WisdomTree Investments, Inc. (WETF) Q3 2020 Earnings Conference Call October 30, 2020 9:00 AM ET Company Participants Jason Weyeneth - Director of IR Amit Muni - EVP and CFO Jarrett Lilien - President and COO Jonathan Steinberg - Founder and CEO Jeremy Schwartz - EVP and Global Head, Research Conference Call Participants Craig Siegenthaler - Credit Suisse Brennan Hawken - UBS Jeff Drezner - KBW Michael Cyprys - Morgan Stanley Ryan Bailey - Goldman Sachs Keith Housum - Northcoast Research Shaun Calnan - Bank ...

AUM and Flows - WisdomTree's AUM rebounded, up +5.3% sequentially[9] - U S listed ETFs had Q3 inflows of +$575 million, representing 7% annualized organic growth[9] - Europe listed ETPs experienced Q3 outflows of ($10) billion, led by Energy ($817 million) and physical Gold ($523 million)[9] - Strong start to Q4 with $854 million of inflows driven by physical Gold[9] Financial Performance - Adjusted Net Income rebounded with higher average AUM/revenues[10] - Q3 Total Revenue was $646 million[10] - Adjusted EPS (non-GAAP) was $007[10] - The company completed a $25 million add-on to its convertible offering and spent $45 million to repurchase 11 million shares[10] Margins and Expenses - Operating margins expanded in Q3/20[11] - Gross margins expanded sequentially, driven by higher average AUM[15] - Discretionary spending remains well controlled, with a full-year outlook of approximately $41 million[16]

Report Overview [SEC Filing Information](index=1&type=section&id=SEC%20Filing%20Information) This is a Quarterly Report on Form 10-Q for WisdomTree Investments, Inc. for Q2 2020, a large accelerated filer listed on NASDAQ - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2020[2](index=2&type=chunk) - WisdomTree Investments, Inc. is a large accelerated filer[4](index=4&type=chunk) - Common Stock, **$0.01 par value**, is traded on The NASDAQ Stock Market LLC under the symbol WETF[5](index=5&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that forward-looking statements involve risks and uncertainties, potentially causing actual results to differ materially - Forward-looking statements are based on management's beliefs and assumptions and involve known and unknown risks and uncertainties[10](index=10&type=chunk) - Actual results may differ materially due to factors listed in the 'Risk Factors' section of this report and previous filings[11](index=11&type=chunk) - Ultimate duration and impact of the COVID-19 pandemic on business and global economy[13](index=13&type=chunk) - Anticipated trends, conditions, and investor sentiment in global markets and ETPs[13](index=13&type=chunk) - Anticipated levels of inflows into and outflows out of ETPs[13](index=13&type=chunk) - Ability to deliver favorable rates of return to investors[13](index=13&type=chunk) - Competition in the business[13](index=13&type=chunk) - Ability to develop new products and services[13](index=13&type=chunk) - Ability to maintain current vendors or find new vendors at favorable costs[13](index=13&type=chunk) - Ability to successfully operate and expand business in non-U.S. markets[13](index=13&type=chunk) - Effect of laws and regulations that apply to the business[13](index=13&type=chunk) PART I: FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents WisdomTree's unaudited consolidated financial statements and detailed notes for the periods ended June 30, 2020 [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased from **$935.2 million** to **$848.8 million** by June 30, 2020, with liabilities and equity also declining | Metric | June 30, 2020 (Unaudited) (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :------------------------ | :------------------ | | Total Assets | $848,801 | $935,207 | | Total Liabilities | $428,700 | $465,226 | | Total Stockholders' Equity | $287,532 | $337,412 | - Cash and cash equivalents decreased from **$74,972 thousand** to **$50,255 thousand**[16](index=16&type=chunk) - Notes receivable, net, decreased from **$28,172 thousand** to **$0**[16](index=16&type=chunk) - Securities held-to-maturity decreased from **$16,863 thousand** to **$581 thousand**[16](index=16&type=chunk) - Convertible notes increased from **$0** to **$141,479 thousand**, while Debt decreased from **$175,956 thousand** to **$0**[16](index=16&type=chunk) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a **$13.25 million net loss** for Q2 2020, a significant decline from prior year, driven by revaluation losses and debt extinguishment | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total Revenues | $58,126 | $66,293 | $122,000 | $131,778 | | Total Operating Expenses | $46,329 | $54,382 | $94,569 | $109,184 | | Operating Income | $11,797 | $11,911 | $27,431 | $22,594 | | (Loss)/gain on revaluation of deferred consideration – gold payments | $(23,358) | $(4,037) | $(25,566) | $367 | | Loss on extinguishment of debt | $(2,387) | — | $(2,387) | — | | Net (loss)/income | $(13,250) | $2,479 | $(21,888) | $11,303 | | (Loss)/earnings per share – basic | $(0.09) | $0.01 | $(0.15) | $0.07 | | Cash dividends declared per common share | $0.03 | $0.03 | $0.06 | $0.06 | - Advisory fees decreased by **12.8%** for the three months ended June 30, 2020, compared to the same period in 2019[18](index=18&type=chunk) - Compensation and benefits decreased by **18.1%** for the three months ended June 30, 2020, compared to the same period in 2019[18](index=18&type=chunk) - Contractual gold payments increased by **30.6%** for the three months ended June 30, 2020, compared to the same period in 2019[18](index=18&type=chunk) [Consolidated Statements of Comprehensive (Loss)/Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%2FIncome) The company reported a **$13.08 million comprehensive loss** for Q2 2020, a significant shift from prior-year income, driven by net loss | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net (loss)/income | $(13,250) | $2,479 | $(21,888) | $11,303 | | Other comprehensive income/(loss) | $168 | $(33) | $(685) | $258 | | Comprehensive (loss)/income | $(13,082) | $2,446 | $(22,573) | $11,561 | - A reclassification of foreign currency translation adjustment to other gains and losses, net, upon the sale of WisdomTree Asset Management Canada, Inc. resulted in a **$(167) thousand** impact for the six months ended June 30, 2020[20](index=20&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity decreased from **$337.4 million** to **$287.5 million** by June 30, 2020, due to repurchases, dividends, and net loss | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Balance – January 1 | $337,412 | $358,335 | | Shares repurchased | $(26,444) | $(2,107) | | Dividends | $(10,270) | $(10,191) | | Net loss/(income) | $(21,888) | $11,303 | | Balance – June 30 | $287,532 | $363,819 | - Common stock shares issued decreased from **155,264 thousand** at January 1, 2020, to **149,796 thousand** at June 30, 2020[24](index=24&type=chunk) - Additional paid-in capital decreased by **$27.25 million** during the six months ended June 30, 2020[24](index=24&type=chunk) - Accumulated deficit increased by **$21.89 million** due to net loss during the six months ended June 30, 2020[24](index=24&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased by **$24.7 million** in H1 2020, driven by financing outflows, partially offset by convertible notes and operating cash | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $19,382 | $15,359 | | Net cash provided by/(used in) investing activities | $27,070 | $(1,516) | | Net cash used in financing activities | $(70,085) | $(12,284) | | (Decrease)/increase in cash and cash equivalents | $(24,717) | $1,827 | | Cash and cash equivalents – end of period | $50,255 | $79,611 | - Repayment of debt totaled **$179,000 thousand** in H1 2020[26](index=26&type=chunk) - Proceeds from the issuance of convertible notes were **$150,000 thousand** in H1 2020[26](index=26&type=chunk) - Shares repurchased amounted to **$26,444 thousand** in H1 2020[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's financial statements, covering organization, accounting policies, assets, liabilities, debt, equity, and recent transactions [1. Organization and Description of Business](index=11&type=section&id=1.