WisdomTree Announces Third Quarter 2023 Results

$11 Billion of Year-to-Date Inflows and 900bps of Margin Improvement vs. Q3 2022
Diluted Earnings Per Share of $0.07 ($0.10, as Adjusted)

12 consecutive quarters of global net inflows
17% annualized organic growth rate across all products

NEW YORK--(BUSINESS WIRE)--WisdomTree, Inc. (NYSE: WT), a global financial innovator, today reported financial results for the third quarter of 2023.

$13.0 million net income ($18.0⁽¹⁾ million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.

$93.7 billion of ending AUM, unchanged from the prior quarter.

$2.0 billion of net inflows, primarily driven by inflows into our fixed income, U.S. equity, international equity and emerging markets products, partly offset by outflows from our commodity products.

0.36% average advisory fee, unchanged from the prior quarter.

$90.4 million of operating revenues, an increase of 5.5% from the prior quarter primarily due to higher average AUM.

80.1% gross margin⁽¹⁾, a 0.8 point increase from the prior quarter due to higher revenues.

29.5% operating income margin, an 8.3 point increase compared to our operating income margin in the prior quarter due to higher revenues, as well as lower professional fees incurred in connection with an activist campaign. Our adjusted operating income margin increased 2.6 points compared to our adjusted operating margin of 26.9%⁽¹⁾ in the prior quarter due to higher revenues.

$0.03 quarterly dividend declared, payable on November 22, 2023 to stockholders of record as of the close of business on November 8, 2023.

Update from Jonathan Steinberg, WisdomTree CEO

“WisdomTree’s results for the third quarter confirm our progress as we continue to successfully drive organic growth and margin expansion. At 17% year-to-date, our pace of organic growth remains the best among all our publicly traded U.S. asset manager peers. The benefits of our scale and an active, disciplined approach to managing margin has generated 900 basis points of operating margin expansion in the third quarter versus the same period last year. Even as we remain focused on organic growth and margin expansion, we are making steady progress in rolling out WisdomTree Prime™ across the U.S, with 12 states added in the third quarter, coupled with enhanced products and features and new digital funds on track to be launched in the fourth quarter. Taken together, these steps solidify WisdomTree’s position as an early mover with a multi-year head start on the industry shift toward tokenization and blockchain-enabled finance.”

Update from Jarrett Lilien, WisdomTree COO and President

“We are executing against our strategy and consistently delivering results, garnering nearly $2 billion of net inflows this quarter – our 12th consecutive quarter of positive flows. This momentum over the past three years is proving to be sustainable, and we have confidence that it will continue.

On the client side, both new and existing relationships are becoming larger, broader and deeper, as many continue to grow in average size while also utilizing more of our products and services, such as our WisdomTree managed model portfolios. Our managed models are currently available to over 65,000 advisors in the U.S., and we have seen significant year-over-year traction at both the large distribution networks as well as in the RIA and independent broker-dealer channels. We are well-positioned to drive continued organic growth in the coming quarters and years.”

OPERATING AND FINANCIAL HIGHLIGHTS

	Three Months Ended
	Sept. 30, 2023		June 30, 2023		Mar. 31, 2023		Dec. 31, 2022		Sept. 30, 2022
Consolidated Operating Highlights ($ in billions):
AUM—end of period	$	93.7	$	93.7	$	90.7	$	82.0	$	70.9
Net inflows	$	2.0	$	2.3	$	6.3	$	5.3	$	1.7
Average AUM	$	95.7	$	91.6	$	87.5	$	77.6	$	74.7
Average advisory fee		0.36%		0.36%		0.36%		0.36%		0.38%

