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8-K - 8-K - WisdomTree Investments, Inc.d665420d8k.htm

Exhibit 99.1

WisdomTree Announces Fourth Quarter and Year End 2013 Results

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, NY – (GlobeNewswire) – January 31, 2014 – WisdomTree Investments, Inc. (NASDAQ: 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.”

 

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Summary Operating and Financial Highlights

 

     Three Months Ended     Change From  
     Dec.
31,
2013
    Sep. 30,
2013
    Dec. 31,
2012
    Sep. 30,
2013
    Dec. 31,
2012
 

Operating Highlights ($, in billions):

          

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     +1.0        +10.0   

Pre-tax margin

     38     38     22     —          +16.0   

 

     Year Ended        
     Dec. 31,
2013
    Dec. 31,
2012
    Change  

Operating Highlights ($, in billions):

      

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.

 

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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.

 

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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.

 

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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.

 

8


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;

 

9


    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.

 

10


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® 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     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