WisdomTree Announces Third Quarter 2015 Results

Net Income Up 119.2% Year-Over-Year to $23.3 Million or Diluted EPS $0.17

Revenues Up 71.4% Year-Over-Year to $80.8 Million

U.S. Pre-Tax Margin of 52%; Consolidated Pre-Tax Margin of 49%

Declares $0.08 Quarterly Dividend and $0.25 Special Dividend

NEW YORK, Oct. 30, 2015 (GLOBE NEWSWIRE) — WisdomTree Investments, Inc. (NASDAQ:WETF), an exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset manager today reported net income of $23.3 million for the third quarter of 2015 or $0.17 per share on a fully diluted basis.  This compares to $10.6 million in the third quarter of 2014 and $24.2 million for the second quarter of 2015. 

WisdomTree CEO and President Jonathan Steinberg said, “WisdomTree generated strong financial results and achieved a solid third quarter despite a challenging market environment.  These results reflect our overall financial strength and demonstrate the profitable, scalable and highly efficient nature of our operating model.”

Mr. Steinberg continued, “WisdomTree is ideally positioned for the future of asset management, as we continue to enhance our global ETF platform through investments in headcount, product and client-facing services.  The structural shift to passive investing and ETFs is continuing, the appetite for investment innovations like Smart Beta and Currency Hedging is growing and a decisive move toward greater transparency in financial products and advice is more pronounced than ever.  These are all trends that will continue to be advantageous to WisdomTree going forward.”

Mr. Steinberg concluded, “In reflection of our growing financial resources, we are pleased to further enhance our capital management program through the addition of a $0.25 special dividend.  We first instituted a $0.08 regular quarterly dividend and a $100 million share buyback program in the third quarter of 2014.  Since that time we have achieved robust growth in assets, revenues and earnings while continuing to make investments for future growth.  We are demonstrating an ability to profitably grow the business, reinvest for future growth and return surplus capital to our shareholders.”   

Summary Operating and Financial Highlights

  Three Months Ended Change From
  Sept. 30, Jun. 30, Sept. 30, Jun. 30, Sept. 30,
Operating Highlights   2015     2015     2014     2015     2014  
U.S. listed ETFs ($, in billions):          
AUM $ 53.0   $ 61.3   $ 35.8     (13.5 %)   48.1 %
Net inflows/(outflows) ($ 0.7 ) $ 6.6   $ 0.7     n/a     n/a  
Average AUM $ 59.6   $ 61.2   $ 35.6     (2.6 %)   67.6 %
Average advisory fee   0.53 %   0.53 %   0.52 %       +0.01  
Market share of U.S. industry inflows   n/a     15.9 %   1.5 %   n/a     n/a  
           
European listed ETPs ($, in millions):          
AUM $ 695.7   $ 612.7   $ 123.2     13.6 %   464.7 %
Net inflows $ 258.8   $ 194.6   $ 19.2     33.0 %   1,246.3 %
Average advisory fee   0.69 %   0.68  %   0.79 %   +0.01     -0.1  
           
Financial Highlights ($, in millions, except per share amounts):          
Consolidated Results:          
Total revenues $ 80.8   $ 81.6   $ 47.1     (1.0 %)   71.4 %
Pre-tax income $ 39.5   $ 40.9   $ 20.3     (3.4 %)   95.2 %
Net income $ 23.3   $ 24.2   $ 10.6     (3.7 %)   119.2 %
Diluted earnings per share $ 0.17   $ 0.18   $ 0.08   $ -0.01   $ +0.09  
Pre-tax margin   49.0 %   50.2 %   43.0 %   -1.2     +6.0  
           
U.S. listed ETFs:          
Gross margin1 (non-GAAP)   87.2 %   86.4 %   82.2 %   +0.8     +5.0  
Pre-tax margin   52.3 %   53.2 %   46.6 %   -0.9     +5.7  
           
 
1 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
 

  Nine Months Ended
  Sept. 30, Sept. 30, Change
Operating Highlights   2015     2014    
U.S. listed ETFs ($, in billions):      
AUM $ 53.0   $ 35.8     48.1 %
Net inflows $ 19.5   $ 0.6     3,254.7 %
Average AUM $ 55.7   $ 34.5     61.4 %
Average advisory fee   0.53 %   0.52 %   +0.01  
Market share of U.S. industry inflows   13.8 %   0.5 %   +13.3  
       
