1 million compared to the second quarter of 2012 and increased 23.2% compared to the first quarter of 2013 primarily due to higher general and administrative expenses.
Balance Sheet
As of June 30, 2013, WisdomTree had total assets of $97.1 million which consisted primarily of cash and cash equivalents of $70.7 million and investments of $11.4 million. There were approximately 128.0 million shares of common stock issued as of June 30, 2013. Fully diluted weighted average shares outstanding was approximately 140 million.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, July 26, 2013 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.
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;
• anticipated levels of inflows into and outflows out of our exchange traded funds;
• our ability to deliver favorable rates of return to investors;
• 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;
• competition in our business; and
• the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
• We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
• Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETF shareholders to sell their fund shares and trigger redemptions.
• Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
• Most of our assets under management are held in ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
• We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
• We derive a substantial amount of our revenue from products invested in securities of Japanese companies and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets and currency fluctuations between the Japanese Yen and the U.S. Dollar.
• We derive a majority of our revenue from a limited number of products--in particular one fund, WisdomTree Japan Hedged Equity Fund, that accounted for 34.3% of our ETF AUM at June 30, 2013--and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.
• The WisdomTree ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
• We depend on other third parties to provide many critical services to operate our business and the WisdomTree ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.
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, please see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
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.
About WisdomTree
WisdomTree Investments, Inc. is a New York-based exchange-traded fund ("ETF") sponsor and asset manager. WisdomTree currently offers 51 ETFs across Equities, Fixed Income, Currency Income and Alternatives asset classes. WisdomTree also licenses its indexes to third parties for proprietary products and promotes the use of WisdomTree ETFs in 401(k) plans. WisdomTree currently has approximately $31.6 billion in ETF assets under management. For more information, please visit www.wisdomtree.com.
WisdomTree(R) is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiaries WisdomTree Asset Management, Inc. and WisdomTree Retirement Services, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust. WisdomTree Retirement Services, Inc. supports the use of the WisdomTree ETFs in retirement plans by financial professionals.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended % Change From Six Months Ended
Jun. 30,
2013 Mar. 31,
2013 Jun. 30,
2012 Mar. 31,
2013 Jun. 30,
2012 Jun. 30,
2013 Jun. 30,
2012 %
Change
Revenues
ETF advisory fees $ 37,101 $ 29,153 $ 20,230 27.3% 83.4% $ 66,254 $ 39,205 69.0%
Other income 230 188 163 22.3% 41.1% 418 358 16.8%
Total revenues 37,331 29,341 20,393 27.2% 83.1% 66,672 39,563 68.5%
Expenses
Compensation and benefits 9,447 7,482 5,477 26.3% 72.5% 16,929 11,334 49.4%
Fund management and administration 9,106 8,223 5,567 10.7% 63.6% 17,329 11,006 57.5%
Marketing and advertising 2,196 1,937 1,548 13.4% 41.9% 4,133 2,874 43.8%
Sales and business development 1,520 1,801 842 -15.6% 80.5% 3,321 1,702 95.1%
Professional and consulting fees 657 613 1,401 7.2% -53.1% 1,270 2,510 -49.4%
Occupancy, communication and equipment 591 377 375 56.8% 57.6% 968 676 43.2%
Depreciation and amortization 83 82 75 1.2% 10.7% 165 146 13.0%
Third party sharing arrangements 428 111 1,229 285.6% -65.2% 539 2,974 -81.9%
Other 1,061 861 743 23.2% 42.8% 1,922 1,352 42.2%
ETF shareholder proxy -- -- 3,198 n/a n/a -- 3,264 n/a
Patent litigation, net -- -- (191) n/a n/a -- 481 n/a
Total expenses 25,089 21,487 20,264 16.8% 23.8% 46,576 38,319 21.5%
Income before provision for income taxes 12,242 7,854 129 55.9% n/a 20,096 1,244 n/a
