NEW YORK, Jan. 28, 2022 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (NASDAQ: WETF) today reported financial results for the fourth quarter of 2021.
$11.2 million of net income ($15.71 million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.
$77.5 billion of ending AUM, an increase of 6.5% arising from market appreciation and net inflows.
$1.9 billion of net inflows, primarily driven by inflows into our fixed income, U.S. equity and international developed market equity products.
0.40% average advisory fee, a decrease of 1 basis point due to AUM mix shift.
$79.2 million of operating revenues, an increase of 1.4% due to higher average AUM.
80.5% gross margin1 is essentially unchanged from the previous quarter.
28.5% operating income margin, a 2.5 point decrease primarily due to higher operating expenses, partly offset by higher revenues.
$0.03 quarterly dividend declared, payable on February 23, 2022 to stockholders of record as of the close of business on February 9, 2022.
Update from Jarrett Lilien, WisdomTree COO and President
| “We had a highly successful year in 2021 driven by smart investments in growth, increased efficiency and disciplined P&L management. This past quarter marked the fifth consecutive quarter of organic growth. Our momentum has continued into the new year with more than $500 million of inflows in January so far, even in the face of a volatile market environment. As we look ahead to 2022 and beyond, we are entering a new chapter, one that leverages core competencies and stays true to our core mission, vision and values. It will be marked by a focus on strengthening and evolving our business, capitalizing on our existing momentum and adding additional fuel for future growth.” |
Update from Jonathan Steinberg, WisdomTree CEO
| “Over the past few years, WisdomTree in keeping with our longstanding track record as an innovator and pioneer has, been positioning itself for the next big structural shift toward a truly digital financial services experience. Today I am very excited to introduce WisdomTree Prime, our new blockchain-native financial services mobile app, that will bring the look and feel that users are accustomed to from traditional mobile apps, while also offering the benefits of a digital financial services experience built on DeFi principles of choice, transparency and inclusivity. WisdomTree Prime is being built for saving, spending, and investing – in both native crypto assets or in tokenized versions of mainstream financial assets and blockchain enabled funds – where we expect WisdomTree will be a product leader. We are playing for a much larger role in the future of financial services and expect these digital assets initiatives to generate new revenue streams that can scale quickly and accelerate sustainable growth in the long-run.” |
OPERATING AND FINANCIAL HIGHLIGHTS
| Three Months Ended | |||||||||||||||
| Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | |||||||||||
| Consolidated Operating Highlights ($ in billions): | |||||||||||||||
| AUM | $ | 77.5 | $ | 72.8 | $ | 73.9 | $ | 69.5 | $ | 67.4 | |||||
| Net inflows/(outflows) | $ | 1.9 | $ | 0.5 | $ | 0.9 | $ | 1.3 | $ | 0.9 | |||||
| Average AUM | $ | 76.0 | $ | 74.6 | $ | 73.6 | $ | 69.6 | $ | 64.1 | |||||
| Average advisory fee | 0.40 | % | 0.41 | % | 0.40 | % | 0.41 | % | 0.40 | % | |||||
| Consolidated Financial Highlights ($ in millions, except per share amounts): | |||||||||||||||
| Operating revenues | $ | 79.2 | $ | 78.1 | $ | 75.8 | $ | 71.3 | $ | 65.7 | |||||
| Net income/(loss) | $ | 11.2 | $ | 5.8 | $ | 17.6 | $ | 15.1 | $ | (13.5 | ) | ||||
| Diluted earnings/(loss) per share | $ | 0.07 | $ | 0.04 | $ | 0.11 | $ | 0.09 | $ | (0.10 | ) | ||||
| Operating income margin | 28.5 | % | 31.0 | % | 31.3 | % | 26.1 | % | 19.7 | % | |||||
| As Adjusted (Non-GAAP1): | |||||||||||||||
| Gross margin | 80.5 | % | 80.6 | % | 81.0 | % | 80.4 | % | 77.2 | % | |||||
| Net income, as adjusted | $ | 15.7 | $ | 16.3 | $ | 16.8 | $ | 12.5 | $ | 9.2 | |||||
| Diluted earnings per share, as adjusted | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.08 | $ | 0.06 | |||||
