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WisdomTree Announces First Quarter 2020 Results – Diluted Loss Per Share of ($0.06), or Earnings Per Share of $0.07, as adjusted

NEW YORK, May 01, 2020 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (WETF) today reported financial results for the first quarter of 2020.

During the first quarter of 2020, market declines arising from the COVID-19 pandemic adversely impacted the market performance of most financial assets and sectors of the economy, including the AUM that we manage.  While we have experienced a recent decline in revenue arising from this volatility, we continue to operate without disruption.

$21.9 million of non-cash charges, including (i) a $19.7 million impairment charge related to our financial interests in AdvisorEngine in anticipation of our exit from this investment and (ii) a loss on revaluation of deferred consideration of $2.2 million.

($8.6) million net loss, or $11.21 million net income, as adjusted, see “Non-GAAP Financial Measurements” for additional information.    

$50.3 billion of ending AUM, a decrease of 20.9% resulting from the market declines associated with the COVID-19 pandemic.

$536 million of net outflows ($182 million of net inflows excluding HEDJ/DXJ), driven by outflows from our international developed market equity and U.S. equity products, partly offset by inflows into our commodity products.

0.43% average global advisory fee, a decrease of 1.0 basis point due to AUM mix shift.

$63.9 million of operating revenues, a decrease of 7.3% primarily due to lower average AUM and a lower average global advisory fee.

77.3% gross margin1, unchanged from the prior quarter.

24.5% operating income margin (25.1%1 as adjusted), a 3.0 point increase (3.1 point increase, as adjusted1) primarily due to reduced discretionary spending as a result of the COVID-19 pandemic.

$5.0 million of available capital used to pay down debt, in connection with our capital management strategy.

$0.03 quarterly dividend declared, payable on May 27, 2020 to stockholders of record as of the close of business May 13, 2020.

Update from Jonathan Steinberg, WisdomTree CEO


“The combination of our investments in technology over the past several years and our resilient business model allowed us to seamlessly work through these unprecedented circumstances with no compromise to our high standards of operational excellence and client service. We remain committed to helping our clients navigate these markets, manage their businesses and better serve their customers while protecting our number one asset, our employees.”

“Like all asset managers, market declines have impacted our business, but we are responsibly managing costs and WisdomTree remains differentiated, confident and well positioned for the future. March disrupted the strong momentum we had built in the business, but the setback was only temporary, and we remain focused on our 2020 plan of growth, performance and innovation.”

OPERATING AND FINANCIAL HIGHLIGHTS

  Three Months Ended
  Mar. 31,
2020
Dec. 31,
2019
Sept. 30,
2019
June 30,
2019
Mar. 31,
2019
Consolidated Operating Highlights ($, in billions):          
AUM  $   50.3   $   63.6   $   60.0   $     60.4   $   59.1  
Net inflows/(outflows)  $   (0.5 ) $   0.4   $     (0.7 ) $     0.3   $   0.6  
Average AUM  $   59.8   $   61.9    $   60.3   $     58.6   $   57.7  
Average advisory fee      0.43 %     0.44 %     0.44 %     0.45 %     0.46 %
           
           
Consolidated Financial Highlights ($, in millions, except per share amounts):          
Operating revenues  $   63.9   $   68.9   $   67.7    $   66.3   $   65.5  
Net (loss)/income  $    (8.6 ) $   (25.9 ) $   4.2    $   2.5   $   8.8  
Diluted (loss)/earnings per share  $   (0.06 ) $   (0.17 ) $   0.02   $   0.01   $   0.05  
Operating income margin     24.5 %     21.5 %     23.8 %     18.0 %     16.3 %
As Adjusted (Non-GAAP1):          
Gross Margin      77.3 %     77.3 %     77.7 %     76.5 %     76.8 %
Net income, as adjusted  $   11.2   $   10.1   $    10.6   $   7.8   $   7.7  
Diluted earnings per share, as adjusted  $   0.07   $   0.06   $   0.06   $   0.05   $   0.05  
Operating income margin, as adjusted      25.1 %     22.0 %     24.1 %     20.2 %     19.9 %
           

RECENT BUSINESS DEVELOPMENTS

 
Company News
  • In February 2020, we completed the sale of our Canadian ETF business to CI Financial Corp.
  • In March 2020, we were awarded ‘Best European Commodity ETF Provider’ at the ETF Express 2020 European Awards.
Product News
  • In February 2020, we launched two Siegel-WisdomTree Model Portfolios, in collaboration with Jeremy Siegel, WisdomTree’s Senior Investment Strategy Advisor and Professor of Finance at The Wharton School; and we launched the EURO trading line for the WisdomTree Bitcoin ETP. The WisdomTree Bitcoin ETP listed on Six, the Swiss stock exchange is now available in Euro (WBTC) and USD (BTCW) trading currencies.
  • In March 2020, we launched the WisdomTree Battery Solutions UCITS ETF (VOLT) on the London Stock Exchange, Borsa Italiana and Boerse Xetra. 


