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WisdomTree Announces First Quarter 2024 Results

Record AUM of $107.2 Billion

870bps of Operating Margin Expansion vs. Q1 2023

Diluted Earnings Per Share of $0.13 ($0.12, as Adjusted)

WisdomTree, Inc. (NYSE: WT), a global financial innovator, today reported financial results for the first quarter of 2024.

$22.1 million of net income ($20.3(1) million of net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.

$107.2 billion of ending AUM, an increase of 7.1% from the prior quarter arising from market appreciation and net inflows.

$2.0 billion of net inflows, primarily driven by inflows into our international developed equity and U.S. equity products.

0.36% average advisory fee, unchanged from the prior quarter.

$96.8 million of operating revenues, an increase of 6.6% from the prior quarter primarily due to higher average AUM.

79.4% gross margin(1), a 0.3 point decrease from the prior quarter due to higher fund costs.

28.9% operating income margin (29.6%(1) as adjusted), a 0.2 point increase (0.9 point increase, as adjusted(1)) compared to our operating margin of 28.7% in the prior quarter primarily due to higher revenues.

$0.03 quarterly dividend declared, payable on May 22, 2024 to stockholders of record as of the close of business on May 8, 2024.

Update from Jonathan Steinberg, WisdomTree CEO

“It has been a great start to the year with record AUM, nearly $2 billion of net inflows, and 820 basis points of margin expansion (as adjusted), driving a 71% increase in our earnings per share as compared to the first quarter of last year. Importantly, we expect that momentum to continue as we are executing on our key initiatives to drive the next $100 billion of assets under management: traction in our ETP lineup, an expanding models footprint, and leadership in the secular shift toward tokenization of financial assets.

 

We achieved several key milestones in the quarter, including the receipt of a trust charter from the New York State Department of Financial Services – the premier regulator for digital asset businesses in the U.S. – and the launch of our debit card to WisdomTree Prime™ users. This key combination not only expands our geographic footprint but also allows us to offer value-added services to our customer base. We continue to believe that tokenized assets and blockchain-enabled finance represent a growth opportunity for WisdomTree, and this quarter’s accomplishments are yet another positive step in unlocking new customers, new markets and new revenue streams.”

 

Update from Jarrett Lilien, WisdomTree COO and President

“We are pleased to report that we are delivering strong operating margin expansion and earnings growth, demonstrating our scalable operating model and ability to leverage our AUM growth. We are confident that we have the right strategy, the right products, the right team and the right culture to continue to create value for our clients and stockholders in the long term. We remain extremely bullish about 2024 and beyond as we continue to drive organic growth, expand our margins, and lead the industry's evolution in tokenized assets and blockchain-enabled finance.

 

For a number of years, we have been alone talking about many of the themes driving our growth, including our diversified product suite, models and the potential of tokenization and blockchain-enabled finance – but now we have company. If you want to know what the industry is going to do tomorrow, look at what WisdomTree is doing today.”

 

OPERATING AND FINANCIAL HIGHLIGHTS

 

Three Months Ended

 

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

Consolidated Operating Highlights ($ in billions):

 

 

 

 

 

AUM—end of period

$

107.2

$

100.1

$

93.7

$

93.7

$

90.7

Net inflows/(outflows)

$

2.0

$

(0.3)

$

2.0

$

2.3

$

6.3

Average AUM

$

102.4

$

96.6

$

95.7

$

91.6

$

87.5

Average advisory fee

 

0.36%

 

0.36%

 

0.36%

 

0.36%

 

0.36%

 

 

 

 

 

 

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

 

 

 

 

 

Operating revenues

$

96.8

$

90.8

$

90.4

$

85.7

$

82.0

Net income

$

22.1

$

19.1

$

13.0

$

54.3

$

16.2

Diluted earnings per share

$

0.13

$

0.16

$

0.07

$

0.32

$

0.10

Operating income margin

 

28.9%

 

28.7%

 

29.5%

 

21.2%

 

20.2%

 

 

 

 

 

 

As Adjusted (Non-GAAP(1)):

 

 

 

 

 

Gross margin

 

79.4%

 

79.7%

 

80.1%

 

79.3%

 

79.1%

Net income, as adjusted

$

20.3

$

18.6

$

18.0

$

14.9

$

11.2

Diluted earnings per share, as adjusted

$

0.12

$

0.11

$

0.10

$

0.09

$

0.07

Operating income margin, as adjusted

 

29.6%

 

28.7%

 

29.5%

 

26.9%

 

21.4%

 

 

 

 

 

 

RECENT BUSINESS DEVELOPMENTS

Company News

  • In February 2024, we launched the WisdomTree Prime™ Visa Debit Card, a digital and physical card enabling users to spend outside the WisdomTree Prime app.
  • In March 2024, we were named ‘Best Leveraged & Inverse ETF Issuer ($1bn+)’ at the ETF Express European ETF Awards and ‘Best ETF Provider’ at the Diaman Quant Awards in Italy; we were granted a charter from the New York State Department of Financial Services (DFS) to operate as a limited purpose trust company under the New York Banking Law; and the Board of Directors extended our existing limited duration stockholder rights plan, as amended.

