WisdomTree Investments
WisdomTree Announces Second Quarter 2010 Results
Wednesday 28 July 2010
Company reports positive proforma operating income $121 million net inflows for the second quarter 21 out of 34 equity funds outperformed competitive benchmarks since inception through Q2
New York, NY – (BUSINESS WIRE) – July 28, 2010 – WisdomTree (Pink Sheets: WSDT - News), an exchange-traded fund (“ETF”) sponsor and asset manager, today reported a GAAP net loss of $1.9 million in the second quarter of 2010, as compared to $3.6 million for the first quarter of 2010. Proforma operating income, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was $0.2 million in the second quarter, as compared to a proforma operating loss of $1.0 million in the first quarter. WisdomTree CEO Jonathan Steinberg commented, “We are extremely pleased to report record revenues and, significantly, our first quarter of positive operating income. These are just some of the important milestones we have achieved during the quarter. We are encouraged to see our business performing well and our expectations remain high for the future.”
Recent Business Highlights
On July 21, 2010, the WisdomTree India Earnings Fund (EPI) surpassed $1 billion in AUM. The Company diversified its product line: registration statements for a commodity currency fund and an emerging market local debt fund became effective during the quarter.
On April 27, 2010, nine of WisdomTree’s ETFs were cross-listed in
Assets Under Management and Performance
As of June 30, 2010, assets under management (“AUM”) managed by WisdomTree or against WisdomTree Indexes was $6.9 billion, down 7% and ETF AUM was $6.2 billion, down 7% from March 31, 2010. Net inflows into WisdomTree ETFs were $121 million in the second quarter, primarily in emerging market and
Second Quarter Financial Highlights
Comparison to the first quarter of 2010 Revenues
Total revenues for the quarter increased 7.1% to a record $9.3 million as compared to $8.7 million in the first quarter. Average ETF assets under management increased 7% in the second quarter as compared to the first quarter primarily due to $121 million of net inflows, partly offset by $594 million in negative market movement. The average advisory fee earned during the second quarter and first quarter was 0.54%.
Expenses
Total expenses decreased 8.9% to $11.2 million from $12.3 million in the first quarter primarily due to lower compensation, marketing and business development and professional fees. Partly offsetting these decreases were higher third party profit sharing costs. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses decreased 5.8% to $9.1 million from $9.7 million in the first quarter.
- Compensation and benefits expenses decreased 12.5% to $4.6 million from $5.3 million in the second quarter primarily due to a decrease in accrued incentive compensation due to lower levels of inflows in the quarter and lower stock-based compensation due to equity awards granted in prior years fully vesting in the first quarter. Excluding stock-based compensation, expenses decreased 11.4% primarily due to lower accrued incentive compensation and payroll taxes associated with restricted stock vesting in the first quarter.
- Fund management and administration expenses decreased 2.7% to $3.3 million from $3.4 million in the first quarter, due to lower legal fees and fund related costs related to fund closures on March 29, 2010.
- Marketing and business development expenses decreased 27.7% to $1.2 million from $1.6 million in the first quarter due to a planned reduction in TV advertising during the quarter. The first quarter included higher levels of TV advertising to support the Company’s sales efforts. Partly offsetting this decrease was an increase in sales related expenses and new product development expenses.
- Professional fees decreased 31.1% to $0.7 million in the second quarter as compared to $1.0 million in first quarter primarily due to lower variable stockbased compensation expense for advisors as well as lower strategic corporate consulting expense.
- Occupancy, communications and equipment expenses remained unchanged at $0.3 million in the second and first quarter of 2010.
- Other expenses remained unchanged at $0.4 million in the second and first quarter of 2010.
- Third party profit sharing expenses increased to $0.6 million in the second quarter from $0.2 million in the first. This increase is primarily due to higher average AUM and revenues as well as lower levels of direct expenses related to the Company’s Currency ETFs as compared to the first quarter. Third party profit sharing arrangements represents the amount paid to (or received from) the Bank of New York Mellon, after netting revenues and direct costs, for its collaboration with the Company’s Currency ETFs.
- Stock-based compensation expenses decreased 20.9% to $2.0 million in the second quarter from $2.5 million in the first quarter due to equity awards granted in prior years fully vesting in the first quarter as well as lower variable expense due to a decline in the Company’s stock price.
Year-to-Date Results
Total revenues more than doubled to $18.0 million during the first six months of 2010 from $8.1 million in the comparable period in 2009, as a result of higher asset levels due to higher levels of net inflows and positive market conditions.