%20Organization%20and%20Description%20of%20Business) WisdomTree is a New York-based ETP sponsor and asset manager, which sold its Canadian ETF business on February 19, 2020 - WisdomTree is an ETP sponsor and asset manager offering ETPs covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies[27](index=27&type=chunk) - The Company completed the sale of WisdomTree Asset Management Canada, Inc. (WTAMC) to CI Financial Corp. on February 19, 2020[28](index=28&type=chunk) [2. Significant Accounting Policies](index=11&type=section&id=2.%20Significant%20Accounting%20Policies) This section details key accounting policies, including segment reporting, revenue recognition, and accounting for financial instruments and assets - Effective January 1, 2020, the Company operates as a single operating segment (ETP sponsor and asset manager) in the U.S. and Europe, a change from previous U.S. and International Business segments[32](index=32&type=chunk) - Substantially all revenue is from advisory fees based on a percentage of ETPs' average daily net assets, recognized over time[35](index=35&type=chunk) - Convertible notes are separated into liability and equity components, with interest expense recognized using the effective interest method[61](index=61&type=chunk) - The Company expects to early adopt ASU 2020-06, which simplifies accounting for convertible instruments, resulting in an approximate **$350 thousand** per quarter reduction in interest expense on convertible notes[68](index=68&type=chunk) [3. Cash and Cash Equivalents](index=16&type=section&id=3.%20Cash%20and%20Cash%20Equivalents) Cash and cash equivalents decreased from **$74.97 million** to **$50.26 million** by June 30, 2020, with regulatory capital requirements for international subsidiaries | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $50,255 | $74,972 | | Regulatory capital (international subsidiaries) | $10,561 | $12,312 | - The Company collateralized its U.S. office lease with a **$1,384 thousand** standby letter of credit, which is restricted from further use[75](index=75&type=chunk) [4. Fair Value Measurements](index=16&type=section&id=4.%20Fair%20Value%20Measurements) Financial instruments are categorized into a three-level fair value hierarchy, with deferred gold consideration at Level 3 and convertible notes at Level 2 | Asset/Liability (June 30, 2020) (in thousands) | Total | Level 1 | Level 2 | Level 3 | | :------------------------------ | :---- | :------ | :------ | :------ | | Cash equivalents | $67 | $67 | — | — | | Securities owned, at fair value | $13,110 | $13,110 | — | — | | Deferred consideration | $198,784 | — | — | $198,784 | | Convertible notes (non-recurring) | $145,847 | — | $145,847 | — | | Deferred Consideration (Level 3) (in thousands) | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :------------------------------- | :------------------------------- | :------------------------------- | | Beginning balance | $175,300 | $173,024 | | Net realized losses/(gains) | $4,063 | $7,823 | | Net unrealized losses/(gains) | $23,358 | $25,556 | | Ending balance | $198,784 | $198,784 | [5. Securities Owned/Sold, but Not Yet Purchased](index=18&type=section&id=5.%20Securities%20Owned%2FSold%2C%20but%20Not%20Yet%20Purchased) Securities owned decreased from **$17.32 million** to **$13.11 million** by June 30, 2020, with no securities sold but not yet purchased | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Securities Owned (Trading securities) | $13,110 | $17,319 | | Securities Sold, but not yet Purchased (Trading securities) | $0 | $582 | [6. Securities Held-to-Maturity](index=18&type=section&id=6.%20Securities%20Held-to-Maturity) Securities held-to-maturity decreased from **$16.86 million** to **$0.58 million** by June 30, 2020, with no credit loss allowance due to U.S. government guarantees | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------------ | :------------ | :---------------- | | Debt instruments: Pass-through GSEs (amortized cost) | $581 | $16,863 | | Proceeds from held-to-maturity securities maturing or called | $16,365 (6 months) | $39 (6 months) | - No allowance for credit losses was provided on held-to-maturity securities due to an estimated loss rate of zero for pass-through GSEs with implicit U.S. government guarantees[89](index=89&type=chunk) [7. AdvisorEngine Inc. – Sale of Financial Interests](index=19&type=section&id=7.%20AdvisorEngine%20Inc.%20%E2%80%93%20Sale%20of%20Financial%20Interests) The company exited its AdvisorEngine Inc. investment on May 4, 2020, receiving **$8.16 million** cash and recognizing a **$19.67 million** impairment - The Company exited its investment in AdvisorEngine Inc. on May 4, 2020[91](index=91&type=chunk) - Upfront consideration: **$9,367 thousand** (of which **$8,155 thousand** has been paid)[91](index=91&type=chunk) - Contingent payments: Up to **$10,633 thousand**, payable upon AdvisorEngine achieving certain revenue milestones over four years[92](index=92&type=chunk) - Impairment recognized on notes receivable (six months ended June 30, 2020): **$19,672 thousand**[95](index=95&type=chunk) - Gain recognized from fair value adjustment of consideration (three months ended June 30, 2020): **$868 thousand**[95](index=95&type=chunk) [8. Notes Receivable](index=20&type=section&id=8.%20Notes%20Receivable) Notes receivable were placed on non-accrual status after the AdvisorEngine exit, resulting in no interest income for Q2 and H1 2020 - Notes receivable were placed on non-accrual status effective January 1, 2020, following the exit of the AdvisorEngine investment[97](index=97&type=chunk) | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Interest income | $0 | $628 | $0 | $1,223 | [9. Investments](index=20&type=section&id=9.%20Investments) The company holds strategic investments in Securrency, Inc. (**$8.11 million**) and Thesys Group, Inc. (**$3.08 million**), with no impairment recognized | Investment (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------------- | :------------ | :---------------- | | Securrency, Inc. – Preferred stock | $8,112 | $8,112 | | Thesys Group, Inc. – Preferred stock | $3,080 | $3,080 | | Total | $11,192 | $11,192 | - The investment in Securrency, Inc. represents approximately **25% ownership** (**20% fully diluted**) and includes a non-cumulative **6.0% dividend** and liquidation preference[99](index=99&type=chunk) - The investment in Thesys Group, Inc. represents approximately **19% ownership** on a fully diluted basis and includes a warrant to purchase additional shares[101](index=101&type=chunk)[102](index=102&type=chunk) [10. Fixed Assets, net](index=21&type=section&id=10.%20Fixed%20Assets%2C%20net) Net fixed assets decreased slightly from **$8.13 million** to **$7.84 million** by June 30, 2020, primarily due to depreciation | Fixed Asset Category (in thousands) | June 30, 2020 | December 31, 2019 | | :---------------------------------- | :------------ | :---------------- | | Equipment | $2,452 | $2,330 | | Furniture and fixtures | $2,225 | $2,218 | | Leasehold improvements | $10,947 | $10,989 | | Less: accumulated depreciation and amortization | $(7,789) | $(7,410) | | Total | $7,835 | $8,127 | [11. Deferred Consideration](index=21&type=section&id=11.