European listed ETPs ($, in millions):      
AUM $ 695.7   $ 123.2     464.7 %
Net inflows $ 627.6   $ 36.9     1,601.7 %
Average advisory fee   0.70 %   0.80  %   -0.1  
       
Financial Highlights ($, in millions, except per share amounts):      
Consolidated Results:      
Total revenues $ 222.5   $ 134.2     65.8 %
Pre-tax income $ 101.5   $ 56.9     78.5 %
Net income $ 59.5   $ 51.4     15.7 %
Diluted earnings per share $ 0.43   $ 0.37     +0.06  
Pre-tax margin   45.6 %   42.4 %   +3.2  
       
U.S. listed ETFs:      
Gross margin2 (non-GAAP)   85.8 %   81.1 %   +4.7  
Pre-tax margin   48.8 %   44.9 %   +3.9  
       
 
2 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.
 

Recent Business Developments

  • On October 30, 2015, the Company announced it will enter into the Commodity ETF space through the acquisition of The GreenHaven Commodity Funds: the GreenHaven Continuous Commodity Index Fund (GCC) and the GreenHaven Coal Fund (TONS)
  • On October 29, 2015, the Company announced the launch of the WisdomTree Europe Local Recovery Fund (EZR), the WisdomTree Strong Dollar Emerging Markets Equity Fund (EMSD) and the WisdomTree Global ex-U.S. Hedged Real Estate Fund (HDRW)
    • WisdomTree Europe:
      • Listed the WisdomTree UK Equity Income UCITS ETF (WUKD) in London on the London Stock Exchange on October 8, 2015; and listed the WisdomTree Emerging Asia Equity Income UCITS ETF (DEMA) in London on the London Stock Exchange on October 12, 2015, and in Italy on Borsa Italiana and in Germany on Börse Xetra on October 15, 2015.
      • Listed two Boost ETPs in Italy on Borsa Italiana on October 19, 2015.

Assets Under Management and Net Inflows

U.S. listed ETF assets under management (“AUM”) was $53.0 billion at the end of the third quarter, up 35.0% for the year and up 48.1% from the third quarter of last year primarily due to record net inflows.  However, AUM declined 13.5% from the end of the second quarter of this year due to $7.6 billion of negative market movement as well as $0.7 billion of net outflows, primarily in our emerging market ETFs.

European listed AUM increased to $695.7 million at the end of the third quarter, up from the third quarter of last year and the second quarter of this year primarily due to net inflows, partially offset by negative market movement.

Performance

In evaluating the performance of our U.S. listed equity, fixed income and alternative ETFs against actively managed and index based mutual funds and ETFs, 91% of the $52.4 billion invested in our ETFs and 55% (33 of 60) of our ETFs outperformed their comparable Morningstar average since inception as of September 30, 2015.

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 71.4% from the third quarter of 2014 primarily due to higher average AUM from strong inflows. Total revenues declined 1.0% from the second quarter of 2015 primarily due to lower average AUM due to negative market movement in our U.S. listed ETFs. Revenues from our European listed ETPs increased to $1.3 million from $0.2 million in the third quarter of 2014 primarily due to higher inflows into our Boost branded ETPs.  The average advisory fee for our U.S. listed ETFs increased to 0.53% as compared to 0.52% for the third quarter of 2014 and was flat compared to the second quarter of 2015.

Margins

Gross margin for our U.S. listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 87.2% in the third quarter of 2015 as compared to 82.2% in the third quarter of 2014 primarily due to higher average AUM.  Gross margins increased from the second quarter of 2015 due to lower regulatory fees as a result of net outflows in the quarter.

Consolidated pre-tax margin was 49.0% in the third quarter of 2015.  Pre-tax margin for our U.S. listed ETFs was 52.3% on average U.S. listed AUM of $59.6 billion.

Expenses

Total expenses increased 53.5% from the third quarter of 2014 and 1.5% compared to the second quarter of 2015 to $41.2 million.  Included in the quarter was $3.3 million of expenses associated with our European listed ETPs. 

