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WisdomTree (Pink Sheets: WSDT), an industry leading index developer and exchange-traded fund ("ETF") sponsor, today reported a net loss of $5.2 million in the second quarter of 2009, a 13.5% improvement from a net loss of $6.0 million in the first quarter. Proforma operating net loss, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was $3.3 million in the quarter, a 17.3% improvement from a net loss of $4.0 million in the first quarter.
WisdomTree CEO Jonathan Steinberg commented, "WisdomTree had its best quarter of net inflows in three quarters, which coupled with positive market movement resulted in increased assets of nearly $1 billion from the first quarter. Significantly, approximately 50% of this increase was in emerging market equities and emerging market currencies. We have built one of the most expansive and innovative product sets in this space."
Mr. Steinberg continued, "Second quarter revenue growth, coupled with cost discipline, resulted in marked improvements in our financial results. This highlights the operating leverage of our business and ability to respond effectively in an environment that is improving, yet still challenging for investors. As the markets recover, we believe that our financial performance will continue to improve."
Assets Under Management and Performance
As of June 30, 2009, assets under management ("AUM") tied to the WisdomTree indexes were $4.1 billion and ETF AUM was $3.7 billion, up 30% and 32% respectively from March 31, 2009. Net inflows into WisdomTree ETFs were $281 million in the second quarter.
WisdomTree's fundamentally weighted ETFs experienced relatively strong investment performance through the second quarter. Approximately 70% of the $3.3 billion invested in WisdomTree's 42 equity ETFs on June 30, 2009 were in funds that, since their respective inceptions, have outperformed their benchmarks through that date. 23 of WisdomTree's 42 equity ETFs outperformed their comparable benchmarks since inception through the second quarter. For more information about WisdomTree ETFs, please click here or visit www.wisdomtree.com.
Recent Business Activity
-- On May 6, 2009, the Company launched the WisdomTree Dreyfus Emerging Currency Fund (CEW), the industry's first and only basket of emerging market currencies in an ETF.
-- WisdomTree intends to launch the WisdomTree CEF Fixed Income Fund. This ETF will be designed to provide investors with exposure to closed-end funds that invest in fixed income securities.
Second Quarter Financial Highlights
Comparison to the first quarter of 2009
Revenues
Total revenues for the second quarter increased 20.2% to $4.4 million as compared to $3.7 million in the first quarter. Average ETF assets under management increased 16.1% primarily due to $602 million of market appreciation as well $281 million of net inflows. The average advisory fee earned during the second quarter was 0.51%, up from 0.50% in the first quarter primarily due to higher inflows into the Company's emerging market ETFs.
Expenses
Total expenses decreased slightly to $9.8 million from $9.9 million in the first quarter primarily due to lower compensation related expenses, partly offset by higher marketing costs. Excluding stock-based compensation, depreciation and amortization charges, proforma operating expenses were essentially unchanged at $7.7 million.
Ninety three percent of the increase in revenues flowed through to the bottom line and directly reduced the Company's operating loss over the first quarter. This was primarily due to the stable expense base resulting from cost reduction actions the Company initiated in the second half of 2008.
-- Compensation and benefits expense decreased 10.3% to $4.3 million from $4.8 million in the first quarter. Excluding stock-based compensation, compensation and benefits expense decreased 4.4% to $2.6 million from $2.7 million. The decrease was primarily due to lower payroll taxes which are usually higher in the first quarter due to incentive compensation payments.
-- Fund management and administration expenses were essentially unchanged at $3.2 million. Higher transaction related fees due to the annual rebalancing of our equity ETFs as well as portfolio management fees due to higher average asset balances were offset by lower fund administration fees.
-- Marketing and business development increased 24.5% to $1.1 million from $0.9 million in the first quarter. This increase was primarily due to the initiation of limited television advertising in June.
-- Professional fees increased 36.6% to $0.4 million from $0.3 million. Excluding stock based compensation, professional fees declined 40.4% to $0.1 million from $0.2 million primarily due to lower legal and other advisory fees.
-- Occupancy, communications and equipment expense remained essentially flat at $0.3 million.
-- Other expenses remained essentially flat at $0.4 million. Fees to Dreyfus for the Company's Currency and Fixed Income ETF collaboration slightly increased.
Year-to-Date Results
Total revenues decreased 30.3% to $8.1 million during the first six months of 2009 from $11.7 million in the comparable period in 2008, as a result of lower asset levels related to the credit crisis and downturn in the economy which began in the second half of 2008 and into the first half of 2009.
Total expenses decreased 31.9% to $19.8 million during the first six months of 2009 from $29.0 million in the same period of last year. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses decreased 34.3% to $15.4 million from $23.5 million in the same period last year. This decrease was primarily due to lower marketing and compensation related expenses due to cost reduction actions initiated by management in the second half of 2008.
Balance Sheet
As of June 30, 2009, WisdomTree had total assets of $25.1 million which consisted primarily of cash and cash equivalents of $9.3 million, and investments of $11.4 million. WisdomTree has no debt. There were approximately 106.9 million shares issued as of June 30, 2009. Fully diluted shares issued and outstanding were approximately 128.3 million as of June 30, 2009.