%20Deferred%20Consideration) Deferred consideration for gold payments increased from **$173.02 million** to **$198.78 million** by June 30, 2020, due to higher gold prices - Deferred consideration is an obligation to pay **9,500 ounces of gold** per year through March 31, 2058, then **6,333 ounces** into perpetuity, assumed from the ETFS Acquisition[107](index=107&type=chunk) | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Deferred consideration | $198,784 | $173,024 | | Forward-looking gold price (weighted average) – per ounce | $2,015 | $1,757 | | Discount rate | 10.0% | 10.0% | | Perpetual growth rate | 1.0% | 1.5% | | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Contractual gold payments | $4,063 | $3,110 | | (Loss)/gain on revaluation of deferred consideration – gold payments | $(23,358) | $(4,037) | [12. Credit Facility](index=22&type=section&id=12.%20Credit%20Facility) The company terminated its credit facility on June 16, 2020, repaying **$174.0 million** debt and incurring a **$2.39 million** loss on extinguishment - The Company terminated its credit facility on June 16, 2020, by repaying **$174,000 thousand** outstanding under its term loan[114](index=114&type=chunk) - A loss on extinguishment of debt of **$2,387 thousand** was recognized due to the write-off of unamortized issuance costs[114](index=114&type=chunk) | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Term Loan outstanding | $0 | $179,000 | | Revolver outstanding | $0 | $0 | | Carrying amount | $0 | $175,956 | | Effective interest rate | 4.15% | 5.32% | [13. Convertible Notes](index=22&type=section&id=13.%20Convertible%20Notes) The company issued **$150.0 million** in **4.25% Convertible Senior Notes** due 2023, with an initial conversion price of **$5.92** per share - The Company issued **$150,000 thousand** in **4.25% Convertible Senior Notes** due 2023 on June 16, 2020[116](index=116&type=chunk) - Maturity date: June 15, 2023[117](index=117&type=chunk) - Interest rate: **4.25%**, payable semiannually[118](index=118&type=chunk) - Initial conversion price: **$5.92 per share** (**168.9189 shares** per **$1,000** principal amount)[125](index=125&type=chunk) - Redemption price: **$7.70 per share** (if redeemed by company)[125](index=125&type=chunk) - Seniority: Senior unsecured obligations, subordinated to Series A Non-Voting Convertible Preferred Stock redemption payments[125](index=125&type=chunk) - Approximately **$23,850 thousand** of the net proceeds were used to repurchase **6,445,949 shares** of common stock[116](index=116&type=chunk) [14. Preferred Shares](index=23&type=section&id=14.%20Preferred%20Shares) The company has **14,750 Series A Non-Voting Convertible Preferred Shares** outstanding, with economic rights equivalent to common stock but no voting rights - **14,750 shares** of Series A Non-Voting Convertible Preferred Stock were issued, convertible into **14,750,000 shares** of common stock[127](index=127&type=chunk) - The Preferred Shares have no voting rights and are not transferable, but have economic rights equivalent to common stock[125](index=125&type=chunk) | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Preferred Shares – carrying value | $132,569 | $132,569 | | Redemption value | $50,244 | $71,630 | [15. Leases](index=24&type=section&id=15.%20Leases) The company accounts for operating leases under ASC 842, with a total lease cost of **$2.23 million** for H1 2020 and a **9.0-year** weighted-average lease term | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $1,588 | $1,590 | | Short-term lease cost | $642 | $772 | | Total lease cost | $2,230 | $2,362 | | Cash paid for operating liabilities | $1,845 | $1,760 | - Weighted-average remaining lease term: **9.0 years**[132](index=132&type=chunk) - Weighted-average discount rate: **6.3%**[136](index=136&type=chunk) - Future minimum lease payments (undiscounted) at June 30, 2020: **$28,333 thousand**[136](index=136&type=chunk) [16. Contingencies](index=25&type=section&id=16.%20Contingencies) The company faces regulatory reviews and legal proceedings but no current litigation is expected to materially impact its financials - The Company is not currently party to any litigation expected to have a material adverse impact on its business, financial position, results of operations or cash flows[137](index=137&type=chunk) [17. Variable Interest Entities](index=25&type=section&id=17.%20Variable%20Interest%20Entities) The company's maximum exposure to loss from VIEs decreased from **$36.28 million** to **$8.11 million** by June 30, 2020, due to the AdvisorEngine exit - The Company is not the primary beneficiary of any entities in which it has a variable interest, as it does not have the power to direct the activities that most significantly impact their economic performance[139](index=139&type=chunk) | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Carrying Amount – Assets (Securrency) | $8,112 | $8,112 | | Carrying Amount – Assets (AdvisorEngine) | $0 | $28,172 | | Total carrying amount – Assets | $8,112 | $36,284 | | Maximum exposure to loss | $8,112 | $36,284 | [18. Revenues from Contracts with Customers](index=26&type=section&id=18.%20Revenues%20from%20Contracts%20with%20Customers) Total operating revenues decreased by **12.3%** to **$58.13 million** in Q2 2020, primarily from advisory fees with related parties | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Advisory fees | $57,208 | $65,627 | $120,158 | $130,467 | | Other income | $918 | $666 | $1,842 | $1,311 | | Total operating revenues | $58,126 | $66,293 | $122,000 | $131,778 | - Revenues are primarily derived from investment advisory agreements with related parties, based on a percentage of ETPs' average daily net assets[143](index=143&type=chunk) | Geographic Revenue (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | United States | $31,629 | $43,146 | $71,499 | $85,769 | | Jersey | $25,641 | $21,368 | $48,166 | $42,529 | | Ireland | $856 | $1,172 | $1,970 | $2,327 | | Canada | $0 | $607 | $365 | $1,153 | [19. Related Party Transactions](index=27&type=section&id=19.%20Related%20Party%20Transactions) Revenues are primarily from investment advisory agreements with related parties, with accounts receivable totaling **$22.03 million** by June 30, 2020 - Revenues are primarily from investment advisory agreements with related parties, where the Company licenses its indexes and provides management/administration services[146](index=146&type=chunk) | Receivable from Related Parties (in thousands) | June 30, 2020 | December 31, 2019 | | :--------------------------------------------- | :------------ | :---------------- | | Receivable from WTT | $10,974 | $14,765 | | Receivable from ManJer Issuers | $10,159 | $9,036 | | Total | $22,026 | $25,667 | | Advisory Services from Related Parties (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | | Advisory services provided to WTT | $31,389 | $42,817 | | Advisory services provided to ManJer Issuers | $23,670 | $19,367 | | Total | $57,208 | $65,627 | [20. Stock-Based Awards](index=28&type=section&id=20.%20Stock-Based%20Awards) Stock-based compensation expense was **$2.92 million** in Q2 2020, with **$15.34 million** unrecognized at June 30, 2020, over a **1.72-year** vesting period - The Company grants equity awards (RSAs, RSUs, PRSUs, and stock options) to employees and directors[151](index=151&type=chunk) | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Stock-based compensation | $2,920 | $3,135 | $6,159 | $6,207 | - Unrecognized stock-based compensation: **$15,337 thousand** at June 30, 2020[153](index=153&type=chunk) - Average remaining vesting period: **1.72 years** at June 30, 2020[153](index=153&type=chunk) [21. Earnings Per Share](index=29&type=section&id=21.