  • Compensation and benefits expense increased 94.3% from the third quarter of 2014 to $19.4 million due to higher accrued incentive compensation as a result of record setting inflow levels, increased headcount related expenses to support our growth and higher stock based compensation due to equity granted as part of incentive compensation.  Included in the quarter was $1.5 million in compensation costs for employees associated with our European listed ETPs.

    This expense increased 4.0% compared to the second quarter of 2015 primarily due to higher headcount related costs as part of our strategic growth initiatives.  Payroll related taxes were higher in the third quarter due to bonus payments and employees exercising stock options.  

  • Fund management and administration expense increased 24.3% from the third quarter of 2014 to $10.5 million.  This increase was primarily due to higher average AUM, inflow levels and number of U.S. ETFs.  We also incurred additional costs for our European listed ETPs as a result of launching our WisdomTree UCITS ETFs in the fourth quarter of 2014.  We had 79 U.S. listed ETFs and 74 European listed ETPs at the end of the quarter.

    This expense decreased 6.1% compared to the second quarter of 2015 primarily due to lower regulatory fees as a result of net outflows in the quarter.

  • Marketing and advertising expense increased 6.9% from the third quarter of 2014 primarily due to higher levels of advertising related activities to support our growth.  This expense was relatively unchanged compared to the second quarter of 2015.
     
  • Sales and business development expense increased 90.6% from the third quarter of 2014 and 17.4% from the second quarter of 2015 to $2.4 million primarily due to higher spending for sales related activities.
     
  • Professional and consulting fees increased 13.5% from the third quarter of 2014 to $1.6 million primarily due to advisory fees associated with our acquisition of Greenhaven ETFs as well as higher technology related initiatives.  This expense was relatively unchanged compared to the second quarter of 2015.
     
  • Occupancy, communications and equipment expense increased 34.1% compared to the third quarter of 2014 and 25.5% compared to the second quarter of 2015 primarily due to technology equipment spending initiatives and higher rent expense due to higher property taxes.    
     
  • Depreciation and amortization expense was also relatively unchanged at $0.2 million as compared to the third quarter of 2014 and second quarter of 2015.
     
  • Third-party sharing arrangements expense increased 159.4% compared to the third quarter of 2014 primarily due to fees for listing our ETFs on a third party platform.  This expense was relatively unchanged compared to the second quarter of 2015.
     
  • Acquisition contingent payment expense was $0.2 million in the third quarter of 2015.  This represents the current expense accrual for expected payments due to the former Boost shareholders related to our acquisition in April 2014 and is primarily driven by increased AUM derived from our European business. 
     
  • Other expenses increased 44.3% from the third quarter of 2014 and 7.4% from the second quarter of 2015 to $1.6 million primarily due to higher general and administrative spending.
     
  • Income tax expense was $16.2 million for the third quarter of 2015.  The effective tax rate on our U.S. listed ETF business was 39.1% in the third quarter.  The Company’s overall effective tax rate was 41.1% due to the non-deductibility of losses in our European ETP business.  These losses may be recognized in the future after the European business is profitable.

Balance Sheet

As of September 30, 2015, the Company had total assets of $292.4 million which consisted primarily of cash and cash equivalents and investments of $235.6 million.  There were approximately 136.7 million shares of common stock outstanding as of September 30, 2015. Fully diluted weighted average shares outstanding were 138.2 million for the third quarter.

Dividend and Share Buyback

The Company’s Board of Directors declared a quarterly cash dividend of $0.08 per share of the Company’s common stock.  The dividend will be paid on November 25, 2015 to stockholders of record as of the close of business on November 11, 2015. 

The Company’s Board of Directors also declared a special cash dividend of $0.25 per share of the Company’s common stock.  The dividend will be paid on November 25, 2015 to stockholders of record as of the close of business on November 11, 2015.

The Company purchased 329,635 shares for $8.4 million in the third quarter of 2015.

Conference Call 

WisdomTree will discuss its results and operational highlights during a conference call on Friday, October 30, 2015 at 9:00 a.m. ET. The call-in number will be (877) 303-7209.  Anyone outside the U.S. or Canada should call (970) 315-0420.  The slides used during the presentation will be available at http://ir.wisdomtree.com.  For those unable to join the conference call at the scheduled time, an audio replay will be available on http://ir.wisdomtree.com.

