WisdomTree Announces Third Quarter 2022 Results - Diluted Earnings Per Share of $0.50 ($0.06, as adjusted)

WisdomTree Investments, Inc.

Year-to-date (YTD) annualized inflow rate of 14% across all products
U.S. Equity products inflowing at a YTD annualized rate of 13% (inflows of $1.2 billion in the quarter)
WisdomTree Floating Rate Treasury Fund (USFR) inflows of $2.8 billion in the quarter

NEW YORK, Oct. 28, 2022 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (NASDAQ: WETF) today reported financial results for the third quarter of 2022.

$81.2 million net income ($9.3⁽¹⁾ million net income, as adjusted); see “Non-GAAP Financial Measurements” for additional information.

$77.9 million non-cash gain associated with the revaluation of deferred consideration–gold payments due to an increase in the discount rate used to compute the present value of the annual payment obligations.

$70.9 billion of ending AUM, a decrease of 4.6% arising from market depreciation, partly offset by net inflows.

$1.7 billion of net inflows, primarily driven by inflows into our fixed income and U.S. equity products, partly offset by outflows from our commodity products.

0.38% average advisory fee, a decrease of 1 basis point due to AUM mix shift.

$72.4 million of operating revenues, a decrease of 6.3% due to lower average AUM and a lower average advisory fee.
        
77.5% gross margin⁽¹⁾, a 1.7 point decrease from the previous quarter due to lower revenues.

20.5% operating income margin, a 2.6 point decrease compared to our adjusted operating margin of 23.1%⁽¹⁾ in the prior quarter due to lower revenues.

$0.03 quarterly dividend declared, payable on November 23, 2022 to stockholders of record as of the close of business on
November 9, 2022.

Update from Jonathan Steinberg, WisdomTree CEO

“WisdomTree is in its ninth consecutive quarter of net inflows and we see opportunities for continued organic growth in our ETF franchise based on our broad and deep product lineup, strong performance, solutions offerings and a growing managed models business. Additionally, our vision for digital assets and blockchain-enabled financial services is fast becoming a reality with the recent SEC approval of our first blockchain-enabled fund, the WisdomTree Short-Term Treasury Digital Fund (WTSY) and our blockchain-native digital wallet, WisdomTree Prime™, on track to launch early next year. WisdomTree has a tremendous and holistic opportunity ahead in both our ETF business and as an early mover in digital assets and blockchain-enabled financial services. On November 7th, we are simplifying our name by dropping ‘Investments’ and expanding our image and broadening our mission by dropping ‘ETF’ from our ticker (new ticker symbol: WT), acknowledging that WisdomTree is more than ETFs and more than investments, with a nod toward our natural evolution and history of innovation.”

Update from Jarrett Lilien, WisdomTree COO and President

“WisdomTree’s broad and growing managed models business continues to gain traction and win new mandates, which should bolster organic growth going forward, as these assets tend to be sticky. As markets normalize, our scalable business model should result in WisdomTree being one of the only asset managers with both a margin improvement story and an inflow story. Moreover, our approach is to bring crypto mainstream, and to bring mainstream exposures, like fixed income, equities and commodities, into the digital world through blockchain-enabled funds and tokenized exposures. We’re building the foundation that will allow us to lead in the coming evolution of financial services and lay claim to the deepest exposures in the digital wrapper, positioning us, in an even larger opportunity, to expand into blockchain-enabled finance, where spending, saving and investing are merged.”

