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WisdomTree(WT) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company ended the quarter with $93.7 billion in assets under management (AUM), unchanged from the prior quarter, with $2 million in inflows during the quarter [5][6] - Revenues reached $90.4 million, an increase of 5.5% from the second quarter and up 24.9% year-over-year, with an operating margin of 29.5% compared to 20.5% in the same quarter last year [7][8] - Adjusted net income was $18 million, translating to $0.10 per share, with adjusted operating expenses up 1.7% primarily due to higher incentive compensation [8][9] Business Line Data and Key Metrics Changes - The company generated nearly $2 billion in net inflows in the third quarter, marking the 12th consecutive quarter of net inflows, with year-to-date inflows totaling approximately $11 billion [14][25] - The U.S. Floating Rate Treasury Fund (USFR) attracted significant interest, with 40% of advisors purchasing it being first-time users of WisdomTree products [15][72] Market Data and Key Metrics Changes - The company experienced approximately 70% AUM growth in Latin America since the beginning of the year, contributing to higher third-party distribution fees [9] - The company reported a gross margin of 80.1% in the third quarter, with updated guidance for gross margin between 79% and 80% [11] Company Strategy and Development Direction - The company's strategy focuses on delivering industry-leading organic growth, expanding operating margins, and leading the evolution in tokenized assets and blockchain-enabled finance [13][24] - WisdomTree is well-positioned with a large distribution platform and a differentiated approach to the Registered Investment Advisor (RIA) and Independent Broker Dealer (IBD) market [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum and the strength of its foundation, with expectations for continued organic growth and margin expansion [25][36] - The company is actively working on expanding the availability of WisdomTree Prime and enhancing its product offerings, with a goal to reach substantial U.S. population coverage by year-end [30][75] Other Important Information - The company is focused on customer acquisition strategies for WisdomTree Prime, with a measured approach to marketing spend until a full suite of product features is available [32][34] - WisdomTree is exploring B2B and B2B2C applications for its platform and product suite, which could unlock additional revenue streams in tokenization [34] Q&A Session Summary Question: What is the house view on the rate cycle and its impact on net flows? - Management indicated that long-term interest rates are expected to settle at higher levels, which positions the company well for diversified inflows across various products [37][40] Question: What is WisdomTree's perspective on the evolving regulatory regime for crypto and blockchain? - Management believes that the current regulatory environment allows for innovation, which is advantageous for the company as it continues to develop its tokenization strategy [44][45] Question: Any updates on the Bitcoin ETF? - Management remains focused on a spot Bitcoin ETF and is engaging with regulators, while also offering Bitcoin products through WisdomTree Prime [46][48] Question: Update on managed models and their momentum? - The company reported that managed models are gaining momentum, with a record quarter for model flows and increasing advisor engagement [51][52] Question: Insights on the USFR product and its asset stickiness? - Management noted that while some assets may be tactical, a significant portion is viewed as cash management, indicating a long-term relationship potential with clients [66][72] Question: Challenges in achieving full national rollout for WisdomTree Prime? - Management highlighted that different states have varying regulations, but they are on track to cover a substantial portion of the U.S. population by year-end [74][75]