Provision for income taxes -- -- --
-- --
Net income $ 12,242 $ 7,854 $ 129 55.9% n/a $ 20,096 $ 1,244 n/a
Net income per share - basic $ 0.10 $ 0.06 $ 0.00
$ 0.16 $ 0.01
Net income per share - diluted $ 0.09 $ 0.06 $ 0.00
$ 0.14 $ 0.01
Weighted average common shares - basic 125,771 125,436 121,920
125,605 120,551
Weighted average common shares - diluted 140,081 139,650 138,477
139,716 137,748
WISDOMTREE INVESTMENTS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended Six Months Ended
Jun. 30,
2013 Mar. 31,
2013 Jun. 30,
2012 Jun. 30,
2013 Jun. 30,
2012
Revenues
ETF advisory fees $ 37,101 $ 29,153 $ 20,230 $ 66,254 $ 39,205
Other income 230 188 163 418 358
Total revenues 37,331 29,341 20,393 66,672 39,563
Operating expenses
Compensation and benefits 9,447 7,482 5,477 16,929 11,334
Fund management and administration 9,106 8,223 5,567 17,329 11,006
Marketing and advertising 2,196 1,937 1,548 4,133 2,874
Sales and business development 1,520 1,801 842 3,321 1,702
Professional and consulting fees 657 613 1,401 1,270 2,510
Occupancy, communication and equipment 591 377 375 968 676
Depreciation and amortization 83 82 75 165 146
Third party sharing arrangements 428 111 1,229 539 2,974
Other 1,061 861 743 1,922 1,352
Total proforma operating expenses 25,089 21,487 17,257 46,576 34,574
Proforma operating income 12,242 7,854 3,136 20,096 4,989
ETF shareholder proxy -- -- 3,198 -- 3,264
Patent litigation, net -- -- (191) -- 481
Income before provision for income taxes 12,242 7,854 129 20,096 1,244
Provision for income taxes -- -- -- -- --
Net income $ 12,242 $ 7,854 $ 129 $ 20,096 $ 1,244
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
June 30,
2013 December 31,
2012
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 70,733 $ 41,246
Accounts receivable 12,460 9,348
Other current assets 2,015 1,273
Total current assets 85,208 51,867
Fixed assets, net 438 480
Investments 11,375 11,036
Other noncurrent assets 51 42
Total assets $ 97,072 $ 63,425
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 10,671 $ 6,924
Compensation and benefits payable 7,232 2,156
Accounts payable and other liabilities 3,783 3,272
Total current liabilities 21,686 12,352
Other noncurrent liabilities -- 13
Total liabilities 21,686 12,365
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares authorized:
issued: 128,017 and 126,554 1,280 1,265
outstanding: 125,978 and 125,272
Additional paid-in capital 182,041 177,826
Accumulated deficit (107,935) (128,031)
Total stockholders' equity 75,386 51,060
Total liabilities and stockholders' equity $ 97,072 $ 63,425
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
June 30,
2013 June 30,
2012
Cash flows from operating activities
Net income $ 20,096 $ 1,244
Non-cash items included in net income:
Depreciation and amortization 165 146
Stock-based compensation 3,405 4,033
Deferred rent (69) (71)
Accretion to interest income and other 94 80
Changes in operating assets and liabilities:
Accounts receivable (3,112) (1,980)
Other assets (761) (497)
Fund management and administration payable 3,747 2,499
Compensation and benefits payable 5,076 (1,362)
Accounts payable and other liabilities 568 4,438
Net cash provided by operating activities 29,209 8,530
Cash flows from investing activities
Purchase of fixed assets (123) (125)
Purchase of investments (2,943) (5,241)
Proceeds from the redemption of investments 2,520 4,437
Net cash used in investing activities (546) (929)
Cash flows from financing activities
Net proceeds from sale of common stock -- 4,329
Shares repurchased (249) (1,033)
Proceeds from exercise of stock options 1,073 2,773
Net cash provided by financing activities 824 6,069
Net increase in cash and cash equivalents 29,487 13,670
Cash and cash equivalents - beginning of period 41,246 25,630
Cash and cash equivalents - end of period $ 70,733 $ 39,300
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 34 $ 16
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended For the Six Months Ended
June 30,
2013 March 31,
2013 June 30,
2012 June 30,
2013 June 30,
2012
Total ETFs (in millions)
Beginning of period assets 25,103 18,286 15,691 18,286 12,182
Inflows/(outflows) 4,962 5,893 338 10,855 2,637
Market appreciation/(depreciation) (1,090) 924 (1,025) (166) 185
End of period assets 28,975 25,103 15,004 28,975 15,004
Average assets during the period 28,390 21,934 15,116 25,162 14,690
ETF Industry and Market Share (in billions)
ETF industry net inflows 16.9 54.4 25.0 71.3 78.2