 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
  Mar. 31,
2020
Dec. 31,
2019
Sept. 30,
2019
June 30,
2019
Mar. 31,
2019
Operating Revenues:          
Advisory fees $ 62,950     $ 68,179     $ 67,006     $ 65,627     $ 64,840  
Other income   924       728       712       666       645  
Total revenues   63,874       68,907       67,718       66,293       65,485  
Operating Expenses:                                            
Compensation and benefits   17,295       19,280       18,880       21,300       21,301  
Fund management and administration   14,485       15,650       15,110       15,576       15,166  
Marketing and advertising   2,468       3,551       3,022       2,910       2,680  
Sales and business development   3,417       5,329       4,354       4,171       4,422  
Contractual gold payments   3,760       3,516       3,502       3,110       3,098  
Professional and consulting fees   1,273       1,604       1,259       1,296       1,482  
Occupancy, communications and equipment   1,551       1,587       1,549       1,548       1,618  
Depreciation and amortization   256       253       259       264       269  
Third-party distribution fees   1,355       1,146       1,503       1,919       2,400  
Acquisition and disposition-related costs   383       366       190       33       313  
Other   1,997       1,816       1,959       2,255       2,053  
Total operating expenses   48,240       54,098       51,587       54,382       54,802  
Operating income   15,634       14,809       16,131       11,911       10,683  
Other Income/(Expenses):          
Interest expense   (2,419 )     (2,606 )     (2,832 )     (2,910 )     (2,892 )
(Loss)/gain on revaluation of deferred consideration – gold payments   (2,208 )     (5,354 )     (6,306 )     (4,037 )     4,404  
Interest income   163       936       799       818       779  
Impairments   (19,672 )     (30,138 )                 (572 )
Other gains and losses, net   (2,507 )     (2 )     843       284       (4,627 )
(Loss)/income before income taxes   (11,009 )     (22,355 )     8,635       6,066       7,775  
Income tax (benefit)/expense   (2,371 )     3,525       4,483       3,587       (1,049 )
Net (loss)/income $ (8,638 )   $ (25,880 )   $ 4,152     $ 2,479     $ 8,824  
(Loss)/earnings per share – basic ($0.06 )   ($0.17 )   $0.02       $0.01       $0.05  
(Loss)/earnings per share – diluted ($0.06 )   ($0.17 )   $0.02       $0.01       $0.05  
Weighted average common shares – basic   152,519       151,948       151,897       151,818       151,625  
Weighted average common shares – diluted   152,519       151,948       167,163       167,249       166,811  
           
As Adjusted (Non-GAAP1)          
Compensation and benefits $ 17,295     $ 19,280     $ 18,880     $ 19,825     $ 19,281  
Operating expenses $ 47,857     $ 53,732     $ 51,397     $ 52,874     $ 52,469  
Operating income $ 16,017     $ 15,175     $ 16,321     $ 13,419     $ 13,016  
Income before income taxes $ 14,358     $ 13,503     $ 15,131     $ 11,611     $ 10,586  
Income tax expense $ 3,134     $ 3,396     $ 4,489     $ 3,798     $ 2,849  
Net income $ 11,224     $ 10,107     $ 10,642     $ 7,813     $ 7,737  
Earnings per share – diluted $ 0.07     $ 0.06     $ 0.06     $ 0.05     $ 0.05  
           

QUARTERLY HIGHLIGHTS

Operating Revenues

  • Operating revenues decreased 7.3% from the fourth quarter of 2019 primarily due to lower average AUM of our U.S. listed products arising from market depreciation and net outflows, as well as a 1 basis point decline in our average global advisory fee due to AUM mix shift.

  • Operating revenues decreased 2.5% from the first quarter of 2019 primarily due to lower average AUM of our U.S. listed products arising from market depreciation and net outflows, as well as a 3 basis point decline in our average global advisory fee due to AUM mix shift.  These declines were partly offset by higher average AUM of our International listed products.  

  • Our average global advisory fee was 0.43%, 0.44% and 0.46% during the first quarter of 2020, the fourth quarter of 2019 and the first quarter of 2019, respectively.