Cautionary Statement Regarding Forward-Looking Statements

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

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

  • anticipated trends, conditions and investor sentiment in the global markets and ETPs;
  • anticipated levels of inflows into and outflows out of our ETPs;
  • our ability to deliver favorable rates of return to investors;
  • our ability to develop new products and services;
  • our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;
  • our ability to successfully expand our business into non-U.S. markets;
  • timing of payment of our cash income taxes;
  • competition in our business; and
  • the effect of laws and regulations that apply to our business.

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

  • Recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
  • Challenging global market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing customers to sell their fund shares and trigger redemptions.
  • Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
  • We derive a substantial portion of our revenue from a limited number of products – in particular two funds, the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund – and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the AUM of those funds.
  • Most of our AUM are held in our U.S. listed ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
  • We derive a substantial portion of our revenue from international hedged equity ETFs and are exposed to the market-specific political and economic risks, as well as general investor sentiment regarding monetary policy of those markets.
  • We derive a substantial portion of our revenue from products invested in securities of Japanese and European companies and are exposed to the market-specific political and economic risks, as well as general investor sentiment regarding future growth of those markets and currency fluctuations.
  • We derive a significant portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
  • Many of our ETPs and ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
  • We depend on third parties to provide many critical services to operate our business and our ETPs and ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm our customers.           

Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. For a more complete description of the risks noted above and other risks that could cause our actual results to differ from our current expectations, please see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

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

About WisdomTree

WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (collectively, “WisdomTree”), is an exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset manager headquartered in New York.  WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies.  WisdomTree currently has approximately $58.1 billion in assets under management globally. 

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

   
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS   
(in thousands, except per share amounts)  
(Unaudited)  
                                 
  Three Months Ended   % Change From   Nine Months Ended  
  Sep. 30,   Jun. 30,   Sep. 30,   Jun. 30,   Sep. 30,   Sep. 30,   Sep. 30,   %  
    2015       2015       2014       2015       2014       2015       2014     Change  
                                 
Revenues:                                
Advisory fees $   80,520     $   81,320     $   46,942       -1.0 %     71.5 %   $   221,709     $   133,489       66.1 %  
Other income     233         239         172       -2.5 %     35.5 %       744         673       10.5 %  
                                 
Total revenues     80,753         81,559         47,114       -1.0 %     71.4 %       222,453         134,162       65.8 %  
                                 
Expenses:                                
Compensation and benefits     19,407         18,669         9,990       4.0 %     94.3 %       57,677         26,896       114.4 %  
Fund management and administration     10,519         11,208         8,465       -6.1 %     24.3 %       31,895         25,451       25.3 %  
Marketing and advertising     3,573         3,628         3,341       -1.5 %     6.9 %       10,277         8,645       18.9 %  
Sales and business development     2,438         2,076         1,279       17.4 %     90.6 %       6,414         4,307       48.9 %  
Professional and consulting fees     1,570         1,604         1,383       -2.1 %     13.5 %       4,637         5,018       -7.6 %  
Occupancy, communications and equipment     1,183         943         882       25.5 %     34.1 %       3,044         2,635       15.5 %  
Depreciation and amortization     253         223         207       13.5 %     22.2 %       696         600       16.0 %  
Third party sharing arrangements     485         497         187       -2.4 %     159.4 %       1,265         312       305.4 %  
Acquisition contingent payment     172         264         –        -34.8 %   n/a       693         –      n/a  
Other     1,620         1,509         1,123       7.4 %     44.3 %       4,364         3,429       27.3 %  
Total expenses     41,220         40,621         26,857       1.5 %     53.5 %       120,962         77,293       56.5 %  
                                                                 
Income before taxes     39,533         40,938         20,257       -3.4 %     95.2 %       101,491         56,869       78.5 %  
                                 
Income tax expense     16,245         16,766         9,634         –          –          41,969         5,440         –     
                                 
Net income $   23,288     $   24,172     $   10,623       -3.7 %     119.2 %   $   59,522     $   51,429       15.7 %  
                                 