RECENT BUSINESS DEVELOPMENTS
Company News
|
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Years Ended | ||||||||||||||||||||
| Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |||||||||||||||
| Operating Revenues: | |||||||||||||||||||||
| Advisory fees2 | $ | 77,441 | $ | 76,400 | $ | 74,169 | $ | 70,042 | $ | 64,697 | $ | 298,052 | $ | 246,395 | |||||||
| Other income | 1,734 | 1,712 | 1,606 | 1,214 | 954 | 6,266 | 3,517 | ||||||||||||||
| Total revenues | 79,175 | 78,112 | 75,775 | 71,256 | 65,651 | 304,318 | 249,912 | ||||||||||||||
| Operating Expenses: | |||||||||||||||||||||
| Compensation and benefits | 23,178 | 22,027 | 20,331 | 22,627 | 20,827 | 88,163 | 74,675 | ||||||||||||||
| Fund management and administration2 | 15,417 | 15,181 | 14,367 | 13,947 | 14,942 | 58,912 | 56,728 | ||||||||||||||
| Marketing and advertising | 4,565 | 2,925 | 3,594 | 3,006 | 3,715 | 14,090 | 11,128 | ||||||||||||||
| Sales and business development | 2,668 | 2,935 | 2,159 | 2,145 | 2,595 | 9,907 | 10,579 | ||||||||||||||
| Contractual gold payments | 4,262 | 4,250 | 4,314 | 4,270 | 4,449 | 17,096 | 16,811 | ||||||||||||||
| Professional fees | 2,099 | 1,583 | 1,921 | 2,013 | 1,322 | 7,616 | 4,902 | ||||||||||||||
| Occupancy, communications and equipment | 725 | 1,163 | 1,266 | 1,475 | 1,622 | 4,629 | 6,427 | ||||||||||||||
| Depreciation and amortization | 45 | 185 | 256 | 252 | 261 | 738 | 1,021 | ||||||||||||||
| Third-party distribution fees | 1,830 | 1,873 | 2,130 | 1,343 | 1,291 | 7,176 | 5,219 | ||||||||||||||
| Acquisition and disposition- related costs | — | — | — | — | — | — | 416 | ||||||||||||||
| Other | 1,823 | 1,787 | 1,752 | 1,571 | 1,720 | 6,933 | 6,924 | ||||||||||||||
| Total operating expenses | 56,612 | 53,909 | 52,090 | 52,649 | 52,744 | 215,260 | 194,830 | ||||||||||||||
| Operating income | 22,563 | 24,203 | 23,685 | 18,607 | 12,907 | 89,058 | 55,082 | ||||||||||||||
| Other Income/(Expenses): | |||||||||||||||||||||
| Interest expense | (3,740 | ) | (3,729 | ) | (2,567 | ) | (2,296 | ) | (2,694 | ) | (12,332 | ) | (9,668 | ) | |||||||
| (Loss)/gain on revaluation of deferred consideration – gold payments | (3,048 | ) | 1,737 | 497 | 2,832 | (22,385 | ) | 2,018 | (56,821 | ) | |||||||||||
| Interest income | 864 | 689 | 225 | 231 | 351 | 2,009 | 744 | ||||||||||||||
| Impairments | — | (15,853 | ) | — | (303 | ) | — | (16,156 | ) | (22,752 | ) | ||||||||||
| Loss on extinguishment of debt | — | — | — | — | — | — | (2,387 | ) | |||||||||||||
| Other losses and gains, net | (1,368 | ) | (714 | ) | 49 | (5,893 | ) | 524 | (7,926 | ) | 580 | ||||||||||
| Income/(loss) before income taxes | 15,271 | 6,333 | 21,889 | 13,178 | (11,297 | ) | 56,671 | (35,222 | ) | ||||||||||||
| Income tax expense/(benefit) | 4,084 | 500 | 4,259 | (1,969 | ) | 2,200 | 6,874 | 433 | |||||||||||||
| Net income/(loss) | $ | 11,187 | $ | 5,833 | $ | 17,630 | $ | 15,147 | $ | (13,497 | ) | $ | 49,797 | $ | (35,655 | ) | |||||
| Earnings/(loss) per share – basic | $ | 0.073 | $ | 0.04 | $ | 0.113 | $ | 0.093 | ($0.10)3 | $ | 0.313 | ($0.25)3 | |||||||||
| Earnings/(loss) per share – diluted | $ | 0.07 | $ | 0.04 | $ | 0.11 | $ | 0.09 | ($0.10)3 | $ | 0.31 | ($0.25)3 | |||||||||
| Weighted average common shares – basic | 142,070 | 142,070 | 145,542 | 145,649 | 145,096 | 143,847 | 148,682 | ||||||||||||||
| Weighted average common shares – diluted | 159,826 | 159,213 | 164,855 | 161,831 | 145,096 | 161,263 | 148,682 | ||||||||||||||
| As Adjusted (Non-GAAP1) | |||||||||||||||||||||
| Income before income taxes | $ | 19,968 | $ | 20,991 | $ | 21,253 | $ | 15,583 | $ | 11,504 | |||||||||||
| Income tax expense | $ | 4,232 | $ | 4,674 | $ | 4,458 | $ | 3,079 | $ | 2,281 | |||||||||||
| Net income | $ | 15,736 | $ | 16,317 | $ | 16,795 | $ | 12,504 | $ | 9,223 | |||||||||||
| Earnings per share – diluted | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.08 | $ | 0.06 | |||||||||||
QUARTERLY HIGHLIGHTS
Operating Revenues
- Operating revenues increased 1.4% and 20.6% from the third quarter of 2021 and fourth quarter of 2020, respectively, due to higher average AUM.
