WisdomTree(WT)2023-02-03 19:24Financial Data and Key Metrics Changes - WisdomTree generated net flows totaling $5.3 billion in Q4 2022, marking the strongest flowing quarter since 2015, and closed the year with $82 billion of AUM, the highest quarter-end on record [5][9] - Revenues were $73.3 million, essentially unchanged from the previous quarter, as higher average AUM was offset by a 2 basis point decline in average advisory fees [10] - Adjusted net income was $7 million or $0.04 per share, excluding a non-cash after-tax loss of $35 million related to future gold commitment payments [10][11] - Operating expenses increased by 7% for the quarter, primarily due to higher incentive compensation accruals and seasonal marketing expenses [11] Business Line Data and Key Metrics Changes - The Floating Rate Treasury product (USFR) was the primary contributor to net flows, attracting $3.4 billion, followed by U.S. equity products with about $1 billion and commodities with $800 million, mainly into oil [6][8] - U.S. equity products experienced positive net flows for 30 of the last 31 months, with over $3 billion in flows during the year [8] Market Data and Key Metrics Changes - WisdomTree's AUM reached a record level of $87.2 billion, an increase of 6% from the end of December, benefiting from positive market movement [9] - The company faced a challenging market backdrop, with negative market movement impacting AUM by almost $8 billion for the year [7] Company Strategy and Development Direction - WisdomTree aims to reinvest in future growth initiatives, including the anticipated national launch of WisdomTree Prime, focusing on organic growth [12] - The company has established a first-mover advantage in digital assets and blockchain-enabled finance, with a suite of 10 blockchain-enabled funds [19][20] - The operations and strategy committee concluded its review, and the Board unanimously supported the executive management team and the firm's strategy [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued momentum, citing a best-in-class 16% organic growth rate and strong product performance, with over 80% of U.S. AUM beating benchmarks [18][20] - The company anticipates strong and steady organic growth based on fund performance and a shift in sentiment towards value investing [22] Other Important Information - The company expects its gross margin to be 78% at current AUM levels, with anticipated margin expansion assuming continued organic flow growth [14] - WisdomTree plans to reduce debt by approximately $50 million and refinance the remainder, with estimated interest costs rising temporarily to about $16 million in 2023 [16][17] Q&A Session Summary Question: Who are the major competitors to WisdomTree Prime? - William Peck identified Circle and Paxos as competitors in the digital asset space, emphasizing WisdomTree Prime's focus on real-world asset tokenization and a user-friendly investor experience [29] Question: What will drive flow growth in 2023 for WisdomTree? - Jeremy Schwartz highlighted the structural advantages of ETFs and the attractiveness of fixed income products, particularly floating rate treasuries, as key drivers for flow growth [32][34] Question: Why hasn't WisdomTree achieved consistent profitability? - Bryan Edmiston explained that fluctuations in GAAP net income are primarily due to deferred consideration related to contractual gold payments, which create accounting noise [40][42] Question: What is the marketing strategy for WisdomTree Prime? - William Peck discussed a lean marketing approach focused on high ROI channels, including digital marketing and TV advertising, to attract users to WisdomTree Prime [69]