%20Earnings%20Per%20Share) Basic and diluted EPS was **$(0.09)** for Q2 2020 and **$(0.15)** for H1 2020, with convertible note shares excluded from diluted EPS | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Basic (loss)/earnings per share | $(0.09) | $0.01 | $(0.15) | $0.07 | | Diluted (loss)/earnings per share | $(0.09) | $0.01 | $(0.15) | $0.07 | | Weighted average common shares – basic (in thousands) | 151,623 | 151,818 | 152,071 | 151,722 | - Potential common shares from convertible notes were excluded from diluted EPS for Q2 and H1 2020 because the average stock price was lower than the conversion price of **$5.92 per share**[156](index=156&type=chunk) [22. Income Taxes](index=30&type=section&id=22.%20Income%20Taxes) The effective income tax rate was **5.7%** for Q2 2020 (**$0.8 million benefit**) and **12.7%** for H1 2020 (**$3.18 million benefit**), impacted by revaluation losses and valuation allowances - Effective income tax rate for Q2 2020: **5.7%** (benefit of **$804 thousand**)[158](index=158&type=chunk) - Effective income tax rate for H1 2020: **12.7%** (benefit of **$3,175 thousand**)[159](index=159&type=chunk) - Key factors for H1 2020 tax benefit: **$5,981 thousand** reduction in unrecognized tax benefits, **$2,877 thousand** non-taxable gain from Canadian ETF business sale, and **$2,842 thousand** tax benefit from deferred tax asset valuation allowance release on UK interest carryforwards[159](index=159&type=chunk) | Deferred Tax Assets (in thousands) | June 30, 2020 | December 31, 2019 | | :--------------------------------- | :------------ | :---------------- | | Total deferred tax assets | $31,596 | $31,553 | | Total deferred tax liabilities | $7,264 | $6,470 | | Less: valuation allowance | $(18,792) | $(17,685) | | Deferred tax assets, net | $5,540 | $7,398 | - Unrecognized tax benefits (including interest and penalties) totaled **$24,364 thousand** at June 30, 2020, with a potential decrease of **$4,527 thousand** in the next 12 months due to lapsing statutes of limitations[173](index=173&type=chunk) [23. Shares Repurchased](index=32&type=section&id=23.%20Shares%20Repurchased) The company repurchased **6.74 million shares** for **$24.95 million** in Q2 2020, with **$56.95 million** remaining under the program - The Board of Directors extended the share repurchase program through April 27, 2022[178](index=178&type=chunk) | Metric | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Shares repurchased | 6,738,313 | 7,123,712 | | Aggregate cost | $24,949 | $26,444 | | Remaining under program (June 30, 2020) | — | $56,945 | [24. Goodwill and Intangible Assets](index=32&type=section&id=24.%20Goodwill%20and%20Intangible%20Assets) Goodwill remained at **$85.86 million**, while indefinite-lived intangible assets totaled **$601.25 million**, decreasing due to the Canadian ETF business sale | Metric (in thousands) | June 30, 2020 | January 1, 2020 | | :-------------------- | :------------ | :-------------- | | Goodwill | $85,856 | $85,856 | | Intangible Assets (Advisory Agreements (ETFS)) | $601,247 | $601,247 | | Intangible Assets (Advisory Agreements (Questrade AUM)) | $0 | $2,047 | | Total Intangible Assets | $601,247 | $603,294 | - Goodwill and indefinite-lived intangible assets are tested annually for impairment on November 30th[181](index=181&type=chunk)[183](index=183&type=chunk) - The decrease in intangible assets is due to the derecognition of Advisory Agreements (Questrade AUM) upon the sale of the Canadian ETF business[182](index=182&type=chunk) [25. Exit Activities](index=33&type=section&id=25.%20Exit%20Activities) The company sold its Canadian ETF business on February 19, 2020, recognizing a **$2.88 million** gain, and liquidated WisdomTree Japan Inc. in September 2019 - Sale of Canadian ETF Business (WTAMC) completed on February 19, 2020, for **CDN $3,720 thousand** (**USD $2,774 thousand**) cash at closing, with potential additional contingent consideration[185](index=185&type=chunk) - A **$2,877 thousand** gain on sale was recognized for the Canadian ETF business[186](index=186&type=chunk) | Operating Losses (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | WTAMC | $0 | $607 | $428 | $1,384 | | WisdomTree Japan Inc. (WTJ) | $0 | $35 | $0 | $465 | [26. Subsequent Events](index=33&type=section&id=26.%20Subsequent%20Events) No events requiring disclosure were identified after the reporting period through the financial statements' issuance date - No events requiring disclosure were identified after the reporting period through the issuance date of the financial statements[188](index=188&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operating results, AUM trends, non-GAAP measures, liquidity, and critical accounting policies, focusing on ETPs [Executive Summary](index=34&type=section&id=Executive%20Summary) WisdomTree, a global ETP sponsor, saw AUM rebound to **$57.6 billion** by June 30, 2020, after Q2 declines, and enhanced capital management - WisdomTree is the only publicly-traded asset management company focused exclusively on ETPs, with **$57.6 billion** in AUM globally as of June 30, 2020[190](index=190&type=chunk) - Average AUM and revenues declined **6.9%** and **9.0%** respectively from the prior quarter due to COVID-19 market declines[195](index=195&type=chunk) - Ending AUM increased **14.6%** from **$50.3 billion** at March 31, 2020, to **$57.6 billion** at June 30, 2020, due to market rebound[197](index=197&type=chunk) - Issued **$150.0 million** in **4.25% Convertible Senior Notes** due 2023 and repaid previously outstanding debt, terminating the former credit facility[197](index=197&type=chunk) - Used **$23.9 million** of proceeds to repurchase approximately **6.4 million shares** of common stock[197](index=197&type=chunk) - Temporarily halted creations into certain European listed oil-related products due to unprecedented volatility in oil prices, with the halt on WisdomTree WTI Crude Oil ETC (CRUD) lifted on July 1, 2020, after implementing risk mitigation steps[199](index=199&type=chunk) [Assets Under Management](index=35&type=section&id=Assets%20Under%20Management) Global ETP AUM increased **14.6%** to **$57.6 billion** by June 30, 2020, driven by market appreciation and international net inflows - Global ETP AUM increased **14.6%** to **$57.6 billion** at June 30, 2020, primarily due to market appreciation[200](index=200&type=chunk) - U.S. listed ETFs AUM increased from **$28.9 billion** at March 31, 2020, to **$31.3 billion** at June 30, 2020 (market appreciation, partly offset by net outflows)[209](index=209&type=chunk) - International listed ETPs AUM increased from **$21.4 billion** at March 31, 2020, to **$26.3 billion** at June 30, 2020 (market appreciation and net inflows)[210](index=210&type=chunk) - Global financial markets rebounded in Q2 2020, with the S&P 500 advancing **20.6%**, MSCI EAFE **12.8%**, MSCI Emerging Markets Index **18.2%**, and gold prices rising **10.0%**[201](index=201&type=chunk)[202](index=202&type=chunk) [Our Operating and Financial Results](index=36&type=section&id=Our%20Operating%20and%20Financial%20Results) Operating results show decreased revenues and a net loss for Q2 and H1 2020, driven by lower AUM, advisory fees, and significant non-operating losses [Consolidated Operating Results (Five Quarters)](index=38&type=section&id=Consolidated%20Operating%20Results) Operating revenues decreased **12.3%** to **$58.1 million** in Q2 2020, resulting in a **$13.3 million net loss** due to revaluation and debt extinguishment costs | Metric (in millions) | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | | :------------------- | :------ | :------ | :------ | :------ | :------ | | Operating Revenues | $58.1 | $63.9 | $66.3 | $65.5 | $66.3 | | Operating Expenses | $46.3 | $48.2 | $50.0 | $50.0 | $54.4 | | Operating Income | $11.8 | $15.7 | $16.3 | $15.5 | $11.9 | | Net (loss)/income | $(13.3) | $(8.6) | $10.0 | $10.0 | $2.5 | - Revenues decreased **12.3% YoY** due to lower average AUM of U.S. listed products and a **4 basis point** decline in average global advisory fee[212](index=212&type=chunk) - Total operating expenses decreased **14.8% YoY** to **$46.3 million**, mainly due to lower compensation accruals, fund management, sales, marketing, and third-party distribution costs[212](index=212&type=chunk) - Loss on revaluation of deferred consideration – gold payments was **$(23.4) million** in Q2 2020, compared to **$(4.0) million** in Q2 2019[212](index=212&type=chunk) [Key Operating Statistics](index=39&type=section&id=Key%20Operating%20Statistics) Global ETP AUM ended Q2 2020 at **$57.6 billion**, with international ETPs seeing **$1.6 billion** net inflows and U.S. ETFs **$1.47 billion** net outflows | Metric (in millions) | Q2 2020 | Q1 2020 | Q2 2019 | | :------------------------------------ | :------ | :------ | :------ | | Global ETPs - End of period assets | $57,647 | $50,323 | $60,389 | | Global ETPs - Average assets during the period | $55,689 | $59,819 | $58,575 | | Global ETPs - Average ETP advisory fee during the period | 0.41% | 0.42% | 0.45% | | U.S. LISTED ETFs - Inflows/(outflows) | $(1,474) | $(1,273) | $(166) | | INTERNATIONAL LISTED ETPs - Inflows/(outflows) | $1,600 | $737 | $509 | | Commodity & Currency - Inflows/(outflows) | $1,316 | $592 | $611 | - Headcount remained stable at **214** at June 30, 2020[214](index=214&type=chunk) [Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019](index=41&type=section&id=Three%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202019) Total revenues decreased **12.3%** to **$58.1 million** in Q2 2020, leading to a net loss despite a **14.8%** operating expense reduction | Metric (in thousands) | June 30, 2020 | June 30, 2019 | Change | Percent Change | | :------------------------------------ | :------------ | :------------ | :----- | :------------- | | Average global AUM | $55,689 | $58,575 | $(2,886) | (4.9%) | | Total revenues | $58,126 | $66,293 | $(8,167) | (12.3%) | | Total operating expenses | $46,329 | $54,382 | $(8,053) | (14.8%) | | Net (loss)/income | $(13,250) | $2,479 | $(15,729) | (634.5%) | - Advisory fee revenues decreased **12.8%** to **$57.2 million**, with average global advisory fee declining from **0.45%** to **0.41%**[217](index=217&type=chunk) - Compensation and benefits decreased **18.1%** due to lower incentive compensation and severance in prior year[221](index=221&type=chunk) - Marketing and advertising decreased **33.0%**, and sales and business development decreased **47.7%** due to lower discretionary spending from COVID-19[223](index=223&type=chunk)[224](index=224&type=chunk) - Contractual gold payments increased **30.6%** to **$4.1 million** due to higher average daily spot price of gold[225](index=225&type=chunk) - Loss on revaluation of deferred consideration – gold payments was **$(23.4) million**, a significant increase from **$(4.0) million** in prior year[234](index=234&type=chunk) - Loss on extinguishment of debt was **$(2.4) million** in Q2 2020[236](index=236&type=chunk) [Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019](index=44&type=section&id=Six%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202019) Total revenues decreased **7.4%** to **$122.0 million** in H1 2020, resulting in a **$21.89 million net loss** due to revaluation losses and AdvisorEngine impairment | Metric (in thousands) | June 30, 2020 | June 30, 2019 | Change | Percent Change | | :------------------------------------ | :------------ | :------------ | :----- | :------------- | | Average global AUM | $57,754 | $58,129 | $(375) | (0.6%) | | Total revenues | $122,000 | $131,778 | $(9,778) | (7.4%) | | Total operating expenses | $94,569 | $109,184 | $(14,615) | (13.4%) | | Net (loss)/income | $(21,888) | $11,303 | $(33,191) | (293.6%) | - Advisory fee revenues decreased **7.9%** to **$120.2 million**, with average global ETP advisory fee declining from **0.45%** to **0.42%**[242](index=242&type=chunk) - Compensation and benefits decreased **18.4%** due to lower incentive compensation and severance[246](index=246&type=chunk) - Marketing and advertising decreased **21.0%**, and sales and business development decreased **34.9%** due to lower discretionary spending[248](index=248&type=chunk)[249](index=249&type=chunk) - Contractual gold payments increased **26.0%** to **$7.8 million** due to higher average daily spot price of gold[250](index=250&type=chunk) - Loss on revaluation of deferred consideration – gold payments was **$(25.6) million**, compared to a gain of **$0.4 million** in prior year[259](index=259&type=chunk) - Impairment charge of **$19.7 million** on AdvisorEngine investment in H1 2020[261](index=261&type=chunk) - Loss on extinguishment of debt of **$2.4 million** in H1 2020[262](index=262&type=chunk) [Non-GAAP Financial Measurements](index=47&type=section&id=Non-GAAP%20Financial%20Measurements) Non-GAAP measures like adjusted net income and EPS are provided to exclude non-recurring items, offering a clearer view of operating performance - Non-GAAP financial measurements (Adjusted net income and adjusted diluted earnings per share) are used to report results exclusive of non-recurring or non-core operating business items[266](index=266&type=chunk)[267](index=267&type=chunk) - Exclusions include: unrealized gains or losses on revaluation of deferred consideration, tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards, interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in convertible notes, loss on extinguishment of debt, release of deferred tax asset valuation allowance, gain/loss from AdvisorEngine investment exit, impairment charges, gain from Canadian ETF business sale, severance expense, and acquisition/disposition-related costs[267](index=267&type=chunk)[270](index=270&type=chunk) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net (loss)/income, as reported | $(13,250) | $2,479 | $(21,888) | $11,303 | | Adjusted net income | $8,494 | $7,813 | $19,718 | $15,550 | | Adjusted earnings per share – diluted | $0.05 | $0.05 | $0.12 | $0.09 | [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) Available liquidity decreased from **$72.55 million** to **$15.58 million** by June 30, 2020, due to debt repayment and share repurchases, despite convertible note issuance | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Total: Liquid assets | $88,318 | $135,992 | | Less: Total current liabilities | $(62,179) | $(79,041) | | Less: Regulatory capital requirement | $(10,561) | $(12,312) | | Total: Available liquidity | $15,578 | $72,547 | - Cash and cash equivalents decreased by **$24.7 million** in H1 2020 due to **$179.0 million** debt repayment, **$26.4 million** share repurchases, and **$10.3 million** dividends, partially offset by **$150.0 million** convertible note proceeds[274](index=274&type=chunk) - Issued **$150.0 million** in **4.25% Convertible Senior Notes** due 2023 on June 16, 2020[276](index=276&type=chunk) - Terminated former credit facility on June 16, 2020, removing financial covenants and limitations on stock repurchases and dividends[278](index=278&type=chunk) - Maintains a capital return program with a **$0.03 per share** quarterly cash dividend and authority to purchase common stock through April 27, 2022 (**$56.9 million** remaining)[280](index=280&type=chunk)[281](index=281&type=chunk) | Contractual Obligations (in thousands) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | | :------------------------------------- | :---- | :--------------- | :----------- | :----------- | :---------------- | | Convertible