- Our average advisory fee was 0.40%, 0.41% and 0.40% during the fourth quarter of 2021, the third quarter of 2021 and the fourth quarter of 2020, respectively.
Operating Expenses
- Operating expenses increased 5.0% from the third quarter of 2021 primarily due to higher marketing expenses, incentive compensation and headcount and professional fees, partly offset by lower occupancy expense.
- Operating expenses increased 7.3% from the fourth quarter of 2020 primarily due to higher incentive compensation and headcount, marketing expenses, fund management and administration costs, professional fees and third-party distribution fees, partly offset by lower occupancy and depreciation expenses and contractual gold payments.
Other Income/(Expenses)
- Interest expense was essentially unchanged from the third quarter of 2021. This expense increased 38.8% from the fourth quarter of 2020 due to a higher level of debt outstanding, partly offset by a lower effective interest rate.
- We recognized a non-cash loss on revaluation of deferred consideration of $3.0 million during the fourth quarter of 2021. The loss was due to higher spot gold prices, partly offset by a flattening 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.
- Interest income increased 25.4% and 146.2% from the third quarter of 2021 and fourth quarter of 2020, respectively, due to an increase in our securities owned.
- Other net losses were $1.4 million for the fourth quarter of 2021 and were primarily comprised of losses on our securities owned. 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 fourth quarter of 2021 of 26.7% resulted in income tax expense of $4.1 million. Our tax rate differs from the federal statutory rate of 21% primarily due to a non-deductible loss on revaluation of deferred consideration and state and local income taxes, partly offset by a lower tax rate on foreign earnings.
- Our adjusted effective income tax rate was 21.2%1.
ANNUAL HIGHLIGHTS
- Operating revenues increased 21.8% as compared to 2020 due to higher average AUM and a 1 basis point increase in our average advisory fee arising from AUM mix shift.
- Operating expenses increased 10.5% as compared to 2020 primarily due to higher incentive compensation accruals and headcount, marketing expenses, professional fees, third-party distribution fees and fund management and administration costs. These increases were partly offset by lower occupancy expense and contractual gold payments.
- Significant items reported in other income/(expenses) in 2021 include an increase in interest expense of 27.6% due to a higher level of debt outstanding; a non-cash gain on revaluation of deferred consideration of $2.0 million; an increase in interest income of 170.0% due to an increase in our securities owned; impairment charges of $16.2 million; a non-cash charge of $5.2 million arising from the release of tax-related indemnification assets upon the expiration of the statute of limitations (an equal and offsetting benefit was recognized in income tax expense); losses on our securities owned of $3.8 million; a gain of $0.8 million related to the remeasurement of contingent consideration payable to us from the sale of our Canadian ETF business; and a gain of $0.4 million recognized on our investment in Securrency, Inc. 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.
- Our effective income tax rate for 2021 of 12.1% resulted in income tax expense of $6.9 million. Our tax rate differs from the federal statutory rate of 21% primarily due to a tax benefit of $5.2 million recognized in connection with the release of the tax-related indemnification asset described above and a lower tax rate on foreign earnings. These items were partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation awards and non-deductible executive compensation.
CONFERENCE CALL
WisdomTree will discuss its results and operational highlights during a conference call on Friday, January 28, 2022 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, cryptocurrency and alternative strategies. WisdomTree currently has over $76 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 Advisory fees and fund management and administration expenses previously reported for the year ended December 31, 2020 have been voluntarily revised by us due to an immaterial error correction. These line items have been reduced by $3.8 million with no impact to net income. The reductions represent the netting of expense reimbursements collected on behalf of a third party that were previously reported on a gross basis in our Consolidated Statements of Operations.
3 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.