WisdomTree market share of industry inflows 29.4% 10.8% 1.4% 15.2% 3.4%
International Developed Equity ETFs (in millions)
Beginning of period assets 8,525 3,732 2,964 3,732 2,407
Inflows/(outflows) 4,433 4,210 137 8,643 439
Market appreciation/(depreciation) (55) 583 (255) 528 --
End of period assets 12,903 8,525 2,846 12,903 2,846
Average assets during the period 11,444 6,072 2,853 8,758 2,767
Emerging Markets Equity ETFs (in millions)
Beginning of period assets 8,071 7,332 5,594 7,332 3,613
Inflows/(outflows) (51) 876 462 825 1,860
Market appreciation/(depreciation) (848) (137) (626) (985) (43)
End of period assets 7,172 8,071 5,430 7,172 5,430
Average assets during the period 7,964 7,905 5,398 7,934 5,089
US Equity ETFs (in millions)
Beginning of period assets 5,161 4,371 4,275 4,371 3,429
Inflows/(outflows) 547 291 (113) 838 452
Market appreciation/(depreciation) 69 499 (68) 568 213
End of period assets 5,777 5,161 4,094 5,777 4,094
Average assets during the period 5,541 4,749 4,101 5,145 4,045
Fixed Income ETFs (in millions)
Beginning of period assets 2,600 2,118 1,735 2,118 1,506
Inflows/(outflows) 78 508 (8) 586 153
Market appreciation/(depreciation) (241) (26) (29) (267) 39
End of period assets 2,437 2,600 1,698 2,437 1,698
Average assets during the period 2,700 2,453 1,716 2,577 1,671
Currency ETFs (in millions)
Beginning of period assets 626 611 881 611 950
Inflows/(outflows) (62) 12 (82) (50) (186)
Market appreciation/(depreciation) (17) 3 (30) (14) 5
End of period assets 547 626 769 547 769
Average assets during the period 607 637 828 622 881
Alternative Strategy ETFs (in millions)
Beginning of period assets 120 122 242 122 277
Inflows/(outflows) 17 (4) (58) 13 (81)
Market appreciation/(depreciation) 2 2 (17) 4 (29)
End of period assets 139 120 167 139 167
Average assets during the period 134 118 220 126 237
Average ETF assets during the period
International developed equity ETFs 40% 27% 19% 35% 19%
Emerging markets equity ETFs 28% 36% 36% 32% 35%
US equity ETFs 20% 22% 27% 20% 27%
Fixed income ETFs 10% 11% 11% 10% 11%
Currency ETFs 2% 3% 6% 2% 6%
Alternative strategy ETFs 0% 1% 1% 1% 2%
Total 100% 100% 100% 100% 100%
Average ETF advisory fee during the period
Alternative strategy ETFs 0.94% 0.94% 0.95% 0.94% 0.95%
Emerging markets equity ETFs 0.66% 0.67% 0.66% 0.66% 0.64%
Fixed income ETFs 0.55% 0.55% 0.55% 0.55% 0.55%
Currency ETFs 0.51% 0.51% 0.50% 0.51% 0.53%
International developed equity ETFs 0.50% 0.52% 0.54% 0.51% 0.54%
US equity ETFs 0.35% 0.35% 0.35% 0.35% 0.35%
Blended total 0.52% 0.54% 0.54% 0.53% 0.54%
Number of ETFs - end of the period
International developed equity ETFs 20 18 18 20 18
US equity ETFs 12 11 12 12 12
Fixed income ETFs 6 6 5 6 5
Currency ETFs 5 5 7 5 7
Emerging markets equity ETFs 5 5 4 5 4
Alternative strategy ETFs 2 2 2 2 2
Total 50 47 48 50 48
Headcount 79 72 66 79 66
Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree
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. The non-GAAP financial measurements included in this release include proforma operating income, proforma expenses and proforma pre-tax operating margin. 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. We have disclosed our results excluding certain non-operating items including (1) our patent litigation with Research Affiliates LLC; and (2) expenses for the WisdomTree ETF shareholder proxy solicitation; Management excludes these items when measuring our financial performance as they are not directly related to our core business of being an ETF sponsor and asset manager.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
For the Three Months Ended For the Six Months Ended
Jun. 30,
2013 Mar. 31,
2013 Jun. 30,
2012 Jun. 30,
2013 Jun. 30,
2012
GAAP total expenses $ 25,089 $ 21,487 $ 20,264 $ 46,576 $ 38,319
ETF shareholder proxy -- -- (3,198) -- (3,264)
Patent litigation, net -- -- 191 -- (481)
Proforma operating expenses $ 25,089 $ 21,487 $ 17,257 $ 46,576 $ 34,574
GAAP net income $ 12,242 $ 7,854 $ 129 $ 20,096 $ 1,244
ETF shareholder proxy -- -- 3,198 -- 3,264
Patent litigation, net -- -- (191) -- 481
Proforma operating income $ 12,242 $ 7,854 $ 3,136 $ 20,096 $ 4,989
GAAP net income $ 12,242 $ 7,854 $ 129 $ 20,096 $ 1,244
Divide GAAP total revenue 37,331 29,341 20,393 66,672 39,563
GAAP pre-tax margin 32.8% 26.8% 0.6% 30.1% 3.1%
Proforma pre-tax net income $ 12,242 $ 7,854 $ 3,136 $ 20,096 $ 4,989
Divide GAAP total revenue 37,331 29,341 20,393 66,672 39,563
Proforma pre-tax operating margin 32.8% 26.8% 15.4% 30.1% 12.6%
.
