WisdomTree Announces Second Quarter 2021 Results – Diluted Earnings Per Share of $0.11 ($0.10, as adjusted)

Friday, 30. July 2021 13:00

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

$17.6 million net income ($16.81 million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.

$73.9 billion of ending AUM, an increase of 6.3% arising from market appreciation and net inflows.

$0.9 billion of net inflows, driven by inflows into our emerging markets equity, international developed market equity, U.S. equity and fixed income products.

0.41% average global advisory fee, a decrease of 1 basis point due to AUM mix shift.

$77.6 million of operating revenues, an increase of 6.6% due to higher average AUM, partly offset by a lower average global advisory fee.
                                                                                                                                                       
79.1% gross margin1, a 0.4 point increase from the previous quarter.

30.5% operating income margin, a 5.0 point increase primarily due to higher revenues.

$150.0 million issuance of convertible senior notes due 2026, bearing interest at a rate of 3.25% and issued with a conversion price of $11.04 per share.  We used a portion of the proceeds to repurchase our common stock and intend to use the remainder of the net proceeds for working capital and other general corporate purposes, which may include debt retirement, organic and inorganic growth initiatives and common stock repurchases.

$31.9 million repurchase of 4.6 million shares of our common stock, principally in connection with the issuance of the convertible notes.

$0.03 quarterly dividend declared, payable on August 25, 2021 to stockholders of record as of the close of business on August 11, 2021.

Update from Jonathan Steinberg, WisdomTree CEO
“Many businesses across the financial services ecosystem are struggling to balance legacy business models and the conflicts that arise with fast moving technological advancements - not WisdomTree.  Our solid operating and financial results in the second quarter demonstrate continued growth and strong execution across our business today, along with exciting progress on our long-term strategic initiatives, all while showing the efficiency and scalability of our business. 

“We continue to strengthen our position in areas of growing interest such as liquid alternatives, ESG and model portfolios.  We are also quickly establishing expertise around digital assets, delivering the insights from our pioneering work in regulated cryptocurrency exposures and our broader vision for the applications of blockchain technology in the form of investor-facing research and events.

“The focus and flexibility of our remote first business model have enabled WisdomTree to attract and retain world-class talent, drive strong operating results, and engage with our clients across different modalities with an ever-expanding set of resources.”   


Update from Jarrett Lilien, WisdomTree COO and President 
“This was a strong quarter for WisdomTree, extending a string of strong quarters, and we are continuing to build momentum as we execute on our key growth initiatives.

“We are producing balance and quality in the mix of our global flows.  In the U.S., we are seeing strength in our Large Blend, Emerging Markets and China funds. In Europe, our UCITs ETFs and Thematic funds are standouts, and we are also experiencing growth in industrial metals, copper, silver and even gold, while there continues to be volatility in the gold market.

“We are investing in our future growth with 11 new fund launches and a number of well-received product enhancements completed in the first half of the year.  We also launched ESG model portfolios and +Crypto models this past quarter and continue to be optimistic about the impact of models on our flows.

“We are executing well on all fronts, building momentum and are excited to enter the second half of the year building on these strong results.” 

OPERATING AND FINANCIAL HIGHLIGHTS

 Three Months Ended  
 June 30,
2021
Mar. 31,
2021
Dec. 31,
2020
Sept. 30,
2020
June 30,
2020
Consolidated Operating Highlights ($ in billions):     
AUM$73.9 $69.5 $67.4 $60.7 $57.7 
Net inflows/(outflows)$0.9 $1.3 $0.9 $(0.5)$0.1 
Average AUM$73.7 $69.6 $64.1 $61.2 $55.7 
Average advisory fee 0.41% 0.42% 0.41% 0.42% 0.41%
      
      
Consolidated Financial Highlights ($ in millions, except per share amounts):     
Operating revenues$77.6 $72.8 $67.1 $64.6 $58.1 
Net income/(loss)$17.6 $15.1 $(13.5)$(0.3)$(13.3)
Diluted earnings/(loss) per share$0.11 $0.09 $(0.10)$(0.01)$(0.09)
Operating income margin 30.5% 25.5% 19.2% 22.8% 20.3%
As Adjusted (Non-GAAP1):     
Gross margin 79.1% 78.7% 75.6% 76.5% 75.1%
Net income, as adjusted$16.8 $12.5 $9.2 $11.0 $8.5 
Diluted earnings per share, as adjusted$0.10 $0.08 $0.06 $0.07 $0.05 

