Market Overview

WisdomTree Announces Fourth Quarter and Year-End 2009 Results

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NEW YORK--(BUSINESS WIRE)--

WisdomTree (Pink Sheets: WSDT), an innovative exchange-traded fund (“ETF”) sponsor and asset manager, today reported a GAAP net loss of $5.0 million in the fourth quarter of 2009, flat with the third quarter. Proforma operating net loss, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was $1.5 million in the fourth quarter, a 37.7% improvement from a proforma operating net loss of $2.4 million in the third quarter. For the full year, net loss was $21.2 million compared to $27.0 million in 2008. Proforma operating net loss for the full year was $11.3 million, a 39.8% improvement from proforma operating net loss of $18.7 million in 2008.

WisdomTree CEO Jonathan Steinberg commented, “WisdomTree achieved our best fourth quarter in Company history. We are encouraged to see the market responding to our innovations in the emerging markets – namely the industry’s first India, and emerging markets small cap ETFs, as well as the first “1940 Act” family of currency ETFs which collectively were responsible for the majority of the $911 million net inflows in the fourth quarter.”

Mr. Steinberg continued, “Our agility proved to be an asset during a challenging year; we pared down operating costs without impeding our ability to grow existing funds and continued to develop innovative products. In fact, we are closer than ever to becoming cash flow positive at a time when the ETF industry, as a whole, is poised for mainstream acceptance.”

Assets Under Management and Performance

As of December 31, 2009, assets under management (“AUM”) managed by WisdomTree or against WisdomTree Indexes by third parties under license from WisdomTree was $6.7 billion and ETF AUM was $6.0 billion, both up 22% from September 30, 2009. Net inflows into WisdomTree ETFs were $911 million in the fourth quarter primarily in Emerging Market Currency and Emerging Market Equity ETFs. For the full year, ETF AUM increased 88% and net inflows were $1.8 billion.

WisdomTree’s fundamentally weighted ETFs experienced relatively strong investment performance through the fourth quarter. Approximately 76% of the $5.1 billion invested in WisdomTree’s 42 equity ETFs on December 31, 2009 were in funds that, since their respective inceptions, have outperformed their benchmarks through that date. 26 of WisdomTree’s 42 equity ETFs outperformed their comparable benchmarks since inception and through the fourth quarter of 2009. For more information about WisdomTree ETFs, please click here or visit www.wisdomtree.com.

Recent Business Activity

  • On January 29, 2010, the Company announced the closure of 10 funds that collectively represented approximately 3% of ETF AUM as of that date, to liquidate by the end of the first quarter 2010.
  • On January 22, the Company announced that effective after the close of business on March 31, 2010, the WisdomTree Japan Total Dividend Fund (DXJ) will be renamed the WisdomTree Japan Hedged Equity Fund and will begin to hedge Japanese yen exposure.
  • On December 31, 2009, the Company launched the WisdomTree International Hedged Equity Fund (HEDJ).
  • On December 30, 2009, the Company filed for the WisdomTree Rising Dollar Fund and the WisdomTree Commodity Currency Fund.

Fourth Quarter Financial Highlights

Comparison to the third quarter of 2009

Revenues

Total revenues for the fourth quarter increased 33.6% to a record $7.6 million as compared to $5.7 million in the third quarter. Average ETF assets under management increased 30% in the fourth quarter as compared to the third quarter primarily due to $911 million of net inflows as well as $166 million of market appreciation. The average advisory fee earned during the fourth quarter was 0.54%, up from 0.53% in the third quarter primarily due to higher inflows into the Company’s Emerging Market ETFs.

Expenses

Total expenses increased 18.1% to $12.8 million from $10.8 million in the third quarter primarily due to higher marketing related expenses and stock-based compensation expenses. Excluding stock-based compensation, depreciation and amortization charges, proforma operating expenses increased 12.3% to $9.2 million from $8.2 million in the third quarter.