Consolidated Financial Highlights ($ in millions, except per share amounts):
Operating revenues	$	90.4	$	85.7	$	82.0	$	73.3	$	72.4
Net income/(loss)	$	13.0	$	54.3	$	16.2	$	(28.3)	$	81.2
Diluted earnings/(loss) per share	$	0.07	$	0.32	$	0.10	$	(0.20)	$	0.50
Operating income margin		29.5%		21.2%		20.2%		16.0%		20.5%
As Adjusted (Non-GAAP⁽¹⁾):
Gross margin		80.1%		79.3%		79.1%		76.9%		77.5%
Net income, as adjusted	$	18.0	$	14.9	$	11.2	$	7.0	$	9.3
Diluted earnings per share, as adjusted	$	0.10	$	0.09	$	0.07	$	0.04	$	0.06
Operating income margin, as adjusted		29.5%		26.9%		21.4%		16.0%		20.5%

RECENT BUSINESS DEVELOPMENTS

Company News

In August 2023, we appointed Rilla Delorier to our Board of Directors, having received the full support of the Board.
In September 2023, the WisdomTree Siegel Strategic Value Index™ (BBG Ticker: CIBQWS6E) won the FIA Index of the Year Award by Structured Retail Products (SRP). The Siegel Index was developed by Professor Jeremy Siegel, Senior Economist to WisdomTree, and recognizes innovative quantitative investment strategy and strength of ongoing partnership with Annexus, CIBC and WisdomTree.

Product News

In August 2023, we activated staking in WisdomTree Physical Ethereum (ETHW), helping to secure the blockchain network and participate in the validation of transactions; we launched GBP and EUR Hedged share classes for the WisdomTree US Quality Dividend Growth UCITS ETF (DGRA) on the London Stock Exchange, Borsa Italiana and Börse Xetra; we launched the WisdomTree EURO STOXX Banks 3x Daily Short (3BAS) on London Stock Exchange, Borsa Italiana and Börse Xetra; and we launched the WisdomTree CAC 40 3x Daily Leveraged (3CAC) and WisdomTree CAC 40 3x Daily Short (3CAS) on Euronext Paris and Börse Xetra.
In September 2023, we cross-listed 13 Delta-1 and short-and-leveraged ETPs on Euronext Paris.
In October 2023, we cross-listed our first seven UCITS ETFs on Euronext Paris; and we launched the WisdomTree US Efficient Core UCITS ETF (NTSX) on the London Stock Exchange, Borsa Italiana and Börse Xetra.

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

	Three Months Ended															Nine Months Ended
	Sept. 30, 2023			June 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sept. 30, 2022			Sept. 30, 2023			Sept. 30, 2022
Operating Revenues:
Advisory fees	$	86,598		$	82,004		$	77,637		$	70,913		$	70,616		$	246,239		$	222,719
Other income		3,825			3,720			4,407			2,397			1,798			11,952			5,316
Total revenues		90,423			85,724			82,044			73,310			72,414			258,191			228,035
Operating Expenses:
Compensation and benefits		27,955			26,319			27,398			24,831			23,714			81,672			73,066
Fund management and administration		18,023			17,727			17,153			16,906			16,285			52,903			47,855
Marketing and advertising		3,833			4,465			4,007			4,240			3,145			12,305			11,062
Sales and business development		3,383			3,326			2,994			3,407			2,724			9,703			8,464
Contractual gold payments		—			1,583			4,486			4,107			4,105			6,069			13,001
Professional fees		3,719			8,334			3,715			2,666			2,367			15,768			11,134
Occupancy, communications and equipment		1,203			1,172			1,101			1,110			986			3,476			2,788
Depreciation and amortization		307			121			109			104			58			537			158
Third-party distribution fees		2,694			1,881			2,253			1,793			1,833			6,828			5,863
Other		2,601			2,615			2,257			2,427			2,324			7,473			6,278
Total operating expenses		63,718			67,543			65,473			61,591			57,541			196,734			179,669
Operating income		26,705			18,181			16,571			11,719			14,873			61,457			48,366
Other Income/(Expenses):
Interest expense		(3,461	)		(4,021	)		(4,002	)		(3,736	)		(3,734	)		(11,484	)		(11,199	)
Gain/(loss) on revaluation/termination of deferred consideration—gold payments		—			41,361			20,592			(35,423	)		77,895			61,953			63,188
Interest income		791			1,000			1,083			945			811			2,874			2,375
Impairments		(2,703	)		—			(4,900	)		—			—			(7,603	)		—
Loss on extinguishment of convertible notes		—			—			(9,721	)		—			—			(9,721	)		—
Other losses and gains, net		(2,512	)		1,286			(2,007	)		(1,815	)		(5,289	)		(3,233	)		(34,470	)
Income/(loss) before income taxes		18,820			57,807			17,616			(28,310	)		84,556			94,243			68,260
Income tax expense/(benefit)		5,836			3,555			1,383			(21	)		3,327			10,774			(10,713	)
Net income/(loss)	$	12,984		$	54,252		$	16,233		$	(28,289	)	$	81,229		$	83,469		$	78,973
Earnings/(loss) per share—basic	$	0.07⁽²⁾		$	0.32⁽²⁾		$	0.10⁽²⁾		$	(0.20	)	$	0.50⁽²⁾		$	0.50⁽²⁾		$	0.49⁽²⁾
Earnings/(loss) per share—diluted	$	0.07		$	0.32		$	0.10		$	(0.20	)	$	0.50⁽²⁾		$	0.49		$	0.49⁽²⁾
Weighted average common shares—basic		145,284			144,351			143,862			143,126		$	143,120			144,505			142,984
Weighted average common shares—diluted		177,140			170,672			159,887			143,126			158,953			169,997			158,741

