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| 8-K - FORM 8-K - WisdomTree Investments, Inc. | d616686d8k.htm |
Exhibit 99.1
WisdomTree Announces Third Quarter 2013 Results
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, NY – (GlobeNewswire) – October 25, 2013 – WisdomTree Investments, Inc. (NASDAQ: 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 $5.0 billion in the second quarter of 2013. WisdomTree’s market share of industry net inflows was 2.1% in the third quarter of 2013 as compared to 2.0% in the third quarter of 2012 and 32.2% in the second quarter of 2013. For the first nine months of 2013, WisdomTree’s market share was 9.8% as compared to 2.8% in the same period last year.
1
Summary Operating and Financial Highlights
| Three Months Ended | Change From | |||||||||||||||||||
| Sep. 30, | Jun. 30, | Sep. 30, | Jun. 30, | Sep. 30, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| Operating Highlights ($, in billions): |
||||||||||||||||||||
| 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 | ||||||||||||
| Sep. 30, | Sep. 30, | |||||||||||
| 2013 | 2012 | Change | ||||||||||
| Operating Highlights ($, in billions): |
||||||||||||
| 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. |
2
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%.
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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. |
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| • | 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.
5
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and 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. |
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| • | 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.
7
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® 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.
Contact Information:
WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com
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WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | % Change From | Nine Months Ended | ||||||||||||||||||||||||||||||
| Sept. 30, | Jun. 30, | Sept. 30, | Jun. 30, | Sept. 30, | Sept. 30, | Sept. 30, | % | |||||||||||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | 2013 | 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 | % | |||||||||||||||||||||
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| Total revenues |
39,630 | 37,331 | 21,661 | 6.2 | % | 83.0 | % | 106,302 | 61,224 | 73.6 | % | |||||||||||||||||||||
| Expenses |
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| 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 | ||||||||||||||||||||||||
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| Total expenses |
24,665 | 25,089 | 17,128 | -1.7 | % | 44.0 | % | 71,241 | 55,447 | 28.5 | % | |||||||||||||||||||||
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| 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 |
— | — | — | — | — | |||||||||||||||||||||||||||
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| Net income |
$ | 14,965 | $ | 12,242 | $ | 4,533 | 22.2 | % | n/a | $ | 35,061 | $ | 5,777 | n/a | ||||||||||||||||||
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| 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, | Jun. 30, | Sept. 30, | Sept. 30, | Sept. 30, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| Revenues |
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| ETF advisory fees |
$ | 39,437 | $ | 37,101 | $ | 21,440 | $ | 105,691 | $ | 60,645 | ||||||||||
| Other income |
193 | 230 | 221 | 611 | 579 | |||||||||||||||
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| Total revenues |
39,630 | 37,331 | 21,661 | 106,302 | 61,224 | |||||||||||||||
| Operating expenses |
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| 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 | |||||||||||||||
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| Total proforma operating expenses |
24,665 | 25,089 | 16,909 | 71,241 | 51,483 | |||||||||||||||
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| Proforma operating income |
14,965 | 12,242 | 4,752 | 35,061 | 9,741 | |||||||||||||||
| ETF shareholder proxy |
— | — | — | — | 3,264 | |||||||||||||||
| Patent litigation, net |
— | — | 219 | — | 700 | |||||||||||||||
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| Income before provision for income taxes |
14,965 | 12,242 | 4,533 | 35,061 | 5,777 | |||||||||||||||
| Provision for income taxes |
— | — | — | — | — | |||||||||||||||
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| Net income |
$ | 14,965 | $ | 12,242 | $ | 4,533 | $ | 35,061 | $ | 5,777 | ||||||||||
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WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
| September 30, | December 31, | |||||||
| 2013 | 2012 | |||||||
| (Unaudited) | ||||||||
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 87,114 | $ | 41,246 | ||||
| Accounts receivable |
16,254 | 9,348 | ||||||
| Other current assets |
1,975 | 1,273 | ||||||
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| Total current assets |
105,343 | 51,867 | ||||||
| Fixed assets, net |
1,349 | 480 | ||||||
| Investments |
11,603 | 11,036 | ||||||
| Other noncurrent assets |
50 | 42 | ||||||
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| Total assets |
$ | 118,345 | $ | 63,425 | ||||
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| 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 outstanding: 127,461 and 125,272 |
1,294 | 1,265 | ||||||
| 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, | September 30, | |||||||
| 2013 | 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, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 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, | Jun. 30, | Sept. 30, | Sept. 30, | Sept. 30, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 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 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||