RECENT BUSINESS DEVELOPMENTS

Company News
  • In May 2021, Bryan Edmiston was appointed as Chief Financial Officer, effective June 1, 2021.
  • In June 2021, we completed a private offering of $150.0 million in aggregate principal amount of 3.25% Convertible Senior Notes due 2026.
  • In June 2021, we appointed Stockholm-based Björn Sandberg as Director of Nordic Sales for WisdomTree Europe.
Product News
  • In May 2021, we launched the WisdomTree Alternative Income Fund (HYIN) on the CBOE; we launched the WisdomTree Efficient Core family of ETFs on the NYSE, which includes the International Efficient Core Fund (NTSI), the Emerging Markets Efficient Core Fund (NTSE) and the renamed U.S. Efficient Core Fund (NTSX); we launched +Crypto Model Portfolios for advisors in collaboration with OnRamp Invest which features Gemini integration; and the WisdomTree S&P 500 VIX Short-Term Futures 2.25x Daily Leveraged (VIXL) underwent a change of index as part of volatility proofing measures across the European product range.
  • In June 2021, we launched the WisdomTree BioRevolution Fund (WDNA) on the CBOE, leveraging data and thematic insights from Dr. Jamie Metzl, one of the world’s leading technology futurists; we launched the WisdomTree U.S. Growth & Momentum Fund (WGRO) on the Nasdaq stock exchange; and we listed the WisdomTree Bitcoin ETP (BTCW) and WisdomTree Ethereum ETP (ETHW) on Euronext exchanges in Paris and Amsterdam.
  • In July 2021, we listed the WisdomTree Enhanced Commodity ex-Agriculture UCITS ETF – EUR Hedged (EXAG) on Börse Xetra.



WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
  

 Three Months Ended    
 Six Months Ended  
 June 30,
2021

 Mar. 31,
2021

 Dec. 31,
2020

 Sept. 30,
2020

 June 30,
2020

 June 30,
2021

 June 30,
2020
Operating Revenues:                           
Advisory fees$75,997  $71,616  $66,105  $63,919  $57,208  $147,613  $120,158 
Other income 1,606   1,214   954   721   918   2,820   1,842 
Total revenues 77,603   72,830   67,059   64,640   58,126   150,433   122,000 
Operating Expenses:       
Compensation and benefits 20,331   22,627   20,827   19,098   17,455   42,958   34,750 
Fund management and administration 16,195   15,521   16,350   15,219   14,461   31,716   28,946 
Marketing and advertising 3,594   3,006   3,715   2,996   1,949   6,600   4,417 
Sales and business development 2,159   2,145   2,595   2,386   2,181   4,304   5,598 
Contractual gold payments 4,314   4,270   4,449   4,539   4,063   8,584   7,823 
Professional fees 1,921   2,013   1,322   950   1,357   3,934   2,630 
Occupancy, communications and equipment 1,266   1,475   1,622   1,611   1,643   2,741   3,194 
Depreciation and amortization 256   252   261   253   251   508   507 
Third-party distribution fees 2,130   1,343   1,291   1,233   1,340   3,473   2,695 
Acquisition and disposition- related costs             33      416 
Other 1,752   1,571   1,720   1,611   1,596   3,323   3,593 
Total operating expenses 53,918   54,223   54,152   49,896   46,329   108,141   94,569 
Operating income 23,685   18,607   12,907   14,744   11,797   42,292   27,431 
Other Income/(Expenses):       
Interest expense (2,567)  (2,296)  (2,694)  (2,511)  (2,044)  (4,863)  (4,463)
Gain/(loss) on revaluation of deferred consideration – gold payments 497   2,832   (22,385)  (8,870)  (23,358)  3,329   (25,566)
Interest income 225   231   351   111   119   456   282 
Impairments    (303)     (3,080)     (303)  (19,672)
Loss on extinguishment of debt             (2,387)     (2,387)
Other gains and losses, net 49   (5,893)  524   744   1,819   (5,844)  (688)
Income/(loss) before income taxes 21,889   13,178   (11,297)  1,138   (14,054)  35,067   (25,063)
Income tax expense/(benefit) 4,259   (1,969)  2,200   1,408   (804)  2,290   (3,175)
Net income/(loss)$17,630  $15,147  $(13,497) $(270) $(13,250) $32,777  $(21,888)
Earnings/(loss) per share – basic$0.112  $0.092   ($0.10)2   ($0.01)2  ($0.09) $0.202  ($0.15)2 
Earnings/(loss) per share – diluted$0.11  $0.09   ($0.10)2   ($0.01)2  ($0.09) $0.20  ($0.15)2 
Weighted average common shares – basic 145,542   145,649   145,096   145,564   151,623   145,652   152,071 
Weighted average common shares – diluted 164,855   161,831   145,096   145,564   151,623   163,062   152,071 
        