Product News

  • In February 2024, we cross-listed the WisdomTree Megatrends UCITS ETF (WMGT) on the SIX; and the WisdomTree Cybersecurity UCITS ETF (WCBR) was named ‘Best Thematic and Sector ETF’ at the Le Revenu Awards 2024 in France.
  • In March 2024, we launched the WisdomTree 1-3 Year Laddered Treasury Fund (USSH) and the 7-10 Year Laddered Treasury Fund (USIN) on the Nasdaq; we celebrated the 10-year anniversary of the WisdomTree Floating Rate Treasury Fund (USFR); the European cryptocurrency ETP range surpassed $800 million in AUM; the WisdomTree Emerging Markets Small Cap Dividend UCITS ETF (DGSE) was named ‘Best Emerging Markets Equity ETF’ at the Mountain View Fund Awards 2024 in Germany; and the WisdomTree Artificial Intelligence UCITS ETF (WTAI) was named ‘Best Equity ETF’ at the Money Mate Awards in Italy.
  • In April 2024, we launched the WisdomTree Energy Transition and Rare Earths Miners UCITS ETF (RARE) on the London Stock Exchange, Börse Xetra and Borsa Italiana; we launched the WisdomTree US Quality Growth UCITS ETF (QGRW) on the London Stock Exchange, Börse Xetra and Borsa Italiana; and we cross-listed a distributing class of the WisdomTree Global Quality Dividend Growth UCITS (GGRW) on the Borsa Italiana.

 

WISDOMTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

Operating Revenues:

 

 

 

 

 

Advisory fees

$

92,501

$

86,988

$

86,598

$

82,004

$

77,637

Other income

 

4,337

 

3,856

 

3,825

 

3,720

 

4,407

Total revenues

 

96,838

 

90,844

 

90,423

 

85,724

 

82,044

Operating Expenses:

 

 

 

 

 

Compensation and benefits

 

31,054

 

27,860

 

27,955

 

26,319

 

27,398

Fund management and administration

 

19,962

 

18,445

 

18,023

 

17,727

 

17,153

Marketing and advertising

 

4,408

 

4,951

 

3,833

 

4,465

 

4,007

Sales and business development

 

3,611

 

3,881

 

3,383

 

3,326

 

2,994

Contractual gold payments

 

 

 

 

1,583

 

4,486

Professional fees

 

3,630

 

3,201

 

3,719

 

8,334

 

3,715

Occupancy, communications and equipment

 

1,210

 

1,208

 

1,203

 

1,172

 

1,101

Depreciation and amortization

 

383

 

335

 

307

 

121

 

109

Third-party distribution fees

 

2,307

 

2,549

 

2,694

 

1,881

 

2,253

Other

 

2,323

 

2,379

 

2,601

 

2,615

 

2,257

Total operating expenses

 

68,888

 

64,809

 

63,718

 

67,543

 

65,473

Operating income

 

27,950

 

26,035

 

26,705

 

18,181

 

16,571

Other Income/(Expenses):

 

 

 

 

 

Interest expense.

 

(4,128)

 

(3,758)

 

(3,461)

 

(4,021)

 

(4,002)

Gain on revaluation/termination of deferred consideration—gold payments

 

 

 

 

41,361

 

20,592

Interest income

 

1,398

 

1,225

 

791

 

1,000

 

1,083

Impairments

 

 

(339)

 

(2,703)

 

 

(4,900)

Loss on extinguishment of convertible notes

 

 

 

 

 

(9,721)

Other gains and losses, net

 

2,592

 

1,602

 

(2,512)

 

1,286

 

(2,007)

Income before income taxes

 

27,812

 

24,765

 

18,820

 

57,807

 

17,616

Income tax expense

 

5,701

 

5,688

 

5,836

 

3,555

 

1,383

Net income

$

22,111

$

19,077

$

12,984

$

54,252

$

16,233

Earnings per share—basic

$

0.14(2)

$

0.16(2)

$

0.07(2)

$

0.32(2)

$

0.10(2)

Earnings per share—diluted

$

0.13

$

0.16(2)

$

0.07

$

0.32

$

0.10

Weighted average common shares—basic

 

146,464

 

145,310

 

145,284

 

144,351

 

143,862

Weighted average common shares—diluted

 

165,268

 

171,703

 

177,140

 

170,672

 

159,887

 

As Adjusted (Non-GAAP(1))