4 Cash flows from purchasing securities owned, at fair value of ($36,444) and selling securities owned, at fair value of $18,703 during the year ended December 31, 2020 that were not acquired specifically for resale or associated with our business activities have been reclassified from operating activities to investing activities to conform to our current presentation in the Consolidated Statements of Cash Flows.
Contact Information:
| Investor Relations Jeremy Campbell +1.646.522.2602 Jeremy.campbell@wisdomtree.com | Media Relations Jessica Zaloom +1.917.267.3735 jzaloom@wisdomtree.com |
WisdomTree Investments, Inc.
| Key Operating Statistics (Unaudited) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | ||||||||||||
| GLOBAL ETPs ($ in millions) | ||||||||||||||||
| Beginning of period assets | $ | 72,780 | $ | 73,941 | $ | 69,532 | $ | 67,383 | $ | 60,707 | ||||||
| Inflows/(outflows) | 1,902 | 548 | 931 | 1,279 | 881 | |||||||||||
| Market appreciation/(depreciation) | 2,811 | (1,709 | ) | 3,482 | 870 | 5,795 | ||||||||||
| Fund closures | (15 | ) | — | (4 | ) | — | — | |||||||||
| End of period assets | $ | 77,478 | $ | 72,780 | $ | 73,941 | $ | 69,532 | $ | 67,383 | ||||||
| Average assets during the period | $ | 75,990 | $ | 74,556 | $ | 73,621 | $ | 69,575 | $ | 64,053 | ||||||
| Average advisory fee during the period | 0.40 | % | 0.41 | % | 0.40 | % | 0.41 | % | 0.40 | % | ||||||
| Revenue days | 92 | 92 | 91 | 90 | 92 | |||||||||||
| Number of ETFs – end of the period | 329 | 322 | 318 | 313 | 309 | |||||||||||
| U.S. LISTED ETFs ($ in millions) | ||||||||||||||||
| Beginning of period assets | $ | 44,742 | $ | 45,129 | $ | 42,163 | $ | 38,517 | $ | 33,310 | ||||||
| Inflows/(outflows) | 1,865 | 612 | 1,130 | 1,343 | 919 | |||||||||||
| Market appreciation/(depreciation) | 1,618 | (999 | ) | 1,836 | 2,303 | 4,288 | ||||||||||
| Fund closures | (15 | ) | — | — | — | — | ||||||||||
| End of period assets | $ | 48,210 | $ | 44,742 | $ | 45,129 | $ | 42,163 | $ | 38,517 | ||||||
| Average assets during the period | $ | 46,943 | $ | 45,509 | $ | 44,183 | $ | 40,706 | $ | 35,926 | ||||||
| Number of ETFs – end of the period | 75 | 73 | 73 | 68 | 67 | |||||||||||
| EUROPEAN LISTED ETPs ($ in millions) | ||||||||||||||||
| Beginning of period assets | $ | 28,038 | $ | 28,812 | $ | 27,369 | $ | 28,866 | $ | 27,397 | ||||||
| Inflows/(outflows) | 37 | (64 | ) | (199 | ) | (64 | ) | (38 | ) | |||||||
| Market appreciation/(depreciation) | 1,193 | (710 | ) | 1,646 | (1,433 | ) | 1,507 | |||||||||
| Fund closures | — | — | (4 | ) | — | — | ||||||||||
| End of period assets | $ | 29,268 | $ | 28,038 | $ | 28,812 | $ | 27,369 | $ | 28,866 | ||||||
| Average assets during the period | $ | 29,047 | $ | 29,047 | $ | 29,438 | $ | 28,869 | $ | 28,127 | ||||||
| Number of ETPs – end of the period | 254 | 249 | 245 | 245 | 242 | |||||||||||
| PRODUCT CATEGORIES ($ in millions) | ||||||||||||||||
| Commodity & Currency | ||||||||||||||||
| Beginning of period assets | $ | 23,826 | $ | 24,772 | $ | 23,657 | $ | 25,880 | $ | 25,177 | ||||||
| Inflows/(outflows) | (251 | ) | (249 | ) | (318 | ) | (660 | ) | (296 | ) | ||||||
| Market appreciation/(depreciation) | 1,023 | (697 | ) | 1,433 | (1,563 | ) | 999 | |||||||||
| End of period assets | $ | 24,598 | $ | 23,826 | $ | 24,772 | $ | 23,657 | $ | 25,880 | ||||||
| Average assets during the period | $ | 24,422 | $ | 24,853 | $ | 25,549 | $ | 25,289 | $ | 25,596 | ||||||
| U.S. Equity | ||||||||||||||||
