WisdomTree Announces First Quarter 2021 Results – Diluted Earnings Per Share of $0.09 ($0.08, as adjusted)

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NEW YORK, April 30, 2021 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (NASDAQ: WETF) today reported financial results for the first quarter of 2021.

$15.1 million net income ($12.51 million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.

$2.7 million of non-cash items, including a gain on revaluation of deferred consideration – gold payments of $2.8 million and other non-operating gains and charges.

$69.5 billion of ending AUM, an increase of 3.2% arising from net inflows and market appreciation.

$1.3 billion of net inflows, driven by inflows into our emerging markets equity products.

0.42% average global advisory fee, an increase of 1 basis point due to AUM mix shift.

$72.8 million of operating revenues, an increase of 8.6% due to higher average AUM and a higher average global advisory fee.

78.7% gross margin1, a 3.1 point increase from the previous quarter.

25.5% operating income margin, a 6.3 point increase primarily due to higher revenues.

$0.03 quarterly dividend declared, payable on May 26, 2021 to stockholders of record as of the close of business on May 12, 2021.

Update from Jarrett Lilien, WisdomTree President and COO


“We continue to deliver on our plan to invest in growth and our people, as well as drive efficiencies in the business. Our first quarter results make clear that we are executing well on all fronts. We generated strong organic growth with $1.3 billion of net inflows this quarter, and our assets under management are at a new record of just under $73 billion. Our thematic products, including cloud computing, artificial intelligence, battery technology and cybersecurity, have been a success with strong inflows across both our U.S. and European platforms.

Overall, top-line growth led to one of our best all-around quarters, with strong revenues and expanding operating margins and net income. Our team remains focused and dedicated to exceptional execution. This, and the breadth and diversified mix of our business, gives us confidence that our momentum is sustainable.”

Update from Jonathan Steinberg, WisdomTree CEO


“The takeaways from this quarter are simple: continued growth, momentum and strong execution. As I have said before, WisdomTree is operating with even greater speed, efficiency and inclusion in our new, remote-first orientation. Our results are clear evidence of this.

In the crypto asset space, we have been laser focused on execution. In March, we filed for the WisdomTree Bitcoin Trust with the SEC. Earlier this month, we cross-listed our European-domiciled WisdomTree Bitcoin ETP (BTCW) in Germany, appointed Coinbase Custody as a custodian and received approval to passport BTCW in the European Union (EU), allowing for a wider audience to access and invest in the product. Just yesterday, we launched a physically backed Ethereum ETP (ETHW) in Europe.

Additionally, we’ve made advancements in our blockchain initiatives. In the U.S., we filed for the WisdomTree Digital Short-Term Treasury Fund with the SEC, leveraging Securrency’s technology. We also invested in Securrency’s Series B funding round, as we believe their team is uniquely suited to lead in blockchain-based fintech and regtech going forward. Our ongoing financial commitment reaffirms the strength of our support and partnership in shaping the future of financial services with Securrency and our fellow investors.”

OPERATING AND FINANCIAL HIGHLIGHTS

Three Months Ended

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

Consolidated Operating Highlights ($ in billions):

AUM

$

69.5

$

67.4

$

60.7

$

57.7

$

50.3

Net inflows/(outflows)

$

1.3

$

0.9

$

(0.5

)

$

0.1

$

(0.5

)

Average AUM

$

69.6

$

64.1

$

61.2

$

55.7

$

60.2

Average advisory fee

0.42

%

0.41

%

0.42

%

0.41

%

0.42

%

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

Operating revenues

$

72.8

$

67.1

$

64.6

$

58.1

$

63.9

Net income/(loss)

$

15.1

$

(13.5

)

$

(0.3

)

$

(13.3

)

$

(8.6

)

Diluted earnings/(loss) per share

$

0.09

$

(0.10

)

$

(0.01

)

$

(0.09

)

$

(0.06

)

Operating income margin

25.5

%

19.2

%

22.8

%

20.3

%

24.5

%

As Adjusted (Non-GAAP1):

Gross margin

78.7

%

75.6

%

76.5

%

75.1

%

77.3

%

Net income, as adjusted

$

12.5

$

9.2

$

11.0

$

8.5

$

11.2

Diluted earnings per share, as adjusted

$

0.08

$

0.06

$

0.07

$

0.05

$

0.07

Operating income margin, as adjusted

25.5

%

19.2

%

22.8

%

20.4

%

25.1

%

RECENT BUSINESS DEVELOPMENTS


Company News

  • In March 2021, we filed for the WisdomTree Bitcoin Trust with the SEC; and we invested in Securrency’s Series B funding round.