  • Compensation and benefits expenses decreased 7.3% to $4.8 million from $5.2 million in the third quarter primarily due to lower stock-based compensation. Excluding stock-based compensation, compensation and benefits expense decreased 2.4% to $2.8 million in the fourth quarter from $2.9 million due to lower annual incentive compensation than anticipated in the third quarter.
  • Fund management and administration expenses increased 10.8% to $3.7 million from $3.3 million in the third quarter due to higher average asset balances.
  • Marketing and business development expenses increased 88.8% to $2.1 from $1.1 million in the third quarter primarily due to increased television advertising during the quarter to support the Emerging Market and Currency ETF sales campaigns.
  • Professional fees increased 46.1% to $0.6 million in the fourth quarter as compared $0.4 million in third quarter. Excluding stock based compensation, professional fees decreased 31.9% to $0.1 million from $0.2 million primarily due to lower corporate consulting expenses.
  • Occupancy, communications and equipment expenses decreased 12.0% to $0.2 million in the fourth quarter from $0.3 million in the third quarter due to lower overhead costs.
  • Other expenses increased $0.8 million to $1.2 million in the fourth quarter from $0.4 million in the third quarter, primarily as a result of the Company's final issuance of common stock to Treasury Equity LLC for satisfaction of certain conditions related to the Company’s Currency ETFs. Other expenses also increased due to one-time charges to terminate certain contracts with vendors.

Full-Year Results

Total revenues decreased 2.7% to $21.5 million during the year ended December 31, 2009 from $22.1 million in the comparable period in 2008 primarily due to lower average assets levels experienced in the first quarter of 2009, which is partly offset by the significant increases in AUM experienced in the fourth quarter of the year.

Total expenses decreased 14.5% to $43.3 million during the year ended December 31, 2009 from $50.7 million in the same period of last year. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses decreased 19.7% to $32.8 million from $40.8 million over the comparable period. This was primarily due to lower discretionary advertising spending as a result of negative market conditions during the year. Also decreasing were fund-related costs as a result of lower average assets under management during the first quarter of 2009 as compared to the same period in 2008.

Balance Sheet

As of December 31, 2009, WisdomTree had total assets of $25.7 million, which consisted primarily of cash and cash equivalents of $11.5 million and investments of $9.3 million. WisdomTree has no debt. There were approximately 114.5 million shares issued as of December 31, 2009. Fully diluted shares issued and outstanding were approximately 135.9 million as of December 31, 2009.

Fourth Quarter 2009 Earnings Call Information

WisdomTree will discuss its results and operational highlights during a conference call on Tuesday, February 9 at 9:00 a.m. ET. The call-in number will be (888) 679-8034 passcode 44922793. Anyone outside the U.S. or Canada should call (617) 213-4847, passcode 44922793. 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 an innovative 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 $6.6 billion in assets currently are managed by WisdomTree or are managed against WisdomTree Indexes by third parties under license from WisdomTree. 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.

         
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
For the Three Months Ended

For the Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,
  2009     2009     2008     2009     2008  
(Audited)
Revenues
Advisory fees $ 7,428 $ 5,536 $ 4,056 $ 20,812 $ 21,643
Other income   208     180     165     676     431  
 
Total revenues 7,636 5,716 4,221 21,488 22,074
 
Expenses:
Compensation and benefits 4,775 5,153 2,750 18,943 20,338
Fund management and administration 3,674 3,317 3,910 13,387 15,167
Marketing and business development 2,101 1,113 989 5,257 9,122
Professional fees 631 432 295 1,780 1,871
Occupancy, communication and equipment 249 283 363 1,087 1,564
Depreciation and amortization 88 88 90 360 337
Other   1,245     423     1,030     2,509     2,257  
 
Total expenses   12,763     10,809     9,427     43,323     50,656  
 
Operating loss (5,127 ) (5,093 ) (5,206 ) (21,835 ) (28,582 )
 
Interest and investment income   95     105     245     607     1,537  
 
Net loss $ (5,032 ) $ (4,988 ) $ (4,961 ) $ (21,228 ) $ (27,045 )
 
 
 
Net loss per share - basic and diluted $ (0.05 ) $ (0.05 ) $ (0.05 ) $ (0.21 ) $ (0.27 )
 
Weighted average common shares - basic and diluted   108,374     101,857     100,955     103,397     100,236  
         
WISDOMTREE INVESTMENTS, INC
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
 
For the Three Months Ended

For the Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,
  2009     2009     2008     2009     2008  
Revenues
Advisory fees $ 7,428 $ 5,536 $ 4,056 $ 20,812 $ 21,643
Other income   208     180     165     676     431  
 
Total revenues 7,636 5,716 4,221 21,488 22,074
 
Operating expenses:
Compensation and benefits 2,807 2,877 1,030 11,026 12,392
Fund management and administration 3,674 3,317 3,910 13,387 15,167
Marketing and business development 2,101 1,113 989 5,257 9,122
Professional fees 130 191 420 688 1,478
Occupancy, communication and equipment 249 283 363 1,087 1,564
Other   195     375     490       1,309     1,050  
 
Total operating expenses   9,156     8,156     7,202         32,754     40,773  
 
Operating loss (1,520 ) (2,440 ) (2,981 ) (11,266 ) (18,699 )
 