Notes | $150,000 | $0 | $0 | $150,000 | $0 | | Deferred consideration – gold payments | $198,784 | $16,364 | $29,246 | $24,274 | $128,900 | | Operating leases | $28,333 | $3,293 | $5,916 | $6,090 | $13,034 | | Total | $377,117 | $19,657 | $35,162 | $180,364 | $141,934 | [Critical Accounting Policies](index=51&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies cover business combinations, goodwill and intangible asset impairment, equity investments, and revenue recognition from advisory fees - Business Combinations: Accounted for under the acquisition method, allocating consideration to identifiable assets, intangible assets, and liabilities based on fair values[285](index=285&type=chunk) - Goodwill and Intangible Assets: Goodwill is tested for impairment at least annually (November 30th) by comparing reporting unit fair value to carrying value. Indefinite-lived intangible assets are also tested annually for impairment[286](index=286&type=chunk)[289](index=289&type=chunk) - Investments: Equity investments without readily determinable fair value are carried at cost less impairment, adjusted for observable price changes[290](index=290&type=chunk) - Revenue Recognition: Substantially all revenue from advisory fees is recognized over time, based on a percentage of ETPs' average daily net assets[291](index=291&type=chunk) [Recently Issued and Pending Accounting Pronouncements](index=52&type=section&id=Recently%20Issued%20and%20Pending%20Accounting%20Pronouncements) FASB amendments to ASC 470-20 simplify convertible instrument accounting, effective after December 31, 2021, with early adoption permitted - FASB approved amendments to ASC 470-20 (Debt with Conversion and Other Options) in June 2020, simplifying convertible instrument accounting by removing major separation models[292](index=292&type=chunk) - The upcoming ASU will be effective for years beginning after December 31, 2021, with early adoption permitted for fiscal periods beginning after December 15, 2020, and is expected to reduce interest expense on convertible notes by approximately **$0.3 million** per quarter[292](index=292&type=chunk) - ASU 2019-12 (Income Taxes) was issued in December 2019 to reduce complexity in income tax accounting, effective for years beginning after December 15, 2020, and is not expected to have a material impact on the company's financial statements[293](index=293&type=chunk) [Recently Adopted Accounting Pronouncements](index=53&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) The company adopted ASU 2016-13 (CECL model) and ASU 2018-13 (Fair Value Measurement) on January 1, 2020, with no material financial impact - Adopted ASU 2016-13 (Financial Instruments-Credit Losses) on January 1, 2020, replacing the 'incurred loss' approach with the 'expected loss' (CECL) model[295](index=295&type=chunk) - The adoption of ASU 2016-13, applicable to trade receivables, notes receivable, and held-to-maturity securities, did not have a material impact on the consolidated financial statements[295](index=295&type=chunk) - Adopted ASU 2018-13 (Fair Value Measurement) on January 1, 2020, which modified fair value disclosure requirements and only impacted disclosures[296](index=296&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risk from ETP values, foreign currency, and commodity prices, impacting AUM and revenues, but has minimal interest rate risk - Market risk arises from changes in the value of ETPs due to fluctuations in securities or commodity prices, foreign currency exchange rates, and interest rates, directly impacting AUM and revenues[298](index=298&type=chunk)[299](index=299&type=chunk) - Interest Rate Risk: Minimal impact anticipated due to short-term interest-earning assets and fixed-rate Convertible Notes (**4.25%**)[300](index=300&type=chunk) - Exchange Rate Risk: Subject to currency translation exposure from non-U.S. operations (primarily UK and Europe), with expenses incurred in British pounds. No derivative financial instruments are currently used for hedging[301](index=301&type=chunk)[302](index=302&type=chunk) - Commodity Price Risk: Fluctuations in commodity prices linked to ETPs can adversely affect AUM and revenues. A portion of gold ETP advisory fees are paid in gold ounces, and the company pays gold ounces for deferred consideration. No hedging arrangements are currently in place for gold exposure[304](index=304&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2020[305](index=305&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended June 30, 2020[306](index=306&type=chunk) PART II: OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - No legal proceedings were reported[308](index=308&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) Risks include the company's ability to settle or repurchase Convertible Notes upon conversion or fundamental change, impacting liquidity - The company may not have the ability to raise funds necessary to settle conversions of Convertible Notes or repurchase them upon a fundamental change, potentially leading to default[310](index=310&type=chunk) - The conditional conversion feature of the Convertible Notes, if triggered, could adversely affect the company's financial condition and liquidity by requiring cash payments for converted principal[312](index=312&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **$150.0 million** in Convertible Senior Notes and repurchased **6.74 million shares** for **$24.9 million** in Q2 2020 - Issued **$150.0 million** in **4.25% Convertible Senior Notes** due 2023 on June 16, 2020, in a private offering[313](index=313&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1, 2020 to April 30, 2020 | 5,103 | $2.94 | | May 1, 2020 to May 31, 2020 | 9,025 | $3.05 | | June 1, 2020 to June 30, 2020 | 6,724,185 | $3.70 | | Total (Q2 2020) | 6,738,313 | $3.70 | - As of June 30, 2020, **$56.9 million** remained under the share repurchase program for future repurchases[316](index=316&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - No defaults upon senior securities were reported[317](index=317&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[318](index=318&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) The company reported no other information - No other information was reported[319](index=319&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, stock agreements, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Certificate of Designations of Series A Non-Voting Convertible Preferred Stock, Second Amended and Restated Bylaws, Specimen Common Stock Certificate, various Stockholders and Securities Purchase Agreements, Investor Rights Agreement, and certifications (31.1, 31.2, 31.3, 32)[320](index=320&type=chunk) - Financial Statements from the Quarterly Report on Form 10-Q are formatted in XBRL (Exhibit 101 and related taxonomy extension documents)[320](index=320&type=chunk) [Signatures](index=57&type=section&id=SIGNATURE) The report was signed on August 7, 2020, by the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer - The report was signed on August 7, 2020, by Jonathan Steinberg (CEO), Amit Muni (CFO), and Bryan Edmiston (Chief Accounting Officer)[323](index=323&type=chunk)[325](index=325&type=chunk)

WisdomTree Investments, Inc. (WETF) Q2 2020 Results Conference Call July 31, 2020 9:00 AM ET Company Participants Jason Weyeneth - Director of IR Amit Muni - EVP and CFO Jeremy Schwartz - EVP and Global Head, Research Jonathan Steinberg - Founder and CEO Jarrett Lilien - President and COO Conference Call Participants Craig Siegenthaler - Credit Suisse Michael Cyprys - Morgan Stanley Jeff Drezner - KBW Brennan Hawken - UBS Shaun Calnan - Bank of America Ryan Bailey - Goldman Sachs Keith Housum - Northcoast R ...