Total operating expenses

$

68,193

$

64,809

$

63,718

$

62,630

$

64,506

Operating income

$

28,645

$

26,035

$

26,705

$

23,094

$

17,538

Income before income taxes

$

26,987

$

23,908

$

23,902

$

19,752

$

14,485

Income tax expense

$

6,731

$

5,342

$

5,854

$

4,833

$

3,287

Net income

$

20,256

$

18,566

$

18,048

$

14,919

$

11,198

Earnings per share—diluted

$

0.12

$

0.11

$

0.10

$

0.09

$

0.07

Weighted average common shares—diluted

 

165,268

 

171,703

 

177,140

 

170,672

 

159,887

 

QUARTERLY HIGHLIGHTS

Operating Revenues

  • Operating revenues increased 6.6% and 18.0% from the fourth quarter of 2023 and the first quarter of 2023, respectively, primarily due to higher average AUM.
  • Our average advisory fee was 0.36% during each of the first quarter of 2024, the fourth quarter of 2023 and the first quarter of 2023.

Operating Expenses

  • Operating expenses increased 6.3% from the fourth quarter of 2023 primarily due to higher compensation arising from payroll taxes, benefits and other items in connection with the payment of year-end bonuses, as well as higher fund management and administration costs and professional fees. These increases were partly offset by lower marketing expenses, sales and business development expenses and third-party distribution fees.
  • Operating expenses increased 5.2% from the first quarter of 2023 primarily due to higher incentive and stock-based compensation expense and increased headcount, as well as higher fund management and administration costs. These increases were partly offset by the termination of the deferred consideration—gold payments obligation on May 10, 2023.

Other Income/(Expenses)

  • Interest expense increased 9.8% from the fourth quarter of 2023 primarily due to the recognition of a full quarter of imputed interest on our obligation payable to Gold Bullion Holdings (Jersey) Limited (“GBH”), a subsidiary of the World Gold Council, in connection with our repurchase in November 2023 of our Series C Non-Voting Convertible Preferred Stock. Interest expense increased 3.1% from the first quarter of 2023 due to the recognition of imputed interest on our obligation payable to GBH, partly offset by a lower level of debt outstanding.
  • Interest income increased 14.1% and 29.1% from the fourth quarter of 2023 and first quarter of 2023, respectively, due to a higher level of interest-earning assets.
  • Other gains and losses, net was a gain of $2.6 million for the first quarter of 2024. This quarter includes gains of $2.1 million and $0.1 million on our financial instruments and our investments, respectively. Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold exchange-traded products (“ETPs”), foreign exchange fluctuations and other miscellaneous items.

Income Taxes

  • Our effective income tax rate for the first quarter of 2024 was 20.5%, resulting in income tax expense of $5.7 million. The effective tax rate differs from the federal statutory rate of 21.0% primarily due to the decrease in the deferred tax asset valuation allowance on losses recognized on the Company’s financial instruments owned, tax windfalls associated with the vesting of stock-based compensation awards and a lower tax rate on foreign earnings. These items were partly offset by state and local income taxes.
  • Our adjusted effective income tax rate for the first quarter of 2024 was 24.9%(1).

CONFERENCE CALL DIAL-IN AND WEBCAST DETAILS

WisdomTree will discuss its results and operational highlights during a live webcast on Friday, April 26, 2024 at 11:00 a.m. ET, which can be accessed using the following link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=fQD4Npsv.

Participants also can dial in using the following numbers: (877) 407-9210 or (201) 689-8049. Click here to access the participant international toll-free access numbers. To avoid delays, we encourage participants to log in or dial into the conference call 10 minutes ahead of the scheduled start time. All earnings materials and the webcast can be accessed through WisdomTree’s investor relations website at https://ir.wisdomtree.com. A replay of the webcast will also be available shortly after the call.

About WisdomTree

WisdomTree is a global financial innovator, offering a well-diversified suite of exchange-traded products (ETPs), models, solutions and products leveraging blockchain technology. We empower investors and consumers to shape their future and support financial professionals to better serve their clients and grow their businesses. WisdomTree is leveraging the latest financial infrastructure to create products that provide access, transparency and an enhanced user experience. Building on our heritage of innovation, we are also developing and have launched next-generation digital products, services and structures, including digital or blockchain-enabled mutual funds and tokenized assets, as well as our blockchain-native digital wallet, WisdomTree Prime™.*

* The WisdomTree Prime digital wallet and digital asset services are made available through WisdomTree Digital Movement, Inc. (NMLS ID: 2372500) in select U.S. jurisdictions and may be limited where prohibited by law. Visit https://www.wisdomtreeprime.com or the WisdomTree Prime mobile app for more information.

WisdomTree currently has approximately $106.0 billion in assets under management globally.

For more information about WisdomTree and WisdomTree Prime™, visit: https://www.wisdomtree.com.

Please visit us on X, formerly known as Twitter, at @WisdomTreeNews.

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

PRODUCTS AND SERVICES AVAILABLE VIA WISDOMTREE PRIME:

NOT FDIC INSURED | NO BANK GUARANTEE | NOT A BANK DEPOSIT | MAY LOSE VALUE | NOT SIPC PROTECTED | NOT INSURED BY ANY GOVERNMENT AGENCY

The products and services available through the WisdomTree Prime app are not endorsed, indemnified or guaranteed by any regulatory agency.