                                 
                                 
Income before taxes per share – basic $   0.29     $   0.30     $   0.15             $   0.75     $   0.43        
                                 
Income before taxes per share – diluted $   0.29     $   0.30     $   0.15             $   0.74     $   0.41        
                                 
                                 
Net income per share – basic     0.17     $   0.18     $   0.08             $   0.44     $   0.39        
                                 
Net income per share – diluted     0.17     $   0.18     $   0.08             $   0.43     $   0.37        
                                 
Weighted average common shares – basic     136,582         135,895         131,778                 135,527         131,418        
                                 
Weighted average common shares – diluted     138,181         137,951         138,346                 137,833         138,476        
                                 

 

 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
                         
    U.S. European                  
    Listed Listed     U.S. Listed Business
    Business Business Total           % Change From
    Q3/15 Q3/15 Q3/15   Q3/15 Q2/15 Q3/14   Q2/15   Q3/14
Revenues                        
Advisory fees   $   79,242   $   1,278   $   80,520     $   79,242   $   80,409   $   46,659       -1.5 %     69.8 %
Other income       230       3       233         230       238       224       -3.4 %     2.7 %
                         
Total revenues       79,472       1,281       80,753         79,472       80,647       46,883       -1.5 %     69.5 %
                         
Expenses                        
Compensation and benefits       17,915       1,492       19,407         17,915       17,437       9,250       2.7 %     93.7 %
Fund management and administration       9,666       853       10,519         9,666       10,462       8,139       -7.6 %     18.8 %
Marketing and advertising       3,156       417       3,573         3,156       3,256       3,244       -3.1 %     -2.7 %
Sales and business development       2,419       19       2,438         2,419       2,048       1,185       18.1 %     104.1 %
Professional and consulting fees       1,414       156       1,570         1,414       1,541       945       -8.2 %     49.6 %
Occupancy, communications and equipment       1,079       104       1,183         1,079       889       809       21.4 %     33.4 %
Depreciation and amortization       249       4       253         249       221       206       12.7 %     20.9 %
Third party sharing arrangements       485       –       485         485       497       187       -2.4 %     159.4 %
Acquisition contingent payment       –       172       172         –       –       –     n/a   n/a
Other       1,517       103       1,620         1,517       1,413       1,088       7.4 %     39.4 %
Total expenses       37,900       3,320       41,220         37,900       37,764       25,053       0.4 %     51.3 %
                         
Income/(loss) before taxes       41,572       (2,039 )     39,533         41,572       42,883       21,830       -3.1 %     90.4 %
                         
Income tax expense/(benefit)       16,263       (18 )     16,245         16,263       16,785       9,662       -3.1 %     n/a  
                             
Net income/(loss)   $   25,309   $   (2,021 ) $   23,288     $   25,309   $   26,098   $   12,168       -3.0 %     108.0 %
                         
Pretax margin     52.3 %     49.0 %                
                         
Gross margin     87.2 %     86.4 %                
                         

 

   
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except per share amounts)  
   
  September 30,   December 31,  
    2015       2014    
  (Unaudited)      
         
ASSETS        
Current assets:        
Cash and cash equivalents $   211,992     $   165,284    
Accounts receivable   25,514       18,176    
Deferred tax asset, net   10,297         3,872    
Other current assets     2,958         1,708    
         
Total current assets     250,761         189,040    
         
Fixed assets, net     11,279         10,356    
Investments     23,651         13,990    
Deferred tax asset, net     4,326         5,618    
Goodwill     1,676         1,676    
Other noncurrent assets     723         71    
         
Total assets $   292,416     $   220,751    
         
         
LIABILITIES AND STOCKHOLDERS’ EQUITY      
LIABILITIES      
Current liabilities:        
Fund management and administration payable $   11,245     $   9,983    
Compensation and benefits payable     21,875         14,333    
Accounts payable and other liabilities     6,420         5,115    
         
Total current liabilities     39,540         29,431    
         
Other noncurrent liabilities:        
Acquisition payable     2,449         1,757    
Deferred rent payable     5,213         5,278    
         
Total liabilities     47,202         36,466    
         
         
         