As Adjusted (Non-GAAP⁽¹⁾)
Total operating expenses	$	63,718		$	62,630		$	64,506		$	61,591		$	57,541
Operating income	$	26,705		$	23,094		$	17,538		$	11,719		$	14,873
Income before income taxes	$	23,902		$	19,752		$	14,485		$	8,615		$	12,645
Income tax expense	$	5,854		$	4,833		$	3,287		$	1,588		$	3,323
Net income	$	18,048		$	14,919		$	11,198		$	7,027		$	9,322
Earnings per share—diluted	$	0.10		$	0.09		$	0.07		$	0.04		$	0.06
Weighted average common shares—diluted		177,140			170,672			159,887			159,478			158,953

QUARTERLY HIGHLIGHTS

Operating Revenues

Operating revenues increased 5.5% and 24.9% from the second quarter of 2023 and the third quarter of 2022, respectively, primarily due to higher average AUM.
Our average advisory fee was 0.36%, 0.36% and 0.38% during the third quarter of 2023, the second quarter of 2023 and the third quarter of 2022, respectively.

Operating Expenses

Operating expenses decreased 5.7% from the second quarter of 2023 primarily due to lower professional fees, the termination of our deferred consideration—gold payments obligation on May 10, 2023 and lower marketing expenses. These decreases were partly offset by higher incentive compensation and third-party distribution fees.
Operating expenses increased 10.7% from the third quarter of 2022 primarily due to higher stock-based compensation and headcount, fund management and administration costs, professional fees, third-party distribution fees, marketing expenses and sales and business development expenses. These increases were partly offset by the termination of our deferred consideration—gold payments obligation.

Other Income/(Expenses)

Interest expense decreased 13.9% from the second quarter of 2023 due to a lower average level of debt outstanding. Interest expense decreased 7.3% from the third quarter of 2022 due to a lower level of debt outstanding, partly offset by a higher effective interest rate.
Interest income decreased 20.9% from the second quarter of 2023 due to lower average levels of financial instruments owned and was essentially unchanged from the third quarter of 2022.
During the third quarter of 2023, we recognized a non-cash impairment charge of $2.7 million, primarily on our investment in Securrency, Inc., as we marked our investment to estimated realizable value in connection with Securrency entering into an agreement to be acquired by an unrelated third party.
Other losses and gains, net was a loss of $2.5 million for the third quarter of 2023. This quarter includes losses on our financial instruments of $2.0 million and other losses on our investments of $0.4 million. Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold exchange-traded products (“ETPs”), foreign exchange fluctuations and other miscellaneous items.