OPERATING AND FINANCIAL HIGHLIGHTS

	Three Months Ended
	Sept. 30, 2022			June 30, 2022			Mar. 31, 2022			Dec. 31, 2021			Sept. 30, 2021
Consolidated Operating Highlights ($ in billions):
AUM—end of period	$	70.9		$	74.3		$	79.4		$	77.5		$	72.8
Net inflows	$	1.7		$	3.9		$	1.3		$	1.9		$	0.5
Average AUM	$	74.7		$	77.7		$	77.8		$	76.0		$	74.5
Average advisory fee		0.38	%		0.39	%		0.40	%		0.40	%		0.41	%
Consolidated Financial Highlights ($ in millions, except per share amounts):
Operating revenues	$	72.4		$	77.3		$	78.4		$	79.2		$	78.1
Net income/(loss)	$	81.2		$	8.0		$	(10.3	)	$	11.2		$	5.8
Diluted earnings/(loss) per share	$	0.50		$	0.05		$	(0.08	)	$	0.07		$	0.04
Operating income margin		20.5	%		20.5	%		22.6	%		28.5	%		31.0	%
As Adjusted (Non-GAAP(1)):
Gross margin		77.5	%		79.2	%		80.2	%		80.5	%		80.6	%
Net income, as adjusted	$	9.3		$	11.3		$	14.1		$	15.7		$	16.3
Diluted earnings per share, as adjusted	$	0.06		$	0.07		$	0.09		$	0.10		$	0.10
Operating income margin, as adjusted		20.5	%		23.1	%		25.7	%		28.5	%		31.0	%

RECENT BUSINESS DEVELOPMENTS

Company News In September 2022, we appointed Daniela Mielke to the Board of Directors; and WisdomTree Europe was certified as one of the UK’s ‘Great Places to Work’ by Great Place to Work UK. In October 2022, we reported our monthly metrics for September 2022, including AUM and flow data by asset class; we announced our collaboration with Stride Bank and Galileo Financial Technologies as key banking and payments partners for our blockchain-native digital wallet, WisdomTree Prime™; we announced the transfer of our common stock listing to the New York Stock Exchange under the new ticker symbol “WT” and our corporate name change to WisdomTree, Inc., both on November 7, 2022, to align with our natural brand evolution and expansion; and we were named “Best U.S. Fixed Income ETF Issuer ($1B- $5B)” at the ETF Express US Awards 2022. Product News In September 2022, we launched the WisdomTree Emerging Markets ex-China Fund (XC) on the NYSE; we launched the WisdomTree Blockchain UCITS ETF (WBLK) on the London Stock Exchange, Deutsche Börse and Borsa Italiana; and we launched the WisdomTree Global Automotive Innovators UCITS ETF (WCAR) on the London Stock Exchange, Deutsche Börse and Borsa Italiana. In October 2022, we achieved a key milestone toward blockchain-enabled financial products and services with SEC approval of WisdomTree Short-Term Treasury Digital Fund (WTSY); and we filed for nine additional blockchain-enabled funds with the SEC.