| Beginning of period assets | $ | 21,383 | $ | 21,285 | $ | 20,018 | $ | 18,367 | $ | 15,612 | ||||||
| Inflows/(outflows) | 783 | 351 | 190 | 218 | 395 | |||||||||||
| Market appreciation/(depreciation) | 1,694 | (253 | ) | 1,077 | 1,433 | 2,360 | ||||||||||
| End of period assets | $ | 23,860 | $ | 21,383 | $ | 21,285 | $ | 20,018 | $ | 18,367 | ||||||
| Average assets during the period | $ | 22,963 | $ | 21,794 | $ | 20,982 | $ | 19,320 | $ | 17,070 | ||||||
| International Developed Market Equity | ||||||||||||||||
| Beginning of period assets | $ | 11,178 | $ | 10,790 | $ | 9,988 | $ | 9,406 | $ | 8,618 | ||||||
| Inflows/(outflows) | 440 | 404 | 399 | 17 | (191 | ) | ||||||||||
| Market appreciation/(depreciation) | 276 | (16 | ) | 403 | 565 | 979 | ||||||||||
| End of period assets | $ | 11,894 | $ | 11,178 | $ | 10,790 | $ | 9,988 | $ | 9,406 | ||||||
| Average assets during the period | $ | 11,523 | $ | 11,144 | $ | 10,524 | $ | 9,790 | $ | 8,927 | ||||||
| Three Months Ended | ||||||||||||||||
| Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | ||||||||||||
| Emerging Market Equity | ||||||||||||||||
| Beginning of period assets | $ | 10,666 | $ | 11,519 | $ | 10,477 | $ | 8,539 | $ | 5,979 | ||||||
| Inflows/(outflows) | (3 | ) | (149 | ) | 531 | 1,662 | 1,399 | |||||||||
| Market appreciation/(depreciation) | (288 | ) | (704 | ) | 511 | 276 | 1,161 | |||||||||
| End of period assets | $ | 10,375 | $ | 10,666 | $ | 11,519 | $ | 10,477 | $ | 8,539 | ||||||
| Average assets during the period | $ | 10,550 | $ | 11,038 | $ | 11,012 | $ | 9,875 | $ | 7,250 | ||||||
| Fixed Income | ||||||||||||||||
| Beginning of period assets | $ | 3,529 | $ | 3,440 | $ | 3,245 | $ | 3,308 | $ | 3,605 | ||||||
| Inflows/(outflows) | 838 | 115 | 168 | 10 | (320 | ) | ||||||||||
| Market appreciation/(depreciation) | (11 | ) | (26 | ) | 27 | (73 | ) | 23 | ||||||||
| End of period assets | $ | 4,356 | $ | 3,529 | $ | 3,440 | $ | 3,245 | $ | 3,308 | ||||||
| Average assets during the period | $ | 4,118 | $ | 3,502 | $ | 3,337 | $ | 3,236 | $ | 3,449 | ||||||
| Leveraged & Inverse | ||||||||||||||||
| Beginning of period assets | $ | 1,666 | $ | 1,693 | $ | 1,521 | $ | 1,477 | $ | 1,423 | ||||||
| Inflows/(outflows) | 11 | 42 | (2 | ) | (5 | ) | (125 | ) | ||||||||
| Market appreciation/(depreciation) | 100 | (69 | ) | 174 | 49 | 179 | ||||||||||
| End of period assets | $ | 1,777 | $ | 1,666 | $ | 1,693 | $ | 1,521 | $ | 1,477 | ||||||
| Average assets during the period | $ | 1,764 | $ | 1,717 | $ | 1,666 | $ | 1,556 | $ | 1,429 | ||||||
| Cryptocurrency | ||||||||||||||||
| Beginning of period assets | $ | 295 | $ | 229 | $ | 377 | $ | 167 | $ | 33 | ||||||
| Inflows/(outflows) | 28 | 12 | 8 | 36 | 48 | |||||||||||
| Market appreciation/(depreciation) | 34 | 54 | (156 | ) | 174 | 86 | ||||||||||
| End of period assets | $ | 357 | $ | 295 | $ | 229 | $ | 377 | $ | 167 | ||||||
| Average assets during the period | $ | 406 | $ | 277 | $ | 300 | $ | 264 | $ | 79 | ||||||
| Alternatives | ||||||||||||||||
| Beginning of period assets | $ | 222 | $ | 198 | $ | 227 | $ | 215 | $ | 229 | ||||||
| Inflows/(outflows) | 56 | 22 | (39 | ) | — | (26 | ) | |||||||||
| Market appreciation/(depreciation) | (17 | ) | 2 | 10 | 12 | 12 | ||||||||||
| End of period assets | $ | 261 | $ | 222 | $ | 198 | $ | 227 | $ | 215 | ||||||
| Average assets during the period | $ | 229 | $ | 214 | $ | 231 | $ | 223 | $ | 224 | ||||||
| Closed ETPs | ||||||||||||||||
| Beginning of period assets | $ | 15 | $ | 15 | $ | 22 | $ | 24 | $ | 31 | ||||||