Total expenses increased 19.1% to $23.5 million during the first six months of 2010 from $19.8 million in the same period of last year. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses increased 21.8% to $18.8 million from $15.4 million in the same period last year. This increase was primarily due to higher third party profit sharing arrangements, compensation, marketing and business development and fund management and administration expenses, all related to an increase in assets under management in the first six months of 2010 as compared to 2009.
Balance Sheet
As of June 30, 2010, WisdomTree had total assets of $25.3 million, which consisted primarily of cash and cash equivalents of $12.5 million and investments of $7.7 million. WisdomTree has no debt. There were approximately 115.0 million shares issued as of June 30, 2010. Fully diluted shares issued and outstanding were approximately 136.9 million as of June 30, 2010.
Second Quarter 2010 Earnings Call Information
WisdomTree will discuss its results and operational highlights during a conference call on Thursday, July 29, 2010 at 9:00 a.m. ET. The call-in number will be (888) 713-4213 passcode 49203767. Anyone outside the
About WisdomTree
WisdomTree® is an exchange-traded fund (“ETF”) sponsor and asset manager using its own fundamentally weighted index methodology. WisdomTree also licenses its indexes to third parties for proprietary products and offers a platform to promote the use of WisdomTree ETFs in 401(k) plans. Approximately $7.3 billion in assets currently are managed by WisdomTree or are managed against WisdomTree Indexes. For more information, please visit www.wisdomtree.com. WisdomTree is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiaries WisdomTree Asset Management, Inc. and WisdomTree Retirement Services, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust. WisdomTree Retirement Services, Inc. supports the use of the WisdomTree ETFs in retirement plans by financial professionals.
Contact:
Media Contact:
Stuart Bell
WisdomTree Investments, Inc.
(917) 267-3702
or
WisdomTree Investor Relations Contacts:
KCSA Strategic Communications
Jeffrey Goldberger / Todd Fromer
(212) 896-1249 / (212) 896-1215
jgoldberger@kcsa.com / tfromer@kcsa.com
GAAP to Non-GAAP Reconciliation
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 this non-GAAP financial measurement 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 and are therefore unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measures should be considered in the context with our GAAP results. We have disclosed our results excluding certain non-operating items. We consider stock-based compensation, depreciation and amortization and interest and investment income as non-operating items. Management excludes these costs when measuring our financial performance as they are non-cash charges or not directly related to our business of being an index developer and ETF sponsor. As the company is currently incurring net losses, management focuses on its cash related expenses of being an index developer and ETF sponsor in measuring the financial health of its business and making related decisions. However, stock-based compensation has been and will continue to be for the foreseeable future, a significant recurring expense in our business and stockbased compensation is an important part of our employees' compensation and impacts their performance.
Forward Looking Statements
Statements in this Press Release regarding WisdomTree Investments, Inc. that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speaks only as of the date made. We have no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect unanticipated events or circumstances occurring after the date of such statements. Forward-looking statements are subject to known and unknown risks, uncertainties and other important factors, some of which are listed below, that could cause actual results or outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. In assessing the forward-looking statements contained herein, readers are urged to carefully read the following risks and considerations:
- Our ability to become profitable is dependent upon our ability to increase our assets under management and to control our expenses.
- Changes in the equity markets have a direct impact on our assets under management. A downturn in the equity markets can result in a significant reduction in assets under management, which, in turn, directly reduces our revenues.
- The mix of our assets under management could be subject to significant fluctuations and could adversely affect our revenues.
- Poor investment performance of our ETFs is likely to lead to a reduction in our assets under management and a reduction in our revenues.
- If our reputation is harmed we could suffer losses in revenue.
- The asset management industry is highly competitive and most of our competitors are larger companies with greater resources.
- We rely very heavily on third-party vendors, such as BNY Mellon, Standard & Poor’s, and Bloomberg, to provide us with services that are very important to our business. If any of those vendors decided to terminate their relationship with us, we might experience a disruption in our ability to do business while we retain an alternative vendor.
- A failure in our operational systems or infrastructure, or those of the third-party vendors, could disrupt our operations, damage our reputation, and reduce our revenues.
- Our business is subject to extensive regulation, and compliance failures and changes in regulation could adversely affect us.
- We depend on key personnel and the loss of such personnel could disrupt our ability to develop new product and conduct our business.
- Our principal stockholders, including our directors and officers, control a large percentage of our shares of common stock and can control our corporate actions.
Past performance is no indication of future results.