_________________

(1)

See “Non-GAAP Financial Measurements.”

(2)

Earnings per share (“EPS”) is calculated pursuant to the two-class method as it results in a lower EPS amount as compared to the treasury stock method. In addition, the three months ended December 31, 2023 includes a gain of $7,966 recognized upon the repurchase of our Series C non-voting preferred shares convertible into 13.1 million shares of common stock from GBH, which is excluded from net income, but required to be added to net income to arrive at income available to common stockholders in the calculation of EPS. This gain is excluded from our EPS when computed on a non-GAAP basis.

WISDOMTREE, INC. AND SUBSIDIARIES

KEY OPERATING STATISTICS

(Unaudited)

 

 

 

Three Months Ended

 

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

GLOBAL ETPs ($ in millions)

 

 

 

 

 

 

 

 

 

 

 

Beginning of period assets

$

100,124

$

93,735

$

93,666

$

90,740

$

81,993

Inflows/(outflows)

 

1,990

 

(255)

 

1,983

 

2,327

 

6,341

Market appreciation/(depreciation)

 

5,116

 

6,644

 

(1,914)

 

599

 

2,406

End of period assets

$

107,230

$

100,124

$

93,735

$

93,666

$

90,740

Average assets during the period

$

102,435

$

96,547

$

95,743

$

91,578

$

87,508

Average advisory fee during the period

 

0.36%

 

0.36%

 

0.36%

 

0.36%

 

0.36%

Revenue days

 

91

 

92

 

92

 

91

 

90

Number of ETFs—end of the period

 

338

 

337

 

344

 

344

 

341

 

 

 

 

 

 

U.S. LISTED ETFs ($ in millions)

 

 

 

 

 

 

 

 

 

 

 

Beginning of period assets

$

72,486

$

68,018

$

65,903

$

61,283

$

55,973

Inflows/(outflows)

 

1,983

 

(67)

 

3,601

 

3,249

 

4,012

Market appreciation/(depreciation)

 

3,618

 

4,535

 

(1,486)

 

1,371

 

1,298

End of period assets

$

78,087

$

72,486

$

68,018

$

65,903

$

61,283

Average assets during the period

$

74,805

$

69,707

$

68,008

$

62,712

$

59,430

Number of ETFs—end of the period

 

77

 

76

 

80

 

80

 

80

 

 

 

 

 

 

EUROPEAN LISTED ETPs ($ in millions)

 

 

 

 

 

 

 

 

 

 

 

Beginning of period assets

$

27,638

$

25,717

$

27,763

$

29,457

$

26,020

Inflows/(outflows)

 

7

 

(188)

 

(1,618)

 

(922)

 

2,329

Market appreciation/(depreciation)

 

1,498

 

2,109

 

(428)

 

(772)

 

1,108

End of period assets

$

29,143

$

27,638

$

25,717

$

27,763

$

29,457

Average assets during the period

$

27,630

$

26,840

$

27,735

$

28,866

$

28,078

Number of ETPs—end of the period

 

261

 

261

 

264

 

264

 

261

 

 

 

 

 

 

PRODUCT CATEGORIES ($ in millions)

 

 

 

 

 

 

 

 

 

 

 

U.S. Equity

 

 

 

 

 

Beginning of period assets

$

29,156

$

25,643

$

26,001

$

24,534

$

24,112

Inflows/(outflows)

 

536

 

487

 

864

 

414

 

(149)

Market appreciation/(depreciation)

 

1,978

 

3,026

 

(1,222)

 

1,053

 

571

End of period assets

$

31,670

$

29,156

$

25,643

$

26,001

$

24,534

Average assets during the period

$

30,130

$

26,835

$

26,501

$

24,732

$

24,725

 

 

 

 

 

 

Commodity & Currency

 

 

 

 

 

Beginning of period assets

$

21,336

$

20,466

$

22,384

$

24,924

$

22,097

(Outflows)/inflows

 

(460)

 

(449)

 

(1,814)

 

(1,513)

 

2,003

Market appreciation/(depreciation)

 

1,068

 

1,319

 

(104)

 

(1,027)

 

824

End of period assets

$

21,944

$

21,336

$

20,466

$

22,384

$

24,924

Average assets during the period

$

20,838

$

21,254

$

22,278

$

24,033

$

23,807

 

 

 

 

 

 

Fixed Income

 

 

 

 

 

Beginning of period assets

$

21,197

$

21,797

$

20,215

$

18,708

$

15,273

(Outflows)/inflows

 

(14)

 

(715)

 

1,670

 

1,471

 

3,513

Market appreciation/(depreciation)

 

35

 

115

 

(88)

 

36

 

(78)