As Adjusted (Non-GAAP1)       
Income before income taxes$21,253  $15,583  $11,504  $13,242  $10,911    
Income tax expense$4,458  $3,079  $2,281  $2,205  $2,417    
Net income$16,795  $12,504  $9,223  $11,037  $8,494    
Earnings per share – diluted$0.10  $0.08  $0.06  $0.07  $0.05    

QUARTERLY HIGHLIGHTS

Operating Revenues

  • Operating revenues increased 6.6% and 33.5% from the first quarter of 2021 and second quarter of 2020, respectively, due to higher average global AUM arising from market appreciation and net inflows.

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

Operating Expenses

  • Operating expenses decreased 0.6% from the first quarter of 2021 primarily due to lower compensation arising from reduced stock-based compensation and prior quarter seasonal payroll taxes, partly offset by higher third-party distribution fees, marketing expenses and fund management and administration costs.

  • Operating expenses increased 16.4% from the second quarter of 2020 primarily due to higher incentive compensation and headcount, fund management and administration costs, marketing expenses, third-party distribution fees and professional fees.

Other Income/(Expenses)

  • Interest expense increased 11.8% from the first quarter of 2021 primarily due to the issuance of $150.0 million convertible senior notes due 2026.  Interest expense increased 25.6% from the second quarter of 2020 primarily due to a higher level of debt outstanding and a higher effective interest rate.

  • We recognized a non-cash gain on revaluation of deferred consideration of $0.5 million during the second quarter of 2021.  The gain was due to 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.

Income Taxes

  • Our effective income tax rate for the second quarter of 19.5% resulted in income tax expense of $4.3 million.  Our tax rate differs from the federal statutory rate of 21% primarily due to a lower tax rate on foreign earnings. 

  • Our adjusted effective income tax rate was 21.0%1.

SIX MONTH HIGHLIGHTS

  • Operating revenues increased 23.3% as compared to 2020 due to higher average AUM.

  • Operating expenses increased 14.4% as compared to 2020 largely due to higher incentive compensation accruals and headcount, fund management and administration costs, marketing expenses, professional fees, third party distribution fees and contractual gold payments.  These increases were partly offset by lower sales and business development expenses and occupancy expenses.

  • Significant items reported in other income/(expenses) in 2021 include a non-cash gain on revaluation of deferred consideration of $3.3 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); and a gain of $0.4 million recognized on our investment in Securrency, Inc. due to its recent capital raise.

  • Our effective income tax rate for 2021 of 6.5% resulted in income tax expense of $2.3 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, a lower tax rate on foreign earnings and a non-taxable gain on revaluation of deferred consideration.  These items were partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation awards and state and local taxes.

CONFERENCE CALL

WisdomTree will discuss its results and operational highlights during a conference call on Friday, July 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, cryptocurrency and alternative strategies. WisdomTree currently has approximately $74.3 billion in assets under management globally.

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

_________________
See “Non-GAAP Financial Measurements.”
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
 June 30,
2021
 Mar. 31,
2021
 Dec. 31,
2020
 Sept. 30,
2020
 June 30,
2020
GLOBAL ETPs ($ in millions)               
                
Beginning of period assets$      69,537  $      67,392  $      60,710  $      57,666  $      50,347 
Inflows/(outflows)              931             1,279                881              (477)               126 
Market appreciation/(depreciation)           3,484                866             5,801             3,567             7,489 
Fund closures                (4)               —                   —                (46)             (296)
End of period assets$      73,948  $      69,537  $      67,392  $      60,710  $      57,666 
Average assets during the period$      73,658  $      69,589  $      64,106  $      61,200  $      55,746 
Average advisory fee during the period             0.41%              0.42%              0.41%              0.42%              0.41%
Revenue days                91                  90                  92                  92                  91 
Number of ETFs – end of the period              318                313                309                305                311 
       
U.S. LISTED ETFs ($ in millions)      
       