.
Contact:.
.
WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com
.
Drmicrocap
11 years ago
WisdomTree Announces First Quarter 2013 Results
Press Release: WisdomTree Investments, Inc. – Fri, Apr 26, 2013
+0.02
Record $5.9 Billion Net Inflows, 10.8% Market Share
Record Revenues, Up 53% From Year Ago Quarter
Record Net Income $7.9 Million, Up 50% From Prior Quarter, Up Seven Times From Year Ago Quarter
Diluted EPS $0.06
NEW YORK, April 26, 2013 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (WETF), an exchange-traded fund ("ETF") sponsor and asset manager, today reported net income of $7.9 million for the first quarter of 2013, or $0.06 per share on a fully diluted basis. This compares to $1.1 million, or $0.01 per share on a fully diluted basis, in the first quarter of 2012 and $5.3 million, or $0.04 per share on a fully diluted basis, in the fourth quarter of 2012.
WisdomTree CEO and President Jonathan Steinberg commented, "WisdomTree's net inflows of $5.9 billion represented our best quarter yet and fueled a meaningful acceleration in our organic growth in 2013. The drivers behind this strong top-line growth underscore two important points: First, WisdomTree is innovating and executing at the highest levels -- our currency hedged Japanese equity strategy led the entire ETF industry with $3.9 billion of net inflows in the first quarter. Second, we are seeing balanced growth across our platform in important asset classes. In fact, excluding Japan-related assets, we achieved our second best quarter with $1.9 billion in inflows across our dividend-weighted equity and fixed income strategies."
Mr. Steinberg continued, "Our scalable business model is driving strong top-line growth, expanding margins and earnings. At $27 billion in assets and the fifth largest U.S. ETF sponsor today, WisdomTree has reached an exciting point in our development."
Assets Under Management, Net Inflows and Market Share
ETF assets under management ("AUM") were $25.1 billion at March 31, 2013, up from $15.7 billion at March 31, 2012 and $18.3 billion at December 31, 2012. Net inflows for the first quarter of 2013 were $5.9 billion compared to $2.3 billion in the first quarter of 2012 and $1.1 billion in the fourth quarter of 2012. WisdomTree's market share of industry net inflows was 10.8% in the first quarter of 2013 as compared to 4.3% in the first quarter of 2012 and 1.9% in the fourth quarter of 2012.
Summary Operating and Financial Highlights
Three Months Ended
Change From
Mar. 31,
Dec. 31,
Mar. 31,
Dec. 31,
Mar. 31,
Operating Highlights (in billions):
2013
2012
2012
2012
2012
ETF AUM
$25.1
$18.3
$15.7
37.3%
60.0%
ETF net inflows
$5.9
$1.1
$2.3
456.5%
156.3%
Average ETF AUM
$21.9
$17.1
$14.3
28.5%
53.8%
Average ETF advisory fee
0.54%
0.54%
0.54%
--
--
Market share of industry inflows
10.8%
1.9%
4.3%
+8.9
+6.5
Financial Highlights (in millions):
Total revenues
$29.3
$23.6
$19.2
24.5%
53.1%
Net income
$7.9
$5.3
$1.1
49.5%
604.4%
Proforma operating income (non-GAAP)
$7.9
$5.1
$1.9
54.5%
323.9%
Gross margin1
72%
68%
63%
+4
+9
Pre-tax margin
27%
22%
6%
+5
+21
Proforma pre-tax margin
27%
22%
10%
+5
+17
1 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
Recent Business Developments
• On January 14, 2013, WisdomTree announced the WisdomTree Emerging Markets Equity Income Fund (DEM) Surpassed $5 Billion in Assets.