Operating Expenses

  • Operating expenses decreased 10.8% from the fourth quarter of 2019 due to lower discretionary spending as a result of the COVID-19 pandemic, including lower sales and business development costs and marketing expenses.  Fund management and administration costs were lower due to one-time costs recognized in the prior-period as we transitioned to new market making arrangements, as well as lower fund management and administration expenses resulting from the sale of our Canadian ETF business.  Compensation expenses declined due to lower incentive compensation accruals, partly offset by seasonally higher payroll taxes associated with bonus payments made in the first quarter of 2020. 

  • Operating expenses decreased 12.0% from the first quarter of 2019 largely due to lower compensation resulting from lower incentive compensation accruals as well as $2.0 million of severance expense included in the prior period, lower third-party distribution fees and lower sales and business development expenses.

Other Income/(Expenses)

  • We recognized a non-cash loss on revaluation of deferred consideration of ($2.2) million and ($5.4) million during the first quarter of 2020 and fourth quarter of 2019, respectively, and a non-cash gain on revaluation of deferred consideration of $4.4 million during the first quarter of 2019.  These (losses)/gains arose due to an increase/(decrease) in forward-looking gold prices when compared to the previous periods forward-looking gold curves.  The magnitude of any gain or loss recognized is highly correlated to the magnitude of the change in the forward-looking price of gold.

  • Interest expense decreased 7.2% from the fourth quarter of 2019 due to a lower level of debt outstanding.  During the first quarter of 2020, we used $5.0 million of available capital to pay down our debt in connection with our capital management strategy.

  • During the first quarter of 2020 and fourth quarter of 2019, we recognized a non-cash impairment charge of $19.7 million and $30.1 million, respectively, on our investment in AdvisorEngine.

  • Other gains and losses, net, includes charges of $6.0 million and $4.3 million for the first quarter of 2020 and the first quarter of 2019, respectively, arising from a release of a tax-related indemnification asset upon the expiration of the statute of limitations.  An equal and offsetting benefit has been recognized in income tax expense.  In addition, during the first quarter of 2020, we recognized a gain of $2.9 million associated with the sale of our Canadian ETF business to CI Financial Corp.

Income Taxes

  • Our effective income tax rate for the first quarter of 2020 of 21.5% resulted in an income tax benefit of $2.4 million. Our tax rate differs from the federal statutory tax rate of 21% primarily due a tax benefit of $6.0 million recognized in connection with the release of the tax-related indemnification asset described above, a $2.9 million non-taxable gain recognized upon sale of our Canadian ETF business and a lower tax rate on foreign earnings, partly offset by a valuation allowance on capital losses, tax shortfalls associated with the vesting and exercise of stock-based compensation awards and a non-deductible loss on revaluation of deferred consideration.
     
  • Our adjusted effective income tax rate was 21.8%1.

CONFERENCE CALL

WisdomTree will discuss its results and operational highlights during a conference call on Friday, May 1, 2020 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.

ABOUT WISDOMTREE

WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (collectively, “WisdomTree”), is an ETF and ETP sponsor and asset manager headquartered in New York. WisdomTree offers products covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. WisdomTree currently has approximately $55.2 billion in assets under management globally.

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.
________________________
1               See “Non-GAAP Financial Measurements.”


Contact Information:  
   
Investor Relations Media Relations
Jason Weyeneth, CFA Jessica Zaloom
+1.917.267.3858 +1.917.267.3735
jweyeneth@wisdomtree.com  jzaloom@wisdomtree.com 
   


 
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
  Three Months Ended
  Mar. 31,
2020
  Dec. 31,
2019
Sept. 30,
2019
June 30,
2019
Mar. 31,
2019
             
GLOBAL ETPs ($ in millions)            
             
Beginning of period assets $ 63,615     $ 59,981     $ 60,389     $ 59,112     $ 54,094  
Assets sold   (778 )                        
Inflows/(outflows)   (536 )     390       (698 )     343       561  
Market appreciation/(depreciation)   (11,958 )     3,247       471       934       4,544  
Fund closures   (20 )     (3 )     (181 )           (87 )
End of period assets $ 50,323     $ 63,615     $ 59,981     $ 60,389     $ 59,112  
Average assets during the period $ 59,819     $ 61,858     $ 60,306     $ 58,575     $ 57,683  
Average advisory fee during the period   0.43 %     0.44 %     0.44 %     0.45 %     0.46 %
Revenue days   91       92       92       91       90  
Number of ETFs – end of the period   331       349       348       536       534  
             