| Inflows/(outflows) | — | — | (6 | ) | 1 | (3 | ) | |||||||||
| Market appreciation/(depreciation) | — | — | 3 | (3 | ) | (4 | ) | |||||||||
| Fund closures | (15 | ) | — | (4 | ) | — | — | |||||||||
| End of period assets | $ | — | $ | 15 | $ | 15 | $ | 22 | $ | 24 | ||||||
| Average assets during the period | $ | 15 | $ | 17 | $ | 20 | $ | 22 | $ | 29 | ||||||
| Headcount | 241 | 235 | 227 | 227 | 217 | |||||||||||
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)
| Dec. 31, 2021 | Dec. 31, 2020 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 140,709 | $ | 73,425 | ||
| Securities owned, at fair value | 127,166 | 34,895 | ||||
| Accounts receivable | 31,864 | 29,455 | ||||
| Income taxes receivable | — | — | ||||
| Prepaid expenses | 3,952 | 3,827 | ||||
| Other current assets | 276 | 259 | ||||
| Total current assets | 303,967 | 141,861 | ||||
| Fixed assets, net | 557 | 7,579 | ||||
| Securities held-to-maturity | 308 | 451 | ||||
| Deferred tax assets, net | 8,881 | 8,063 | ||||
| Investments | 14,238 | 8,112 | ||||
| Right of use assets – operating leases | 520 | 16,327 | ||||
| Goodwill | 85,856 | 85,856 | ||||
| Intangible assets | 601,247 | 601,247 | ||||
| Other noncurrent assets | 361 | 180 | ||||
| Total assets | $ | 1,015,935 | $ | 869,676 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| LIABILITIES | ||||||
| Current liabilities: | ||||||
| Fund management and administration payable | $ | 20,661 | $ | 19,564 | ||
| Compensation and benefits payable | 32,782 | 22,803 | ||||
| Deferred consideration – gold payments | 16,739 | 17,374 | ||||
| Operating lease liabilities | 209 | 3,135 | ||||
| Income taxes payable | 3,979 | 916 | ||||
| Accounts payable and other liabilities | 9,297 | 10,207 | ||||
| Total current liabilities | 83,667 | 73,999 | ||||
| Convertible notes | 318,624 | 166,646 | ||||
| Deferred consideration – gold payments | 211,323 | 212,763 | ||||
| Operating lease liabilities | 328 | 17,434 | ||||
| Total liabilities | $ | 613,942 | 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: 145,107 and 148,716 at December 31, 2021 and December 31, 2020, respectively | 1,451 | 1,487 | ||||
| Additional paid-in capital | 289,736 | 317,075 | ||||
| Accumulated other comprehensive income | 682 | 1,102 | ||||
| Accumulated deficit | (22,445 | ) | (53,399 | ) | ||
| Total stockholders’ equity | 269,424 | 266,265 | ||||
| Total liabilities and stockholders’ equity | $ | 1,015,935 | $ | 869,676 | ||
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Years Ended | ||||||
| Dec. 31, 2021 | Dec. 31, 20204 | |||||
| Cash flows from operating activities: | ||||||
| Net income/(loss) | $ | 49,797 | $ | (35,655 | ) | |
| Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||||||
| Advisory fees received in gold and other precious metals | (74,970 | ) | (62,416 | ) | ||
| Contractual gold payments | 17,096 | 16,811 | ||||
| Impairments | 16,156 | 22,752 | ||||
| Stock-based compensation | 9,998 | 11,706 | ||||
| Unrealized losses | 3,781 | — | ||||
| Amortization of issuance costs – convertible notes | 2,187 | 1,710 | ||||
| (Gain)/loss on revaluation of deferred consideration – gold payments | (2,018 | ) | 56,821 | |||
| Amortization of right of use asset | 1,950 | 3,182 | ||||
| Gain on sale – Canadian ETF business | (787 | ) | (2,877 | ) | ||
| Depreciation and amortization | 738 | 1,021 | ||||
| Deferred income taxes | 316 | (2,192 | ) | |||
| Loss on extinguishment of debt | — | 2,387 | ||||
| Amortization of issuance costs – former credit facility | — | 1,328 | ||||
| Other | (272 | ) | (990 | ) | ||