• On January 22, 2013, WisdomTree announced the WisdomTree Japan Hedged Equity Fund (DXJ) Surpassed $2 Billion in Assets.
• On January 23, 2013, WisdomTree announced the Company Surpassed $20 Billion in AUM.
• On January 31, 2013, WisdomTree announced the launch of the WisdomTree Global Corporate Bond Fund (GLCB).
• On March 15, 2013, WisdomTree announced the WisdomTree Japan Hedged Equity Fund (DXJ) Surpassed $5 Billion in Assets.
• On April 25, 2013, WisdomTree announced the WisdomTree Emerging Markets Corporate Bond Fund (EMCB) Received a National Association of Insurance Companies (NAIC) Designation.
Performance
77% of the $21.8 billion invested in our 34 equity ETFs on March 31, 2013 were in funds that, since their respective inceptions, outperformed their capitalization-weighted or competitive benchmarks through that date. 62%, or 21 of our 34 equity ETFs, outperformed their capitalization-weighted or competitive benchmarks since their respective inceptions through March 31, 2013. For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.
First Quarter Financial Discussion
Revenues
Total revenues increased 53.1% to a record $29.3 million as compared to the first quarter of 2012 and 24.5% compared to the fourth quarter of 2012 primarily due to higher average AUM as a result of record $5.9 billion of net inflows into our ETFs. Our average advisory fee earned was unchanged at 0.54% as compared to the first and fourth quarters of 2012.
Margins
Our gross margin, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 72% in the first quarter of 2013 as compared to 63% in the first quarter of 2012 and 68% in the fourth quarter of 2012. The end of our joint venture with BNY Mellon and higher AUM were the primary drivers for the higher gross margin.
Our pre-tax margin was 27% in the first quarter of 2013 as compared to 6% in the first quarter of 2012 and 22% in the fourth quarter of 2012 reflecting the operating scale in our business model.
Expenses
Total expenses increased 19.0% to $21.5 million from $18.1 million in the first quarter of 2012 and increased 17.3% from $18.3 million in the fourth quarter of 2012. Included in the prior periods were non-operating items related to patent litigation, ETF shareholder proxy and secondary and initial exchange listing costs.
Three Months Ended
Change from
(in thousands)
Mar. 31,
Dec. 31,
Mar. 31,
Dec. 31,
Mar. 31,
2013
2012
2012
2012
2012
Total expenses
$21,487
$18,321
$18,055
17.3%
19.0%
Patent litigation, net
--
524
(672)
ETF shareholder proxy
--
--
(66)
Offering costs
--
(353)
--
Proforma operating expenses (non-GAAP)
$21,487
$18,492
$17,317
16.2%
24.1%
• Compensation and benefits expense increased 27.7% to $7.5 million compared to the first quarter of 2012. This increase was primarily due to higher accrued incentive compensation due to our record level of net inflows. Our headcount at the end of the first quarter of 2013 was 72 compared to 64 at the end of the first quarter of 2012.
Compensation and benefits expense increased 21.4% compared to the fourth quarter of 2012 primarily due to higher accrued incentive compensation, higher stock based compensation and payroll taxes.
• Fund management and administration expenses increased 51.2% to $8.2 million compared to the first quarter of 2012. At the end of 2012, we ended our joint venture with BNY Mellon. As a result, we began to record certain operating costs related to our currency and fixed income ETFs, which were previously recognized by BNY Mellon as part of the joint venture. This resulted in approximately $0.6 million in higher costs. Higher average AUM resulted in a $1.8 million increase in portfolio management, fund administration, accounting, index licensing, regulatory and distribution fees. We also incurred $0.3 million in higher printing related fees due to an increase in the number of holders of our ETFs.
Fund management and administration expenses increased 29.6% compared to the fourth quarter of 2012 primarily due to the end of the joint venture and higher average AUM.
• Marketing and advertising expenses increased 46.1% to $1.9 million compared to the first quarter of 2012 and increased 19.1% compared to the fourth quarter of 2012 primarily due to higher levels of advertising related activities to support our growth.
