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
Product News
|
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 | 2 | $ | 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 revenues decreased 9.0% from the first quarter of 2020 due to lower average AUM of our U.S. listed products due to market depreciation arising from the COVID-19 pandemic toward the end of the prior quarter and net outflows. Also, our average global advisory fee declined 1 basis point due to AUM mix shift. These declines were partly offset by net inflows into our international listed products and market appreciation.
- Operating revenues decreased 12.3% from the second quarter of 2019 due to lower average AUM of our U.S. listed products arising from market depreciation and net outflows, as well as a 4 basis point decline in our average global advisory fee due to AUM mix shift. These declines were partly offset by higher average AUM of our international listed products arising from net inflows and market appreciation.
- Our average global advisory fee was 0.41%, 0.42% and 0.45% during the second quarter of 2020, the first quarter of 2020 and the second quarter of 2019, respectively.
Operating Expenses
- Operating expenses decreased 4.0% from the first quarter of 2020 due to lower discretionary spending as a result of the COVID-19 pandemic, including lower sales and business development costs and marketing expenses.
- Operating expenses decreased 14.8% from the second quarter of 2019 largely due to lower incentive compensation accruals as well as $1.5 million of severance expense included in the prior period, lower fund management and administration costs due to lower average AUM and lower sales and business development costs, marketing expenses and third-party distribution costs. These declines were partly offset by higher contractual gold payments due to higher average gold prices.
Other Income/(Expenses)
- We recognized a non-cash loss on revaluation of deferred consideration of ($23.4) million, ($2.2) million and ($4.0) million during the second quarter of 2020, first quarter of 2020 and second quarter of 2019, respectively. These losses arose due to an increase in forward-looking gold prices when compared to the previous periods’ forward-looking gold curves. The magnitude of any gain or loss recognized is highly correlated to the magnitude of the change in the forward-looking price of gold.
- Interest expense decreased 15.5% and 29.8% from the first quarter of 2020 and second quarter of 2019, respectively, due to lower levels of debt outstanding and lower interest rates.
- During the second quarter of 2020, we recognized a non-cash loss on extinguishment of debt of $2.4 million arising from the acceleration of debt issuance cost amortization in connection with the termination of our former Credit Facility.
- Other gains and losses, net, for the second quarter of 2020 includes a gain of $0.9 million arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine. 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, securities owned and other miscellaneous items.
Income Taxes
- Our effective income tax rate for 2020 of 5.7% resulted in an income tax benefit of $0.8 million. Our tax rate differs from the federal statutory tax rate of 21% primarily due to a non-deductible loss on revaluation of deferred consideration. This loss was partly offset by a tax benefit of $2.8 million recognized in connection with the release of a deferred tax asset valuation allowance on interest carryforwards arising from our debt previously held in the United Kingdom and a lower tax rate on foreign earnings.
- Our adjusted effective income tax rate was 22.2%1.
SIX MONTH HIGHLIGHTS
- Operating revenues decreased 7.4% as compared to 2019 due to lower average AUM of our U.S. listed products and a 3 basis point decline in our average global advisory fee due to AUM mix shift. These declines were partly offset by higher average AUM of our international listed products.
- Operating expenses decreased 13.4% as compared to 2019 largely due to lower incentive compensation accruals as well as $3.5 million of severance expense included in the prior period, lower fund management and administration costs due to lower average AUM and lower sales and business development costs, marketing expenses and third-party distribution costs. These declines were partly offset by higher contractual gold payments due to higher average gold prices.
- Significant changes in items reported in other income/(expenses) include a non-cash loss on revaluation of deferred consideration of ($25.6) million in 2020 as compared to a gain of $0.4 million in 2019; a non-cash impairment charge of $19.7 million recorded in the first quarter of 2020 in connection with the exit from our investment in AdvisorEngine; a loss on extinguishment of debt of $2.4 million in 2020; non-cash charges of $6.0 million and $4.3 million in 2020 and 2019, respectively, 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 $0.9 million in the second quarter of 2020 arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine.
- Our effective income tax rate for 2020 of 12.7% resulted in an income tax benefit of $3.2 million. Our tax rate differs from the federal statutory rate of 21% primarily due to a valuation allowance on capital losses, a non-deductible loss on revaluation of deferred consideration and tax shortfalls associated with the vesting and exercise of stock-based compensation awards. These items were partly offset by a tax benefit of $6.0 million recognized in connection with the release of the tax-related indemnification asset described above, a $2.9 million non-taxable gain recognized upon sale of our Canadian ETF business in the first quarter, a tax benefit of $2.8 million recognized in connection with the release of a deferred tax asset valuation allowance on interest carryforwards arising from our debt previously held in the United Kingdom and a lower tax rate on foreign earnings.
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.” | |
| 2 | (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 | |
| jweyeneth@wisdomtree.com | jzaloom@wisdomtree.com | |
Contact Information:
Jason Weyeneth, CFA
+1.917.267.3858
jweyeneth@wisdomtree.com
Tags:
, Wire, Disclosure Newswire, United States, English
Contact Information:
Jason Weyeneth, CFA
+1.917.267.3858
jweyeneth@wisdomtree.com