Beginning of period assets$     42,163  $     38,517  $      33,310  $      31,362  $      28,920 
Inflows/(outflows)           1,130             1,343                919                575           (1,474)
Market appreciation/(depreciation)           1,836             2,303             4,288             1,373             4,030 
Fund closures              —                  —                    —                —                (114)
End of period assets$      45,129  $      42,163  $      38,517  $      33,310  $      31,362 
Average assets during the period$      44,183  $      40,706  $      35,926  $      33,002  $      30,651 
Average advisory fee during the period             0.40%              0.40%              0.40%              0.41%              0.41%
Number of ETFs – end of the period                73                  68                  67                  67                  67 
       
EUROPEAN LISTED ETPs ($ in millions)      
       
Beginning of period assets$      27,374  $      28,875  $      27,400  $      26,304  $      21,427 
Inflows/(outflows)            (199)               (64)               (38)           (1,052)            1,600 
Market appreciation/(depreciation)           1,648           (1,437)            1,513             2,194             3,459 
Fund closures                (4)               —                  —                  (46)             (182)
End of period assets$      28,819  $      27,374  $      28,875  $      27,400  $      26,304 
Average assets during the period$      29,475  $      28,883  $      28,135  $      28,198  $      25,095 
Average advisory fee during the period             0.43%              0.44%              0.42%              0.42%              0.41%
Number of ETPs – end of the period              245                245                242                238                244 
       
PRODUCT CATEGORIES ($ in millions)      
       
Commodity & Currency      
Beginning of period assets$      23,657  $      25,879  $      25,176  $      24,246  $      19,818 
Inflows/(outflows)            (318)             (660)             (296)          (1,112)            1,308 
Market appreciation/(depreciation)           1,433           (1,562)               999             2,042             3,120 
End of period assets$      24,772  $      23,657  $      25,879  $      25,176  $      24,246 
Average assets during the period$      25,577  $      25,296  $      25,598  $      25,949  $      23,048 
       
U.S. Equity      
Beginning of period assets$      20,019  $      18,367  $      15,612  $      13,997  $      12,151 
Inflows/(outflows)              199                218                395                897              (241)
Market appreciation/(depreciation)           1,076             1,434             2,360                718             2,087 
End of period assets$      21,294  $      20,019  $      18,367  $      15,612  $      13,997 
Average assets during the period$      20,989  $      19,320  $      17,070  $      15,159  $      13,324 
       
Emerging Market Equity      
Beginning of period assets$      10,477  $        8,539  $        5,979  $        5,413  $        4,600 
Inflows/(outflows)              529             1,662             1,399                257                (25)
Market appreciation/(depreciation)              511                276             1,161                309                838 
End of period assets$      11,517  $      10,477  $        8,539  $        5,979  $        5,413 
Average assets during the period$      11,010  $        9,875  $        7,250  $        5,917  $        5,131 



 Three Months Ended
 June 30,
2021
 Mar. 31,
2021
 Dec. 31,
2020
 Sept. 30,
2020
 June 30,
2020
             
International Developed Market Equity            
Beginning of period assets$9,991  $9,414  $8,621  $8,839  $8,659 
Inflows/(outflows) 397   17   (191)  (587)  (965)
Market appreciation/(depreciation) 405   560   984   369   1,145 
End of period assets$10,793  $9,991  $9,414  $8,621  $8,839 
Average assets during the period$10,529  $9,796  $8,931  $8,835  $8,780 
       
Fixed Income      
Beginning of period assets$3,261  $3,324  $3,630  $3,530  $3,527 
Inflows/(outflows) 168   10   (330)  76   (53)
Market appreciation/(depreciation) 28   (73)  24   24   56 
End of period assets$3,457  $3,261  $3,324  $3,630  $3,530 
Average assets during the period$3,354  $3,253  $3,472  $3,605  $3,523 
       
Leveraged & Inverse      
Beginning of period assets$1,521  $1,478  $1,425  $1,345  $896 
Inflows/(outflows) (2)  (5)  (125)  (9)  311 
Market appreciation/(depreciation) 173   48   178   89   138 
End of period assets$1,692  $1,521  $1,478  $1,425  $1,345 
Average assets during the period$1,666  $1,555  $1,430  $1,476  $1,164 
       
Cryptocurrency      
Beginning of period assets$377  $168  $33  $15  $5 
Inflows/(outflows) 8   36   48   15   8 
Market appreciation/(depreciation) (156)  173   87   3   2 
End of period assets$229  $377  $168  $33  $15 
Average assets during the period$300  $264  $79  $27  $11 
       