STOCKHOLDERS’ EQUITY        
Common stock, par value $0.01; 250,000 shares authorized:        
issued: 138,398 and 134,959;     1,384         1,350    
outstanding: 136,727 and 133,445;        
Additional paid-in capital     243,410         209,216    
Accumulated other comprehensive loss     (7 )       (53 )  
Retained earnings/(accumulated deficit)     427         (26,228 )  
         
Total stockholders’ equity     245,214         184,285    
         
         
Total liabilities and stockholders’ equity $   292,416     $   220,751    
         

 

   
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(Unaudited)  
         
         
  Nine Months Ended  
   September 30,     September 30,   
    2015       2014    
Cash flows from operating activities:        
Net income $   59,522     $   51,429    
Non-cash items included in net income:        
Income tax expense     40,573         5,396    
Depreciation and amortization     696         600    
Stock-based compensation     7,878         6,122    
Deferred rent     (26 )       1,620    
Accretion to interest income and other     9         (76 )  
Changes in operating assets and liabilities:        
Accounts receivable     (7,253 )       2,049    
Other assets     (1,892 )       (811 )  
Deferred acquisition contingent payment     693         –     
Fund management and administration payable     1,216         (1,579 )  
Compensation and benefits payable     7,402         (7,510 )  
Accounts payable and other liabilities     1,330         (590 )  
         
Net cash provided by operating activities     110,148         56,650    
         
Cash flows from investing activities:        
Purchase of fixed assets     (1,606 )       (4,580 )  
Purchase of investments     (11,353 )       (1,384 )  
Cash acquired on acquisition     –          1,349    
Proceeds from the redemption of investments     1,681         868    
         
Net cash used in investing activities     (11,278 )       (3,747 )  
         
Cash flows from financing activities:        
Dividends paid     (32,867 )       –     
Shares repurchased     (23,689 )       (6,259 )  
Proceeds from exercise of stock options     4,471         341    
         
Net cash used in financing activities     (52,085 )       (5,918 )  
         
Decrease in cash flows due to changes in foreign exchange rate     (77 )       (14 )  
         
         
Net increase in cash and cash equivalents     46,708         46,971    
         
Cash and cash equivalents – beginning of period     165,284         104,316    
       
Cash and cash equivalents – end of period $   211,992     $   151,287    
         
Supplemental disclosure of cash flow information:        
         
Cash paid for taxes $   551     $   66    
         

 

                         
  WisdomTree Investments, Inc.                    
  Key Operating Statistics (Unaudited)                    
                         
                         
                         
      Three Months Ended   For the Nine Months Ended  
      September 30,   June 30,   September 30,   September 30,   September 30,  
        2015       2015       2014       2015       2014    
  U.S. LISTED ETFs                    
  Total ETFs (in millions)                    
    Beginning of period assets     61,299         55,758         35,500         39,281         34,884    
    Inflows/(outflows)     (661 )       6,598         748         19,457         580    
    Market appreciation/(depreciation)     (7,591 )       (1,057 )       (425 )       (5,691 )       359    
    End of period assets     53,047         61,299         35,823         53,047         35,823    
                         
    Average assets during the period     59,572         61,153         35,554         55,705         34,518    
    Revenue Days     92         91         92         273         273    
                         
  ETF Industry and Market Share (in billions)                    
    ETF industry net inflows     44.3         41.4         48.8         141.2         121.0    
    WisdomTree market share of industry inflows   n/a       15.9 %     1.5 %     13.8 %     0.5 %  
                         
  International Hedged Equity ETFs (in millions)                    
    Beginning of period assets     39,222         33,925         12,557         17,760         13,348    
    Inflows     751         6,083         799         20,274         285    
    Market appreciation/(depreciation)     (5,365 )       (786 )       615         (3,426 )       338    
    End of period assets     34,608         39,222         13,971         34,608         13,971    
                         
    Average assets during the period     39,061         38,548         12,654         34,056         12,631    
                         
  U.S. Equity ETFs (in millions)                    
    Beginning of period assets     9,245         9,748         8,052         9,390         7,181    
    Inflows/(outflows)     (259 )       (320 )       84         (285 )       494    
    Market appreciation/(depreciation)     (739 )       (183 )       (197 )       (858 )       264    
    End of period assets     8,247         9,245         7,939         8,247         7,939    
                         