  • In April 2021, we filed for the WisdomTree Digital Short-Term Treasury Fund with the SEC, leveraging Securrency’s blockchain-based financial technology.

Product News

  • In February 2021, we launched tax-smart WisdomTree Model Portfolios technology, in collaboration with 55ip, a financial technology company; we listed the WisdomTree Core Physical Gold ETP (WGLD) on Borsa Italiana; we launched the WisdomTree European Union Bond UCITS ETF (EUBO) on Borsa Italiana and Börse Xetra; we launched the WisdomTree Energy Enhanced - EUR Daily Hedged ETC (WNRG) on Börse Xetra; and 16 WisdomTree commodity ETPs began tracking Solactive and Bloomberg Commodity (BCOM) indices in a move to make the products more immune to extreme volatility.

  • In March 2021, we listed the WisdomTree Core Physical Gold ETP (WGLD) on Börse Xetra along with a new trading line on the London Stock Exchange; we listed the WisdomTree Cyber Security UCITS ETF on SIX, the Swiss stock exchange, following a global launch in December 2020; we appointed Coinbase Custody as a custodian for the WisdomTree Bitcoin ETP (BTCW); and we received approval from the Swedish regulator to passport the WisdomTree Bitcoin ETP in the EU countries of Austria, Belgium, Denmark, Finland, France, Germany, Italy, Ireland, Luxembourg, Netherlands, Norway, Spain and Sweden.

  • In April 2021, we listed the WisdomTree Bitcoin ETP on Börse Xetra; and we expanded the range of cryptocurrency ETPs available to European investors with the launch of the WisdomTree Ethereum ETP (ETHW), now listed on SIX, the Swiss Stock Exchange and Börse Xetra. The ETP is also passported across the EU.

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

Three Months Ended

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

Operating Revenues:

Advisory fees

$

71,616

$

66,105

$

63,919

$

57,208

$

62,950

Other income

1,214

954

721

918

924

Total revenues

72,830

67,059

64,640

58,126

63,874

Operating Expenses:

Compensation and benefits

22,627

20,827

19,098

17,455

17,295

Fund management and administration

15,521

16,350

15,219

14,461

14,485

Marketing and advertising

3,006

3,715

2,996

1,949

2,468

Sales and business development

2,145

2,595

2,386

2,181

3,417

Contractual gold payments

4,270

4,449

4,539

4,063

3,760

Professional fees

2,013

1,322

950

1,357

1,273

Occupancy, communications and equipment

1,475

1,622

1,611

1,643

1,551

Depreciation and amortization

252

261

253

251

256

Third-party distribution fees

1,343

1,291

1,233

1,340

1,355

Acquisition and disposition-related costs

33

383

Other

1,571

1,720

1,611

1,596

1,997

Total operating expenses

54,223

54,152

49,896

46,329

48,240

Operating income

18,607

12,907

14,744

11,797

15,634

Other Income/(Expenses):

Interest expense

(2,296

)

(2,694

)

(2,511

)

(2,044

)

(2,419

)

Gain/(loss) on revaluation of deferred consideration – gold payments

2,832

(22,385

)

(8,870

)

(23,358

)

(2,208

)

Interest income

231

351

111

119

163

Impairments

(303

)

(3,080

)

(19,672

)

Loss on extinguishment of debt

(2,387

)

Other gains and losses, net

(5,893

)

524

744

1,819

(2,507

)

Income/(loss) before income taxes

13,178

(11,297

)

1,138

(14,054

)

(11,009

)

Income tax (benefit)/expense

(1,969

)

2,200

1,408

(804

)

(2,371

)

Net income/(loss)

$

15,147

$

(13,497

)

$

(270

)

$

(13,250

)

$

(8,638

)

Earnings/(loss) per share – basic

$0.092

($0.10)2

($0.01)2

($0.09)

($0.06)

Earnings/(loss) per share – diluted

$0.09

($0.10)2

($0.01)2

($0.09)

($0.06)

Weighted average common shares – basic

145,649

145,096

145,564

151,623

152,519

Weighted average common shares – diluted

161,831

145,096

145,564

151,623

152,519

As Adjusted (Non-GAAP1)