Income Taxes

Our effective income tax rate for the third quarter of 2023 was 31.0%, resulting in income tax expense of $5.8 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to an increase in the deferred tax asset valuation allowance on losses recognized on the Company’s investments and non-deductible executive compensation.
Our adjusted effective income tax rate was 24.5%⁽¹⁾.

NINE MONTH HIGHLIGHTS

Operating revenues increased 13.2% as compared to 2022 due to higher average AUM and higher other income from large flows from some of our European products, partly offset by a lower average advisory fee.
Operating expenses increased 9.5% as compared to 2022 primarily due to higher stock-based compensation and headcount, fund management and administration costs, professional fees, marketing expenses, sales and business development expenses, third-party distribution fees and other expenses. These increases were partly offset by the termination of our deferred consideration—gold payments obligation on May 10, 2023.
Significant items reported in other income/(expense) in 2023 include: a non-cash gain on revaluation/termination of deferred consideration of $62.0 million during the first and second quarter; loss on extinguishment of convertible notes of $9.7 million arising from the repurchase of $115.0 million in aggregate principal amount of our 4.25% Convertible Senior Notes (the “2020 Notes”) in the first quarter; non-cash impairment charges totaling $7.6 million, primarily on our investments in Securrency, Inc.; losses on our financial instruments owned of $1.0 million and other losses on our investments of $1.2 million; and a non-cash charge of $1.4 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). Gains and losses also generally arise from the sale of gold earned on management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.
Our effective income tax rate for 2023 was 11.4%, resulting in income tax expense of $10.8 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to a non-taxable gain on revaluation/termination of deferred consideration, a reduction in unrecognized tax benefits associated with the release of the tax-related indemnification asset described above and a lower tax rate on foreign earnings. These items were partly offset by a non-deductible loss on extinguishment of the 2020 Notes during the first quarter of 2023, an increase in the deferred tax asset valuation allowance on losses recognized on our investments and non-deductible executive compensation.

CONFERENCE CALL DIAL-IN AND WEBCAST DETAILS

WisdomTree will discuss its results and operational highlights during a live webcast on Friday, October 27, 2023 at 11:00 a.m. ET, which can be accessed using the following link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=wtCKhqvm.

Participants also can dial in using the following numbers: (877) 407-9210 or (201) 689-8049. Click here to access the Participant international toll-free access numbers. To avoid delays, we encourage participants to log in or dial into the conference call 10 minutes ahead of the scheduled start time. All earnings materials and the webcast can be accessed through WisdomTree’s investor relations website at https://ir.wisdomtree.com. A replay of the webcast will also be available shortly after the call.

About WisdomTree

WisdomTree is a global financial innovator, offering a well-diversified suite of exchange-traded products (ETPs), models, solutions and products leveraging blockchain-enabled technology. We empower investors and consumers to shape their future and support financial professionals to better serve their clients and grow their businesses. WisdomTree is leveraging the latest financial infrastructure to create products that provide access, transparency and an enhanced user experience. Building on our heritage of innovation, we are also developing and have launched next-generation digital products, services and structures, including digital or blockchain-enabled mutual funds and tokenized assets, as well as our blockchain-native digital wallet, WisdomTree Prime™.

WisdomTree currently has approximately $94 billion in assets under management globally.

For more information about WisdomTree and WisdomTree Prime™, visit: https://www.wisdomtree.com.

Please visit us on X, formerly known as Twitter, at @WisdomTreeNews.

WisdomTree® is the marketing name for WisdomTree, 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.

WisdomTree, Inc. Key Operating Statistics (Unaudited)	Three Months Ended
	Sept. 30, 2023			June 30, 2023			Mar. 31, 2023			Dec. 31, 2022		Sept. 30, 2022
GLOBAL ETPs ($ in millions)

Beginning of period assets	$	93,666		$	90,740		$	81,993		$	70,878	$	74,302
Inflows/(outflows)		1,983			2,327			6,341			5,264		1,747
Market (depreciation)/appreciation		(1,907	)		599			2,406			5,851		(5,171	)
Fund closures		(7	)		—			—			—		—
End of period assets	$	93,735		$	93,666		$	90,740		$	81,993	$	70,878
Average assets during the period	$	95,743		$	91,578		$	87,508		$	77,649	$	74,677
Average advisory fee during the period		0.36%			0.36%			0.36%			0.36%		0.38%
Revenue days		92			91			90			92		92
Number of ETFs—end of the period		353			353			350			348		347