The Company's audited 2008 financial statement is available under the investor relations sections of the Company's and Pink Sheet's websites.
Second Quarter 2009 Earnings Call Information
WisdomTree will discuss its results and operational highlights during a conference call on Friday, July 31 at 9:00 a.m. ET. The call-in number will be (888) 679-8035, passcode 33033619. Anyone outside the U.S. or Canada should call (617) 213-4848, passcode 33033619. 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(R) is a leading ETF sponsor and innovative index developer 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 $4.4 billion in assets currently are managed against the WisdomTree Indexes by WisdomTree and third parties under license from WisdomTree. For more information, please visit www.wisdomtree.com or www.wisdomtree401k.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 Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
Revenues $ 4,441 $ 3,695 $ 6,249 $ 8,136 $ 11,670
Expenses:
Compensation and benefits 4,264 4,751 5,163 9,015 11,898
Fund management and administration 3,205 3,191 3,739 6,396 7,262
Marketing and business development 1,133 910 3,253 2,043 6,632
Professional fees 414 303 649 717 1,387
Occupancy, communication and equipment 281 274 391 555 826
Depreciation and amortization 94 90 84 184 159
Other 432 409 521 841 844
Total expenses 9,823 9,928 13,800 19,751 29,008
Operating loss (5,382 ) (6,233 ) (7,551 ) (11,615 ) (17,338 )
Interest and investment income 185 222 352 407 925
Net loss $ (5,197 ) $ (6,011 ) $ (7,199 ) $ (11,208 ) $ (16,413 )
Net loss per share - basic and diluted $ (0.05 ) $ (0.06 ) $ (0.07 ) $ (0.11 ) $ (0.16 )
Weighted average common shares - basic and diluted 101,738 101,561 99,995 101,650 99,744
WISDOMTREE INVESTMENTS, INC
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
Revenues $ 4,441 $ 3,695 $ 6,249 $ 8,136 $ 11,670
Operating expenses:
Compensation and benefits 2,611 2,732 3,309 5,343 7,808
Fund management and administration 3,205 3,191 3,739 6,396 7,262
Marketing and business development 1,133 910 3,253 2,043 6,632
Professional fees 137 230 461 367 780
Occupancy, communication and equipment 281 274 391 555 826
Other 382 357 (54 ) 739 194
Total operating expenses 7,749 7,694 11,099 15,443 23,502
Operating loss (3,308 ) (3,999 ) (4,850 ) (7,307 ) (11,832 )
Stock-based compensation 1,980 2,144 2,617 4,124 5,347
Depreciation and amortization 94 90 84 184 159
Interest and investment income (185 ) (222 ) (352 ) (407 ) (925 )
Net loss $ (5,197 ) $ (6,011 ) $ (7,199 ) $ (11,208 ) $ (16,413 )
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
June 30, December 31,
2009 2008
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,295 $ 13,275
Investments 3,797 4,593
Accounts receivable 1,754 1,530
Other current assets 1,199 875
Total current assets 16,045 20,273
Fixed assets, net 1,364 1,266
Investments 7,598 13,191
Other long-term assets 74 126
Total assets $ 25,081 $ 34,856
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 7,082 $ 8,966
Compensation and benefits payable 1,313 2,012
Accounts payable and other liabilities 1,235 1,207
Total current liabilities 9,630 12,185
Other liabilities 477 615
Total liabilities 10,107 12,800
Stockholders' equity
Common stock, par value $0.01; 250,000,000 shares authorized:
issued: 106,934,326 and 105,244,385 1,069 1,052
outstanding: 101,788,743 and 101,339,143
Additional paid-in capital 138,489 134,383
Accumulated other comprehensive income - (3 )
Accumulated deficit (124,584 ) (113,376 )
Total stockholders' equity 14,974 22,056
Total liabilities and stockholders' equity $ 25,081 $ 34,856
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For the Six Months Ended
June 30, June 30,
2009 2008
Cash flows from operating activities
Net loss $ (11,208 ) $ (16,413 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation, amortization and other 184 497
Stock-based compensation 4,124 5,347
Deferred rent (138 ) 5
Accretion to interest income (86 ) 99
Net change in operating assets and liabilities:
Accounts receivable (224 ) (277 )
Other assets (272 ) (39 )
Fund management and administration payable (1,884 ) 283
Compensation and benefits payable (699 ) (633 )
Other accounts payable and other liabilities 28 (157 )
Net cash used in operating activities (10,175 ) (11,288 )
Cash flows from investing activities
Purchase of fixed assets (282 ) (618 )
Purchase of investments (6,785 ) (9,866 )
Proceeds from the redemption of investments 13,262 20,298
Net cash provided by investing activities 6,195 9,814
Cash flows from financing activities
Proceeds from exercise of stock options and warrants -- 4
Net cash provided by financing activities -- 4
Net decrease in cash and cash equivalents (3,980 ) (1,470 )
Cash and cash equivalents - beginning of period 13,275 15,138
Cash and cash equivalents - end of period $ 9,295 $ 13,668
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 3 $ 3
WisdomTree Investments, Inc.
