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WisdomTree (Pink Sheets: WSDT - News), an industry leading index developer and exchange-traded fund ("ETF") sponsor, today reported a GAAP net loss of $5.0 million in the third quarter of 2009, a 4.0% improvement from a net loss of $5.2 million in the second quarter. Proforma operating net loss, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was $2.4 million in the quarter, a 26.2% improvement from a net loss of $3.3 million in the second quarter. WisdomTree CEO Jonathan Steinberg commented, "Due to improving market conditions and investor sentiment, WisdomTree nearly doubled net inflows from the prior quarter. In fact, we achieved our best third quarter in Company history. Higher revenues generated from record asset levels combined with a continued focus on cost management have improved our bottom line. I believe we have emerged from the credit crisis in a better competitive position, with an enhanced ability to grow market share going forward." Mr. Steinberg continued, "We continue to see strong net inflows in October, particularly in our Currency Income ETFs. As of October 28, total inflows into the currency family were $300 million, representing 25% of the category industry wide. We have taken an active role in educating financial professionals about the importance of currencies as an asset class within a diversified portfolio. We expect continued growth in this category." Assets Under Management and Performance As of September 30, 2009, assets under management ("AUM") managed in WisdomTree ETFs, Indexes and other accounts was $5.5 billion and ETF AUM was $4.9 billion, up 32% and 33.8% respectively from June 30, 2009. Net inflows into WisdomTree ETFs were $558 million in the third quarter. WisdomTree's fundamentally weighted ETFs experienced relatively strong investment performance through the third quarter. Approximately 74% of the $4.5 billion invested in WisdomTree's 42 equity ETFs on September 30, 2009 were in funds that, since their respective inceptions, have outperformed their benchmarks through that date. 25 of WisdomTree's 42 equity ETFs outperformed their comparable benchmarks since inception through the third quarter. For more information about WisdomTree ETFs, please click here or visit www.wisdomtree.com. Third Quarter Financial Highlights Comparison to the second quarter of 2009 Revenues Total revenues for the third quarter increased 28.7% to $5.7 million as compared to $4.4 million in the second quarter. Average ETF assets under management increased 24.8% primarily due to $680 million of market appreciation as well as $558 million of net inflows. The average advisory fee earned during the third quarter was 0.53%, up from 0.51% in the second quarter primarily due to higher inflows into the Company's emerging market ETFs and greater market appreciation in this market. Expenses Total expenses increased 10.2% to $10.8 million from $9.8 million in the second quarter primarily due to higher compensation and fund management and administration related expenses. Excluding stock-based compensation, depreciation and amortization charges, proforma operating expenses increased 5.3% to $8.2 million from $7.7 million in the second quarter. 68% percent of the increase in revenues flowed through to the bottom line, improving the Company's operating loss over the second quarter. -- Compensation and benefits expenses increased 20.8% to $5.2 million from $4.3 million in the second quarter primarily due to higher stock-based compensation expense. Excluding stock-based compensation, compensation and benefits expense increased 10.2% to $2.9 million from $2.6 million due to the accrual of increased incentive compensation due to higher inflows. -- Fund management and administration expenses increased 3.5% to $3.3 million from $3.2 million in the second quarter due to higher average asset balances. -- Marketing and business development expenses were flat at $1.1 million in the third quarter as lower television advertising was offset by higher sales and business development related expenses. -- Professional fees were flat at $0.4 million in the third quarter as compared to the second quarter. Excluding stock based compensation, professional fees increased 39.4% to $0.2 million from $0.1 million primarily due to regulatory compliance consulting during the quarter. -- Occupancy, communications and equipment expenses were flat at $0.3 million. -- Other expenses were also flat at $0.4 million. Revenue sharing with The Bank of New York-Mellon for the Company's Currency and Fixed Income ETF collaboration increased due to higher average assets under management for these products. This increase was offset by lower general and administrative expenses. Year-to-Date Results Total revenues decreased 22.4% to $13.9 million during the first nine months of 2009 from $17.9 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 continued into the first half of 2009. Total expenses decreased 25.9% to $30.6 million during the first nine months of 2009 from $41.2 million in the same period of last year. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses decreased 29.7% to $23.6 million from $33.6 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 along with lower fund management and administration costs due to lower average asset balances. Balance Sheet As of September 30, 2009, WisdomTree had total assets of $22.5 million which consisted primarily of cash and cash equivalents of $8.3 million, and investments of $9.6 million. WisdomTree has no debt. There were approximately 107.1 million shares issued as of September 30, 2009. Fully diluted shares issued and outstanding were approximately 128.5 million as of September 30, 2009. Financing In October 2009, the Company completed a financing raising $5.0 million through the issuance of approximately 6.7 million shares of common stock. The proceeds from this financing will be used for general business purposes. As of October 29, 2009, the Company has approximately $22 million of cash, cash equivalents and investments; 114,033,904 shares of common stock issued and outstanding (including 5,036,910 shares of unvested restricted stock); and 21,402,959 options outstanding with a weighted average strike price of $0.57 per option. Third Quarter 2009 Earnings Call Information WisdomTree will discuss its results and operational highlights during a conference call on Friday, October 30 at 9:00 a.m. ET. The call-in number will be (888) 713-4215 passcode 15327435. Anyone outside the U.S. or Canada should call (617) 213-4867, passcode 15327435. 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 $5.7 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 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 Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
Revenues $ 5,716 $ 4,441 $ 6,183 $ 13,852 $ 17,853
Expenses:
Compensation and benefits 5,153 4,264 5,690 14,168 17,588
Fund management and administration 3,317 3,205 3,995 9,713 11,257
Marketing and business development 1,113 1,133 1,501 3,156 8,133
Professional fees 432 414 189 1,149 1,576
Occupancy, communication and equipment 283 281 375 838 1,201
Depreciation and amortization 88 94 88 272 247
Other 423 432 383 1,264 1,227
Total expenses 10,809 9,823 12,221 30,560 41,229
Operating loss (5,093 ) (5,382 ) (6,038 ) (16,708 ) (23,376 )
Interest and investment income 105 185 367 512 1,292
Net loss $ (4,988 ) $ (5,197 ) $ (5,671 ) $ (16,196 ) $ (22,084 )
Net loss per share - basic and diluted $ (0.05 ) $ (0.05 ) $ (0.06 ) $ (0.16 ) $ (0.22 )
Weighted average common shares - basic and diluted 101,857 101,738 100,444 101,720 99,994
WISDOMTREE INVESTMENTS, INC
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
Revenues $ 5,716 $ 4,441 $ 6,183 $ 13,852 $ 17,853
Operating expenses:
Compensation and benefits 2,877 2,611 3,554 8,220 11,362
Fund management and administration 3,317 3,205 3,995 9,713 11,257
Marketing and business development 1,113 1,133 1,501 3,156 8,133
Professional fees 191 137 278 558 1,058
Occupancy, communication and equipment 283 281 375 838 1,201
Other 375 382 366 1,114 560
Total operating expenses 8,156 7,749 10,069 23,599 33,571
Operating loss (2,440 ) (3,308 ) (3,886 ) (9,747 ) (15,718 )
Stock-based compensation 2,565 1,980 2,064 6,689 7,411
Depreciation and amortization 88 94 88 272 247
Interest and investment income (105 ) (185 ) (367 ) (512 ) (1,292 )
Net loss $ (4,988 ) $ (5,197 ) $ (5,671 ) $ (16,196 ) $ (22,084 )
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
September 30, December 31,
2009 2008
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 8,340 $ 13,275
Investments 2,607 4,593
Accounts receivable 2,201 1,530
Other current assets 1,026 875
Total current assets 14,174 20,273
Fixed assets, net 1,287 1,266
Investments 6,971 13,191
Other long-term assets 61 126
Total assets $ 22,493 $ 34,856
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 6,546 $ 8,966
Compensation and benefits payable 1,688 2,012
Accounts payable and other liabilities 1,254 1,207
Total current liabilities 9,488 12,185
Other liabilities 454 615
Total liabilities 9,942 12,800
Stockholders' equity
Common stock, par value $0.01; 250,000,000 shares authorized:
issued: 107,109,591 and 105,244,385 1,071 1,052
outstanding: 102,140,954 and 101,339,143
Additional paid-in capital 141,053 134,383
Accumulated other comprehensive income (1 ) (3 )
Accumulated deficit (129,572 ) (113,376 )
Total stockholders' equity 12,551 22,056
Total liabilities and stockholders' equity $ 22,493 $ 34,856
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For the Nine Months Ended
September 30, September 30,
2009 2008
Cash flows from operating activities
Net loss $ (16,196 ) $ (22,084 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation, amortization and other 272 585
Stock-based compensation 6,689 7,411
Deferred rent (161 ) (14 )
Accretion to interest income (56 ) 129
Net change in operating assets and liabilities:
Accounts receivable (671 ) (37 )
Other assets (86 ) 467
Fund management and administration payable (2,420 ) 2,489
Compensation and benefits payable (324 ) 208
Other accounts payable and other liabilities 47 (652 )
Net cash used in operating activities (12,906 ) (11,498 )
Cash flows from investing activities
Purchase of fixed assets (293 ) (691 )
Purchase of investments (7,292 ) (10,368 )
Proceeds from the redemption of investments 15,556 22,763
Net cash provided by investing activities 7,971 11,704
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 (4,935 ) 210
Cash and cash equivalents - beginning of period 13,275 15,138
Cash and cash equivalents - end of period $ 8,340 $ 15,348
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 3 $ 4
WisdomTree Investments, Inc.