    Average assets during the period     8,876         9,664         8,067         9,436         7,655    
                         
  International Developed Equity ETFs (in millions)                    
    Beginning of period assets     4,829         4,323         5,340         3,988         3,864    
    Inflows/(outflows)     21         497         (452 )       706         878    
    Market appreciation/(depreciation)     (456 )       9         (394 )       (300 )       (248 )  
    End of period assets     4,394         4,829         4,494         4,394         4,494    
                         
    Average assets during the period     4,714         4,790         5,016         4,538         4,833    
                         
  Emerging Markets Equity ETFs (in millions)                    
    Beginning of period assets     6,244         6,068         7,606         6,187         7,448    
    Inflows/(outflows)     (1,013 )       250         270         (928 )       26    
    Market appreciation/(depreciation)     (943 )       (74 )       (381 )       (971 )       21    
    End of period assets     4,288         6,244         7,495         4,288         7,495    
                         
    Average assets during the period     5,253         6,336         7,878         5,912         7,247    
                         
  Fixed Income ETFs (in millions)                    
    Beginning of period assets     956         904         1,376         1,152         1,906    
    Inflows/(outflows)     (85 )       67         69         (228 )       (515 )  
    Market depreciation     (77 )       (15 )       (66 )       (130 )       (12 )  
    End of period assets     794         956         1,379         794         1,379    
                         
    Average assets during the period     884         929         1,385         944         1,522    
                         
  Currency ETFs (in millions)                    
    Beginning of period assets     573         565         406         599         979    
    Inflows/(outflows)     (63 )       7         (35 )       (100 )       (605 )  
    Market appreciation/(depreciation)     (5 )       1         (9 )       6         (12 )  
    End of period assets     505         573         362         505         362    
                         
    Average assets during the period     562         651         380         595         468    
                         
  Alternative Strategy ETFs (in millions)                    
    Beginning of period assets     230         225         163         205         158    
    Inflows/(outflows)     (13 )       14         13         18         17    
    Market appreciation/(depreciation)     (6 )       (9 )       7         (12 )       8    
    End of period assets     211         230         183         211         183    
                         
    Average assets during the period     222         235         174         224         162    
                         
      Three Months Ended   For the Nine Months Ended  
      September 30,   June 30,   September 30,   September 30,   September 30,  
        2015       2015       2014       2015       2014    
  Average ETF assets during the period                    
    International hedged equity ETFs   66 %     63 %     36 %     61 %     37 %  
    U.S. equity ETFs   15 %     16 %     23 %     17 %     22 %  
    Emerging markets equity ETFs   9 %     10 %     22 %     11 %     21 %  
    International developed equity ETFs   8 %     8 %     14 %     8 %     14 %  
    Fixed income ETFs   1 %     2 %     4 %     2 %     4 %  
    Currency ETFs   1 %     1 %     1 %     1 %     1 %  
    Alternative strategy ETFs   0 %     0 %     0 %     0 %     1 %  
    Total   100 %     100 %     100 %     100 %     100 %  
                         
  Average ETF advisory fee during the period                    
    Alternative strategy ETFs   0.95 %     0.95 %     0.94 %     0.95 %     0.94 %  
    Emerging markets equity ETFs   0.72 %     0.71 %     0.68 %     0.71 %     0.67 %  
    International developed equity ETFs   0.56 %     0.56 %     0.56 %     0.56 %     0.56 %  
    International hedged equity ETFs   0.54 %     0.54 %     0.50 %     0.54 %     0.50 %  
    Fixed income ETFs   0.51 %     0.52 %     0.55 %     0.52 %     0.55 %  
    Currency ETFs   0.50 %     0.50 %     0.49 %     0.50 %     0.49 %  
    U.S. equity ETFs   0.35 %     0.35 %     0.35 %     0.35 %     0.35 %  
    Blended total   0.53 %     0.53 %     0.52 %     0.53 %     0.52 %  
                         