Total operating expenses

$

54,223

$

54,152

$

49,896

$

46,296

$

47,857

Operating income

$

18,607

$

12,907

$

14,744

$

11,830

$

16,017

Income before income taxes

$

15,583

$

11,504

$

13,242

$

10,911

$

14,358

Income tax expense

$

3,079

$

2,281

$

2,205

$

2,417

$

3,134

Net income

$

12,504

$

9,223

$

11,037

$

8,494

$

11,224

Earnings per share – diluted

$

0.08

$

0.06

$

0.07

$

0.05

$

0.07

QUARTERLY HIGHLIGHTS

Operating Revenues

  • Operating revenues increased 8.6% and 14.0% from the fourth quarter of 2020 and first quarter of 2020, respectively, due to higher average global AUM arising from market appreciation and net inflows.

  • Our average global advisory fee was 0.42%, 0.41% and 0.42% during the first quarter of 2021, the fourth quarter of 2020 and the first quarter of 2020, respectively.

Operating Expenses

  • Operating expenses were essentially unchanged from the fourth quarter of 2020. Higher compensation, due to seasonal payroll taxes, and higher professional fees from our digital assets initiative, were offset by lower fund management and administration costs as the prior quarter included costs arising from Brexit and fund rebalances, as well as lower marketing and sales and business development expenses.

  • Operating expenses increased 12.4% from the first quarter of 2020 due to higher incentive compensation, fund management and administration costs, professional fees, contractual gold payments and marketing expenses, partly offset by lower sales and business development and other expenses.

Other Income/(Expenses)

  • Interest expense declined 14.8% from the fourth quarter of 2020 upon the early adoption of a new accounting standard applicable to our convertible notes, which became effective January 1, 2021 and eliminated the requirement to bifurcate certain conversion options embedded in convertible instruments. Previously, the discount arising from bifurcation was amortized as interest expense over the life of the instrument. Interest expense declined 5.1% from the first quarter of 2020 primarily due to lower levels of debt outstanding.

  • We recognized a non-cash gain on revaluation of deferred consideration of $2.8 million during the first quarter of 2021. The gain was due to a decline in spot gold prices, partly offset by a steepening of the forward-looking gold curve. The magnitude of any gain or loss recognized is highly correlated to the magnitude of the change in the forward-looking price of gold.

  • During the quarter, we recognized an impairment charge of $0.3 million upon exiting our London office.

  • Other net losses were $5.9 million for the quarter. The quarter includes the release of a tax-related indemnification asset of $5.2 million upon the expiration of the statute of limitations related to our acquisition of ETFS in 2018. An equal and offsetting benefit has been recognized in income tax expense. The quarter also includes an unrealized gain of $0.2 million recognized on our investment in Securrency due to its recent capital raise. Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations, securities owned and other miscellaneous items.

Income Taxes

  • We recorded an income tax benefit of $2.0 million in the quarter primarily due to the release of the tax-related indemnification asset described above, a non-taxable gain on revaluation of deferred consideration and a lower tax rate on foreign earnings, partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation awards.

  • Our adjusted effective income tax rate was 19.8%1.

CONFERENCE CALL

WisdomTree will discuss its results and operational highlights during a conference call on Friday, April 30, 2021 at 9:00 a.m. ET. The call-in number is (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 $72.9 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.”

2

Earnings/(loss) per share (“EPS”) is calculated pursuant to the two-class method as it results in a lower EPS amount as compared to the treasury stock method.

Contact Information:

Corporate Communications
Jessica Zaloom
+1.917.267.3735
jzaloom@wisdomtree.com

WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)

Three Months Ended

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

GLOBAL ETPs ($ in millions)

Beginning of period assets

$

67,392

$

60,710

$

57,666

$

50,347

$

63,615

Assets sold

(778

)

Inflows/(outflows)

1,279

881

(477

)

126

(536

)

Market appreciation/(depreciation)

866

5,898

3,567

7,489

(11,934

)

Fund closures

(97

)

(46

)

(296

)

(20

)

End of period assets

$

69,537

$

67,392

$

60,710

$

57,666

$

50,347

Average assets during the period

$

69,552

$

64,125

$

61,216

$

55,708

$

60,189

Average advisory fee during the period

0.42

%

0.41

%

0.42

%

0.41

%

0.42

%

Revenue days

90

92

92

91

91

Number of ETFs – end of the period

313

309

305

311

331

U.S. LISTED ETFs ($ in millions)