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

		Three Months Ended																						Nine Months Ended
		Sept. 30, 2022				June 30, 2022				Mar. 31, 2022				Dec. 31, 2021				Sept. 30, 2021						Sept. 30, 2022				Sept. 30, 2021
Operating Revenues:
Advisory fees		$	70,616			$	75,586			$	76,517			$	77,441			$	76,400					$	222,719			$	220,611
Other income			1,798				1,667				1,851				1,734				1,712						5,316				4,532
Total revenues			72,414				77,253				78,368				79,175				78,112						228,035				225,143
Operating Expenses:
Compensation and benefits			23,714				24,565				24,787				23,178				22,027						73,066				64,985
Fund management and administration			16,285				16,076				15,494				15,417				15,181						47,855				43,495
Marketing and advertising			3,145				3,894				4,023				4,565				2,925						11,062				9,525
Sales and business development			2,724				3,131				2,609				2,668				2,935						8,464				7,239
Contractual gold payments			4,105				4,446				4,450				4,262				4,250						13,001				12,834
Professional fees			2,367				4,308				4,459				2,099				1,583						11,134				5,517
Occupancy, communications and equipment			986				1,049				753				725				1,163						2,788				3,904
Depreciation and amortization			58				53				47				45				185						158				693
Third-party distribution fees			1,833				1,818				2,212				1,830				1,873						5,863				5,346
Other			2,324				2,109				1,845				1,823				1,787						6,278				5,110
Total operating expenses			57,541				61,449				60,679				56,612				53,909						179,669				158,648
Operating income			14,873				15,804				17,689				22,563				24,203						48,366				66,495
Other Income/(Expenses):
Interest expense			(3,734	)			(3,733	)			(3,732	)			(3,740	)			(3,729			)			(11,199	)			(8,592	)
Gain/(loss) on revaluation of deferred consideration—gold payments			77,895				2,311				(17,018	)			(3,048	)			1,737						63,188				5,066
Interest income			811				770				794				864				689						2,375				1,145
Impairments			—				—				—				—				(15,853			)			—				(16,156	)
Other losses, net			(5,289	)			(4,474	)			(24,707	)			(1,368	)			(714			)			(34,470	)			(6,558	)
Income/(loss) before income taxes			84,556				10,678				(26,974	)			15,271				6,333						68,260				41,400
Income tax expense/(benefit)			3,327				2,673				(16,713	)			4,084				500						(10,713	)			2,790
Net income/(loss)		$	81,229			$	8,005			$	(10,261	)		$	11,187			$	5,833					$	78,973			$	38,610
Earnings/(loss) per share—basic		$	0.50	(2)		$	0.05	(2)		$	(0.08	)(2)		$	0.07	(2)		$	0.04					$	0.49	(2)		$	0.24	(2)
Earnings/(loss) per share—diluted		$	0.50	(2)		$	0.05			$	(0.08	)(2)		$	0.07			$	0.04					$	0.49	(2)		$	0.24
Weighted average common shares—basic			143,120				143,046				142,782				142,070				142,070						142,984				144,445
Weighted average common shares—diluted			158,953				158,976				142,782				159,826				159,213						158,741				161,706
As Adjusted (Non-GAAP(1))
Total operating expenses		$	57,541			$	59,425			$	58,244			$	56,612			$	53,909
Operating income		$	14,873			$	17,828			$	20,124			$	22,563			$	24,203
Income before income taxes		$	12,645			$	14,498			$	17,674			$	19,968			$	20,991
Income tax expense		$	3,323			$	3,241			$	3,611			$	4,232			$	4,674
Net income		$	9,322			$	11,257			$	14,063			$	15,736			$	16,317
Earnings per share—diluted		$	0.06			$	0.07			$	0.09			$	0.10			$	0.10

QUARTERLY HIGHLIGHTS

Operating Revenues

• Operating revenues decreased 6.3% from the second quarter of 2022 due to lower average AUM and a lower average advisory fee.

• Operating revenues decreased 7.3% from the third quarter of 2021 due to a lower average advisory fee.

• Our average advisory fee was 0.38%, 0.39% and 0.41% during the third quarter of 2022, the second quarter of 2022 and the third quarter of 2021, respectively.
  

Operating Expenses

• Operating expenses decreased 6.4% from the second quarter of 2022 due to lower professional fees, incentive compensation, marketing expenses, sales and business development expenses and contractual gold payments, partly offset by higher fund management and administration costs and other expenses. The prior quarter included $2.0 million of professional fees incurred in response to an activist campaign.

• Operating expenses increased 6.7% from the third quarter of 2021 primarily due to higher incentive compensation and headcount, fund management and administration costs, professional fees incurred in connection with our digital assets initiative and other expenses, partly offset by lower sales and business development expenses, occupancy expenses, contractual gold payments and depreciation and amortization expenses.

Other Income/(Expenses)

• Interest expense was essentially unchanged from the second quarter of 2022 and the third quarter of 2021.

• We recognized a non-cash gain on revaluation of deferred consideration of $77.9 million during the third quarter of 2022. The gain arose primarily from an increase in the discount rate (from 9.0% to 12.3%) used to compute the present value of the annual payment obligations as well as lower 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 changes in the discount rate and the magnitude of the change in the forward-looking price of gold.