| Changes in operating assets and liabilities: | ||||||
| Securities owned, at fair value | (66 | ) | (14 | ) | ||
| Accounts receivable | (3,506 | ) | (193 | ) | ||
| Prepaid expenses | (139 | ) | (159 | ) | ||
| Gold and other precious metals | 57,417 | 45,087 | ||||
| Other assets | (394 | ) | 107 | |||
| Fund management and administration payable | 1,348 | (2,264 | ) | |||
| Compensation and benefits payable | 10,242 | (3,804 | ) | |||
| Income taxes payable | 3,101 | (2,441 | ) | |||
| Securities sold, but not yet purchased, at fair value | — | (582 | ) | |||
| Operating lease liabilities | (15,560 | ) | (3,517 | ) | ||
| Accounts payable and other liabilities | (1,097 | ) | 1,328 | |||
| Net cash provided by operating activities | 75,318 | 47,136 | ||||
| Cash flows from investing activities: | ||||||
| Purchase of securities owned, at fair value | (115,526 | ) | (36,444 | ) | ||
| Purchase of investments | (5,750 | ) | — | |||
| Purchase of fixed assets | (293 | ) | (472 | ) | ||
| Proceeds from the sale of securities owned, at fair value | 19,441 | 18,703 | ||||
| Proceeds from the sale of Canadian ETF business, net, including receipt of contingent consideration | 2,360 | 2,774 | ||||
| Proceeds from held-to-maturity securities maturing or called prior to maturity | 136 | 16,488 | ||||
| Proceeds from the sale of the Company’s financial interests in AdvisorEngine Inc. | — | 9,592 | ||||
| Net cash (used in)/provided by investing activities | (99,632 | ) | 10,641 | |||
| Cash flows from financing activities: | ||||||
| Shares repurchased | (34,506 | ) | (31,197 | ) | ||
| Dividends paid | (19,459 | ) | (20,113 | ) | ||
| Convertible notes issuance costs | (4,297 | ) | (5,411 | ) | ||
| Repayment of debt | — | (179,000 | ) | |||
| Proceeds from the issuance of convertible notes | 150,000 | 175,250 | ||||
| Proceeds from exercise of stock options | 815 | 292 | ||||
| Net cash provided by/(used in) financing activities | 92,553 | (60,179 | ) | |||
| (Decrease)/increase in cash flow due to changes in foreign exchange rate | (955 | ) | 855 | |||
| Net increase/(decrease) in cash and cash equivalents | 67,284 | (1,547 | ) | |||
| Cash and cash equivalents—beginning of year | 73,425 | 74,972 | ||||
| Cash and cash equivalents—end of year | $ | 140,709 | $ | 73,425 | ||
| Supplemental disclosure of cash flow information: | ||||||
| Cash paid for taxes | $ | 8,456 | $ | 10,131 | ||
| Cash paid for interest | $ | 9,898 | $ | 7,088 | ||
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 income before income taxes, income tax expense, net income and diluted earnings per share. We disclose adjusted 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.
- Gains or losses on securities owned: We account for our securities owned as trading securities which requires these instruments to be measured at fair value with gains and losses reported in net income. In the third quarter of 2021, we began excluding these items when calculating our non-GAAP financial measurements as these securities have become a more meaningful percentage of total assets and the gains and losses introduce volatility in earnings and are not core to our operating business.
- 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: Remeasurement of contingent consideration payable to us from the sale of our Canadian ETF business, unrealized gains recognized on our investment in Securrency, impairment charges, 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 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.
