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

Rhea-AI Summary

WisdomTree Investments reported a strong second quarter of 2021 with a net income of $17.6 million and adjusted net income of $16.8 million. The company achieved $73.9 billion in assets under management (AUM), up 6.3% from the previous quarter, driven by $0.9 billion in net inflows. Operating revenues increased 6.6% to $77.6 million, thanks to higher AUM. Gross margin rose to 79.1% while operating income margin improved to 30.5%. A quarterly dividend of $0.03 was declared, payable on August 25, 2021.

Positive

• Net income of $17.6 million for Q2 2021, a significant increase from previous quarters.
• Assets under management (AUM) rose to $73.9 billion, reflecting a 6.3% increase.
• Operating revenues increased by 6.6% to $77.6 million, supported by higher average AUM.
• Operating income margin increased to 30.5%, up 5.0 points due to higher revenues.
• Quarterly dividend declared at $0.03, indicating shareholder returns.

Negative

• Average global advisory fee decreased to 0.41%, down 1 basis point due to AUM mix shift.
• Interest expense rose by 11.8% due to issuance of $150.0 million convertible senior notes.

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.

_________________
¹ See “Non-GAAP Financial Measurements.”
² Earnings/(loss) per share (“EPS”) is calculated pursuant to the two-class method as it results in a lower EPS amount as compared to the treasury stock method.

Contact Information:

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.

FAQ

What were WisdomTree's net income and adjusted net income for Q2 2021?

WisdomTree reported a net income of $17.6 million and adjusted net income of $16.8 million for the second quarter of 2021.

How much did WisdomTree's assets under management increase in Q2 2021?

WisdomTree's assets under management increased to $73.9 billion, marking a 6.3% rise from the prior quarter.

What is the quarterly dividend declared by WisdomTree?

WisdomTree declared a quarterly dividend of $0.03, which is payable on August 25, 2021.

What was the increase in WisdomTree's operating revenues for Q2 2021?

Operating revenues for WisdomTree increased by 6.6% to $77.6 million in the second quarter of 2021.

What were the average global advisory fees for WisdomTree in Q2 2021?

The average global advisory fee for WisdomTree in Q2 2021 was 0.41%, a decrease of 1 basis point from the previous quarter.