• Interest income was essentially unchanged from the second quarter of 2022. Interest income increased 17.7% from the third quarter of 2021 due to an increase in our securities owned.

• Other net losses were $5.3 million for the third quarter of 2022 and included losses on our securities owned of $6.3 million. 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 and other miscellaneous items.

Income Taxes

• Our effective income tax rate for the third quarter of 2022 was 3.9%, resulting in income tax expense of $3.3 million. Our tax rate differs from the federal statutory rate of 21% primarily due to a non-taxable gain on revaluation of deferred consideration. This was partly offset by an increase in the deferred tax asset valuation allowance on losses recognized on securities owned.

• Our adjusted effective income tax rate was 26.3%⁽¹⁾, or 21.8% excluding prior-period taxes accrued associated with exposure to the Global Intangible Low-Taxed Income, or GILTI, provisions of the 2017 U.S. Tax Reform Act and other adjustments identified upon filing our 2021 income tax returns.

NINE MONTH HIGHLIGHTS

• Operating revenues were essentially unchanged as compared to 2021.

• Operating expenses increased 13.3% as compared to 2021 primarily due to higher incentive compensation and headcount, professional fees including $4.5 million incurred in response to an activist campaign and professional fees associated with our digital assets initiative, fund management and administration costs, marketing expenses, sales and business development expenses, other expenses and third-party distribution fees. These increases were partly offset by lower occupancy expenses and depreciation and amortization expenses.

• Significant items reported in other income/(expense) in 2022 include: an increase in interest expense of 30.3% due to a higher level of debt outstanding; a non-cash gain on revaluation of deferred consideration of $63.2 million; an increase in interest income of 107.4% due to an increase in our securities owned; a non-cash charge of $19.9 million upon the release of tax-related indemnification assets arising from a favorable resolution of certain tax audits as well as the expiration of the statute of limitations (an equal and offsetting benefit was recognized in income tax expense); and losses on our securities owned of $15.6 million. Gains and losses also generally arise from the sale of gold earned on management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.

• Our effective income tax rate for 2022 was negative 15.7%, resulting in an income tax benefit of $10.7 million. Our tax rate differs from the federal statutory rate of 21% primarily due to the reduction in unrecognized tax benefits associated with 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. These items were partly offset by an increase in the deferred tax asset valuation allowance on losses recognized on securities owned.

DIAL-IN AND WEBCAST DETAILS

Participants can register for the conference call by clicking the Registration Link and will be provided with a dial-in number and a unique PIN. To avoid delays, we encourage participants to dial into the conference call 10 minutes ahead of the scheduled start time.

All earnings materials and the webcast can be accessed through the WisdomTree Investor Relations website at: https://ir.wisdomtree.com. A replay of the webcast will also be available shortly after the call.

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, cryptocurrency and alternative strategies. WisdomTree currently has approximately $74.6 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:

Investor Relations	Media Relations
Jeremy Campbell	Jessica Zaloom
+1.646.522.2602	+1.917.267.3735
Jeremy.campbell@wisdomtree.com	jzaloom@wisdomtree.com

WisdomTree Investments, Inc.

