WisdomTree(WT) - 2024 Q3 - Quarterly Results

Financial Performance - WisdomTree reported a record AUM of $112.6 billion, a 2.6% increase from the prior quarter, driven by market appreciation despite $2.4 billion in net outflows[2] - The company experienced a diluted loss per share of -$0.13, while adjusted earnings per share increased by 80% year-over-year to $0.18[5] - Operating revenues reached $113.2 million, reflecting a 5.7% increase from the previous quarter due to higher average AUM[2] - Operating revenues increased by 5.7% from Q2 2024 and by 25.2% from Q3 2023, reaching $113.168 million in Q3 2024, driven by higher average AUM and additional revenues[11] - Operating revenues increased by 22.8% compared to 2023, driven by higher average AUM and recognition of $4.1 million in other revenue related to legal expenses[15] - Adjusted net income for Q3 2024 was $28,768,000, compared to $27,075,000 in Q2 2024, reflecting a 6.3% increase[30] - Adjusted earnings per share (EPS) for Q3 2024 was $0.18, up from $0.16 in Q2 2024, representing a 12.5% increase[30] - The company reported a net loss of $4,485,000 for Q3 2024, a significant improvement from a net loss of $21,759,000 in Q2 2024[30] Operating Efficiency - The adjusted operating income margin improved to 37.3%, an increase of 2.0 points compared to the prior quarter, attributed to higher revenues[3] - Total operating expenses for Q3 2024 were $72,376,000, compared to $73,523,000 in Q2 2024, indicating a decrease of 1.6%[32] - Adjusted total operating expenses for Q3 2024 were $68,715,000, down from $69,252,000 in Q2 2024, a reduction of 0.8%[32] - Adjusted operating income for Q3 2024 was $40,792,000, compared to $33,511,000 in Q2 2024, reflecting a significant increase of 21.5%[30] - Adjusted operating income margin for Q3 2024 was 37.3%, up from 35.3% in Q2 2024, indicating improved operational efficiency[30] Shareholder Actions - WisdomTree repurchased $198.8 million worth of shares, including all Series A Non-Voting Convertible Preferred Stock from ETFS Capital Limited[3] - WisdomTree declared a quarterly dividend of $0.03, payable on November 20, 2024[4] - The company repurchased Series A Non-Voting Convertible Preferred Stock for $143,812,000 during the period, indicating a significant capital allocation strategy[25] Debt and Interest - The company issued $345.0 million in convertible senior notes due 2029, with a conversion price of $11.82 per share[4] - Interest expense rose by 21.4% from Q2 2024 and by 45.2% from Q3 2023, reflecting a higher level of debt[13] - Interest income increased by 24.8% from Q2 2024 and by 126.9% from Q3 2023, due to a higher level of interest-earning assets[13] - The company reported a loss on extinguishment of convertible notes amounting to $30.6 million due to the repurchase of $104.2 million in 2028 Notes[15] - The company reported a loss on extinguishment of convertible notes of $30,632,000 for the nine months ended September 30, 2024, compared to $9,721,000 in the same period of 2023, which is an increase of 215.5%[25] Taxation - The effective income tax rate for Q3 2024 was 216.0%, resulting in an income tax expense of $8.4 million[14] - The adjusted effective income tax rate for Q3 2024 was 23.9%[14] - The effective income tax rate for 2024 was 35.6%, resulting in an income tax expense of $21.8 million, influenced by non-deductible losses and penalties[16] - Adjusted income tax expense for September 30, 2024, was $9,049 million, compared to $9,008 million in June 2024, and $6,731 million in March 2024[34] - The adjusted effective income tax rate decreased to 23.9% in September 2024 from 25.0% in June 2024[34] - Income tax expense increased to $8,351 million in September 2024 from $7,767 million in June 2024[34] Product Development and Innovation - WisdomTree launched WisdomTree Connect, a platform for tokenized real-world assets, expanding access to a broader range of users[7] - New products launched include WisdomTree Core Physical Silver and WisdomTree European Natural Gas, expanding the company's product offerings[9] - The company is developing next-generation digital products, including blockchain-enabled mutual funds and a digital wallet, WisdomTree Prime[17] - The company is focused on expanding its digital assets and blockchain-enabled financial services, including WisdomTree Prime and WisdomTree Connect[36] Market and Asset Management - Total assets under management globally reached approximately $112.9 billion[17] - Average assets during the nine months ended September 30, 2024, were $110.4 billion, reflecting growth from $95.7 billion in the same period last year[20] - The number of ETPs at the end of the period increased to 352, up from 344 in the previous year[20] - The company reported a net inflow of $201 thousand in cryptocurrency assets during the period, with end-of-period assets reaching $1,054 thousand[21] - Emerging Market Equity assets grew to $12,452 thousand, up from $11,875 thousand, indicating an increase of about 4.8%[21] - Average assets during the period for International Developed Market Equity were $18,636 thousand, compared to $13,873 thousand in the previous year, showing a growth of approximately 34.0%[21] Workforce and Operational Changes - The company’s headcount increased to 314 from 304, reflecting a growth in workforce[21] - Compensation and benefits payable decreased to $30,087 thousand from $38,111 thousand, a reduction of approximately 21.5%[23] - Operating expenses decreased by 1.6% from Q2 2024 to $72.376 million, primarily due to lower incentive compensation[12] - Operating expenses rose by 9.2% compared to 2023, primarily due to increased compensation expenses and headcount, totaling $4.1 million in legal expenses related to the SEC ESG Settlement[15] Risks and Future Outlook - The company anticipates trends in global markets and ETPs, with a focus on maintaining favorable rates of return for investors[36] - The company faces risks from declining prices of securities and commodities, which could adversely affect its business[36] - A significant portion of the company's assets under management (AUM) is exposed to U.S. and international developed markets, leading to currency exchange rate risks[36] - The company is subject to operational and regulatory risks as it expands its business internationally[36] - The company has no current intention to update its forward-looking statements except as required by law[36]