[PART I: FINANCIAL INFORMATION](index=5&type=section&id=PART%20I:%20FINANCIAL%20INFORMATION) [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) WisdomTree's Q1 2020 unaudited consolidated financial statements show an **$8.6 million net loss**, primarily due to a **$19.7 million impairment charge** and reduced total assets [Consolidated Balance Sheet Summary (in thousands)](index=5&type=section&id=Item%201.%20Financial%20Statements) | | March 31, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$887,105** | **$935,207** | | Cash and cash equivalents | $68,429 | $74,972 | | Goodwill | $85,856 | $85,856 | | Intangible assets | $601,247 | $603,294 | | **Total Liabilities** | **$429,767** | **$465,226** | | Debt | $171,548 | $175,956 | | Deferred consideration – gold payments | $175,300 | $173,024 | | **Total Stockholders' Equity** | **$324,769** | **$337,412** | [Consolidated Statements of Operations Summary (in thousands)](index=5&type=section&id=Item%201.%20Financial%20Statements) | | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | **Total revenues** | **$63,874** | **$65,485** | | Advisory fees | $62,950 | $64,840 | | **Total expenses** | **$48,240** | **$54,802** | | Operating income | $15,634 | $10,683 | | Impairments | $(19,672) | $(572) | | **Net (loss)/income** | **$(8,638)** | **$8,824** | | **(Loss)/earnings per share – diluted** | **$(0.06)** | **$0.05** | - Net cash used in operating activities was **$2.6 million**, a significant decrease from the **$7.9 million** provided by operating activities in the prior-year period, mainly due to a net loss and unfavorable working capital changes[24](index=24&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, including the **$19.7 million AdvisorEngine impairment**, the **$175.3 million gold-linked deferred consideration**, and the **$174 million term loan** - On February 19, 2020, the Company sold its Canadian ETF business for initial cash of **CDN $3.7 million** (**USD $2.8 million**) and potential future payments of **CDN $2.0 to $8.0 million** based on AUM growth targets[26](index=26&type=chunk)[179](index=179&type=chunk)[201](index=201&type=chunk) - The company recognized a **$19.7 million** impairment charge to adjust the carrying value of its AdvisorEngine investment to its fair value of **$8.5 million** prior to its exit from the investment[95](index=95&type=chunk)[97](index=97&type=chunk) - Deferred consideration for the ETFS Acquisition, payable in gold, was valued at **$175.3 million**, resulting in a **$2.2 million** loss on revaluation due to rising forward-looking gold prices[109](index=109&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) - The company has a **$174.0 million** term loan outstanding, maturing on April 11, 2021, and is actively exploring refinancing and extension alternatives[113](index=113&type=chunk)[121](index=121&type=chunk)[247](index=247&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **COVID-19's impact**, noting a **20.9% AUM decline** to **$50.3 billion**, a **2.5% revenue decrease**, and an **$8.6 million net loss** due to a **$19.7 million impairment** - The COVID-19 pandemic caused a **16%** decline in AUM in March alone, contributing to a total AUM decrease from **$63.6 billion** at year-end 2019 to **$50.3 billion** at March 31, 2020[189](index=189&type=chunk)[195](index=195&type=chunk) [Q1 2020 vs Q1 2019 Operating Results (in thousands)](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) | | Q1 2020 | Q1 2019 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$63,874** | **$65,485** | **(2.5%)** | | **Total Expenses** | **$48,240** | **$54,802** | **(12.0%)** | | Operating Income | $15,634 | $10,683 | 46.3% | | **Net (Loss)/Income** | **$(8,638)** | **$8,824** | **n/a** | - A non-cash impairment charge of **$19.7 million** was recognized on the company's investment in AdvisorEngine; adjusted net income was **$11.2 million**, or **$0.07** per diluted share, excluding this and other non-recurring items[208](index=208&type=chunk)[232](index=232&type=chunk)[240](index=240&type=chunk) - The company is managing costs in response to the market environment, with expected declines in variable expenses, incentive compensation, and discretionary spending on marketing and sales[193](index=193&type=chunk) [Assets Under Management](index=33&type=section&id=2.1_Assets_Under_Management) Global AUM declined **20.9%** to **$50.3 billion** in Q1 2020, primarily due to **market depreciation** and **net outflows**, also impacting the average advisory fee [Global ETP AUM Roll-Forward Q1 2020 (in millions)](index=33&type=section&id=2.1_Assets_Under_Management) | | Amount | | :--- | :--- | | Beginning of period assets | $63,615 | | Assets sold | ($778) | | Inflows/(outflows) | ($536) | | Market appreciation/(depreciation) | ($11,958) | | Fund closures | ($20) | | **End of period assets** | **$50,323** | - The average global ETP advisory fee decreased from **0.46%** in Q1 2019 to **0.43%** in Q1 2020, primarily due to AUM mix shift[209](index=209&type=chunk)[213](index=213&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=2.2_Liquidity_and_Capital_Resources) Available liquidity slightly increased to **$74.7 million**, while the company manages a **$174.0 million term loan** maturing in April 2021 and remains compliant with debt covenants [Available Liquidity (in thousands)](index=43&type=section&id=2.2_Liquidity_and_Capital_Resources) | | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total: Liquid assets | $122,282 | $135,992 | | Less: Total current liabilities | ($54,329) | ($79,041) | | Less: Regulatory capital requirement | ($10,398) | ($12,312) | | Plus: Revolving credit facility – available capacity | $17,128 | $27,908 | | **Total: Available liquidity** | **$74,683** | **$72,547** | - The company's credit facility matures in April 2021, and management is actively exploring refinancing and extension alternatives[251](index=251&type=chunk) - The company's ability to pay dividends above **$0.03/share** or repurchase stock is restricted by a Total Leverage Ratio covenant, requiring the ratio not to exceed **1.75 to 1.00** for such actions[254](index=254&type=chunk)[294](index=294&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks include **securities price fluctuations**, **foreign currency exchange rates**, and **commodity price risk** (gold), with no current hedging strategies - The company's revenue is directly tied to its AUM, making it vulnerable to market risk from fluctuations in securities prices driven by market volatility, economic conditions, and investor sentiment[271](index=271&type=chunk)[272](index=272&type=chunk) - The company has commodity price risk exposure to gold, as advisory fees and a significant deferred consideration liability are payable in gold ounces, with no current hedging of this exposure[277](index=277&type=chunk)[278](index=278&type=chunk) - Exchange rate risk exists from translating the results of non-U.S. operations, mainly in the United Kingdom, from British pounds to the U.S. dollar reporting currency[275](index=275&type=chunk) [Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2020, with **no material changes** to internal controls - The CEO, CFO, and Chief Accounting Officer concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective[279](index=279&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[280](index=280&type=chunk) [PART II: OTHER INFORMATION](index=48&type=section&id=PART%20II:%20OTHER%20INFORMATION) [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently party to any litigation expected to have a **material adverse impact** on its business or financial position - There are no material legal proceedings to report[282](index=282&type=chunk)[135](index=135&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) Key risks include **COVID-19's adverse impact** on AUM and liquidity, **operational challenges** from remote work, and **counterparty risk** for certain European products - The COVID-19 pandemic has led to a significant decline in AUM, adversely impacting revenues, and continued pressure could affect compliance with the credit facility's leverage test covenant[284](index=284&type=chunk)[285](index=285&type=chunk) - Operational challenges may arise from the company's and its key service providers' remote work arrangements, including potential disruptions to communication systems or workforce illness[286](index=286&type=chunk) - Certain European products face counterparty risk, such as oil products backed by uncollateralized futures swaps from a Shell affiliate, exposing investors to default risk[288](index=288&type=chunk)[292](index=292&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported **no unregistered equity sales** and repurchased **385,399 shares** for **$1.5 million** under its program, with **$81.9 million** remaining available [Issuer Purchases of Equity Securities (Q1 2020)](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) | Period | Total Shares Purchased | Average Price Paid Per Share | Dollar Value Remaining in Program (in thousands) | | :--- | :--- | :--- | :--- | | Jan 2020 | 378,408 | $3.86 | - | | Feb 2020 | 6,991 | $4.75 | - | | Mar 2020 | 0 | $0.00 | - | | **Total** | **385,399** | **$3.88** | **$81,894** | - The share repurchase program was extended for three years through April 27, 2022, with **$81.9 million** remaining available for future repurchases as of March 31, 2020[294](index=294&type=chunk) [Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including **corporate documents**, **agreements**, and **officer certifications**