Alternatives      
Beginning of period assets$227  $214  $229  $225  $244 
Inflows/(outflows) (44)     (26)  (4)  (29)
Market appreciation/(depreciation) 11   13   11   8   10 
End of period assets$194  $227  $214  $229  $225 
Average assets during the period$228  $223  $224  $226  $226 
       
Closed ETPs      
Beginning of period assets$7  $9  $5  $56  $447 
Inflows/(outflows) (6)  1   7   (10)  (188)
Market appreciation/(depreciation) 3   (3)  (3)  5   93 
Fund closures (4)        (46)  (296)
End of period assets$  $7  $9  $5  $56 
Average assets during the period$5  $7  $7  $6  $538 
       
Headcount 227   227   217   211   214 

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)

 June 30,
2021

 Dec. 31,
2020
 (Unaudited)
  
ASSETS     
Current assets:     
Cash and cash equivalents$167,635  $73,425 
Securities owned, at fair value 58,806   34,895 
Accounts receivable 34,800   29,455 
Income taxes receivable 948    
Prepaid expenses 6,327   3,827 
Other current assets 288   259 
Total current assets 268,804   141,861 
Fixed assets, net 7,247   7,579 
Securities held-to-maturity 370   451 
Deferred tax assets, net 5,628   8,063 
Investments 14,238   8,112 
Right of use assets – operating leases 16,213   16,327 
Goodwill 85,856   85,856 
Intangible assets 601,247   601,247 
Other noncurrent assets 348   180 
Total assets$999,951  $869,676 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY  
LIABILITIES  
Current liabilities:  
Fund management and administration payable$18,592  $19,564 
Compensation and benefits payable 15,447   22,803 
Deferred consideration – gold payments 16,101   17,374 
Operating lease liabilities 3,326   3,135 
Income taxes payable    916 
Accounts payable and other liabilities 11,318   10,207 
Total current liabilities 64,784   73,999 
Convertible notes 317,336   166,646 
Deferred consideration – gold payments 210,605   212,763 
Operating lease liabilities 16,920   17,434 
Total liabilities 609,645   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: 145,114 and 148,716 at June 30, 2021 and December 31, 2020, respectively 1,451   1,487 
Additional paid-in capital 285,002   317,075 
Accumulated other comprehensive income 1,155   1,102 
Accumulated deficit (29,871)  (53,399)
Total stockholders’ equity 257,737   266,265 
Total liabilities and stockholders’ equity$999,951  $869,676 



WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)  

 Six Months Ended  
 June 30,
2021

 June 30,
2020
Cash flows from operating activities:     
Net income/(loss)$32,777  $(21,888)
Adjustments to reconcile net income/(loss) to net cash (used in)/provided by operating activities:     
Advisory fees received in gold, other precious metals and cryptocurrencies (39,341)  (29,135)
Contractual gold payments 8,584   7,823 
Stock-based compensation 5,264   6,159 
Deferred income taxes 3,367   832 
(Gain)/loss on revaluation of deferred consideration – gold payments (3,329)  25,566 
Amortization of right of use asset 1,340   1,588 
Amortization of issuance costs - convertible notes 899   115 
Depreciation and amortization 508   507 
Impairments 303   19,672 
Gain on sale – Canadian ETF business    (2,877)
Loss on extinguishment of debt    2,387 
Amortization of issuance costs - former credit facility    1,328 
Other (372)  (83)
Changes in operating assets and liabilities:  
Securities owned, at fair value (23,911)  4,209 
Accounts receivable (2,622)  4,461 
Prepaid expenses (2,497)  (2,016)
Gold, other precious metals and cryptocurrencies 27,959   20,882 
Other assets (202)  (702)
Fund management and administration payable (896)  1,677 
Compensation and benefits payable (7,396)  (18,431)
Income taxes receivable/payable (1,852)  (1,046)
Securities sold, but not yet purchased, at fair value    (582)
Operating lease liabilities (1,658)  (1,845)
Accounts payable and other liabilities 858   781 
Net cash (used in)/provided by operating activities (2,217)  19,382 
   
Cash flows from investing activities:  
Purchase of investments (5,750)   
Purchase of fixed assets (173)  (224)
Proceeds from held-to-maturity securities maturing or called prior to maturity 77   16,365 
Proceeds from the sale of the Company’s financial interests in AdvisorEngine Inc    8,155 
Proceeds from sale of Canadian ETF business, net    2,774 
Net cash (used in)/provided by investing activities (5,846)  27,070 
   
