WisdomTree Investments

WisdomTree Announces First Quarter 2011 Results

Wednesday 27 April 2011

   

Company achieves first GAAP net income quarter

68% growth in AUM and 67% growth in revenues year over year

$1.3 billion in net inflows; 4.7% market share of industry flows

New York, NY – (BUSINESS WIRE) – April 27, 2011 – WisdomTree (Pink Sheets: WSDT - News), today reported GAAP net income of $0.2 million for the first quarter of 2011 as compared to a GAAP net loss of $3.6 million in the first quarter of 2010 and a GAAP net loss of $0.6 million for the fourth quarter of 2010.  

Proforma operating income (which excludes stock-based compensation and depreciation and amortization expenses) was $2.3 million in the first quarter of 2011 as compared to a proforma loss of $1.0 million in the first quarter of 2010 and proforma income of $1.7 million in the fourth quarter of 2010.

ETF assets under management (“AUM”) reached a record $11.3 billion, up 68.1% from March 31, 2010 and up 14.1% from December 31, 2010.  Net inflows were $1.3 billion in the first quarter which represented 4.7% market share of industry inflows.  Revenues increased 66.8% to a record $14.5 million compared to the first quarter of last year and up 8.4% from the fourth quarter of 2010.

WisdomTree CEO Jonathan Steinberg commented, “WisdomTree is extremely pleased to report our first quarter of GAAP net income on the back of another strong quarter of net inflows and overall ETF industry market share.  I am proud of the track record we are building as we execute the corporate goals we outlined for our shareholders.” 

Mr. Steinberg continued, “We are continuing to expand and diversify our product offering by launching our second international fixed income ETF and launching our first alternative strategy ETF during the quarter.  Strong net inflows during the quarter resulting in record AUM and revenues demonstrate that the diversification of our product set has enhanced our ability to gather assets in changing market cycles.”

 Summary Operating and Financial Highlights

 

 

For the Three Months Ended

% Change From

 

Mar. 31,

Dec. 31,

Mar. 31,

Dec. 31,

Mar. 31,

Operating Highlights (in millions)

2011

2010

2010

2010

2010

ETF AUM

$11,284

$9,891

$6,713

14%

68%

ETF inflows

$1,264

$1,271

$582

-1%

117%

Average ETF AUM

$10,294

$9,104

$6,311

13%

63%

Average ETF advisory fee

0.56%

0.57%

0.54%

-

-

Financial Highlights (in thousands)

 

 

 

 

 

Revenues

$14,533

$13,413

$8,714

8%

67%

Net income/(loss)

$155

($580)

($3,592)

-

-

Proforma operating income/(loss)

$2,339

$1,725

($968)

36%

-

 

 

 

 

 

 

 

Recent Business Highlights

On January 5, 2011, the Company announced the launch of its first alternative strategy ETF, the WisdomTree Managed Futures Strategy Fund (WDTI).

On February 8, 2011, the Company announced the appointment of Steven L. Begleiter, Senior Principal at Flexpoint Ford, LLC, to the Company’s Board of Directors.

On March 17, 2011, the Company announced the launch of its second international fixed income ETF, the WisdomTree Asia Local Debt Fund (ALD). 

On March 31, 2011, the Company announced the filing of a Registration Statement on Form 10 with the U.S. Securities and Exchange Commission in connection with the planned listing of its common stock on a national securities exchange.

On April 14, 2011, the Company announced intended changes in the investment strategies for six equity ETFs and two currency ETFs in an effort to improve upon the existing strategies.  Once in effect, the Company will have more direct commodity themed products and a more robust presence in international fixed income.   

Performance

Approximately 80% of the $8.8 billion invested in WisdomTree’s 34 equity ETFs on March 31, 2011 were in funds that, since their respective inceptions, have outperformed their competitive benchmarks through that date.  21 of WisdomTree’s 34 equity ETFs have outperformed their competitive benchmarks since inception and through March 31, 2011. For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.

First Quarter Financial Discussion

Revenues

Total revenues for the quarter increased 66.8% to a record $14.5 million as compared to the first quarter of 2010 and increased 8.4% from the fourth quarter of 2010.  These increases were primarily due to higher average assets under management from strong net ETF inflows and positive market movement.  Average ETF assets under management were $10.3 billion in the first quarter of 2011, as compared to $6.3 billion in the first quarter of 2010 and $9.1 billion in the fourth quarter of 2010.  The average fee earned during the first quarter of 2011 decreased to 0.56% from 0.57% in the fourth quarter of 2010 due to the change in mix of our average assets and net inflows from our emerging market ETFs to our international developed world ETFs for which we charge a lower fee.  As compared to the first quarter of 2010, our average fee increased from 0.54% due to higher mix of average assets and net inflows into our emerging market funds.

Expenses

Total expenses increased 16.8% to $14.4 million from $12.3 million in the first quarter of 2010.  This increase was primarily due to higher third party sharing arrangements, fund related costs and sales and business development related expenses due to higher asset levels and increase in overall business activity.  Excluding stock-based compensation and depreciation and amortization expenses, proforma operating expenses increased 25.9% to $12.2 million from $9.7 million in the first quarter of last year.

Compared to the fourth quarter of 2010, total expenses increased 2.8% from $14.0 million.  This increase was primarily due to higher third-party sharing arrangements and fund related expenses due to higher average assets under management as well as higher compensation related expenses offset by lower marketing and advertising.  Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses increased 4.3% from $11.7 million in the fourth quarter.

During the first quarter we incurred approximately $0.4 million of expenses related to the preparation of our registration statement on Form 10 in connection with our exchange listing.  We will incur additional expenses in the second quarter related to the preparation of our initial listing on an exchange as well as ongoing costs in the future to meet public company reporting requirements.  