Stock-based compensation 3,519 2,565 2,135 10,209 9,546
Depreciation and amortization 88 88 90 360 337
Interest and investment income   (95 )   (105 )   (245 )     (607 )   (1,537 )
 
Net loss $ (5,032 ) $ (4,988 ) $ (4,961 )   $ (21,228 ) $ (27,045 )
   
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
 

December 31,

December 31,
  2009     2008  
(Unaudited)
 
ASSETS
Current assets:
Cash and cash equivalents $ 11,476 $ 13,275
Investments 2,627 4,593
Accounts receivable 2,884 1,530
Other current assets   961     875  
 
Total current assets 17,948 20,273
 
Fixed assets, net 977 1,266
Investments 6,693 13,191
Other long-term assets   85     126  
 
Total assets $ 25,703   $ 34,856  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 5,055 $ 8,966
Compensation and benefits payable 2,587 2,012
Accounts payable and other liabilities   1,603     1,207  
 
Total current liabilities 9,245 12,185
 
Other liabilities   430     615  
 
Total liabilities 9,675 12,800
 
 
 
Stockholders' equity
 
Common stock, par value $0.01; 250,000,000 shares authorized:
issued: 114,535,630 and 105,244,385 1,145 1,052
outstanding: 110,105,507 and 101,339,143
Additional paid-in capital 149,487 134,383
Accumulated other comprehensive income (3 )
Accumulated deficit   (134,604 )   (113,376 )
 
Total stockholders' equity   16,028     22,056  
 
 
Total liabilities and stockholders' equity $ 25,703   $ 34,856  
   
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
 
For the Twelve Months Ended
December 31, December 31,
  2009     2008  
(Audited)
Cash flows from operating activities
Net loss $ (21,228 ) $ (27,045 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and other 583 675
Stock-based compensation 10,209 9,546
Loss on sub-lease -- 139
Deferred rent (185 ) (36 )
Accretion to interest income (68 ) 111
Net change in operating assets and liabilities:
Accounts receivable (1,354 ) 468
Other assets (45 ) 579
Fund management and administration payable (3,911 ) 2,600
Compensation and benefits payable 575 (1,531 )
Other accounts payable and other liabilities   396     (1,121 )
 
Net cash used in operating activities   (15,028 )   (15,615 )
 
Cash flows from investing activities
Purchase of fixed assets (295 ) (703 )
Purchase of investments (7,290 ) (16,809 )
Proceeds from the redemption of investments   15,825     31,260  
 
Net cash provided by investing activities   8,240     13,748  
 
Cash flows from financing activities
Net proceeds from sale of common stock 4,989 --
Proceeds from exercise of stock options and warrants   --     4  
 
Net cash provided by financing activities   4,989     4  
 
Net decrease in cash and cash equivalents (1,799 ) (1,863 )
 
Cash and cash equivalents - beginning of period   13,275     15,138  
 
Cash and cash equivalents - end of period $ 11,476   $ 13,275  
 
Supplemental disclosure of cash flow information
 
Cash paid for income taxes $ 3   $ 5  
 
         
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
 
For the Three Months Ended For the Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2009   2009   2008 2009 2008
Total assets under management (in thousands)
ETFs 5,978,605 4,901,755 3,180,133 5,978,605 3,180,133
Non-ETFs 689,103     567,627     462,513   689,103   462,513  
End of period assets 6,667,708     5,469,382     3,642,646   6,667,708   3,642,646  
 
Total ETFs (in thousands)
Beginning of period assets 4,901,755 3,663,004 4,074,954 3,180,133 4,558,796
Inflows/(Outflows) 910,989 558,437 29,955 1,772,764 906,847
Market appreciation/(depreciation) 165,861     680,314     (924,776 ) 1,025,708   (2,285,510 )
End of period assets 5,978,605     4,901,755     3,180,133   5,978,605   3,180,133  
 
Average assets during the period 5,438,756 4,181,938 3,176,375 3,963,943 4,327,160
 
International ETFs (in thousands)
Beginning of period assets 2,912,661 2,082,340 2,301,003 1,723,244 2,985,606
Inflows/(Outflows) 368,099 400,985 10,011 931,129 284,914
Market appreciation/(depreciation) 103,568     429,336     (587,770 ) 729,955   (1,547,276 )
End of period assets 3,384,328     2,912,661     1,723,244   3,384,328   1,723,244  
 
Average assets during the period 3,193,815 2,397,470 1,763,032 2,264,042 2,552,438
 