End of period assets

$

21,218

$

21,197

$

21,797

$

20,215

$

18,708

Average assets during the period

$

21,082

$

21,889

$

20,965

$

19,185

$

17,176

 

Three Months Ended

 

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

International Developed Market Equity

 

 

 

 

 

Beginning of period assets

$

15,103

$

13,902

$

13,423

$

11,433

$

10,195

Inflows

 

1,599

 

9

 

798

 

1,593

 

450

Market appreciation/(depreciation)

 

1,401

 

1,192

 

(319)

 

397

 

788

End of period assets

$

18,103

$

15,103

$

13,902

$

13,423

$

11,433

Average assets during the period

$

16,688

$

14,266

$

13,873

$

12,276

$

10,879

 

 

 

 

 

 

Emerging Market Equity

 

 

 

 

 

Beginning of period assets

$

10,726

$

9,569

$

9,191

$

8,811

$

8,116

Inflows

 

217

 

412

 

451

 

329

 

486

Market appreciation/(depreciation)

 

246

 

745

 

(73)

 

51

 

209

End of period assets

$

11,189

$

10,726

$

9,569

$

9,191

$

8,811

Average assets during the period

$

10,900

$

9,833

$

9,652

$

8,998

$

8,666

 

 

 

 

 

 

Leveraged & Inverse

 

 

 

 

 

Beginning of period assets

$

1,815

$

1,781

$

1,864

$

1,785

$

1,754

(Outflows)/inflows

 

(50)

 

(59)

 

(1)

 

12

 

43

Market appreciation/(depreciation)

 

63

 

93

 

(82)

 

67

 

(12)

End of period assets

$

1,828

$

1,815

$

1,781

$

1,864

$

1,785

Average assets during the period

$

1,792

$

1,803

$

1,894

$

1,798

$

1,757

 

 

 

 

 

 

Cryptocurrency

 

 

 

 

 

Beginning of period assets

$

414

$

243

$

248

$

239

$

136

Inflows/(outflows)

 

158

 

28

 

10

 

(1)

 

13

Market appreciation/(depreciation)

 

302

 

143

 

(15)

 

10

 

90

End of period assets

$

874

$

414

$

243

$

248

$

239

Average assets during the period

$

614

$

325

$

238

$

236

$

190

 

 

 

 

 

 

Alternatives

 

 

 

 

 

Beginning of period assets

$

377

$

334

$

340

$

306

$

310

Inflows/(outflows)

 

4

 

32

 

5

 

22

 

(18)

Market appreciation/(depreciation)

 

23

 

11

 

(11)

 

12

 

14

End of period assets

$

404

$

377

$

334

$

340

$

306

Average assets during the period

$

391

$

342

$

342

$

320

$

308

 

 

 

 

 

 

Headcount

 

300

 

303

 

299

 

291

 

279

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

Source: WisdomTree

WISDOMTREE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

March 31,

 

Dec 31,

 

2024

2023

 

(Unaudited)

 

ASSETS

 

 

Current assets:

 

 

Cash, cash equivalents and restricted cash

$

116,926

$

129,305

Financial instruments owned, at fair value

 

58,301

 

58,722

Accounts receivable

 

40,020

 

35,473

Prepaid expenses

 

6,491

 

5,258

Other current assets

 

1,284

 

1,036

Total current assets

 

223,022

 

229,794

Fixed assets, net

 

436

 

427

Securities held-to-maturity

 

224

 

230

Deferred tax assets, net

 

5,477

 

11,057

Investments

 

9,606

 

9,684

Right of use assets—operating leases

 

243

 

563

Goodwill

 

86,841

 

86,841

Intangible assets, net

 

605,347

 

605,082

Other noncurrent assets

 

456

 

459

Total assets

$

931,652

$

944,137

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

LIABILITIES

 

 

Current liabilities:

 

 

Fund management and administration payable

$

32,665

$

30,085

Compensation and benefits payable

 

9,624

 

38,111

Payable to Gold Bullion Holdings (Jersey) Limited (“GBH”)

 

14,804

 

14,804

Income taxes payable

 

1,140

 

3,866

Operating lease liabilities

 

251

 

578

Accounts payable and other liabilities

 

17,105

 

15,772

Total current liabilities

 

75,589

 

103,216

Convertible notes—long term

 

275,263

 

274,888

Payable to GBH

 

24,994

 

24,328

Total liabilities

 

375,846

 

402,432

Preferred stock:

 

 

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

 

132,569

 

132,569

STOCKHOLDERS’ EQUITY

 

Common stock, par value $0.01; 400,000 shares authorized:

 

 

Issued and outstanding: 151,819 and 150,330 at March 31, 2024 and December 31, 2023, respectively

 

1,518

 

1,503

Additional paid-in capital

 

309,768

 

312,440

Accumulated other comprehensive loss

 

(907)

 

(548)

Retained earnings

 

112,858

 

95,741

Total stockholders’ equity

 

423,237

 

