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Aug 1, 2020 5:30 PM ET

WisdomTree Announces Second Quarter 2020 Results – Diluted Loss Per Share of ($0.09), or Earnings Per Share of $0.05, as adjusted




iCrowd Newswire - Aug 1, 2020

WisdomTree Investments, Inc. reported financial results for the second quarter of 2020.

During the second quarter of 2020, we experienced a partial recovery of our AUM which was adversely impacted by severe market declines arising from the COVID-19 pandemic toward the end of the prior quarter.  This recovery was driven principally by market appreciation, resulting in a 14.6% increase of our ending AUM.  Our business continues to operate remotely without disruption.

$23.0 million of non-cash charges, including (i) a loss on revaluation of deferred consideration of ($23.4) million (ii) a loss on extinguishment of debt of ($2.4) million and (iii) a release of a deferred tax valuation allowance of $2.8 million.

($13.3) million net loss ($8.51 million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.    

$57.6 billion of ending AUM, an increase of 14.6% resulting primarily from market appreciation.

$126 million of net inflows ($928 million of net inflows excluding HEDJ/DXJ), driven by inflows into our commodity and leveraged and inverse products, partly offset by outflows from our international developed market equity and U.S. equity products.

0.41% average global advisory fee, a decrease of 0.1 basis point due to AUM mix shift.

$58.1 million of operating revenues, a decrease of 9.0% primarily due to lower average AUM and a lower average global advisory fee.

75.1% gross margin1, a 2.2 point decrease primarily due to lower revenues.

20.3% operating income margin (20.4%1 as adjusted), a 4.2 point decrease (4.7 point decrease, as adjusted1) primarily due to lower revenues, partly offset by reduced discretionary spending as a result of the COVID-19 pandemic.

$150.0 million issuance of convertible senior notes due 2023, coupled with the repayment of $174.0 million of debt previously outstanding and termination of our revolver, collectively referred to in this press release as the “former Credit Facility.”

$24.9 million repurchase of 6.7 million shares of our common stock, principally in connection with the issuance of the convertible notes.

$0.03 quarterly dividend declared, payable on August 26, 2020 to stockholders of record as of the close of business  on August 12, 2020.

Update from Jonathan Steinberg, WisdomTree CEO

“During the second quarter, assets under management rebounded, resulting in revenue tailwinds as we entered the second half of the year. The global WisdomTree team has remained focused on what we can control, and demonstrated strong execution in the quarter, including navigating unprecedented volatility in energy markets, generating record client engagement and producing strong U.S.-listed product gross sales and record Europe-listed product net flows. 

“We’ve realized significant cost efficiencies in the current environment, some of which should prove sustainable in the future. We also successfully refinanced our debt, repurchased 6.7 million shares and improved our financial flexibility. Despite the uncertain environment, we are seeing momentum in important lead indicators, and we are well positioned for growth with the right team and strategy in place.”

OPERATING AND FINANCIAL HIGHLIGHTS

  Three Months Ended  
  June 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sept. 30,
2019
June 30,
2019
Consolidated Operating Highlights ($, in billions):          
AUM $ 57.6   $ 50.3   $ 63.6   $ 60.0   $ 60.4  
Net inflows/(outflows) $ 0.1   $ (0.5 ) $ 0.4   $ (0.7 ) $ 0.3  
Average AUM $ 55.7   $ 59.8   $ 61.9   $ 60.3   $ 58.6  
Average advisory fee   0.41 %   0.42 %   0.44 %   0.44 %   0.45 %
           
Consolidated Financial Highlights ($, in millions, except per share amounts):          
Operating revenues $ 58.1   $ 63.9   $ 68.9   $ 67.7   $ 66.3  
Net (loss)/income $ (13.3 ) $ (8.6 ) $ (25.9 ) $ 4.2   $ 2.5  
Diluted (loss)/earnings per share $ (0.09 ) $ (0.06 ) $ (0.17 ) $ 0.02   $ 0.01  
Operating income margin   20.3 %   24.5 %   21.5 %   23.8 %   18.0 %
As Adjusted (Non-GAAP1):          
Gross Margin   75.1 %   77.3 %   77.3 %   77.7 %   76.5 %
Net income, as adjusted $ 8.5   $ 11.2   $ 10.1   $ 10.6   $ 7.8  
Diluted earnings per share, as adjusted $ 0.05   $ 0.07   $ 0.06   $ 0.06   $ 0.05  
Operating income margin, as adjusted   20.4 %   25.1 %   22.0 %   24.1 %   20.2 %
           

RECENT BUSINESS DEVELOPMENTS

Company News

  • In June 2020, we issued $150.0 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2023, repaid our debt previously outstanding and terminated our former Credit Facility; and
  • In June 2020, we entered into a new distribution agreement in Italy for our model portfolios with The Intermonte Eye – a digital service providing investment products to its network of private banks.

Product News

  • In May 2020, we listed sterling trading lines for the WisdomTree Brent Crude Oil (BRNG), the WisdomTree Brent Crude Oil Pre-roll (BRNB) and the WisdomTree WTI Crude Oil Pre-roll (WTIB) on the London Stock Exchange.
  • In June 2020, we announced the results of a WisdomTree study revealing various investor behavior data as it relates to model portfolio usage and allocation.
  • In July 2020, we secured additional third-party relationships for our model portfolios, including: Carson Group, Riskalzye, Kwanti, ETF Logic and Orion; we listed WisdomTree Battery Solutions UCITS ETF (VOLT) and WisdomTree Cloud Computing UCITS ETF (WCLD) on SIX, the Swiss Exchange; and the WisdomTree WTI Crude Oil ETC (CRUD) security holders voted in favour of changing the underlying index tracked by the ETC. The new index is the result of extensive work between WisdomTree and Bloomberg to create an index which would be more resilient to extreme conditions in the WTI Crude Oil market.