  Number of ETFs – end of the period                    
    International developed equity ETFs     18         18         17         18         17    
    International hedged equity ETFs     17         16         12         17         12    
    U.S. equity ETFs     15         13         13         15         13    
    Fixed income ETFs     13         12         12         13         12    
    Emerging markets equity ETFs     8         8         7         8         7    
    Currency ETFs     6         6         6         6         6    
    Alternative strategy ETFs     2         2         2         2         2    
    Total     79         75         69         79         69    
                         
  EUROPEAN LISTED ETPs                    
  Total ETPs (in thousands)                    
    Beginning of period assets     384,089         288,801         113,244         165,018         96,817    
    Inflows     191,044         50,331         19,224         386,757         36,882    
    Market appreciation/(depreciation)     (143,874 )       44,957         (9,258 )       (120,516 )       (10,489 )  
    End of period assets     431,259         384,089         123,210         431,259         123,210    
                         
  Average ETP advisory fee during the period   0.83 %     0.82 %     0.79 %     0.83 %     0.80 %  
  Number of ETPs – end of the period     62         57         42         62         42    
                         
  Total UCITS ETFs (in thousands)                    
    Beginning of period assets****     228,588         45,846             16,179        
    Inflows     67,770         144,234             240,855        
    Market appreciation/(depreciation)     (31,906 )       38,508             7,418        
    End of period assets     264,452         228,588             264,452        
                         
  Average ETP advisory fee during the period   0.45 %     0.44 %         0.44 %      
  Number of ETPs – end of the period     12         10             12        
                         
  U.S. headcount     128         117         97         128       97    
  Non-U.S. headcount     34         29         20         34       20    
                         
                         
  Note: Previously issued statistics may be restated due to trade adjustments                    
  Source: Investment Company Institute, Bloomberg, WisdomTree                    
                         
  ****UCITS first launched October 24, 2014                    
                         

 

 
Non-GAAP Financial Measurements
 
In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain non-GAAP information which we believe provides useful and meaningful information.  The non-GAAP financial measurements included in this release include gross margin, gross margin percentage and our operating results for our US and European listed ETF businesses. Our management reviews these non-GAAP financial measurements when evaluating our financial performance and results of operations; therefore, we believe it is useful to provide information with respect to these non-GAAP measurements so as to share this perspective of management.  Non-GAAP measurements do not have any standardized meaning, do not replace nor are superior to GAAP financial measurements and are unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measurements should be considered in the context with our GAAP results. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues.  We disclose the results of our US listed ETF business to allow investors to better compare our results to the prior year as in April 2014, we acquired Boost ETP, a UK based ETP sponsor.
 

 

   
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
GAAP to NON-GAAP RECONCILIATION  
(in thousands)  
(Unaudited)  
                       
           
  Three Months Ended      For the Nine Months Ended   
  Sep. 30,   Jun. 30,   Sep. 30,     Sep. 30,   Sep. 30,  
    2015       2015       2014         2015       2014    
GAAP total revenue $   80,753     $   81,559     $   47,114       $   222,453     $   134,162    
Fund management and administration     (10,519 )       (11,208 )       (8,465 )         (31,895 )       (25,451 )  
Third party sharing arrangements     (485 )       (497 )       (187 )         (1,265 )       (312 )  
                       
Gross margin $   69,749     $   69,854     $   38,462       $   189,293     $   108,399    
                       
Gross margin percentage   86.4 %     85.6 %     81.6 %       85.1 %     80.8 %  
                       
                       
U.S. listed ETFs:                      
                       
GAAP total revenue $   79,472     $   80,647     $   46,883       $   219,699     $   133,738    
Fund management and administration     (9,666 )       (10,462 )       (8,139 )         (29,861 )       (24,932 )  
Third party sharing arrangements     (485 )       (497 )       (187 )         (1,265 )       (312 )  
                       
Gross margin $   69,321     $   69,688     $   38,557       $   188,573     $   108,494    
                       
Gross margin percentage   87.2 %     86.4 %     82.2 %       85.8 %     81.1 %  
                       
CONTACT: Contact Information:
WisdomTree Investments, Inc.
Stuart Bell / Jessica Zaloom
+1.917.267.3702 / +1.917.267.3735
sbell@wisdomtree.com / jzaloom@wisdomtree.com