409,136

Total liabilities and stockholders’ equity

$

931,652

$

944,137

 

 

 

WISDOMTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

Three Months Ended

 

March 31,

 

 

2024

 

2023

Cash flows from operating activities:

Net income

$

22,111

$

16,233

Adjustments to reconcile net income to net cash used in operating activities:

Advisory and license fees paid in gold, other precious metals and cryptocurrency

 

(11,727)

 

(12,760)

Deferred income taxes

 

5,640

 

4,783

Stock-based compensation

 

5,163

 

4,536

Gains on financial instruments owned, at fair value

 

(2,063)

 

(1,954)

Imputed interest on payable to GBH

 

666

 

Depreciation and amortization

 

383

 

109

Amortization of issuance costs—convertible notes

 

375

 

579

Amortization of right of use asset

 

324

 

319

Gains on investments

 

(123)

 

3,919

Gain on revaluation/termination of deferred consideration—gold payments

 

 

(20,592)

Loss on extinguishment of convertible notes

 

 

9,721

Impairments

 

 

4,900

Contractual gold payments

 

 

4,486

Other

 

 

(452)

Changes in operating assets and liabilities:

Accounts receivable

 

(4,243)

 

(4,791)

Prepaid expenses

 

(1,247)

 

(1,161)

Gold and other precious metals

 

11,561

 

8,332

Other assets

 

(79)

 

167

Fund management and administration payable

 

2,659

 

3,638

Compensation and benefits payable

 

(28,386)

 

(27,271)

Income taxes payable

 

(2,723)

 

(3,418)

Operating lease liabilities

 

(332)

 

(326)

Accounts payable and other liabilities

 

1,003

 

5,606

Net cash used in operating activities

 

(1,038)

 

(5,397)

Cash flows from investing activities:

Purchase of financial instruments owned, at fair value

 

(2,500)

 

(20,278)

Cash paid—software development

 

(592)

 

Purchase of fixed assets

 

(66)

 

(26)

Proceeds from the sale of financial instruments owned, at fair value

 

5,180

 

18,290

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

 

6

 

6

Net cash provided by/(used in) investing activities

 

2,028

 

(2,008)

Cash flows from financing activities:

Dividends paid

 

(4,997)

 

(4,821)

Shares repurchased

 

(7,820)

 

(3,384)

Repurchase of convertible notes

 

 

(124,317)

Issuance costs—convertible notes

 

 

(3,548)

Proceeds from the issuance of convertible notes

 

 

130,000

Net cash used in financing activities

 

(12,817)

 

(6,070)

(Decrease)/increase in cash flow due to changes in foreign exchange rate

 

(552)

 

473

Net decrease in cash, cash equivalents and restricted cash

 

(12,379)

 

(13,002)

Cash, cash equivalents and restricted cash—beginning of year

 

129,305

 

132,101

Cash, cash equivalents and restricted cash—end of period

$

116,926

$

119,099

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

2,769

$

1,422

Cash paid for interest

$

3,738

$

801

NON-GAAP FINANCIAL MEASUREMENTS

In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain non-GAAP information which we believe provides useful and meaningful information. Our management reviews these non-GAAP financial measurements when evaluating our financial performance and results of operations; therefore, we believe it is useful to provide information with respect to these non-GAAP measurements so as to share this perspective of management. Non-GAAP measurements do not have any standardized meaning, do not replace nor are superior to GAAP financial measurements and are unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measurements should be considered in the context with our GAAP results. The non-GAAP financial measurements contained in this press release include:

Adjusted Operating Income, Operating Expenses, Income Before Income Taxes, Income Tax Expense, Net Income and Diluted Earnings per Share

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

Gains or losses on financial instruments owned: We account for our financial instruments owned as trading securities, which requires these instruments to be measured at fair value with gains and losses reported in net income. We exclude these items when calculating our non-GAAP financial measurements as the gains and losses introduce volatility in earnings and are not core to our operating business.

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

Imputed interest on our payable to the Gold Bullion Holdings (Jersey) Limited (“GBH”): During the fourth quarter of 2023, we repurchased our Series C Non-Voting Convertible Preferred Stock, which was convertible into 13.1 million shares of WisdomTree common stock, from GBH, a subsidiary of the World Gold Council, for aggregate cash consideration of approximately $84.4 million. Under the terms of the transaction, we paid GBH $40.0 million on the closing date, with the remainder of the purchase price payable in equal annual installments on the first, second and third anniversaries of the closing date, with no requirement to pay interest. Under US GAAP, the obligation is recorded at its present value utilizing a market rate of interest on the closing date of 7.0% and the corresponding discount is amortized as interest expense pursuant to the effective interest method of accounting over the life of the obligation. We exclude this item when calculating our non-GAAP financial measurements as recognition of interest expense is non-cash and contrary to the stated terms of our obligation.