• Sales and business development expenses more than doubled to $1.8 million compared to the first quarter of 2012 and increased 71.0% compared to the fourth quarter of 2012 primarily due to higher levels of sales related initiatives and activities.
• Professional and consulting fees decreased 44.7% to $0.6 million compared to the first quarter of 2012 and decreased 22.2% compared to the fourth quarter of 2012 primarily due to lower variable stock based compensation, which ended as of the end of 2012, partly offset by higher corporate consulting and accounting related fees.
• Occupancy, communication and equipment expense increased 25.2% to $0.4 million compared to the first quarter of 2012. Beginning in the second quarter of 2012, we began occupying office space we had previously sub-leased to a third party. This expense was essentially unchanged compared to the fourth quarter of 2012.
• Third-party sharing arrangements expense declined 93.6% to $0.1 million compared to the first quarter of 2012 and declined 91.5% compared to the fourth quarter of 2012 due to the end of our joint venture with BNY Mellon discussed above.
• Other expenses increased 41.4% to $0.9 million compared to the first quarter of 2012 and increased 12.5% compared to the fourth quarter of 2012 primarily due to higher general and administrative expenses.
Balance Sheet
As of March 31, 2013, WisdomTree had total assets of $76.1 million which consisted primarily of cash and cash equivalents of $52.3 million and investments of $10.7 million. The Company has no debt. There were approximately 127.7 million shares of common stock issued as of March 31, 2013. Fully diluted weighted average shares outstanding were 139.7 million for the three months ended March 31, 2013.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, April 26, 2013 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.
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;
• anticipated levels of inflows into and outflows out of our exchange traded funds;
• our ability to deliver favorable rates of return to investors;
• 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;
• competition in our business; and
• the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
• We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
• Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETF shareholders to sell their fund shares and trigger redemptions.
• Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
• Most of our assets under management are held in ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
• We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
• We derive a substantial portion of our revenue from a limited number of products and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.
• The WisdomTree ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
• We depend on other third parties to provide many critical services to operate our business and the WisdomTree ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.
• We may from time to time in the future be, involved in legal proceedings that could require significant management time and attention, possibly resulting in significant expense or in an unfavorable outcome, which could have a material adverse effect on our business, financial conditions, results of operations and cash flows.
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, please see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
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.
About WisdomTree
WisdomTree Investments, Inc. is a New York-based exchange-traded fund ("ETF") sponsor and asset manager. WisdomTree currently offers 47 ETFs across Equities, Fixed Income, Currency Income and Alternatives asset classes. WisdomTree also licenses its indexes to third parties for proprietary products and promotes the use of WisdomTree ETFs in 401(k) plans. WisdomTree currently has approximately $27.3 billion in ETF assets under management. For more information, please visit www.wisdomtree.com.
WisdomTree(R) is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiaries WisdomTree Asset Management, Inc. and WisdomTree Retirement Services, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust. WisdomTree Retirement Services, Inc. supports the use of the WisdomTree ETFs in retirement plans by financial professionals.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended
% Change From
Mar. 31,
Dec. 31,
Mar. 31,
Dec. 31,
Mar. 31,
2013
2012
2012
2012
2012
Revenues
ETF advisory fees
$ 29,153
$ 23,379
$ 18,975
24.7%