Beginning of period assets

$

38,517

$

33,310

$

31,362

$

28,920

$

40,600

Inflows/(outflows)

1,343

919

575

(1,474

)

(1,273

)

Market appreciation/(depreciation)

2,303

4,385

1,373

4,030

(10,397

)

Fund closures

(97

)

(114

)

(10

)

End of period assets

$

42,163

$

38,517

$

33,310

$

31,362

$

28,920

Average assets during the period

$

40,673

$

36,002

$

32,984

$

30,626

$

36,940

Average advisory fee during the period

0.40

%

0.40

%

0.41

%

0.41

%

0.43

%

Number of ETFs – end of the period

68

67

67

67

77

INTERNATIONAL LISTED ETPs ($ in millions)

Beginning of period assets

$

28,875

$

27,400

$

26,304

$

21,427

$

23,015

Assets sold

(778

)

Inflows/(outflows)

(64

)

(38

)

(1,052

)

1,600

737

Market appreciation/(depreciation)

(1,437

)

1,513

2,194

3,459

(1,537

)

Fund closures

(46

)

(182

)

(10

)

End of period assets

$

27,374

$

28,875

$

27,400

$

26,304

$

21,427

Average assets during the period

$

28,879

$

28,123

$

28,232

$

25,082

$

23,249

Average advisory fee during the period

0.44

%

0.42

%

0.42

%

0.41

%

0.40

%

Number of ETPs – end of the period

245

242

238

244

254

PRODUCT CATEGORIES ($ in millions)

Commodity & Currency

Beginning of period assets

$

26,047

$

25,122

$

24,191

$

19,748

$

19,947

Inflows/(outflows)

(624

)

(254

)

(1,106

)

1,325

622

Market appreciation/(depreciation)

(1,389

)

1,179

2,037

3,118

(821

)

End of period assets

$

24,034

$

26,047

$

25,122

$

24,191

$

19,748

Average assets during the period

$

25,555

$

25,676

$

25,878

$

22,964

$

20,302

U.S. Equity

Beginning of period assets

$

18,367

$

15,612

$

13,997

$

12,151

$

17,732

Inflows/(outflows)

218

395

897

(241

)

(285

)

Market appreciation/(depreciation)

1,434

2,360

718

2,087

(5,296

)

End of period assets

$

20,019

$

18,367

$

15,612

$

13,997

$

12,151

Average assets during the period

$

19,293

$

17,050

$

15,141

$

13,302

$

16,011

Emerging Market Equity

Beginning of period assets

$

8,539

$

5,979

$

5,413

$

4,600

$

6,400

Inflows/(outflows)

1,662

1,399

257

(25

)

69

Market appreciation/(depreciation)

276

1,161

309

838

(1,869

)

End of period assets

$

10,477

$

8,539

$

5,979

$

5,413

$

4,600

Average assets during the period

$

9,871

$

7,249

$

5,917

$

5,129

$

5,919


Three Months Ended

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

International Developed Market Equity

Beginning of period assets

$

9,414

$

8,621

$

8,839

$

8,659

$

13,011

Inflows/(outflows)

17

(191

)

(587

)

(965

)

(1,097

)

Market appreciation/(depreciation)

560

984

369

1,145

(3,255

)

End of period assets

$

9,991

$

9,414

$

8,621

$

8,839

$

8,659

Average assets during the period

$

9,793

$

8,930

$

8,835

$

8,779

$

11,453

Fixed Income

Beginning of period assets

$

3,324

$

3,630

$

3,530

$

3,527

$

3,585

Inflows/(outflows)

10

(330

)

76

(53

)

21

Market appreciation/(depreciation)

(73

)

24

24

56

(79

)

End of period assets

$

3,261

$

3,324

$

3,630

$

3,530

$

3,527

Average assets during the period

$

3,253

$

3,472

$

3,605

$

3,523

$

3,653

Leveraged & Inverse

Beginning of period assets

$

1,487

$

1,430

$

1,350

$

896

$

1,138

Inflows/(outflows)

(4

)

(118

)

(9

)

312

12

Market appreciation/(depreciation)

45

175

89

142

(254

)

End of period assets

$

1,528

$

1,487

$

1,430

$

1,350

$

896

Average assets during the period

$

1,564

$

1,436

$

1,482

$

1,169

$

1,147

Alternatives

Beginning of period assets

$

214

$

229

$

225

$

244

$

358

Inflows/(outflows)

(26

)

(4

)

(29

)

(66

)

Market appreciation/(depreciation)

13

11

8

10

)

End of period assets

$

227

$

214

$

229

$

225

$

244

Average assets during the period

$

223

$

224

$

226

$

226

$

328

Closed ETPs

Beginning of period assets

$

$

87

$

121

$

522

$

1,444

Assets sold

(778

)

Inflows/(outflows)

6

(1

)

(198

)

188

Market appreciation/(depreciation)

4

13

93

(312

)

Fund closures .