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

  Three Months Ended
  Six Months Ended  
  June 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sept. 30,
2019
June 30,
2019

  June 30,
2020
June 30,
2019
Operating Revenues:              
Advisory fees $ 57,208     $ 62,950     $ 68,179     $ 67,006     $ 65,627     $ 120,158     $ 130,467  
Other income   918       924       728       712       666       1,842       1,311  
Total revenues   58,126       63,874       68,907       67,718       66,293       122,000       131,778  
Operating Expenses:                                                  
Compensation and benefits   17,455       17,295       19,280       18,880       21,300       34,750       42,601  
Fund management and administration   14,461       14,485       15,650       15,110       15,576       28,946       30,742  
Marketing and advertising   1,949       2,468       3,551       3,022       2,910       4,417       5,590  
Sales and business development   2,181       3,417       5,329       4,354       4,171       5,598       8,593  
Contractual gold payments   4,063       3,760       3,516       3,502       3,110       7,823       6,208  
Professional and consulting fees   1,357       1,273       1,604       1,259       1,296       2,630       2,778  
Occupancy, communications and equipment   1,643       1,551       1,587       1,549       1,548       3,194       3,166  
Depreciation and
amortization
  251       256       253       259       264       507       533  
Third-party distribution fees   1,340       1,355       1,146       1,503       1,919       2,695       4,319  
Acquisition and disposition- related costs   33       383       366       190       33       416       346  
Other   1,596       1,997       1,816       1,959       2,255       3,593       4,308  
Total operating expenses   46,329       48,240       54,098       51,587       54,382       94,569       109,184  
Operating income   11,797       15,634       14,809       16,131       11,911       27,431       22,594  
Other Income/(Expenses):              
Interest expense   (2,044 )     (2,419 )     (2,606 )     (2,832 )     (2,910 )     (4,463 )     (5,802 )
(Loss)/gain on revaluation of deferred consideration – gold payments   (23,358 )     (2,208 )     (5,354 )     (6,306 )     (4,037 )     (25,566 )     367  
Interest income   119       163       936       799       818       282       1,597  
Impairments         (19,672 )     (30,138 )                 (19,672 )     (572 )
Loss on extinguishment of debt   (2,387 )                             (2,387 )      
Other gains and losses, net   1,819       (2,507 )     (2 )     843       284       (688 )     (4,343 )
(Loss)/income before income taxes   (14,054 )     (11,009 )     (22,355 )     8,635       6,066       (25,063 )     13,841  
Income tax (benefit)/expense   (804 )     (2,371 )     3,525       4,483       3,587       (3,175 )     2,538  
Net (loss)/income $ (13,250 )   $ (8,638 )   $ (25,880 )   $ 4,152     $ 2,479     $ (21,888 )   $ 11,303  
                                                   
(Loss)/earnings per share – basic $ (0.09 )   $ (0.06 )   $ (0.17 )   $ 0.02   $ 0.01 2    $ (0.15 )2   $ 0.07  
(Loss)/earnings per share – diluted $   (0.09 )   $   (0.06 )   $ (0.17 )   $   0.02     $ 0.01     $ (0.15 )2   $ 0.07  
Weighted average common shares – basic   151,623       152,519       151,948       151,897       151,818       152,071       151,722  
Weighted average common shares – diluted   151,623       152,519       151,948       167,163       167,249       152,071       166,855  
               
As Adjusted (Non-GAAP1)                    
Compensation and benefits $   17,455     $   17,295     $   19,280     $   18,880     $   19,825        
Total expenses $   46,296     $   47,857     $   53,732     $   51,397     $   52,874        
Operating income $   11,830     $   16,017     $   15,175     $   16,321     $   13,419        
Income before income taxes $   10,911     $   14,358     $   13,503     $   15,131     $   11,611        
Income tax expense $   2,417     $   3,134     $   3,396     $   4,489     $   3,798        
Net income $     8,494     $   11,224     $   10,107     $   10,642     $   7,813        
Earnings per share – diluted $   0.05     $   0.07     $   0.06      $   0.06     $   0.05        
                     

QUARTERLY HIGHLIGHTS

Operating Revenues

Operating Expenses

Other Income/(Expenses)

Income Taxes

SIX MONTH HIGHLIGHTS

CONFERENCE CALL

WisdomTree will discuss its results and operational highlights during a conference call on Friday, July 31, 2020 at 9:00 a.m. ET. The call-in number will be (877) 303-7209. Anyone outside the U.S. or Canada should call (970) 315-0420. The slides used during the presentation will be available at http://ir.wisdomtree.com. For those unable to join the conference call at the scheduled time, an audio replay will be available on http://ir.wisdomtree.com.

ABOUT WISDOMTREE

WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (collectively, “WisdomTree”), is an ETF and ETP sponsor and asset manager headquartered in New York. WisdomTree offers products covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. WisdomTree currently has approximately $61.5 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.” 
  (Loss)/earnings per share (“EPS”) is calculated pursuant to the two-class method as it results in a lower EPS amount as compared to the treasury stock method.

 

Contact Information:
     
Investor Relations    Media Relations
Jason Weyeneth, CFA    Jessica Zaloom
+1.917.267.3858    +1.917.267.3735
[email protected]    [email protected] 


Contact Information:

Jason Weyeneth, CFA 
+1.917.267.3858 
[email protected]








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