53.6%
Other income
188
195
195
-3.6%
-3.6%
Total revenues
29,341
23,574
19,170
24.5%
53.1%
Expenses
Compensation and benefits
7,482
6,165
5,857
21.4%
27.7%
Fund management and administration
8,223
6,343
5,439
29.6%
51.2%
Marketing and advertising
1,937
1,627
1,326
19.1%
46.1%
Sales and business development
1,801
1,053
860
71.0%
109.4%
Professional and consulting fees
613
788
1,109
-22.2%
-44.7%
Occupancy, communication and equipment
377
369
301
2.2%
25.2%
Depreciation and amortization
82
82
71
0.0%
15.5%
Third party sharing arrangements
111
1,300
1,745
-91.5%
-93.6%
Other
861
765
609
12.5%
41.4%
ETF shareholder proxy
--
--
66
n/a
n/a
Patent litigation, net
--
(524)
672
n/a
n/a
Offering costs
--
353
--
n/a
n/a
Total expenses
21,487
18,321
18,055
17.3%
19.0%
Income before provision for income taxes
7,854
5,253
1,115
49.5%
604.4%
Provision for income taxes
--
--
--
Net income
$ 7,854
$ 5,253
$ 1,115
49.5%
604.4%
Net income per share - basic
$ 0.06
$ 0.04
$ 0.01
Net income per share - diluted
$ 0.06
$ 0.04
$ 0.01
Weighted average common shares - basic
125,436
124,202
119,182
Weighted average common shares - diluted
139,650
138,417
137,400
WISDOMTREE INVESTMENTS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended
Mar. 31,
Dec. 31,
Mar. 31,
2013
2012
2012
Revenues
ETF advisory fees
$ 29,153
$ 23,379
$ 18,975
Other income
188
195
195
Total revenues
29,341
23,574
19,170
Operating expenses
Compensation and benefits
7,482
6,165
5,857
Fund management and administration
8,223
6,343
5,439
Marketing and advertising
1,937
1,627
1,326
Sales and business development
1,801
1,053
860
Professional and consulting fees
613
788
1,109
Occupancy, communication and equipment
377
369
301
Depreciation and amortization
82
82
71
Third party sharing arrangements
111
1,300
1,745
Other
861
765
609
Total proforma operating expenses
21,487
18,492
17,317
Proforma operating income
7,854
5,082
1,853
ETF shareholder proxy
--
--
66
Patent litigation, net
--
(524)
672
Offering costs
--
353
--
Income before provision for income taxes
7,854
5,253
1,115
Provision for income taxes
--
--
--
Net income
$ 7,854
$ 5,253
$ 1,115
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
March 31,
December 31,
2013
2012
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$ 52,297
$ 41,246
Accounts receivable
11,098
9,348
Other current assets
1,529
1,273
Total current assets
64,924
51,867
Fixed assets, net
408
480
Investments
10,668
11,036
Other noncurrent assets
53
42
Total assets
$ 76,053
$ 63,425
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable
$ 9,513
$ 6,924
Compensation and benefits payable
2,613
2,156
Accounts payable and other liabilities
2,800
3,272
Total current liabilities
14,926
12,352
Other noncurrent liabilities
--
13
Total liabilities
14,926
12,365
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares authorized:
issued: 127,667 and 126,554
1,276
1,265
outstanding: 125,628 and 125,272
Additional paid-in capital
180,028
177,826
Accumulated deficit
(120,177)
(128,031)
Total stockholders' equity
61,127
51,060
Total liabilities and stockholders' equity
$ 76,053
$ 63,425
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
March 31,
2013
2012
(Unaudited)
Cash flows from operating activities
Net income
$ 7,854
$ 1,115
Non-cash items included in net income:
Depreciation and amortization
82
71
Stock-based compensation
1,714
2,115
Deferred rent
(34)
(37)
Accretion to interest income and other
39
20
Changes in operating assets and liabilities:
Accounts receivable
(1,750)
(1,504)
Other assets
(256)
198
Fund management and administration payable
2,589
1,913
Compensation and benefits payable
457
(2,931)
Accounts payable and other liabilities
(451)
1,720
Net cash provided by operating activities
10,244
2,680
Cash flows from investing activities
Purchase of fixed assets
(10)
(56)
Purchase of investments
(1,314)
(3,549)
Proceeds from the redemption of investments
1,633
2,486
Net cash provided by/( used in) investing activities
309
(1,119)
Cash flows from financing activities
Net proceeds from sale of common stock
--
4,329
Shares repurchased
(249)
(995)
Proceeds from exercise of stock options
747
1,613
Net cash provided by financing activities
498
4,947
Net increase in cash and cash equivalents
11,051
6,508
Cash and cash equivalents - beginning of period
41,246
25,630
Cash and cash equivalents - end of period
$ 52,297
$ 32,138
Supplemental disclosure of cash flow information
Cash paid for income taxes
$ 34
$ 3
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended
March 31,
December 31,
March 31,
2013
2012