(97

)

(46

)

(296

)

(20

)

End of period assets

$

$

$

87

$

121

$

522

Average assets during the period

$

$

88

$

132

$

616

$

1,376

Headcount

227

217

211

214

210

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

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

Mar. 31,
2021

Dec. 31,
2020

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

62,302

$

73,425

Securities owned, at fair value

34,771

34,895

Accounts receivable

30,341

29,455

Income taxes receivable

126

Prepaid expenses

4,187

3,827

Other current assets

237

259

Total current assets

131,964

141,861

Fixed assets, net

7,432

7,579

Securities held-to-maturity

411

451

Deferred tax assets, net

6,215

8,063

Investments

13,849

8,112

Right of use assets – operating leases

15,841

16,327

Goodwill

85,856

85,856

Intangible assets

601,247

601,247

Other noncurrent assets

180

180

Total assets

$

862,995

$

869,676

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Current liabilities:

Fund management and administration payable

$

17,980

$

19,564

Compensation and benefits payable

8,568

22,803

Deferred consideration – gold payments

15,637

17,374

Operating lease liabilities

2,958

3,135

Income taxes payable

916

Accounts payable and other liabilities

11,415

10,207

Total current liabilities

56,558

73,999

Convertible notes

171,163

166,646

Deferred consideration – gold payments

211,509

212,763

Operating lease liabilities

17,012

17,434

Total liabilities

456,242

470,842

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

132,569

132,569

STOCKHOLDERS’ EQUITY

Common stock, par value $0.01; 250,000 shares authorized:

Issued and outstanding: 149,811 and 148,716 at March 31, 2021 and December 31, 2020, respectively .

1,498

1,487

Additional paid-in capital

314,274

317,075

Accumulated other comprehensive income

985

1,102

Accumulated deficit .

(42,573

)

(53,399

)

Total stockholders’ equity

274,184

266,265

Total liabilities and stockholders’ equity

$

862,995

$

869,676

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

Three Months Ended

Mar. 31,
2021

Mar. 31,
2020

Cash flows from operating activities:

Net income/(loss)

$

15,147

$

(8,638

)

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

Advisory fees received in gold, other precious metals and bitcoin

(19,757

)

(13,860

)

Contractual gold payments

4,270

3,760

Stock-based compensation

3,143

3,239

Deferred income taxes

2,904

4,526

(Gain)/loss on revaluation of deferred consideration – gold payments .

(2,832

)

2,208

Amortization of right of use asset

697

798

Amortization of issuance costs - convertible notes

429

Impairments

303

19,672

Depreciation and amortization

252

256

Gain on sale – Canadian ETF business

(2,877

)

Amortization of issuance costs - former credit facility

723

Other

(235

)

(31

)

Changes in operating assets and liabilities:

Securities owned, at fair value

124

(2,942

)

Accounts receivable

290

5,850

Prepaid expenses

(362

)

(616

)

Gold, other precious metals and bitcoin

14,166

9,838

Other assets

5

139

Fund management and administration payable

(1,470

)

537

Compensation and benefits payable

(14,245

)

(22,688

)

Income taxes receivable/payable

(1,028

)

(2,032

)

Securities sold, but not yet purchased, at fair value

(112

)

Operating lease liabilities

(918

)

(926

)

Accounts payable and other liabilities

982

542

Net cash provided by/(used in) operating activities

1,865

(2,634

)

Cash flows from investing activities:

Purchase of investments

(5,500

)

Purchase of fixed assets

(103

)

(50

)

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

38

6,030

Proceeds from sale of Canadian ETF business, net

2,774

Net cash (used in)/provided by investing activities

(5,565

)

8,754

Cash flows from financing activities:

Dividends paid

(4,937

)

(5,136

)

Shares repurchased

(2,630

)

(1,495

)

Repayment of debt

(5,000

)

Proceeds from exercise of stock options

379

240

Net cash used in financing activities

(7,188

)