Cash flows from financing activities:  
Shares repurchased (34,506)  (26,444)
Dividends paid (9,865)  (10,270)
Convertible notes issuance costs (4,297)  (4,611)
Repayment of debt    (179,000)
Proceeds from the issuance of convertible notes 150,000   150,000 
Proceeds from exercise of stock options 815   240 
Net cash provided by/(used in) financing activities 102,147   (70,085)
Increase/(decrease) in cash flows due to changes in foreign exchange rate 126   (1,084)
Increase/(decrease) in cash and cash equivalents 94,210   (24,717)
Cash and cash equivalents – beginning of year 73,425   74,972 
Cash and cash equivalents – end of period$167,635  $50,255 
Supplemental disclosure of cash flow information:  
Cash paid for taxes$5,846  $2,200 
Cash paid for interest$3,719  $3,390 

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.
  • 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:  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, a gain arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine 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:June 30,
2021
 Mar. 31,
2021
 Dec. 31,
2020
 Sept. 30,
2020
 June 30,
2020
Net income/(loss), as reported$17,630  $15,147  $(13,497) $(270) $(13,250)
Deduct/Add back: (Gain)/loss on revaluation of deferred consideration (497)  (2,832)  22,385   8,870   23,358 
Deduct: Unrealized gain recognized on our investment in Securrency, net of income taxes (105)  (179)         
Deduct/Add back: Tax (windfalls)/shortfalls upon vesting and exercise of stock-based compensation awards (233)  123   21   50   119 
Add back: Impairments, net of income taxes (where applicable)    245      2,326    
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 our 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)
Add back: Acquisition and disposition-related costs, net of income taxes             25 
Adjusted net income$16,795  $12,504  $9,223  $11,037  $8,494 
Weighted average common shares - diluted 164,855   161,831   161,138   160,876   166,634 
Adjusted earnings per share - diluted$0.10  $0.08  $0.06  $0.07  $0.05 
     
     
     
 Three Months Ended
Gross Margin and Gross Margin Percentage:June 30,
2021
 Mar. 31,
2021
 Dec. 31,
2020
 Sept. 30,
2020
 June 30,
2020
Operating revenues$77,603  $72,830  $67,059  $64,640  $58,126 
Less: Fund management and administration (16,195)  (15,521)  (16,350)  (15,219)  (14,461)
Gross margin$61,408  $57,309  $50,709  $49,421  $43,665 
Gross margin percentage 79.1%  78.7%  75.6%  76.5%  75.1%


 Three Months Ended
Adjusted Income Before Income Taxes:June 30,
2021
 Mar. 31,
2021
 Dec. 31,
2020
 Sept. 30,
2020
 June 30,
2020
Income/(loss) before income taxes$21,889  $13,178  $(11,297) $1,138  $(14,054)
Deduct/Add back: (Gain)/loss on revaluation of deferred consideration (497)  (2,832)  22,385   8,870   23,358 
Deduct: Unrealized gain recognized on our investment in Securrency, before income taxes (139)  (237)         
Add back: Loss recognized upon reduction of a tax-related indemnification asset    5,171          
Add back: Impairments, before income taxes    303      3,080    
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 our investment in AdvisorEngine          (225)  (868)
Add back: Loss on extinguishment of debt, before income taxes             2,387 
Add back: Acquisition and disposition-related costs, before income taxes             33 
Adjusted income before income taxes$21,253  $15,583  $11,504  $13,242  $10,911 


 Three Months Ended  
Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate:  June 30,
2021
 Mar. 31,
2021

 Dec. 31,
2020
 Sept. 30,
2020
 June 30,
2020
Adjusted income before income taxes (above)$21,253  $15,583  $11,504  $13,242  $10,911 
Income tax expense/(benefit)$4,259  $(1,969) $2,200  $1,408  $(804)
Add back/(deduct): Tax windfalls/(shortfalls) upon vesting and exercise of stock-based compensation awards 233   (123)  (21)  (50)  (119)
Deduct: Tax expense on unrealized gain recognized on our 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 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 
Adjusted income tax expense$4,458  $3,079  $2,281  $2,205  $2,417 
Adjusted effective income tax rate 21.0%  19.8%  19.8%  16.7%  22.2%

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.


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