U.S. LISTED ETFs ($ in millions)

Beginning of period assets	$	65,903		$	61,283		$	55,973		$	48,043	$	47,255
Inflows/(outflows)		3,601			3,249			4,012			4,232		3,812
Market (depreciation)/appreciation		(1,486	)		1,371			1,298			3,698		(3,024	)
Fund closures		—			—			—			—		—
End of period assets	$	68,018		$	65,903		$	61,283		$	55,973	$	48,043
Average assets during the period	$	68,008		$	62,712		$	59,430		$	53,655	$	49,466
Number of ETFs—end of the period		80			80			80			79		78

EUROPEAN LISTED ETPs ($ in millions)

Beginning of period assets	$	27,763		$	29,457		$	26,020		$	22,835	$	27,047
(Outflows)/inflows		(1,618	)		(922	)		2,329			1,032		(2,065	)
Market (depreciation)/appreciation		(421	)		(772	)		1,108			2,153		(2,147	)
Fund closures		(7	)		—			—			—		—
End of period assets	$	25,717		$	27,763		$	29,457		$	26,020	$	22,835
Average assets during the period	$	27,735		$	28,866		$	28,078		$	23,994	$	25,211
Number of ETPs—end of the period		273			273			270			269		269

PRODUCT CATEGORIES ($ in millions)

U.S. Equity
Beginning of period assets	$	26,001		$	24,534		$	24,112		$	20,952	$	21,058
Inflows/(outflows)		864			414			(149	)		1,021		1,239
Market (depreciation)/appreciation		(1,222	)		1,053			571			2,139		(1,345	)
End of period assets	$	25,643		$	26,001		$	24,534		$	24,112	$	20,952
Average assets during the period	$	26,502		$	24,732		$	24,725		$	23,492	$	22,534

Fixed Income
Beginning of period assets	$	20,204		$	18,696		$	15,259		$	11,683	$	9,178
Inflows/(outflows)		1,675			1,472			3,516			3,392		2,628
Market (depreciation)/appreciation		(82	)		36			(79	)		184		(123	)
End of period assets	$	21,797		$	20,204		$	18,696		$	15,259	$	11,683
Average assets during the period	$	20,955		$	19,173		$	17,164		$	13,949	$	10,065

Commodity & Currency
Beginning of period assets	$	22,384		$	24,924		$	22,097		$	19,561	$	23,624
(Outflows)/inflows		(1,815	)		(1,513	)		2,003			796		(2,179	)
Market (depreciation)/appreciation		(103	)		(1,027	)		824			1,740		(1,884	)
End of period assets	$	20,466		$	22,384		$	24,924		$	22,097	$	19,561
Average assets during the period	$	22,278		$	24,033		$	23,806		$	20,345	$	21,625

	Three Months Ended
	Sept. 30, 2023			June 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sept 30, 2022

International Developed Market Equity
Beginning of period assets	$	13,423		$	11,433		$	10,195		$	9,183		$	9,968
Inflows/(outflows)		798			1,592			450			40			(115	)
Market (depreciation)/appreciation		(319	)		398			788			972			(670	)
End of period assets	$	13,902		$	13,423		$	11,433		$	10,195		$	9,183
Average assets during the period	$	13,873		$	12,276		$	10,879		$	10,000		$	10,032

Emerging Market Equity
Beginning of period assets	$	9,191		$	8,811		$	8,116		$	7,495		$	8,386
Inflows/(outflows)		451			329			486			(53	)		114
Market (depreciation)/appreciation		(73	)		51			209			674			(1,005	)
End of period assets	$	9,569		$	9,191		$	8,811		$	8,116		$	7,495
Average assets during the period	$	9,652		$	8,998		$	8,666		$	7,770		$	8,329