Sector ETFs (in thousands)
Beginning of period assets 322,145 222,085 361,435 246,501 546,565
Inflows/(Outflows) 34,154 52,241 (32,180 ) 58,413 (47,184 )
Market appreciation/(depreciation) 1,888     47,819     (82,754 ) 53,273   (252,880 )
End of period assets 358,187     322,145     246,501   358,187   246,501  
 
Average assets during the period 338,336 268,661 262,956 257,344 453,033
 
US ETFs (in thousands)
Beginning of period assets 1,271,172 1,039,480 983,435 986,568 1,026,625
Inflows/(Outflows) (2,514 ) 42,970 241,244 136,949 409,325
Market appreciation/(depreciation) 60,939     188,722     (238,111 ) 206,080   (449,382 )
End of period assets 1,329,597     1,271,172     986,568   1,329,597   986,568  
 
Average assets during the period 1,272,642 1,163,833 844,368 1,083,545 984,204
 
Currency/Fixed Income ETFs (in thousands)
Beginning of period assets 395,777 319,099 429,081 223,820 -
Inflows/(Outflows) 511,250 62,241 (189,120 ) 646,273 259,792
Market appreciation/(depreciation) (534 )   14,437     (16,141 ) 36,400   (35,972 )
End of period assets 906,493     395,777     223,820   906,493   223,820  
 
Average assets during the period 633,963 351,974 306,019 359,012 337,485
 
Average ETF assets during the period
International ETFs 59 % 58 % 55 % 57 % 59 %
Sector ETFs 6 % 6 % 8 % 7 % 10 %
US ETFs 23 % 28 % 27 % 27 % 23 %
Currency/Fixed Income ETFs 12 % 8 % 10 % 9 % 8 %
 
Average ETF advisory fee during the period
International ETFs 0.63 % 0.62 % 0.59 % 0.62 % 0.58 %
Sector ETFs 0.58 % 0.58 % 0.58 % 0.58 % 0.58 %
US ETFs 0.34 % 0.33 % 0.34 % 0.33 % 0.34 %
Currency/Fixed Income ETFs 0.46 %   0.44 %   0.42 % 0.44 % 0.43 %
Blended Total 0.54 %   0.53 %   0.51 % 0.52 % 0.52 %
 
Number of ETFs
International ETFs 19 18 18 19 18
Sector ETFs 11 11 11 11 11
US ETFs 13 13 13 13 13
Currency/Fixed Income ETFs 9     9     8   9   8  
Total 52     51     50   52   50  
 
Note: Previously issued statistics may be restated due to trade adjustments
 

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 stock-based compensation is an important part of our employees' compensation and impacts their performance.

           
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
 
 
For the Three Months Ended

For the Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,
  2009     2009     2008     2009     2008  
 
 
GAAP expenses as reported $ 12,763 $ 10,809 $ 9,427 $ 43,323 $ 50,656
 
Less Stock-Based Compensation included in:
Compensation and benefits (1,968 ) (2,276 ) (1,720 ) (7,917 ) (7,946 )
Professional fees (501 ) (241 ) 125 (1,092 ) (393 )
Other   (1,050 )   (48 )   (540 )   (1,200 )   (1,207 )
 
Total stock-based compensation expenses (3,519 ) (2,565 ) (2,135 ) (10,209 ) (9,546 )
 
Less depreciation and amortization   (88 )   (88 )   (90 )   (360 )   (337 )
 
Proforma operating expenses $ 9,156   $ 8,156   $ 7,202   $ 32,754   $ 40,773  
 
 
 
GAAP net loss, as reported $ (5,032 ) $ (4,988 ) $ (4,961 ) $ (21,228 ) $ (27,045 )
 
Add back stock-based compensation 3,519 2,565 2,135 10,209 9,546
Add back depreciation and amortization 88 88 90 360 337
Less interest and investment income   (95 )   (105 )   (245 )   (607 )   (1,537 )
 
Proforma net loss $ (1,520 ) $ (2,440 ) $ (2,981 ) $ (11,266 ) $ (18,699 )
 

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:

  • We have a limited operating history in our investment management business upon which you may evaluate us and we have experienced significant losses to date.
  • 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.

Media Contact:
Stuart Bell
WisdomTree Investments, Inc.
(917) 267-3702
sbell@wisdomtree.com
or
WisdomTree Investor Relations Contacts:
KCSA Strategic Communications
Jeffrey Goldberger / Todd Fromer
+1 212.896.1249 / +1 212.896.1215
jgoldberger@kcsa.com / tfromer@kcsa.com

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