(11,391

)

Decrease in cash flows due to changes in foreign exchange rate

(235

)

(1,272

)

Decrease in cash and cash equivalents

(11,123

)

(6,543

)

Cash and cash equivalents – beginning of year

73,425

74,972

Cash and cash equivalents – end of period

$

62,302

$

68,429

Supplemental disclosure of cash flow information:

Cash paid for taxes

$

1,278

$

1,147

Cash paid for interest

$

$

2,312

Non-GAAP Financial Measurements

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

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

    • Unrealized gains or losses on the revaluation of deferred consideration: Deferred consideration is an obligation we assumed in connection with the ETFS acquisition that is carried at fair value. This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices. Changes in the forward-looking price of gold and changes in the discount rate used to compute the present value of the annual payment obligations may have a material impact on the carrying value of the deferred consideration and our reported financial results. We exclude this item when calculating our non-GAAP financial measurements as it is not core to our operating business. The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.

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

    • Other items: Impairment charges, an unrealized gain recognized on our investment in Securrency, interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in the convertible notes (prior to January 1, 2021, the effective date of Accounting Standards Update 2020-06, Debt – Debt with Conversion and Other Options, Cash Conversion), a loss on extinguishment of debt, the release of a deferred tax asset valuation allowance recognized on interest carryforwards arising from our debt previously outstanding in the United Kingdom, a gain arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine, a gain recognized upon the sale of our Canadian ETF business and acquisition and disposition-related costs are excluded when calculating our non-GAAP financial measurements.

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

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

  • Adjusted operating income margin. We disclose adjusted operating income margin as a non-GAAP financial measurement in order to report our operating income margin exclusive of items that are non-recurring or not core to our operating business.

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION (CONSOLIDATED)
(in thousands)
(Unaudited)

Three Months Ended

Adjusted Net Income and Diluted Earnings per Share:

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020



Net income/(loss), as reported

$

15,147

$

(13,497

)

$

(270

)

$

(13,250

)

$

(8,638

)

Deduct/Add back: (Gain)/loss on revaluation of deferred consideration

(2,832

)

22,385

8,870

23,358

2,208

Deduct: Unrealized gain recognized on our investment in Securrency, net of income taxes

(179

)

Add back: Impairments, net of income taxes (where applicable)

245

2,326

19,672

Add back: Tax shortfalls upon vesting and exercise of stock-based compensation awards

123

21

50

119

501

Add back: Interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in the convertible notes, net of income taxes

314

286

42

Deduct: Gain arising from an adjustment to the estimated fair value of consideration received from the exit of investment in AdvisorEngine

(225

)

(868

)

Add back: Loss on extinguishment of debt, net of income taxes

1,910

Deduct: Release of a deferred tax asset valuation allowance recognized on interest carryforwards arising from debt previously outstanding in the United Kingdom

(2,842

)

Deduct: Gain recognized upon the sale of Canadian ETF business

(2,877

)

Add back: Acquisition and disposition-related costs, net of income taxes

25

358

Adjusted net income

$

12,504

$

9,223

$

11,037

$

8,494

$

11,224

Weighted average common shares - diluted

161,831

161,138

160,876

166,634

167,561

Adjusted earnings per share - diluted

$

0.08

$

0.06

$

0.07

$

0.05

$

0.07

Three Months Ended

Gross Margin and Gross Margin Percentage:

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

Operating revenues

$

72,830

$

67,059

$

64,640

$

58,126

$

63,874

Less: Fund management and administration

(15,521

)

(16,350

)

(15,219

)

(14,461

)

(14,485

)

Gross margin

$

57,309

$

50,709

$

49,421

$

43,665

$

49,389

Gross margin percentage

78.7

%

75.6

%

76.5

%

75.1

%

77.3

%


Three Months Ended

Adjusted Operating Income and Adjusted Operating
Income Margin:

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

Operating revenues

$

72,830

$

67,059

$

64,640

$

58,126

$

63,874

Operating income

$

18,607

$

12,907

$

14,744

$

11,797

$

15,634

Add back: Acquisition and disposition-related costs, before income taxes

33

383

Adjusted operating income

$

18,607

$

12,907

$

14,744

$

11,830

$

16,017

Adjusted operating income margin

25.5

%

19.2

%

22.8

%

20.4

%

25.1

%


Three Months Ended

Adjusted Total Operating Expenses:

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

Total operating expenses

$

54,223

$

54,152

$

49,896

$

46,329

$

48,240

Deduct: Acquisition and disposition-related costs, before income taxes

(33

)

(383

)

Adjusted total operating expenses

$

54,223

$

54,152

$

49,896

$

46,296

$

47,857


Three Months Ended

Adjusted Income Before Income Taxes:

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

Income/(loss) before income taxes

$

13,178

$

(11,297

)

$

1,138

$

(14,054

)

$

(11,009

)

Deduct/Add back: (Gain)/loss on revaluation of deferred consideration

(2,832

)

22,385

8,870

23,358

2,208

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

5,171

5,981

Deduct: Unrealized gain recognized on our investment in Securrency, before income taxes

(237

)

Add back: Impairments, before income taxes

303

3,080

19,672

Add back: Interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in the convertible notes, before income taxes

416

379

55

Deduct: Gain arising from an adjustment to the estimated fair value of consideration received from the exit of investment in AdvisorEngine

(225

)

(868

)

Add back: Loss on extinguishment of debt, before income taxes

2,387

Deduct: Gain recognized upon sale of Canadian ETF business

(2,877

)

Add back: Acquisition and disposition-related costs, before income taxes

33

383

Adjusted income before income taxes

$

15,583

$

11,504

$

13,242

$

10,911

$

14,358



Three Months Ended

Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate:

Mar. 31,
2021

Dec. 31,
2020

Sept. 30,
2020

June 30,
2020

Mar. 31,
2020

Adjusted income before income taxes (above)

$

15,583

$

11,504

$

13,242

$

10,911

$

14,358

Income tax (benefit)/expense

$

(1,969

)

$

2,200

$

1,408

$

(804

)

$

(2,371

)

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

5,171

5,981

Deduct: Tax shortfalls upon vesting and exercise of stock-based compensation awards

(123

)

(21

)

(50

)

(119

)

(501

)

Deduct: Tax expense on unrealized gain recognized on our investment in Securrency

(58

)

Add back: Tax benefit arising from impairments .

58

754

Add back: Tax benefit arising from the amortization of discount associated with the bifurcation of the conversion option embedded in the convertible notes

102

93

13

Add back: Tax benefit arising from loss on extinguishment of debt

477

Add back: Release of a deferred tax asset valuation allowance recognized on interest carryforwards arising from debt previously outstanding in the United Kingdom

2,842

Add back: Tax benefit arising from acquisition and disposition-related costs

8

25

Adjusted income tax expense

$

3,079

$

2,281

$

2,205

$

2,417

$

3,134

Adjusted effective income tax rate

19.8

%

19.8

%

16.7

%

22.2

%

21.8

%

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

  • the ultimate duration of the COVID-19 pandemic and its short-term and long-term impact on our business and the global economy;

  • anticipated trends, conditions and investor sentiment in the global markets and ETPs;

  • anticipated levels of inflows into and outflows out of our ETPs;

  • our ability to deliver favorable rates of return to investors;

  • competition in our business;

  • 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 operate and expand our business in non-U.S. markets; and

  • the effect of laws and regulations that apply to our business.

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

  • adverse market developments arising from the COVID-19 pandemic could negatively impact our assets under management, resulting in a decline in our revenues and other potential operational challenges;

  • declining prices of securities, gold and other precious metals and other commodities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETP investors to sell their fund shares and trigger redemptions;

  • fluctuations in the amount and mix of our AUM, whether caused by disruptions in the financial markets or otherwise, including but not limited to a pandemic event such as COVID-19, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity or, increase the cost of borrowing upon a refinancing;

  • competitive pressures could reduce revenues and profit margins;

  • we derive a substantial portion of our revenues from a limited number of products, and as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products and market-specific and political and economic risk;

  • a significant portion of our AUM is held in products with exposure to U.S. and international developed markets and we therefore have exposure to domestic and foreign market conditions and are subject to currency exchange rate risks;

  • withdrawals or broad changes in investments in our ETPs by investors with significant positions may negatively impact revenues and operating margins;

  • over the last few years, we have expanded our business internationally. This expansion subjects us to increased operational, regulatory, financial and other risks;

  • many of our ETPs have a limited track record, and poor investment performance could cause our revenues to decline; and

  • we depend on third parties to provide many critical services to operate our business and our ETPs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETP investors.

Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. For a more complete description of the risks noted above and other risks that could cause our actual results to differ from our current expectations, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

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.