Other items: Unrealized gains and losses recognized on our investments, changes in deferred tax asset valuation allowance, expenses incurred in response to an activist campaign, unrealized gains or losses on the revaluation/termination of deferred consideration – gold payments which we terminated in the second quarter of 2023, loss on extinguishment of convertible notes, impairments, remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business and litigation expenses associated with certain provisions of our Stockholder Rights Agreement dated as of March 17, 2023, as amended, with Continental Stock Transfer & Trust Company, as Rights Agent, are excluded when calculating our non-GAAP financial measurements.

Adjusted Effective Income Tax Rate

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

Gross Margin and Gross Margin Percentage

We disclose our gross margin and gross margin percentage as non-GAAP financial measurements because we believe they provide investors with a consistent way to analyze the amount we retain after paying third-party service providers to operate our ETPs. These measures also assist us in analyzing the profitability of our products. We define gross margin as total operating revenues less fund management and administration expenses. Gross margin percentage is calculated as gross margin divided by total operating revenues.

 

GAAP to NON-GAAP RECONCILIATION (CONSOLIDATED)

(in thousands)

(Unaudited)

 

 

Three Months Ended

 

Adjusted Net Income and Diluted Earnings per Share:

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

 

 

 

 

 

 

Net income, as reported

$

22,111

$

19,077

$

12,984

$

54,252

$

16,233

(Deduct)/add back: (Gains)/losses on financial instruments owned, net of income taxes

 

(1,562)

 

(370)

 

1,479

 

762

 

(1,479)

(Deduct)/add back: Tax (windfalls)/shortfalls upon vesting of stock-based compensation awards

 

(699)

 

(6)

 

(18)

 

33

 

(185)

(Deduct)/add back: (Decrease)/increase in deferred tax asset valuation allowance on financial instruments owned and investments

(531)

 

(280)

 

 

 

1,234

 

 

(508)

1,667

Add back: Expenses incurred in response to an activist campaign, net of income taxes

 

526

 

3,720

732

Add back: Imputed interest on payable to GBH, net of income taxes

504

224

(Deduct)/add back: (Gains)/losses recognized on investments, net of income taxes

 

(93)

 

(336)

 

323

(2,346)

 

2,966

Add back: Litigation expenses associated with certain provisions of the Stockholder Rights Agreement, net of income taxes

 

 

 

367

Add back: Impairments, net of income taxes

 

 

257

 

2,046

 

 

3,710

Deduct: Gain on revaluation/termination of deferred consideration—gold payments

(41,361)

(20,592)

Add back: Loss on extinguishment of convertible notes, net of income taxes

 

 

 

9,623

Deduct: Remeasurement of contingent consideration—sale of former Canadian ETF business

(1,477)

Adjusted net income

$

20,256

$

18,566

$

18,048

$

14,919

$

11,198

Weighted average common shares—diluted

 

165,268

 

171,703

 

177,140

 

170,672

 

159,887

Adjusted earnings per share—diluted

$

0.12

$

0.11

$

0.10

$

0.09

$

0.07

 

Three Months Ended

 

Gross Margin and Gross Margin Percentage:

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

 

 

 

 

 

 

Operating revenues

$

96,838

$

90,844

$

90,423

$

85,724

$

82,044

Less: Fund management and administration

 

(19,962)

 

(18,445)

 

(18,023)

 

(17,727)

 

(17,153)

Gross margin

$

76,876

$

72,399

$

72,400

$

67,997

$

64,891

Gross margin percentage

 

79.4%

 

79.7%

 

80.1%

 

79.3%

 

79.1%

 

Three Months Ended

Adjusted Operating Income and Adjusted Operating

Income Margin:

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

 

 

 

 

 

 

Operating revenues

$

96,838

$

90,844

$

90,423

$

85,724

$

82,044

Operating income

$

27,950

$

26,035

$

26,705

$

18,181

$

16,571

Add back: Expenses incurred in response to an activist campaign

 

695

 

 

 

4,913

 

967

Adjusted operating income

$

28,645

$

26,035

$

26,705

$

23,094

$

17,538

Adjusted operating income margin

 

29.6%

 

28.7%

 

29.5%

 

26.9%

 

21.4%

 

Three Months Ended

 

Adjusted Total Operating Expenses:

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

 

 

 

 

 

 

Total operating expenses

$

68,888

$

64,809

$

63,718

$

67,543

$

65,473

Deduct: Expenses incurred in response to an activist campaign

 

(695)

 

 

 

(4,913)

 

(967)

Adjusted total operating expenses

$

68,193

$

64,809

$

63,718

$

62,630

$

64,506

 

Three Months Ended

 

Adjusted Income Before Income Taxes:

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

 

 

 

 

 

 

Income before income taxes

$

27,812

$

24,765

$

18,820

$

57,807

$

17,616

(Deduct)/add back: (Gains)/losses on financial instruments owned

 

(2,063)

 

(489)

 

1,953

 

1,007

 

(1,954)