  • Compensation and benefits expense remained relatively unchanged compared to the first quarter of 2010 as higher headcount related expenses were offset by lower stock-based compensation expense.  This expense increased 5.8% compared to the fourth quarter of 2010 primarily due to higher payroll taxes associated with the vesting of restricted stock, higher salary expenses and higher stock-based compensation in connection with equity awards granted for 2010 incentive compensation.  Partly offsetting these increases was lower accrued incentive compensation expense.  
  • Fund management and administration expenses increased 22.5% to $4.2 million compared to the first quarter of 2010 and increased 3.7% compared to the fourth quarter of 2010.  These increases were primarily due to higher fund management and administrative expenses due to higher average assets under management.  
  • Marketing and advertising expenses decreased 16.2% to $1.0 million in the first quarter compared to the first quarter of 2010 and decreased 30.1% compared to the fourth quarter of 2010.  These decreases were primarily due to lower levels of discretionary television and online advertising expenses. 

 

  • Sales and business development expenses increased 62.0% to $0.7 million in the first quarter compared to the first quarter of 2010 due to higher levels of business activity.  This expense remained relatively unchanged compared to the fourth quarter of 2010.
  • Professional and consulting fees increased 32.7% to $1.4 million in the first quarter of 2011 as compared to the first quarter of 2010 primarily due to fees associated with the preparation of our registration statement in connection with our exchange listing as well as higher variable stock based compensation expense for equity awards granted to non-employee consultants.  Partly offsetting these increases were lower corporate related legal expenses.  This expense increased 8.5% from the fourth quarter of 2010 primarily due to the registration statement preparation related expenses and partly offset by lower variable stock based compensation expense.  
  • Third-party sharing arrangements expense increased to $1.1 million in the first quarter of 2011, an increase  of 39.1% from $0.8 million in the fourth quarter of 2010.  These increases were primarily due to profit sharing arrangements with the Bank of New York Mellon Corporation related to certain currency and fixed income ETFs as well as marketing fees paid to third parties due to higher average assets under management.
  • Stock-based compensation expense (which is included in the compensation and benefits, professional and consulting fees and other expenses discussion above) decreased 16.8% to $2.1 million compared to the first quarter of 2010.  Fixed stock based compensation expense decreased as equity awards granted in prior years to employees and directors became fully vested.  Partly offsetting this decrease was an increase in variable stock based compensation expense due to an increase in the company’s stock price.  This expense decreased 4.8% compared to the fourth quarter of 2010 primarily due to lower variable expense partly offset by slightly higher fixed expense due to new equity awards granted as part of 2010 year end compensation.
  • Other expenses; occupancy, communication and equipment expenses; and depreciation and amortization expenses all had relatively small dollar value changes compared to both periods.

Balance Sheet

As of March 31, 2011, WisdomTree had total assets of $28.5 million, which consisted primarily of cash and cash equivalents of $12.8 million and investments of $8.9 million. WisdomTree has no debt. There were approximately 115.5 million shares issued as of March 31, 2011. Fully diluted weighted average shares outstanding were approximately 134.5 million as of March  31, 2011.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements generally can be identified by the use of forward- looking terminology such as “outlook,” “objective,” “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “plans,” or “continue,” or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect our current expectations regarding future events and operating performance and speak only as of the date of this press release.  Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to the assumption that the projects will operate and perform in accordance with our expectations. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved. A number of risks and other factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the risks discussed below.   

These risks include, without limitation:

 

•

 

We have only a limited operating history and we have not yet reported net income.

 

 

•

 

Difficult market conditions and declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing customers to sell their fund shares and triggering redemptions.

 

 

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Volatility and disruption of the capital and credit markets, and adverse changes in the global economy, may significantly affect our results of operations and may put pressure on our financial results.

 

 

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The amount and mix of our assets under management, which impact revenue, are subject to significant fluctuations.

 

 

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Most of our assets under management are held in ETFs that invest in foreign securities and we have substantial exposure to foreign market conditions and we are subject to currency exchange rate risks.

 

 

•

 

We derive a substantial portion of our revenues from products invested in emerging markets.

 

 

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We derive a substantial portion of our revenues from a limited number of products.

Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. For a more complete description of the risks noted above and other risks that could cause our actual results to materially differ from our current expectations, please see Item 1A. “Risk Factors” of our Registration Statement on Form 10 filed March 31, 2011.

These forward-looking statements are made as of the date of this press release and, except as expressly required by applicable law, we assume no obligation to update or revise them to reflect new events or circumstances.

Conference Call

WisdomTree will discuss its results and operational highlights during a conference call on Thursday, April 28, 2011 at 9:00 a.m. ET. The call-in number will be (888) 680-0893

passcode 24395369.   Anyone outside the U.S. or Canada should call (617) 213- 4859, passcode 24395369.  The slides used during the presentation will be available at www.wisdomtree.com/ir. For those unable to join the conference call at the scheduled time, an audio replay will be available on www.wisdomtree.com/ir.

About WisdomTree

 

WisdomTree® is a New York-based exchange-traded fund (“ETF”) sponsor and asset manager.  WisdomTree currently offers 46 ETFs across Equities, Currency Income, Fixed Income and Alternatives asset classes. 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. WisdomTree currently has approximately $11.9 billion in ETF assets under management. 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.

 

Media Contact:

WisdomTree Investor Relations Contacts

Stuart Bell

KCSA Strategic Communications

WisdomTree Investments, Inc.

Jeffrey Goldberger  /  Todd Fromer

+1 917.267.3702

+1 212.896.1249  /  +1 212.896.1215

sbell@wisdomtree.com

 

jgoldberger@kcsa.com  /  tfromer@kcsa.com