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: | Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | |||||||||||
| Net income/(loss), as reported | $ | 11,187 | $ | 5,833 | $ | 17,630 | $ | 15,147 | $ | (13,497 | ) | |||||
| Add back/Deduct: Loss/(gain) on revaluation of deferred consideration | 3,048 | (1,737 | ) | (497 | ) | (2,832 | ) | 22,385 | ||||||||
| Add back: Losses on securities owned, net of income taxes | 1,501 | 1,006 | — | — | — | |||||||||||
| Add back: Impairments, net of income taxes (where applicable) | — | 12,002 | — | 245 | — | |||||||||||
| Deduct: Remeasurement of contingent consideration – sale of Canadian ETF business | — | (787 | ) | — | — | — | ||||||||||
| Deduct/Add back: Tax (windfalls)/shortfalls upon vesting and exercise of stock-based compensation awards | — | — | (233 | ) | 123 | 21 | ||||||||||
| Deduct: Unrealized gain recognized on investment in Securrency, net of income taxes | — | — | (105 | ) | (179 | ) | — | |||||||||
| 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 | |||||||||||
| Adjusted net income | $ | 15,736 | $ | 16,317 | $ | 16,795 | $ | 12,504 | $ | 9,223 | ||||||
| Weighted average common shares - diluted | 159,826 | 159,213 | 164,855 | 161,831 | 161,138 | |||||||||||
| Adjusted earnings per share - diluted | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.08 | $ | 0.06 | ||||||
| Three Months Ended | ||||||||||||||||
| Gross Margin and Gross Margin Percentage: | Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | |||||||||||
Operating revenues | $ | 79,175 | $ | 78,112 | $ | 75,775 | $ | 71,256 | $ | 65,651 | ||||||
| Less: Fund management and administration | (15,417 | ) | (15,181 | ) | (14,367 | ) | (13,947 | ) | (14,942 | ) | ||||||
| Gross margin | $ | 63,758 | $ | 62,931 | $ | 61,408 | $ | 57,309 | $ | 50,709 | ||||||
| Gross margin percentage | 80.5 | % | 80.6 | % | 81.0 | % | 80.4 | % | 77.2 | % | ||||||
| Three Months Ended | |||||||||||||||
| Adjusted Income Before Income Taxes: | Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | ||||||||||
| Income/(loss) before income taxes | $ | 15,271 | $ | 6,333 | $ | 21,889 | $ | 13,178 | $ | (11,297 | ) | ||||
| Add back/Deduct: Loss/(gain) on revaluation of deferred consideration | 3,048 | (1,737 | ) | (497 | ) | (2,832 | ) | 22,385 | |||||||
| Add back: Losses on securities owned, before income taxes | 1,649 | 1,329 | — | — | — | ||||||||||
| Add back: Impairments, before income taxes | — | 15,853 | — | 303 | — | ||||||||||
| Deduct: Remeasurement of contingent consideration – sale of Canadian ETF business | — | (787 | ) | — | — | — | |||||||||
| Deduct: Unrealized gain recognized on investment in Securrency, before income taxes | — | — | (139 | ) | (237 | ) | — | ||||||||
| Add back: Loss recognized upon reduction of a tax-related indemnification asset | — | — | — | 5,171 | — | ||||||||||
| 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 | ||||||||||
| Adjusted income before income taxes | $ | 19,968 | $ | 20,991 | $ | 21,253 | $ | 15,583 | $ | 11,504 | |||||
| Three Months Ended | ||||||||||||||||
| Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate: | Dec. 31, 2021 | Sept. 30, 2021 | June 30, 2021 | Mar 31, 2021 | Dec. 31, 2020 | |||||||||||
Adjusted income before income taxes (above) | $ | 19,968 | $ | 20,991 | $ | 21,253 | $ | 15,583 | $ | 11,504 | ||||||
| Income tax expense/(benefit) | $ | 4,084 | $ | 500 | $ | 4,259 | $ | (1,969 | ) | $ | 2,200 | |||||
| Add back: Tax benefit arising from impairments | — | 3,851 | — | 58 | — | |||||||||||
| Add back: Tax benefit arising from losses on securities owned | 148 | 323 | — | — | — | |||||||||||
| Add back/(Deduct): Tax windfalls/(shortfalls) upon vesting and exercise of stock-based compensation awards | — | — | 233 | (123 | ) | (21 | ) | |||||||||
| Deduct: Tax expense on unrealized gain recognized on investment in Securrency | — | — | (34 | ) | (58 | ) | — | |||||||||
| Add back: Tax benefit arising from reduction of a tax-related indemnification asset | — | — | — | 5,171 | — | |||||||||||
| Add back: Tax benefit arising from the amortization of discount associated with the bifurcation of the conversion option embedded in the convertible notes | — | — | — | — | 102 | |||||||||||
| Adjusted income tax expense | $ | 4,232 | $ | 4,674 | $ | 4,458 | $ | 3,079 | $ | 2,281 | ||||||
| Adjusted effective income tax rate | 21.2 | % | 22.3 | % | 21.0 | % | 19.8 | % | 19.8 | % | ||||||
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;
- whether we will experience future growth;
- 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 implement our digital assets strategy, including WisdomTree Prime, and achieve its objectives;
- 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;
- 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; and
- actions of activist stockholders against us could be disruptive and costly and may cause uncertainty about the strategic direction of our business.
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 and our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2021 and September 30, 2021.
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.