Key Operating Statistics (Unaudited)
	Three Months Ended
	Sept. 30, 2022				June 30, 2022				Mar. 31, 2022				Dec. 31, 2021				Sept. 30, 2021
GLOBAL ETPs ($ in millions)
Beginning of period assets	$	74,292			$	79,384			$	77,450			$	72,755			$	73,918
Inflows/(outflows)		1,747				3,852				1,319				1,902				548
Market (depreciation)/appreciation		(5,162	)			(8,940	)			615				2,808				(1,711	)
Fund closures		—				(4	)			—				(15	)			—
End of period assets	$	70,877			$	74,292			$	79,384			$	77,450			$	72,755
Average assets during the period	$	74,681			$	77,735			$	77,790			$	75,967			$	74,527
Average advisory fee during the period		0.38	%			0.39	%			0.40	%			0.40	%			0.41	%
Revenue days		92				91				90				92				92
Number of ETFs—end of the period		347				344				341				329				322
U.S. LISTED ETFs ($ in millions)
Beginning of period assets	$	47,255			$	48,622			$	48,210			$	44,742			$	45,129
Inflows/(outflows)		3,812				4,278				2,250				1,865				612
Market (depreciation)/appreciation		(3,024	)			(5,645	)			(1,838	)			1,618				(999	)
Fund closures		—				—				—				(15	)			—
End of period assets	$	48,043			$	47,255			$	48,622			$	48,210			$	44,742
Average assets during the period	$	49,473			$	48,278			$	47,504			$	46,945			$	45,507
Number of ETFs—end of the period		78				77				77				75				73
EUROPEAN LISTED ETPs ($ in millions)
Beginning of period assets	$	27,037			$	30,762			$	29,240			$	28,013			$	28,789
(Outflows)/inflows		(2,065	)			(426	)			(931	)			37				(64	)
Market (depreciation)/appreciation		(2,138	)			(3,295	)			2,453				1,190				(712	)
Fund closures		—				(4	)			—				—				—
End of period assets	$	22,834			$	27,037			$	30,762			$	29,240			$	28,013
Average assets during the period	$	25,208			$	29,457			$	30,286			$	29,022			$	29,020
Number of ETPs—end of the period		269				267				264				254				249
PRODUCT CATEGORIES ($ in millions)
U.S. Equity
Beginning of period assets	$	21,058			$	23,738			$	23,860			$	21,383			$	21,285
Inflows/(outflows)		1,239				306				779				784				351
Market (depreciation)/appreciation		(1,344	)			(2,986	)			(901	)			1,693				(253	)
End of period assets	$	20,953			$	21,058			$	23,738			$	23,860			$	21,383
Average assets during the period	$	22,540			$	22,370			$	23,139			$	22,964			$	21,792
Commodity & Currency
Beginning of period assets	$	23,625			$	26,302			$	24,598			$	23,825			$	24,772
(Outflows)/inflows		(2,179	)			(475	)			(1,053	)			(251	)			(249	)
Market (depreciation)/appreciation		(1,885	)			(2,202	)			2,757				1,024				(698	)
End of period assets	$	19,561			$	23,625			$	26,302			$	24,598			$	23,825
Average assets during the period	$	21,628			$	25,771			$	25,892			$	24,424			$	24,850
Fixed Income
Beginning of period assets	$	9,191			$	5,416			$	4,351			$	3,524			$	3,435
Inflows/(outflows)		2,627				4,038				1,242				837				115
Market (depreciation)/appreciation		(124	)			(263	)			(177	)			(10	)			(26	)
End of period assets	$	11,694			$	9,191			$	5,416			$	4,351			$	3,524
Average assets during the period	$	10,077			$	7,424			$	4,687			$	4,113			$	3,496

	Three Months Ended
	Sept. 30, 2022				June 30, 2022				Mar. 31, 2022				Dec. 31, 2021				Sept. 30, 2021
International Developed Market Equity
Beginning of period assets	$	9,958			$	11,401			$	11,870			$	11,159			$	10,772
(Outflows)/inflows		(115	)			79				97				440				404
Market (depreciation)/appreciation		(661	)			(1,522	)			(566	)			271				(17	)
End of period assets	$	9,182			$	9,958			$	11,401			$	11,870			$	11,159
Average assets during the period	$	10,027			$	10,682			$	11,522			$	11,502			$	11,126
Emerging Market Equity
Beginning of period assets	$	8,386			$	9,991			$	10,375			$	10,666			$	11,519
Inflows/(outflows)		114				(223	)			189				(3	)			(149	)
Market (depreciation)/appreciation		(1,005	)			(1,382	)			(573	)			(288	)			(704	)
End of period assets	$	7,495			$	8,386			$	9,991			$	10,375			$	10,666
Average assets during the period	$