Key Operating Statistics
For the Three Months Ended For the Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
Total assets under management (in thousands)
ETFs 4,901,755 3,663,004 4,074,954 4,901,755 4,074,954
Non-ETFs 567,627 478,717 581,048 567,627 581,048
End of period assets 5,469,382 4,141,721 4,656,002 5,469,382 4,656,002
Total ETFs (in thousands)
Beginning of period assets 3,663,004 2,775,647 4,745,628 3,180,133 4,558,796
Inflows/(Outflows) 558,426 280,825 (15,483 ) 861,764 876,891
Market appreciation/(depreciation) 680,325 606,532 (655,191 ) 859,858 (1,360,733 )
End of period assets 4,901,755 3,663,004 4,074,954 4,901,755 4,074,954
Average assets during the period 4,181,938 3,349,826 4,615,359 3,472,338 4,704,468
International ETFs (in thousands)
Beginning of period assets 2,082,340 1,525,297 2,834,451 1,723,243 2,985,606
Inflows/(Outflows) 400,974 165,198 (23,796 ) 563,019 274,903
Market appreciation/(depreciation) 429,347 391,845 (509,652 ) 626,399 (959,507 )
End of period assets 2,912,661 2,082,340 2,301,003 2,912,661 2,301,002
Average assets during the period 2,397,470 1,892,494 2,675,443 1,954,117 2,809,136
Sector ETFs (in thousands)
Beginning of period assets 222,085 190,098 538,372 246,502 546,565
Inflows/(Outflows) 52,241 (8,358 ) (61,806 ) 24,259 (15,004 )
Market appreciation/(depreciation) 47,819 40,345 (115,131 ) 51,384 (170,125 )
End of period assets 322,145 222,085 361,435 322,145 361,436
Average assets during the period 268,661 210,826 464,982 230,347 516,391
US ETFs (in thousands)
Beginning of period assets 1,039,480 866,224 972,077 986,568 1,026,625
Inflows/(Outflows) 42,970 15,456 22,048 139,462 168,080
Market appreciation/(depreciation) 188,722 157,800 (10,690 ) 145,142 (211,270 )
End of period assets 1,271,172 1,039,480 983,435 1,271,172 983,435
Average assets during the period 1,163,833 1,001,301 1,003,329 1,020,513 1,023,498
Currency/Fixed Income ETFs (in thousands)
Beginning of period assets 319,099 194,028 400,728 223,820 -
Inflows/(Outflows) 62,241 108,529 48,071 135,024 448,912
Market appreciation/(depreciation) 14,437 16,542 (19,718 ) 36,933 (19,831 )
End of period assets 395,777 319,099 429,081 395,777 429,081
Average assets during the period 351,974 245,205 471,605 267,361 355,443
Average ETF assets during the period
International ETFs 58 % 57 % 58 % 56 % 59 %
Sector ETFs 6 % 6 % 10 % 7 % 11 %
US ETFs 28 % 30 % 22 % 29 % 22 %
Currency/Fixed Income ETFs 8 % 7 % 10 % 8 % 8 %
Average ETF advisory fee during the period
International ETFs 0.62 % 0.61 % 0.59 % 0.61 % 0.59 %
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 % 0.44 % 0.43 % 0.44 % 0.43 %
Blended Total 0.53 % 0.51 % 0.52 % 0.51 % 0.52 %
Number of ETFs
International ETFs 18 18 18 18 18
Sector ETFs 11 11 11 11 11
US ETFs 13 13 12 13 12
Currency/Fixed Income ETFs 9 9 8 9 8
Total 51 51 49 51 49
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 Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
GAAP expenses as reported $ 10,809 $ 9,823 $ 12,221 $ 30,560 $ 41,229
Less Stock-Based Compensation included in:
Compensation and benefits (2,276 ) (1,653 ) (2,136 ) (5,948 ) (6,226 )
Professional fees (241 ) (277 ) 89 (591 ) (518 )
Other (48 ) (50 ) (17 ) (150 ) (667 )
Total stock-based compensation expenses (2,565 ) (1,980 ) (2,064 ) (6,689 ) (7,411 )
Less depreciation and amortization (88 ) (94 ) (88 ) (272 ) (247 )
Proforma operating expenses $ 8,156 $ 7,749 $ 10,069 $ 23,599 $ 33,571
GAAP net loss, as reported $ (4,988 ) $ (5,197 ) $ (5,671 ) $ (16,196 ) $ (22,084 )
Add back stock-based compensation 2,565 1,980 2,064 6,689 7,411
Add back depreciation and amortization 88 94 88 272 247
Less interest and investment income (105 ) (185 ) (367 ) (512 ) (1,292 )
Proforma net loss $ (2,440 ) $ (3,308 ) $ (3,886 ) $ (9,747 ) $ (15,718 )
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. 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 For full details for WSDT click here.
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