Key Operating Statistics
For the Three Months Ended For the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
Total assets under management (in thousands)
ETFs 3,658,428 2,775,647 4,745,628 3,658,428 4,745,628
Non-ETFs 478,717 399,110 171,166 478,717 171,166
End of period assets 4,137,145 3,174,757 4,916,794 4,137,145 4,916,794
Total ETFs (in thousands)
Beginning of period assets 2,775,647 3,180,133 4,296,257 3,180,133 4,558,796
Inflows/(Outflows) 280,825 22,512 756,150 303,337 892,374
Market appreciation/(depreciation) 601,956 (426,998 ) (306,779 ) 174,958 (705,542 )
End of period assets 3,658,428 2,775,647 4,745,628 3,658,428 4,745,628
Average assets during the period 3,349,826 2,885,250 4,796,753 3,117,538 4,598,959
International ETFs (in thousands)
Beginning of period assets 1,525,297 1,723,243 2,759,400 1,723,243 2,985,606
Inflows/(Outflows) 165,198 (3,153 ) 264,334 162,045 298,699
Market appreciation/(depreciation) 386,415 (194,793 ) (189,283 ) 191,622 (449,854 )
End of period assets 2,076,910 1,525,297 2,834,451 2,076,910 2,834,451
Average assets during the period 1,892,494 1,572,388 2,986,072 1,732,441 2,842,080
Sector ETFs (in thousands)
Beginning of period assets 190,098 246,502 514,398 246,502 546,565
Inflows/(Outflows) (8,358 ) (19,625 ) 33,251 (27,983 ) 46,801
Market appreciation/(depreciation) 40,345 (36,779 ) (9,277 ) 3,566 (54,994 )
End of period assets 222,085 190,098 538,372 222,085 538,372
Average assets during the period 210,826 211,554 550,526 211,189 542,096
US ETFs (in thousands)
Beginning of period assets 866,224 986,568 1,022,459 986,568 1,026,625
Inflows/(Outflows) 15,456 81,037 57,724 96,493 146,033
Market appreciation/(depreciation) 158,654 (201,381 ) (108,106 ) (42,727 ) (200,581 )
End of period assets 1,040,334 866,224 972,077 1,040,334 972,077
Average assets during the period 1,001,301 896,404 1,078,954 948,853 1,033,582
Currency/Fixed Income ETFs (in thousands)
Beginning of period assets 194,028 223,820 - 223,820 -
Inflows/(Outflows) 108,529 (35,747 ) 400,841 72,782 400,841
Market appreciation/(depreciation) 16,542 5,955 (113 ) 22,497 (113 )
End of period assets 319,099 194,028 400,728 319,099 400,728
Average assets during the period 245,205 204,904 181,201 225,055 181,201
Average ETF Assets During the Period
International ETFs 57 % 55 % 63 % 56 % 62 %
Sector ETFs 6 % 7 % 11 % 7 % 12 %
US ETFs 30 % 31 % 22 % 30 % 22 %
Currency/Fixed Income ETFs 7 % 7 % 4 % 7 % 4 %
Average ETF Advisory Fee During the Period
International ETFs 0.61 % 0.59 % 0.59 % 0.60 % 0.57 %
Sector ETFs 0.58 % 0.58 % 0.58 % 0.58 % 0.58 %
US ETFs 0.33 % 0.33 % 0.34 % 0.33 % 0.34 %
Currency/Fixed Income ETFs 0.44 % 0.42 % 0.41 % 0.43 % 0.41 %
Blended Total 0.51 % 0.50 % 0.52 % 0.51 % 0.52 %
Number of ETFs
International ETFs 18 18 17 18 17
Sector ETFs 11 11 11 11 11
US ETFs 13 13 12 13 12
Currency/Fixed Income ETFs 9 8 8 9 8
Total 51 50 48 51 48
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 Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
GAAP expenses as reported $ 9,823 $ 9,928 $ 13,800 $ 19,751 $ 29,008
Less Stock-Based Compensation included in:
Compensation and benefits (1,653 ) (2,019 ) (1,854 ) (3,672 ) (4,090 )
Professional fees (277 ) (73 ) (188 ) (350 ) (607 )
Other (50 ) (52 ) (575 ) (102 ) (650 )
Total stock-based compensation expenses (1,980 ) (2,144 ) (2,617 ) (4,124 ) (5,347 )
Less depreciation and amortization (94 ) (90 ) (84 ) (184 ) (159 )
Proforma operating expenses $ 7,749 $ 7,694 $ 11,099 $ 15,443 $ 23,502
GAAP net loss, as reported $ (5,197 ) $ (6,011 ) $ (7,199 ) $ (11,208 ) $ (16,413 )
Add back stock-based compensation 1,980 2,144 2,617 4,124 5,347
Add back depreciation and amortization 94 90 84 184 159
Less interest and investment income (185 ) (222 ) (352 ) (407 ) (925 )
Proforma net loss $ (3,308 ) $ (3,999 ) $ (4,850 ) $ (7,307 ) $ (11,832 )
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 do 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.
SOURCE: WisdomTree
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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