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 dividenddeclared, 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.