U.S. LISTED ETFs ($ in millions)            
             
Beginning of period assets $ 40,600     $ 37,592     $ 39,220     $ 39,366     $ 35,486  
Inflows/(outflows)   (1,273 )     563       (1,198 )     (166 )     147  
Market appreciation/(depreciation)   (10,424 )     2,448       (430 )     20       3,820  
Fund closures   (10 )     (3 )                 (87 )
End of period assets $ 28,893     $ 40,600     $ 37,592     $ 39,220     $ 39,366  
Average assets during the period $ 36,936     $ 39,094     $ 37,857     $ 38,945     $ 38,061  
Average advisory fee during the period   0.43 %     0.44 %     0.44 %     0.44 %     0.45 %
Number of ETFs – end of the period   77       80       80       79       77  
             
INTERNATIONAL LISTED ETPs ($ in millions)            
             
Beginning of period assets $ 23,015     $ 22,389     $ 21,169     $ 19,746     $ 18,608  
Assets sold   (778 )                        
Inflows/(outflows)   737       (173 )     500       509       414  
Market appreciation/(depreciation)   (1,534 )     799       901       914       724  
Fund closures   (10 )           (181 )            
End of period assets $ 21,430     $ 23,015     $ 22,389     $ 21,169     $ 19,746  
Average assets during the period $ 22,883     $ 22,764     $ 22,449     $ 19,630     $ 19,622  
Average advisory fee during the period   0.43 %     0.44 %     0.44 %     0.46 %     0.47 %
Number of ETPs – end of the period   254       269       268       457       457  
             
PRODUCT CATEGORIES ($ in millions)            
             
Commodity & Currency            
Beginning of period assets $ 20,326     $ 19,954     $ 18,445     $ 16,979     $ 16,212  
Inflows/(outflows)   780       (266 )     532       564       228  
Market appreciation/(depreciation)   (1,018 )     638       977       902       539  
End of period assets $ 20,088     $ 20,326     $ 19,954     $ 18,445     $ 16,979  
Average assets during the period $ 20,643     $ 20,146     $ 19,796     $ 16,912     $ 16,994  
             
U.S. Equity            
Beginning of period assets $ 17,746     $ 16,296     $ 15,903     $ 15,759     $ 13,222  
Inflows/(outflows)   (285 )     458       241       108       639  
Market appreciation/(depreciation)   (5,302 )     992       152       36       1,898  
End of period assets $ 12,159     $ 17,746     $ 16,296     $ 15,903     $ 15,759  
Average assets during the period $ 16,022     $ 16,983     $ 15,885     $ 15,690     $ 14,823  
             
International Developed Market Equity            
Beginning of period assets $ 13,089     $ 12,243     $ 13,391     $ 14,141     $ 14,309  
Inflows/(outflows)   (1,107 )     (139 )     (1,011 )     (741 )     (1,575 )
Market appreciation/(depreciation)   (3,300 )     985       (137 )     (9 )     1,407  
End of period assets $ 8,682     $ 13,089     $ 12,243     $ 13,391     $ 14,141  
Average assets during the period $ 11,515     $ 12,684     $ 12,453     $ 13,675     $ 14,280  
             


...
 
  Three Months Ended
  Mar. 31,
2020
  Dec. 31,
2019
Sept. 30,
2019
June 30,
2019
Mar. 31,
2019
             
Emerging Market Equity            
Beginning of period assets $ 6,494     $ 5,787     $ 6,062     $ 5,714     $ 5,275  
Inflows/(outflows)   59       193       173       355       (94 )
Market appreciation/(depreciation)   (1,887 )     514       (448 )     (7 )     533  
End of period assets $ 4,666     $ 6,494     $ 5,787     $ 6,062     $ 5,714  
Average assets during the period $ 6,002     $ 6,082     $ 5,824     $ 5,767     $ 5,492  
             
Fixed Income            
Beginning of period assets $ 3,633     $ 3,390     $ 4,009     $ 3,772     $ 2,345  
Inflows/(outflows)   17       212       (601 )     219       1,403  
Market appreciation/(depreciation)   (86 )     31       (18 )     18       24  
End of period assets $ 3,564     $ 3,633     $ 3,390     $ 4,009     $ 3,772  
Average assets during the period $ 3,697     $ 3,589     $ 3,792     $ 3,867     $ 3,268  
             
Leveraged & Inverse            
Beginning of period assets $ 1,058     $ 1,046     $ 1,019     $ 1,085     $ 981  
Inflows/(outflows)   (81 )     14       (1 )     (59 )     147