Add back: Expenses incurred in response to an activist campaign

695

4,913

967

Add back: Imputed interest on payable to GBH

 

666

 

296

 

 

 

(Deduct)/add back: (Gains)/losses recognized on investments

 

(123)

 

(1,003)

 

426

 

(3,099)

 

3,918

Add back: Litigation expenses associated with certain provisions of the Stockholder Rights Agreement

 

 

 

 

485

 

Add back: Impairments

 

 

339

 

2,703

 

 

4,900

Deduct: Gain on revaluation/termination of deferred consideration—gold payments

 

 

 

 

(41,361)

 

(20,592)

Add back: Loss on extinguishment of convertible notes

 

 

 

 

 

9,721

Deduct: Remeasurement of contingent consideration—sale of former Canadian ETF business

 

 

 

 

 

(1,477)

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

 

 

 

 

 

1,386

Adjusted income before income taxes

$

26,987

$

23,908

$

23,902

$

19,752

$

14,485

 

Three Months Ended

Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate:

Mar. 31,

2024

Dec. 31,

2023

Sept. 30,

2023

June 30,

2023

Mar. 31,

2023

 

 

 

 

 

 

Adjusted income before income taxes (above)

$

26,987

$

23,908

$

23,902

$

19,752

$

14,485

Income tax expense

$

5,701

$

5,688

$

5,836

$

3,555

$

1,383

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

 

699

 

6

 

18

 

(33)

 

185

Add back/(deduct): Decrease/(increase) in deferred tax asset valuation allowance on financial instruments owned and investments

531

280

(1,234)

508

(1,667)

(Deduct)/add back: Tax (expense)/benefit arising from (gains)/losses on financial instruments owned

 

(501)

 

(119)

 

474

 

245

 

475)

Add back: Tax benefit arising from expenses incurred in response to an activist campaign

 

169

 

 

 

1,193

 

235

Add back: Tax benefit on imputed interest

 

162

 

72

 

 

 

(Deduct)/add back: Tax (expense)/benefit on gains and losses on investments

 

(30)

 

(667)

 

103

 

(753)

 

952

Add back: Tax benefit arising from litigation expenses associated with certain provisions of the Stockholder Rights Agreement

 

 

 

 

118

 

Add back: Tax benefit arising from impairments

 

 

82

 

657

 

 

1,190

Add back: Tax benefit arising from extinguishment of convertible notes

 

 

 

 

 

98

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

 

 

 

 

 

1,386

Adjusted income tax expense

$

6,731

$

5,342

$

5,854

$

4,833

$

3,287

Adjusted effective income tax rate

 

24.9%

 

22.3%

 

24.5%

 

24.5%

 

22.7%

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, the risks described below. If one or more of these or other risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this press release completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

In particular, forward-looking statements in this press release may include statements about:

  • anticipated trends, conditions and investor sentiment in the global markets and ETPs;
  • anticipated levels of inflows into and outflows out of our ETPs;
  • our ability to deliver favorable rates of return to investors;
  • competition in our business;
  • whether we will experience future growth;
  • our ability to develop new products and services and their potential for success;
  • our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;
  • our ability to successfully implement our strategy relating to digital assets and blockchain-enabled financial services, including WisdomTree Prime™, and achieve its objectives;
  • our ability to successfully operate and expand our business in non-U.S. markets;
  • the effect of laws and regulations that apply to our business; and
  • actions of activist stockholders.

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

  • declining prices of securities, gold and other precious metals and other commodities and changes in interest rates and general market conditions can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETP investors to sell their fund shares and trigger redemptions;
  • fluctuations in the amount and mix of our AUM, whether caused by disruptions in the financial markets or otherwise, including but not limited to events such as a pandemic or war, geopolitical conflicts, political events, acts of terrorism and other matters beyond our control, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity or increase the cost of borrowing upon a refinancing;
  • competitive pressures could reduce revenues and profit margins;
  • we derive a substantial portion of our revenues from a limited number of products, and, as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products and market-specific and political and economic risk;
  • a significant portion of our AUM is held in products with exposure to U.S. and international developed markets, and we therefore have exposure to domestic and foreign market conditions and are subject to currency exchange rate risks;
  • withdrawals or broad changes in investments in our ETPs by investors with significant positions may negatively impact revenues and operating margins;
  • we face increased operational, regulatory, financial and other risks as a result of conducting our business internationally, and as we expand our digital assets product offerings and services beyond our existing ETP business;
  • many of our ETPs have a limited track record, and poor investment performance could cause our revenues to decline;
  • we depend on third parties to provide many critical services to operate our business and our ETPs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETP investors; and
  • actions of activist stockholders against us, which have been costly and may be disruptive and cause uncertainty about the strategic direction of our business.

Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. For a more complete description of the risks noted above and other risks that could cause our actual results to differ from our current expectations, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

The forward-looking statements in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this press release.

Category: Business Update

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