2012
Total ETFs (in millions)
Beginning of period assets
18,286
16,783
12,182
Inflows/(outflows)
5,893
1,059
2,299
Market appreciation/(depreciation)
924
444
1,210
End of period assets
25,103
18,286
15,691
Average assets during the period
21,934
17,068
14,265
ETF Industry and Market Share (in billions)
ETF industry net inflows
54.4
55.4
53.2
WisdomTree market share of industry inflows
10.8%
1.9%
4.3%
International Developed Equity ETFs (in millions)
Beginning of period assets
3,732
2,896
2,407
Inflows/(outflows)
4,210
620
302
Market appreciation/(depreciation)
583
216
255
End of period assets
8,525
3,732
2,964
Average assets during the period
6,072
3,022
2,680
Emerging Markets Equity ETFs (in millions)
Beginning of period assets
7,332
6,542
3,613
Inflows/(outflows)
876
515
1,398
Market appreciation/(depreciation)
(137)
275
583
End of period assets
8,071
7,332
5,594
Average assets during the period
7,905
6,767
4,780
US Equity ETFs (in millions)
Beginning of period assets
4,371
4,640
3,429
Inflows/(outflows)
291
(205)
565
Market appreciation/(depreciation)
499
(64)
281
End of period assets
5,161
4,371
4,275
Average assets during the period
4,749
4,522
3,990
International Fixed Income ETFs (in millions)
Beginning of period assets
2,118
1,904
1,506
Inflows/(outflows)
508
190
161
Market appreciation/(depreciation)
(26)
24
68
End of period assets
2,600
2,118
1,735
Average assets during the period
2,453
1,990
1,627
Currency ETFs (in millions)
Beginning of period assets
611
654
950
Inflows/(outflows)
12
(37)
(104)
Market appreciation/(depreciation)
3
(6)
35
End of period assets
626
611
881
Average assets during the period
637
632
935
Alternative Strategy ETFs (in millions)
Beginning of period assets
122
147
277
Inflows/(outflows)
(4)
(24)
(23)
Market appreciation/(depreciation)
2
(1)
(12)
End of period assets
120
122
242
Average assets during the period
118
135
253
Average ETF assets during the period
Emerging markets equity ETFs
36%
39%
33%
International developed equity ETFs
27%
18%
19%
US equity ETFs
22%
26%
28%
International fixed income ETFs
11%
12%
12%
Currency ETFs
3%
4%
7%
Alternative strategy ETFs
1%
1%
1%
Total
100%
100%
100%
Average ETF advisory fee during the period
Alternative strategy ETFs
0.94%
0.94%
0.95%
Emerging markets equity ETFs
0.67%
0.67%
0.67%
International fixed income ETFs
0.55%
0.55%
0.55%
International developed equity ETFs
0.52%
0.54%
0.55%
Currency ETFs
0.51%
0.50%
0.49%
US equity ETFs
0.35%
0.35%
0.35%
Blended total
0.54%
0.54%
0.54%
Number of ETFs - end of the period
International developed equity ETFs
18
18
18
US equity ETFs
11
11
12
International fixed income ETFs
6
5
5
Currency ETFs
5
5
7
Emerging markets equity ETFs
5
5
4
Alternative strategy ETFs
2
2
2
Total
47
46
48
Headcount
72
70
64
Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree
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. The non-GAAP financial measurements included in this release include proforma operating income, proforma expenses and proforma pre-tax operating margin. 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. We have disclosed our results excluding certain non-operating items including (1) our patent litigation with Research Affiliates LLC; (2) expenses for the WisdomTree ETF shareholder proxy solicitation; and (3) advisory and other related fees associated with the secondary offering of our common stock in November 2012. Management excludes these items when measuring our financial performance as they are not directly related to our core business of being an ETF sponsor and asset manager.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
For the Three Months Ended
Mar. 31,
Dec. 31,
Mar. 31,
2013
2012
2012
GAAP total expenses
$ 21,487
$ 18,321
$ 18,055
ETF shareholder proxy
--
--
(66)
Patent litigation, net
--
524
(672)
Offering costs
--
(353)
--
Proforma operating expenses
$ 21,487
$ 18,492
$ 17,317
GAAP net income
$ 7,854
$ 5,253
$ 1,115
ETF shareholder proxy
--
--
66
Patent litigation, net
--
(524)
672
Offering costs
--
353
--
Proforma operating income
$ 7,854
$ 5,082
$ 1,853
GAAP net income
$ 7,854
$ 5,253
$ 1,115
Divide GAAP total revenue
29,341
23,574
19,170
GAAP pre-tax margin
26.8%
22.3%
5.8%
Proforma pre-tax net income
$ 7,854
$ 5,082
$ 1,853
Divide GAAP total revenue
29,341
23,574
19,170
Proforma pre-tax operating margin
26.8%
21.6%
9.7%
.
.
Contact:.
.
WisdomTree Investments, Inc.Stuart Bell / Jessica Zaloom+1.917.267.3702 / +1.917.267.3735sbell@wisdomtree.com / jzaloom@wisdomtree.com. ...
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