Leveraged & Inverse
Beginning of period assets	$	1,864		$	1,785		$	1,754		$	1,523		$	1,618
(Outflows)/inflows		(1	)		12			43			59			45
Market (depreciation)/appreciation		(82	)		67			(12	)		172			(140	)
End of period assets	$	1,781		$	1,864		$	1,785		$	1,754		$	1,523
Average assets during the period	$	1,894		$	1,798		$	1,757		$	1,623		$	1,589

Alternatives
Beginning of period assets	$	340		$	306		$	310		$	306		$	305
Inflows/(outflows)		5			22			(18	)		12			16
Market (depreciation)/appreciation		(11	)		12			14			(8	)		(15	)
End of period assets	$	334		$	340		$	306		$	310		$	306
Average assets during the period	$	342		$	320		$	308		$	305		$	313

Cryptocurrency
Beginning of period assets	$	248		$	239		$	136		$	163		$	151
Inflows/(outflows)		10			(1	)		13			(4	)		—
Market (depreciation)/appreciation		(15	)		10			90			(23	)		12
End of period assets	$	243		$	248		$	239		$	136		$	163
Average assets during the period	$	238		$	236		$	190		$	152		$	178

Closed ETPs
Beginning of period assets	$	11		$	12		$	14		$	12		$	14
(Outflows)/inflows		(4	)		—			(3	)		1			(1	)
Market (depreciation)/appreciation		—			(1	)		1			1			(1	)
Fund closures		(7	)		—			—			—			—
End of period assets	$	—		$	11		$	12		$	14		$	12
Average assets during the period	$	9		$	12		$	13		$	13		$	12

Headcount		299			291			279			273			274

Note: Previously issued statistics may be restated due to fund closures and trade adjustments
Source: WisdomTree

WISDOMTREE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

	Sept. 30, 2023			Dec. 31, 2022

ASSETS
Current assets:
Cash and cash equivalents	$	89,481		$	132,101
Financial instruments owned, at fair value		78,950			126,239
Accounts receivable		35,868			30,549
Prepaid expenses		6,511			4,684
Other current assets		1,004			390
Total current assets		211,814			293,963
Fixed assets, net		457			544
Indemnification receivable		—			1,353
Securities held-to-maturity		237			259
Deferred tax assets, net		9,508			10,536
Investments		36,873			35,721
Right of use assets—operating leases		866			1,449
Goodwill		86,841			85,856
Intangible assets, net		604,781			603,567
Other noncurrent assets		447			571
Total assets	$	951,824		$	1,033,819

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable	$	27,655		$	36,521
Compensation and benefits payable		27,792			24,121
Income taxes payable		4,365			1,599
Operating lease liabilities		889			1,125
Convertible notes—current		—			59,197
Deferred consideration—gold payments		—			16,796
Accounts payable and other liabilities		14,660			9,075
Total current liabilities		75,361			148,434
Convertible notes—long term		274,514			262,019
Deferred consideration—gold payments		—			183,494
Operating lease liabilities		—			339
Other noncurrent liabilities		—			1,353
Total liabilities		349,875			595,639
Preferred stock:
Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding		132,569			132,569
STOCKHOLDERS’ EQUITY
Preferred stock:
Series C Non-Voting Convertible, par value $0.01; 13.087 shares authorized, issued and outstanding		—			—
Common stock, par value $0.01; 400,000 shares authorized:
Issued and outstanding: 150,335 and 146,517 at September 30, 2023 and December 31, 2022, respectively		1,503			1,465
Additional paid-in capital		387,507			291,847
Accumulated other comprehensive loss		(1,637	)		(1,420	)
Retained earnings		82,007			13,719
Total stockholders’ equity		469,380			305,611
Total liabilities and stockholders’ equity	$	951,824		$	1,033,819

Contacts

Investor Relations
Jeremy Campbell
+1.646.522.2602
Jeremy.campbell@wisdomtree.com

Corporate Communications
Jessica Zaloom
+1.917.267.3735
jzaloom@wisdomtree.com

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