Financial Performance - Operating revenues for the year ended December 31, 2019, were $268.4 million, a decrease of 2.1% from 2018 due to a 3 basis point decline in average global advisory fees and lower average AUM of U.S. listed products [40]. - Total operating expenses increased by 1.0% to $214.9 million, driven by expenses from the ETFS acquired business and higher compensation expenses [40]. - The company reported a net loss of $10.4 million for the year ended December 31, 2019, compared to a net income of $36.6 million in 2018, including impairment charges of $30.7 million [40]. Assets Under Management (AUM) - As of December 31, 2019, the aggregate AUM of ETPs globally was $6.2 trillion, with the company ranking as the fourteenth largest ETP sponsor based on AUM [42][43]. - Total AUM of Commodity & Currency products was $20.3 billion as of December 31, 2019 [65]. - Total AUM of U.S. Equity products was $17.9 billion as of December 31, 2019 [66]. - Total AUM of International Developed Market Equity products was $13.4 billion as of December 31, 2019 [67]. - Total AUM of Emerging Market Equity products was $6.5 billion as of December 31, 2019 [68]. - Total AUM of Fixed Income products was $3.9 billion as of December 31, 2019 [69]. - Total AUM of Leveraged & Inverse products was $1.1 billion as of December 31, 2019 [71]. - Total AUM of Alternative products was $0.4 billion as of December 31, 2019 [72]. Market Trends and Innovations - The shift to fee-based models among financial advisors is expected to benefit the ETF industry, as ETFs generally charge lower fees than mutual funds [50]. - The elimination of trading commissions for ETFs by major custodial platforms is anticipated to positively impact the ETF industry by reducing trading costs [51]. - The company aims to continue innovating in the ETF space, focusing on alternative strategies and digital assets to capture additional market share [50]. - The company has launched several industry firsts, including the first actively managed currency ETF and the first gold and oil ETPs via the acquisition of ETFS [56]. - The SEC approved Rule 6c-11 in September 2019, simplifying the rules governing ETFs [64]. - The company is focused on innovative product development, particularly through its Modern Alpha approach, which combines active and passive management to create cost-effective investment products [80]. - The company has a strategic focus on launching differentiated ETFs, aiming to introduce products that can be first to market or offer significant improvements over existing products [80]. Competitive Landscape - The ETF industry is highly competitive, with significant pressure from larger firms that can offer lower fees, with some funds being offered at fees of 20 bps or less, attracting approximately 76% of net flows globally over the last three years [84]. - Despite the fee pressure, the company believes its competitive product offerings and ability to generate strong after-fee performance will help maintain its market position [86]. - Fee reductions by competitors have been a trend, with some funds being offered at fees of 20 bps or less, attracting 76% of net flows globally over the last three years [132]. Regulatory Environment - The company is subject to extensive U.S. regulations, including the Investment Advisers Act and the Investment Company Act, which impose various compliance costs and operational requirements [89]. - The SEC's approval of Rule 6c-11 in 2019 simplifies the rules governing ETFs, allowing issuers to operate more efficiently without the need for exemptive relief [93]. - The company has expanded its international presence, with subsidiaries subject to regulatory systems comparable to those in the U.S., which may impact operations and compliance costs [92]. Risks and Challenges - WisdomTree's business is subject to risks from declining prices of securities and commodities, which can adversely affect AUM and revenues [118]. - The company does not hedge against fluctuations in the price of gold, which could impact revenues from ETPs backed by gold [124]. - The company relies on third-party distribution channels, and increased competition could impair its distribution capabilities and negatively affect AUM levels [135]. - Many WisdomTree ETPs have a limited track record, which could lead to poor investment performance and a decline in revenues [137]. - The uncertainty surrounding Brexit may negatively impact revenues and investor confidence, affecting AUM [145]. - Catastrophic events could disrupt business operations and adversely affect revenues and expenses [146]. - The company relies on State Street Bank and other third-party vendors for critical services, and their failure could harm operations [149][150]. - Risk management policies may not fully mitigate exposure to risks, including employee misconduct, potentially harming financial condition [160]. Financial Obligations and Capital Structure - The company has an outstanding term loan of $179.0 million and a $50.0 million revolving credit facility, with borrowings at a floating rate maturing on April 11, 2021 [166]. - The company’s credit agreement includes covenants that may limit business activities, including restrictions on incurring additional indebtedness [166]. - The company’s ability to pay dividends is subject to the discretion of its Board of Directors and may be limited by financial conditions and covenants [196]. Employee and Operational Insights - As of December 31, 2019, WisdomTree had 208 full-time employees, with 137 in the U.S. Business segment and 71 in the International Business segment [113]. - The company is dependent on retaining key personnel, with a competitive market for skilled employees potentially impacting operations and financial condition [164]. - The company's expenses are subject to fluctuations, which can materially affect operating results from quarter to quarter [165]. Intellectual Property and Reputation - The company has applied for an additional patent related to its index methodology, which may not be issued, impacting competitive advantage [177]. - Damage to the company's reputation could adversely affect its ability to maintain and grow assets under management (AUM) and attract employees [184]. - The advisory fees from WisdomTree ETFs are subject to review by Independent Trustees, who may determine that fees are too high, adversely affecting revenues [182].

Table of Contents Commission File Number 001-10932 Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the transition period from to . WisdomTree Investments, Inc. (Exact name of registrant as specified in its charter) Delaware 13-34 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-10932 WisdomTree Investments, Inc. (Exact name of registrant as specified in its charter) Delaware 13-3487784 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-10932 WisdomTree Investments, Inc. (Exact name of registrant as specified in its charter) Delaware 13-348778 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended December 31, 2018 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-10932 WisdomTree Investments, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdictio ...