Artificial Intelligence
WisdomTree Announces Fourth Quarter 2019 Results – Diluted EPS of $0.02 ($0.06 as adjusted)
NEW YORK, Jan. 31, 2020 (GLOBE NEWSWIRE) — WisdomTree Investments, Inc. (NASDAQ: WETF) today reported financial results for the fourth quarter of 2019.
$4.3 million net income ($10.11 million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.
$63.6 billion of ending AUM, an increase of 6.1% resulting from market appreciation and net inflows for the quarter and an increase of 17.6% for the full year.
$368 million of net inflows ($560 million of net inflows excluding HEDJ/DXJ), driven by flows into our U.S. equity, fixed income and emerging markets products, partly offset by outflows from our commodity and international developed market equity products. For the full year, net inflows were $572 million or $3.3 billion excluding outflows from HEDJ/DXJ.
0.44% average global advisory fee, unchanged from the prior quarter.
$68.9 million of operating revenues, an increase of 1.8% primarily due to higher average AUM of our U.S. listed products.
81.2% gross margin1 for our U.S. Business, a 0.4 point increase due to higher revenues.
70.7% gross margin1 for our International Business, a 1.9 point decrease due to higher market making fees incurred in connection with transitioning to new arrangements as well as costs associated with preparing our products for Brexit.
21.5% operating income margin (22.0%1 as adjusted), a 2.3 point decrease (2.1 point decrease, as adjusted1) primarily due to higher non-compensation expenses, partly offset by higher revenues.
$6.0 million of available capital used to pay down debt, in connection with our capital management strategy.
$0.03 quarterly dividend declared, payable on February 26, 2020 to stockholders of record as of the close of business February 12, 2020.
We are currently pursuing an exit from our $58 million investment in AdvisorEngine Inc. While the process is not yet finalized, we estimate taking a non-cash impairment charge of $22.0 million to $30.0 million in the fourth quarter, which is not yet included in these unaudited financial results. The final impairment charge will be recognized and disclosed in our Form 10-K. We do not anticipate the exit of our investment will drive any asset attrition or change our organic growth outlook.
Update from Jonathan Steinberg, WisdomTree CEO
“WisdomTree exited 2019 with momentum building across our business. The performance track records of our funds remain excellent with thirty-five 4- or 5-star Morningstar rated funds across our ETF and UCITS product range. We’ve generated positive net flows in four of the past five quarters, adoption of our model portfolios by advisors is accelerating and we are excited by the recent launch of the Siegel-WisdomTree models.” |
“As we look toward 2020, we are focused on capitalizing on the tailwinds that exist in our business, continuing to drive operating efficiencies and prudently investing to remain at the forefront of industry innovation. For example, in January we announced a strategic investment in Securrency, Inc., a blockchain-based financial services infrastructure company. Blockchain has the potential to be revolutionary in financial services and we believe we have the right vision and the right partner to be a global leader in digital assets. There are reasons to be optimistic, and I believe WisdomTree has reached an inflection point with top line and bottom line growth set to emerge.” |
OPERATING AND FINANCIAL HIGHLIGHTS
Three Months Ended | |||||||||||||||
Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|||||||||||
Consolidated Operating Highlights ($, in billions): | |||||||||||||||
AUM | $ | 63.6 | $ | 60.0 | $ | 60.4 | $ | 59.1 | $ | 54.1 | |||||
Net inflows/(outflows) | $ | 0.4 | $ | (0.7 | ) | $ | 0.3 | $ | 0.6 | $ | 0.2 | ||||
Average AUM | $ | 61.9 | $ | 60.3 | $ | 58.6 | $ | 57.7 | $ | 56.4 | |||||
Average advisory fee | 0.44 | % | 0.44 | % | 0.45 | % | 0.46 | % | 0.47 | % | |||||
Consolidated Financial Highlights ($, in millions, except per share amounts): | |||||||||||||||
Operating revenues | $ | 68.9 | $ | 67.7 | $ | 66.3 | $ | 65.5 | $ | 67.9 | |||||
Net income/(loss) | $ | 4.3 | $ | 4.2 | $ | 2.5 | $ | 8.8 | $ | (11.6 | ) | ||||
Diluted earnings/(loss) per share | $ | 0.02 | $ | 0.02 | $ | 0.01 | $ | 0.05 | $ | (0.08 | ) | ||||
Operating income margin | 21.5 | % | 23.8 | % | 18.0 | % | 16.3 | % | 17.4 | % | |||||
As Adjusted (Non-GAAP1): | |||||||||||||||
Gross Margin – U.S. Business | 81.2 | % | 80.8 | % | 80.3 | % | 80.4 | % | 80.2 | % | |||||
Gross Margin – International Business | 70.7 | % | 72.6 | % | 69.5 | % | 70.1 | % | 69.1 | % | |||||
Net income, as adjusted | $ | 10.1 | $ | 10.6 | $ | 7.8 | $ | 7.7 | $ | 9.8 | |||||
Diluted earnings per share, as adjusted | $ | 0.06 | $ | 0.06 | $ | 0.05 | $ | 0.05 | $ | 0.06 | |||||
Operating income margin, as adjusted | 22.0 | % | 24.1 | % | 20.2 | % | 19.9 | % | 21.9 | % | |||||
RECENT BUSINESS DEVELOPMENTS
Company News
- In November 2019, we entered into an agreement to sell our Canadian asset management business to CI Financial Corp. (TSX: CIX); and we were named as European Smart Beta Provider of the Year at the Funds Europe Awards 2019.
- In January 2020, we announced a strategic investment in Securrency, Inc. with plans to pursue the integration of blockchain technology into the ETF ecosystem; we announced the appointment of Ravinder Azad as Head of UK and Nordic Sales; and we announced the collaboration with Professor Jeremy Siegel to design and launch two model portfolios – The Siegel-WisdomTree Global Equity Model and the Siegel-WisdomTree Longevity Model.
Product News
- In November 2019, we launched the Mortgage Plus Bond Fund (MTGP) in the U.S. on the NYSE Arca; the WisdomTree Artificial Intelligence UCITS ETF (WTAI) reached its one-year anniversary, and the WisdomTree Emerging Markets Equity Income UCITS ETF (DEM) and WisdomTree Emerging Markets Small Cap Dividend UCITS ETF (DGSG) reached their five-year anniversaries.
- In December 2019, we declared final capital gains distributions for our U.S. ETFs; we announced the closing and liquidation of three ETFs in January 2020 – DYB, WBAL and RPUT; and we announced the launch of the WisdomTree Bitcoin ETP (BTCW) on the Swiss stock exchange (SIX).
- In January 2020, we announced the unitholders’ approval of proposed change in manager for our Canadian ETFs.
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended |
Years Ended |
||||||||||||||||||||||||||
Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||||||||||||||||||||
Operating Revenues: | |||||||||||||||||||||||||||
Advisory fees | $ | 68,179 | $ | 67,006 | $ | 65,627 | $ | 64,840 | $ | 67,191 | $ | 265,652 | $ | 271,104 | |||||||||||||
Other income | 728 | 712 | 666 | 645 | 676 | 2,751 | 3,012 | ||||||||||||||||||||
Total revenues | 68,907 | 67,718 | 66,293 | 65,485 | 67,867 | 268,403 | 274,116 | ||||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||||
Compensation and benefits | 19,280 | 18,880 | 21,300 | 21,301 | 18,838 | 80,761 | 74,515 | ||||||||||||||||||||
Fund management and administration | 15,650 | 15,110 | 15,576 | 15,166 | 15,861 | 61,502 | 56,686 | ||||||||||||||||||||
Marketing and advertising | 3,551 | 3,022 | 2,910 | 2,680 | 3,672 | 12,163 | 13,884 | ||||||||||||||||||||
Sales and business development | 5,329 | 4,354 | 4,171 | 4,422 | 5,036 | 18,276 | 17,153 | ||||||||||||||||||||
Contractual gold payments | 3,516 | 3,502 | 3,110 | 3,098 | 2,917 | 13,226 | 8,512 | ||||||||||||||||||||
Professional and consulting fees | 1,604 | 1,259 | 1,296 | 1,482 | 2,854 | 5,641 | 7,984 | ||||||||||||||||||||
Occupancy, communications and equipment | 1,587 | 1,549 | 1,548 | 1,618 | 1,544 | 6,302 | 6,203 | ||||||||||||||||||||
Depreciation and amortization | 253 | 259 | 264 | 269 | 303 | 1,045 | 1,301 | ||||||||||||||||||||
Third-party distribution fees | 1,146 | 1,503 | 1,919 | 2,400 | 1,813 | 6,968 | 6,611 | ||||||||||||||||||||
Acquisition and disposition- related costs | 366 | 190 | 33 | 313 | 1,008 | 902 | 11,454 | ||||||||||||||||||||
Other | 1,816 | 1,959 | 2,255 | 2,053 | 2,202 | 8,083 | 8,534 | ||||||||||||||||||||
Total expenses | 54,098 | 51,587 | 54,382 | 54,802 | 56,048 | 214,869 | 212,837 | ||||||||||||||||||||
Operating income | 14,809 | 16,131 | 11,911 | 10,683 | 11,819 | 53,534 | 61,279 | ||||||||||||||||||||
Other Income/(Expenses): | |||||||||||||||||||||||||||
Interest expense | (2,606 | ) | (2,832 | ) | (2,910 | ) | (2,892 | ) | (2,859 | ) | (11,240 | ) | (7,962 | ) | |||||||||||||
(Loss)/gain on revaluation of deferred consideration – gold payments | (5,354 | ) | (6,306 | ) | (4,037 | ) | 4,404 | (5,410 | ) | (11,293 | ) | 12,220 | |||||||||||||||
Interest income | 936 | 799 | 818 | 779 | 800 | 3,332 | 3,093 | ||||||||||||||||||||
Impairments | — | — | — | (572 | ) | (17,386 | ) | (572 | ) | (17,386 | ) | ||||||||||||||||
Other gains and losses, net | (2 | ) | 843 | 284 | (4,627 | ) | 439 | (3,502 | ) | (205 | ) | ||||||||||||||||
Income/(loss) before income taxes | 7,783 | 8,635 | 6,066 | 7,775 | (12,597 | ) | 30,259 | 51,039 | |||||||||||||||||||
Income tax expense/(benefit) | 3,525 | 4,483 | 3,587 | (1,049 | ) | (1,033 | ) | 10,546 | 14,406 | ||||||||||||||||||
Net income/(loss) | $ | 4,258 | $ | 4,152 | $ | 2,479 | $ | 8,824 | $ | (11,564 | ) | $ | 19,713 | $ | 36,633 | ||||||||||||
Earnings/(loss) per share – basic | $ | 0.02 | $ | 0.02 | $ | 0.01 | $ | 0.05 | $ | (0.08 | ) | $ | 0.12 | $ | 0.23 | ||||||||||||
Earnings/(loss) per share – diluted | $ | 0.022 | $ | 0.02 | $ | 0.01 | $ | 0.05 | $ | (0.08 | ) | $ | 0.12 | $ | 0.23 | ||||||||||||
Weighted average common shares – basic | 151,948 | 151,897 | 151,818 | 151,625 | 151,083 | 151,823 | 146,645 | ||||||||||||||||||||
Weighted average common shares – diluted | 167,203 | 167,163 | 167,249 | 166,811 | 151,083 | 166,977 | 158,415 | ||||||||||||||||||||
As Adjusted (Non-GAAP1) | |||||||||||||||||||||||||||
Compensation and benefits | $ | 19,280 | $ | 18,880 | $ | 19,825 | $ | 19,281 | $ | 16,824 | |||||||||||||||||
Total expenses | $ | 53,732 | $ | 51,397 | $ | 52,874 | $ | 52,469 | $ | 53,026 | |||||||||||||||||
Operating income | $ | 15,175 | $ | 16,321 | $ | 13,419 | $ | 13,016 | $ | 14,841 | |||||||||||||||||
Income before income taxes | $ | 13,503 | $ | 15,131 | $ | 11,611 | $ | 10,586 | $ | 13,221 | |||||||||||||||||
Income tax expense | $ | 3,396 | $ | 4,489 | $ | 3,798 | $ | 2,849 | $ | 3,392 | |||||||||||||||||
Net income | $ | 10,107 | $ | 10,642 | $ | 7,813 | $ | 7,737 | $ | 9,829 | |||||||||||||||||
Earnings per share – diluted | $ | 0.06 | $ | 0.06 | $ | 0.05 | $ | 0.05 | $ | 0.06 | |||||||||||||||||
QUARTERLY HIGHLIGHTS
Operating Revenues
- Operating revenues increased 1.8% from the third quarter of 2019 primarily due to higher average AUM of our U.S. listed products arising from market appreciation and net inflows.
- Operating revenues increased 1.5% from the fourth quarter of 2018 primarily due to higher average AUM of our International listed products arising from market appreciation and net inflows, partly offset by a 3 basis point decline in our average global advisory fee due to AUM mix shift.
- Our average global advisory fee was 0.44% during the third and fourth quarters of 2019 and 0.47% during the fourth quarter of 2018.
Operating Expenses
- Operating expenses increased 4.9% from the third quarter of 2019 due to higher sales and business development expenses inclusive of costs associated with the launch of our Bitcoin ETP; higher fund management and administration costs due to higher market making fees in connection with transitioning to new arrangements, as well as costs associated with preparing our products for Brexit; and higher marketing and advertising expenses, compensation, and professional fees.
- Operating expenses decreased 3.5% from the fourth quarter of 2018 largely due to lower professional fees, acquisition and disposition-related costs and third-party distribution fees.
Other Income/(Expenses)
- We recognized a non-cash loss on revaluation of deferred consideration of ($5.4) million and ($6.3) million during the fourth and third quarters of 2019, and ($5.4) million during the fourth quarter of 2018. These losses arose due to an increase in forward-looking gold prices when compared to the previous periods forward-looking gold curves. The magnitude of any gain or loss recognized is highly correlated to the magnitude of the change in the forward-looking price of gold.
- Interest expense decreased 8.0% from the third quarter of 2019 due to a lower level of debt outstanding. During the third and fourth quarters of 2019, we used $21.0 million of available capital to pay down our debt in connection with our capital management strategy.
Income Taxes
- Our effective income tax rate for the fourth quarter of 45.3% resulted in income tax expense of $3.5 million. Our tax rate differs from the federal statutory tax rate of 21% primarily due to a non-deductible loss on revaluation of deferred consideration, a valuation allowance on foreign net operating losses, state and local taxes and non-deductible executive compensation, partly offset by a lower tax rate on foreign earnings.
Our adjusted effective income tax rate was 25.1%1.
ANNUAL HIGHLIGHTS
Our operating results for the current year are not directly comparable to the prior year due to our acquisition of ETFS, which was completed on April 11, 2018.
- Operating revenues decreased 2.1% as compared to 2018 to a 3 basis point decline in our average global advisory fee and lower average AUM of our U.S. listed products due to AUM mix shift, partly offset by higher revenues earned from the ETFS acquired business, which were recognized for the entire year of 2019.
- Operating expenses increased 1.0% as compared to 2018 due to expenses associated with the ETFS acquired business, which were recognized for the entire year of 2019, and higher compensation expenses. These items were partly offset by lower acquisition and disposition-related costs, professional fees, marketing and advertising expenses and fund management and administration costs associated with our U.S. listed products.
- Significant changes in items reported in other income/(expenses) include a non-cash loss on revaluation of deferred consideration of ($11.3) million in 2019 as compared to a gain of $12.2 million in 2018; a 41.2% increase in interest expense as borrowing under our term loan commenced on April 11, 2018 and a $4.3 million non-cash charge arising from the release of a tax-related indemnification asset which arose from tax exposures assumed from the ETFS acquisition. This item was recognized upon the expiration of the statute of limitations which occurred in the first quarter of 2019 and an equal and offsetting benefit was recognized in income tax expense.
- Our effective income tax rate for 2019 of 34.9% resulted in income tax expense of $10.5 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due to a valuation allowance on foreign net operating losses, a non-deductible loss on revaluation of deferred consideration, non-deductible executive compensation, state and local income taxes and tax shortfalls associated with the vesting and exercise of stock-based compensation awards, partly offset by a $4.3 million reduction in unrecognized tax benefits and a lower tax rate on foreign earnings.
CONFERENCE CALL
WisdomTree will discuss its results and operational highlights during a conference call on Friday, January 31, 2020 at 9:00 a.m. ET. The call-in number will be (877) 303-7209. Anyone outside the U.S. or Canada should call (970) 315-0420. The slides used during the presentation will be available at http://ir.wisdomtree.com. For those unable to join the conference call at the scheduled time, an audio replay will be available on http://ir.wisdomtree.com.
ABOUT WISDOMTREE
WisdomTree Investments, Inc., through its subsidiaries in the U.S., Europe and Canada (collectively, “WisdomTree”), is an ETF and ETP sponsor and asset manager headquartered in New York. WisdomTree offers products covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. WisdomTree currently has approximately $63.2 billion in assets under management globally.
WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.
Contact Information:
1 See “Non-GAAP Financial Measurements.”
2 Earnings per share calculated pursuant to the two-class method.
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(in thousands)
(Unaudited)
The following tables set forth the pre-tax operating results for our U.S. Business and International Business segments.
U.S. BUSINESS SEGMENT
Three Months Ended | Years Ended | ||||||||||||||||||||||||||
Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||||||||||||||||||||
Operating Revenues: | |||||||||||||||||||||||||||
Advisory fees | $ | 42,952 | $ | 41,950 | $ | 43,070 | $ | 42,517 | $ | 45,633 | $ | 170,489 | $ | 204,298 | |||||||||||||
Other income | 76 | 81 | 76 | 106 | 126 | 339 | 608 | ||||||||||||||||||||
Total revenues | 43,028 | 42,031 | 43,146 | 42,623 | 45,759 | 170,828 | 204,906 | ||||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||||
Compensation and benefits | 14,947 | 14,531 | 16,696 | 16,779 | 14,370 | 62,953 | 58,307 | ||||||||||||||||||||
Fund management and administration | 8,070 | 8,072 | 8,505 | 8,340 | 9,038 | 32,987 | 35,728 | ||||||||||||||||||||
Marketing and advertising |
2,745 | 2,411 | 2,336 | 2,162 | 2,704 | 9,654 | 11,003 | ||||||||||||||||||||
Sales and business development | 3,144 | 3,124 | 2,867 | 3,359 | 3,747 | 12,494 | 13,426 | ||||||||||||||||||||
Professional and consulting fees | 1,144 | 908 | 1,055 | 1,072 | 2,166 | 4,179 | 6,169 | ||||||||||||||||||||
Occupancy, communications and equipment | 1,235 | 1,215 | 1,211 | 1,283 | 1,205 | 4,944 | 5,162 | ||||||||||||||||||||
Depreciation and amortization | 235 | 238 | 242 | 246 | 280 | 961 | 1,215 | ||||||||||||||||||||
Third-party distribution fees | 914 | 1,404 | 1,867 | 2,338 | 1,789 | 6,523 | 6,457 | ||||||||||||||||||||
Acquisition and disposition-related costs | 170 | — | — | 11 | 72 | 181 | 8,289 | ||||||||||||||||||||
Other | 1,403 | 1,574 | 1,628 | 1,586 | 1,617 | 6,191 | 6,674 | ||||||||||||||||||||
Total expenses | 34,007 | 33,477 | 36,407 | 37,176 | 36,988 | 141,067 | 152,430 | ||||||||||||||||||||
Operating income | 9,021 | 8,554 | 6,739 | 5,447 | 8,771 | 29,761 | 52,476 | ||||||||||||||||||||
Other Income/(Expenses): | |||||||||||||||||||||||||||
Interest expense | (197 | ) | (197 | ) | (194 | ) | (192 | ) | (197 | ) | (780 | ) | (566 | ) | |||||||||||||
Interest income | 936 | 793 | 818 | 779 | 800 | 3,326 | 3,093 | ||||||||||||||||||||
Impairments | — | — | — | (572 | ) | (17,386 | ) | (572 | ) | (17,386 | ) | ||||||||||||||||
Other gains and losses, net | (54 | ) | 235 | (54 | ) | 145 | 266 | 272 | 292 | ||||||||||||||||||
Income/(loss) before income taxes | $ | 9,706 | $ | 9,385 | $ | 7,309 | $ | 5,607 | $ | (7,746 | ) | $ | 32,007 | $ | 37,909 | ||||||||||||
Operating income margin | 21.0 | % | 20.4 | % | 15.6 | % | 12.8 | % | 19.2 | % | 17.4 | % | 25.6 | % |
INTERNATIONAL BUSINESS SEGMENT
Three Months Ended |
Years Ended |
||||||||||||||||||||||||||
Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||||||||||||||||||||
Operating Revenues: | |||||||||||||||||||||||||||
Advisory fees | $ | 25,227 | $ | 25,056 | $ | 22,557 | $ | 22,323 | $ | 21,558 | $ | 95,163 | $ | 66,806 | |||||||||||||
Other income | 652 | 631 | 590 | 539 | 550 | 2,412 | 2,404 | ||||||||||||||||||||
Total revenues | 25,879 | 25,687 | 23,147 | 22,862 | 22,108 | 97,575 | 69,210 | ||||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||||
Compensation and benefits | 4,333 | 4,349 | 4,604 | 4,522 | 4,468 | 17,808 | 16,208 | ||||||||||||||||||||
Fund management and administration | 7,580 | 7,038 | 7,071 | 6,826 | 6,823 | 28,515 | 20,958 | ||||||||||||||||||||
Marketing and advertising | 806 | 611 | 574 | 518 | 968 | 2,509 | 2,881 | ||||||||||||||||||||
Sales and business development | 2,185 | 1,230 | 1,304 | 1,063 | 1,289 | 5,782 | 3,727 | ||||||||||||||||||||
Contractual gold payments | 3,516 | 3,502 | 3,110 | 3,098 | 2,917 | 13,226 | 8,512 | ||||||||||||||||||||
Professional and consulting fees | 460 | 351 | 241 | 410 | 688 | 1,462 | 1,815 | ||||||||||||||||||||
Occupancy, communications and equipment | 352 | 334 | 337 | 335 | 339 | 1,358 | 1,041 | ||||||||||||||||||||
Depreciation and amortization | 18 | 21 | 22 | 23 | 23 | 84 | 86 | ||||||||||||||||||||
Third-party distribution fees | 232 | 99 | 52 | 62 | 24 | 445 | 154 | ||||||||||||||||||||
Acquisition and disposition-related costs | 196 | 190 | 33 | 302 | 936 | 721 | 3,165 | ||||||||||||||||||||
Other | 413 | 385 | 627 | 467 | 585 | 1,892 | 1,860 | ||||||||||||||||||||
Total expenses | 20,091 | 18,110 | 17,975 | 17,626 | 19,060 | 73,802 | 60,407 | ||||||||||||||||||||
Operating income | 5,788 | 7,577 | 5,172 | 5,236 | 3,048 | 23,773 | 8,803 | ||||||||||||||||||||
Other Income/(Expenses): | |||||||||||||||||||||||||||
Interest expense | (2,409 | ) | (2,635 | ) | (2,716 | ) | (2,700 | ) | (2,662 | ) | (10,460 | ) | (7,396 | ) | |||||||||||||
(Loss)/gain on revaluation of deferred consideration – gold payments | (5,354 | ) | (6,306 | ) | (4,037 | ) | 4,404 | (5,410 | ) | (11,293 | ) | 12,220 | |||||||||||||||
Interest income | — | 6 | — | — | — | 6 | — | ||||||||||||||||||||
Other gains and losses, net | 52 | 608 | 338 | (4,772 | ) | 173 | (3,774 | ) | (497 | ) | |||||||||||||||||
(Loss)/income before income taxes | $ | (1,923 | ) | $ | (750 | ) | $ | (1,243 | ) | $ | 2,168 | $ | (4,851 | ) | $ | (1,748 | ) | $ | 13,130 | ||||||||
Operating income margin | 22.4 | % | 29.5 | % | 22.3 | % | 22.9 | % | 13.8 | % | 24.4 | % | 12.7 | % |
WisdomTree Investments, Inc. | |||||||||||||||||||
Key Operating Statistics (Unaudited) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|||||||||||||||
GLOBAL ETPs (in millions) | |||||||||||||||||||
Beginning of period assets | $ | 59,981 | $ | 60,389 | $ | 59,112 | $ | 54,094 | $ | 59,140 | |||||||||
Inflows/(outflows) | 368 | (694 | ) | 337 | 561 | 245 | |||||||||||||
Market appreciation/(depreciation) | 3,269 | 467 | 940 | 4,544 | (5,291 | ) | |||||||||||||
Fund closures | (3 | ) | (181 | ) | — | (87 | ) | — | |||||||||||
End of period assets | $ | 63,615 | $ | 59,981 | $ | 60,389 | $ | 59,112 | $ | 54,094 | |||||||||
Average assets during the period | $ | 61,858 | $ | 60,306 | $ | 58,575 | $ | 57,683 | $ | 56,423 | |||||||||
Average advisory fee during the period | 0.44 | % | 0.44 | % | 0.45 | % | 0.46 | % | 0.47 | % | |||||||||
Revenue days | 92 | 92 | 91 | 90 | 92 | ||||||||||||||
Number of ETFs – end of the period | 367 | 366 | 536 | 534 | 537 | ||||||||||||||
U.S. LISTED ETFs (in millions) | |||||||||||||||||||
Beginning of period assets | $ | 37,592 | $ | 39,220 | $ | 39,366 | $ | 35,486 | $ | 41,556 | |||||||||
Inflows/(outflows) | 563 | (1,198 | ) | (166 | ) | 147 | (894 | ) | |||||||||||
Market appreciation/(depreciation) | 2,448 | (430 | ) | 20 | 3,820 | (5,176 | ) | ||||||||||||
Fund closures | (3 | ) | — | — | (87 | ) | — | ||||||||||||
End of period assets | $ | 40,600 | $ | 37,592 | $ | 39,220 | $ | 39,366 | $ | 35,486 | |||||||||
Average assets during the period | $ | 39,094 | $ | 37,857 | $ | 38,945 | $ | 38,061 | $ | 38,246 | |||||||||
Average advisory fee during the period | 0.44 | % | 0.44 | % | 0.44 | % | 0.45 | % | 0.47 | % | |||||||||
Number of ETFs – end of the period | 80 | 80 | 79 | 77 | 85 | ||||||||||||||
INTERNATIONAL LISTED ETPs (in millions) | |||||||||||||||||||
Beginning of period assets | $ | 22,389 | $ | 21,169 | $ | 19,746 | $ | 18,608 | $ | 17,584 | |||||||||
Inflows/(outflows) | (195 | ) | 504 | 503 | 414 | 1,139 | |||||||||||||
Market appreciation/(depreciation) | 821 | 897 | 920 | 724 | (115 | ) | |||||||||||||
Fund closures | — | (181 | ) | — | — | — | |||||||||||||
End of period assets | $ | 23,015 | $ | 22,389 | $ | 21,169 | $ | 19,746 | $ | 18,608 | |||||||||
Average assets during the period | $ | 22,764 | $ | 22,449 | $ | 19,630 | $ | 19,622 | $ | 18,177 | |||||||||
Average advisory fee during the period | 0.44 | % | 0.44 | % | 0.46 | % | 0.47 | % | 0.47 | % | |||||||||
Number of ETPs – end of the period | 287 | 286 | 457 | 457 | 452 | ||||||||||||||
PRODUCT CATEGORIES (in millions) | |||||||||||||||||||
Commodity & Currency | |||||||||||||||||||
Beginning of period assets | $ | 19,954 | $ | 18,446 | $ | 16,978 | $ | 16,213 | $ | 14,998 | |||||||||
Inflows/(outflows) | (267 | ) | 534 | 563 | 227 | 988 | |||||||||||||
Market appreciation/(depreciation) | 639 | 974 | 905 | 538 | 227 | ||||||||||||||
End of period assets | $ | 20,326 | $ | 19,954 | $ | 18,446 | $ | 16,978 | $ | 16,213 | |||||||||
Average assets during the period | $ | 20,146 | $ | 19,796 | $ | 16,912 | $ | 16,995 | $ | 15,620 | |||||||||
U.S. Equity | |||||||||||||||||||
Beginning of period assets | $ | 16,416 | $ | 16,021 | $ | 15,880 | $ | 13,335 | $ | 15,186 | |||||||||
Inflows/(outflows) | 468 | 242 | 103 | 632 | 393 | ||||||||||||||
Market appreciation/(depreciation) | 1,002 | 153 | 38 | 1,913 | (2,244 | ) | |||||||||||||
End of period assets | $ | 17,886 | $ | 16,416 | $ | 16,021 | $ | 15,880 | $ | 13,335 | |||||||||
Average assets during the period | $ | 17,112 | $ | 16,004 | $ | 15,808 | $ | 14,947 | $ | 14,291 | |||||||||
International Developed Market Equity | |||||||||||||||||||
Beginning of period assets | $ | 12,541 | $ | 13,687 | $ | 14,414 | $ | 14,508 | $ | 19,385 | |||||||||
Inflows/(outflows) | (122 | ) | (1,001 | ) | (729 | ) | (1,530 | ) | (2,216 | ) | |||||||||
Market appreciation/(depreciation) | 1,006 | (145 | ) | 2 | 1,436 | (2,661 | ) | ||||||||||||
End of period assets | $ | 13,425 | $ | 12,541 | $ | 13,687 | $ | 14,414 | $ | 14,508 | |||||||||
Average assets during the period | $ | 13,001 | $ | 12,747 | $ | 13,957 | $ | 14,506 | $ | 16,869 |
Three Months Ended | |||||||||||||||||||
Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|||||||||||||||
Emerging Market Equity | |||||||||||||||||||
Beginning of period assets | $ | 5,814 | $ | 6,090 | $ | 5,730 | $ | 5,278 | $ | 5,346 | |||||||||
Inflows/(outflows) | 193 | 173 | 367 | (84 | ) | 232 | |||||||||||||
Market appreciation/(depreciation) | 516 | (449 | ) | (7 | ) | 536 | (300 | ) | |||||||||||
End of period assets | $ | 6,523 | $ | 5,814 | $ | 6,090 | $ | 5,730 | $ | 5,278 | |||||||||
Average assets during the period | $ | 6,111 | $ | 5,851 | $ | 5,785 | $ | 5,502 | $ | 5,148 | |||||||||
Fixed Income | |||||||||||||||||||
Beginning of period assets | $ | 3,655 | $ | 4,258 | $ | 4,023 | $ | 2,570 | $ | 1,720 | |||||||||
Inflows/(outflows) | 220 | (582 | ) | 208 | 1,418 | 880 | |||||||||||||
Market appreciation/(depreciation) | 34 | (21 | ) | 27 | 35 | (30 | ) | ||||||||||||
End of period assets | $ | 3,909 | $ | 3,655 | $ | 4,258 | $ | 4,023 | $ | 2,570 | |||||||||
Average assets during the period | $ | 3,856 | $ | 4,050 | $ | 4,119 | $ | 3,511 | $ | 2,140 | |||||||||
Leveraged & Inverse | |||||||||||||||||||
Beginning of period assets | $ | 1,130 | $ | 1,149 | $ | 1,226 | $ | 1,083 | $ | 1,250 | |||||||||
Inflows/(outflows) | (55 | ) | 11 | (63 | ) | 83 | (18 | ) | |||||||||||
Market appreciation/(depreciation) | 71 | (30 | ) | (14 | ) | 60 | (149 | ) | |||||||||||
End of period assets | $ | 1,146 | $ | 1,130 | $ | 1,149 | $ | 1,226 | $ | 1,083 | |||||||||
Average assets during the period | $ | 1,186 | $ | 1,154 | $ | 1,199 | $ | 1,213 | $ | 1,193 | |||||||||
Alternatives | |||||||||||||||||||
Beginning of period assets | $ | 468 | $ | 514 | $ | 628 | $ | 755 | $ | 674 | |||||||||
Inflows/(outflows) | (69 | ) | (48 | ) | (108 | ) | (141 | ) | 178 | ||||||||||
Market appreciation/(depreciation) | 1 | 2 | (6 | ) | 14 | (97 | ) | ||||||||||||
End of period assets | $ | 400 | $ | 468 | $ | 514 | $ | 628 | $ | 755 | |||||||||
Average assets during the period | $ | 443 | $ | 490 | $ | 574 | $ | 666 | $ | 712 | |||||||||
Closed ETPs | |||||||||||||||||||
Beginning of period assets | $ | 3 | $ | 224 | $ | 233 | $ | 352 | $ | 581 | |||||||||
Inflows/(outflows) | — | (23 | ) | (4 | ) | (44 | ) | (192 | ) | ||||||||||
Market appreciation/(depreciation) | — | (17 | ) | (5 | ) | 12 | (37 | ) | |||||||||||
Fund closures | (3 | ) | (181 | ) | — | (87 | ) | — | |||||||||||
End of period assets | $ | — | $ | 3 | $ | 224 | $ | 233 | $ | 352 | |||||||||
Average assets during the period | $ | 3 | $ | 214 | $ | 221 | $ | 343 | $ | 450 | |||||||||
Headcount – U.S. Business segment | 137 | 142 | 143 | 141 | 153 | ||||||||||||||
Headcount – International Business segment | 71 | 70 | 71 | 75 | 75 |
Note: Previously issued statistics may be restated due to fund closures and trade adjustments
Source: WisdomTree
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
Dec. 31, 2019 |
Dec. 31, 2018 |
||||||
(Unaudited) |
|||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 74,972 | $ | 77,784 | |||
Securities owned, at fair value | 17,319 | 8,873 | |||||
Accounts receivable | 26,838 | 25,834 | |||||
Income taxes receivable | — | 1,181 | |||||
Prepaid expenses | 3,724 | 4,441 | |||||
Other current assets | 207 | 163 | |||||
Total current assets | 123,060 | 118,276 | |||||
Fixed assets, net | 8,127 | 9,122 | |||||
Notes receivable | 33,310 | 28,722 | |||||
Securities held-to-maturity | 16,863 | 20,180 | |||||
Deferred tax assets, net | 7,398 | 7,042 | |||||
Investments, carried at cost | 36,192 | 28,080 | |||||
Right of use assets – operating leases | 18,161 | — | |||||
Goodwill | 85,856 | 85,856 | |||||
Intangible assets | 603,294 | 603,209 | |||||
Other noncurrent assets | 983 | 2,155 | |||||
Total assets | $ | 933,244 | $ | 902,642 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
LIABILITIES | |||||||
Current liabilities: | |||||||
Fund management and administration payable | $ | 22,021 | $ | 22,508 | |||
Compensation and benefits payable | 26,501 | 18,453 | |||||
Deferred consideration – gold payments | 13,953 | 11,765 | |||||
Securities sold, but not yet purchased, at fair value | 582 | 1,698 | |||||
Operating lease liabilities | 3,682 | — | |||||
Income taxes payable | 3,372 | — | |||||
Accounts payable and other liabilities | 8,930 | 8,377 | |||||
Total current liabilities | 79,041 | 62,801 | |||||
Debt | 175,956 | 194,592 | |||||
Deferred consideration – gold payments | 159,071 | 149,775 | |||||
Operating lease liabilities | 19,057 | — | |||||
Deferred rent payable | — | 4,570 | |||||
Total liabilities | 433,125 | 411,738 | |||||
Preferred stock – Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding | 132,569 | 132,569 | |||||
STOCKHOLDERS’ EQUITY | |||||||
Common stock, par value $0.01; 250,000 shares authorized: | |||||||
Issued and outstanding: 155,264 and 153,202 at December 31, 2019 and December 31, 2018, respectively | 1,553 | 1,532 | |||||
Additional paid-in capital | 373,043 | 363,655 | |||||
Accumulated other comprehensive income | 945 | 467 | |||||
Accumulated deficit | (7,991 | ) | (7,319 | ) | |||
Total stockholders’ equity | 367,550 | 358,335 | |||||
Total liabilities and stockholders’ equity | $ | 933,244 | $ | 902,642 | |||
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Years Ended | |||||||
Dec. 31, 2019 |
Dec. 31, 2018 |
||||||
Cash flows from operating activities: | |||||||
Net income | $ | 19,713 | $ | 36,633 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Advisory fees received in gold and other precious metals | (49,887 | ) | (32,238 | ) | |||
Contractual gold payments | 13,226 | 8,512 | |||||
Stock-based compensation | 11,590 | 13,255 | |||||
Loss/(gain) on revaluation of deferred consideration – gold payments | 11,293 | (12,220 | ) | ||||
Amortization of right of use asset | 3,174 | — | |||||
Amortization of credit facility issuance costs | 2,888 | 2,087 | |||||
Paid-in-kind interest income | (2,498 | ) | (1,974 | ) | |||
Depreciation and amortization | 1,045 | 1,301 | |||||
Impairments | 572 | 17,386 | |||||
Deferred income taxes | (349 | ) | (6,083 | ) | |||
Other | (173 | ) | 798 | ||||
Changes in operating assets and liabilities: | |||||||
Securities owned, at fair value | (8,446 | ) | (7,182 | ) | |||
Accounts receivable | (19 | ) | 3,804 | ||||
Income taxes receivable/payable | 4,524 | 5,706 | |||||
Prepaid expenses | 738 | 427 | |||||
Gold and other precious metals | 35,886 | 25,604 | |||||
Other assets | 172 | 984 | |||||
Fund management and administration payable | (476 | ) | 221 | ||||
Compensation and benefits payable | 7,885 | (16,050 | ) | ||||
Securities sold, but not yet purchased, at fair value | (1,116 | ) | 748 | ||||
Operating lease liabilities | (3,587 | ) | — | ||||
Accounts payable and other liabilities | 677 | (4,251 | ) | ||||
Net cash provided by operating activities | 46,832 | 37,468 | |||||
Cash flows from investing activities: | |||||||
Purchase of fixed assets | (47 | ) | (71 | ) | |||
Purchase of investments | (8,112 | ) | — | ||||
Funding of notes receivable | (2,090 | ) | (8,000 | ) | |||
Proceeds from held-to-maturity securities maturing or called prior to maturity | 3,244 | 1,107 | |||||
Proceeds from sales and maturities of debt securities available-for-sale | — | 64,498 | |||||
Cash paid for acquisition, net of cash acquired | — | (239,313 | ) | ||||
Net cash used in investing activities | (7,005 | ) | (181,779 | ) | |||
Cash flows from financing activities: | |||||||
Dividends paid | (20,385 | ) | (19,236 | ) | |||
Repayment of debt | (21,000 | ) | — | ||||
Shares repurchased | (2,341 | ) | (2,885 | ) | |||
Credit facility issuance costs | — | (8,690 | ) | ||||
Preferred stock issuance costs | — | (181 | ) | ||||
Proceeds from the issuance of debt | — | 200,000 | |||||
Proceeds from exercise of stock options | 160 | 191 | |||||
Net cash (used in)/provided by financing activities | (43,566 | ) | 169,199 | ||||
Increase/(decrease) in cash flows due to changes in foreign exchange rate | 927 | (1,297 | ) | ||||
(Decrease)/increase in cash and cash equivalents | (2,812 | ) | 23,591 | ||||
Cash and cash equivalents – beginning of year | 77,784 | 54,193 | |||||
Cash and cash equivalents – year | $ | 74,972 | $ | 77,784 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for taxes | $ | 10,060 | $ | 14,398 | |||
Cash paid for interest | $ | 8,037 | $ | 5,577 | |||
Non-GAAP Financial Measurements
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 these non-GAAP financial measurements 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, do not replace nor are superior to GAAP financial measurements and are unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measurements should be considered in the context with our GAAP results. The non-GAAP financial measurements contained in this release include:
- Adjusted compensation, operating income, total expenses, income before income taxes, income tax expense, net income and diluted earnings per share. We disclose adjusted compensation, operating income, total expenses, income before income taxes, income tax expense, net income and diluted earnings per share as non-GAAP financial measurements in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting these non-GAAP financial measures provides investors with a consistent way to analyze our performance. These non-GAAP financial measures exclude the following:
- Unrealized gains or losses on the revaluation of deferred consideration: Deferred consideration is an obligation we assumed in connection with the ETFS acquisition that is carried at fair value. This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices. Changes in the forward-looking price of gold may have a material impact on the carrying value of the deferred consideration and our reported financial results. We exclude this item when calculating our non-GAAP financial measurements as it is not core to our operating business. The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.
- Tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards: GAAP requires the recognition of tax windfalls and shortfalls within income tax expense. These items arise upon the vesting and exercise of stock-based compensation awards and the magnitude is directly correlated to the number of awards vesting/exercised as well as the difference between the price of our stock on the date the award was granted and the date the award vested or was exercised. We exclude these items when calculating our non-GAAP financial measurements as they introduce volatility in earnings and are not core to our operating business.
- Other items: Impairment charges, severance expense and acquisition and disposition-related costs are excluded when calculating our non-GAAP financial measurements.
- Adjusted effective income tax rate. We disclose our adjusted effective income tax rate as a non-GAAP financial measurement in order to report our effective income tax rate exclusive of items that are non-recurring or not core to our operating business. We believe reporting our adjusted effective income tax rate provides investors with a consistent way to analyze our income taxes. Our adjusted effective income tax rate is calculated by dividing adjusted income tax expense by adjusted income before income taxes. See above for information regarding the items that are excluded.
- Gross margin and gross margin percentage. We disclose our gross margin and gross margin percentage as non-GAAP financial measurements for our U.S. Business segment and International Business segment because we believe they provide investors with a consistent way to analyze the amount we retain after paying third-party service providers to operate our ETPs. These ratios also assist us in analyzing the profitability of our products. We define gross margin as total operating revenues less fund management and administration expenses. Gross margin percentage is calculated as gross margin divided by total operating revenues.
- Adjusted operating income margin. We disclose adjusted operating income margin as a non-GAAP financial measurement on a consolidated basis, as well as for our U.S. Business segment and International Business segment in order to report our operating income margin exclusive of items that are non-recurring or not core to our operating business.
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION (CONSOLIDATED)
(in thousands)
(Unaudited)
Three Months Ended |
|||||||||||||||||||
Adjusted Net Income and Diluted Earnings per Share: | Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
Dec. 31, |
||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||||||
Net income/(loss), as reported | $ | 4,258 | $ | 4,152 | $ | 2,479 | $ | 8,824 | $ | (11,564 | ) | ||||||||
Add back/(deduct): Unrealized loss/(gain) on revaluation of deferred consideration | 5,354 | 6,306 | 4,037 | (4,404 | ) | 5,410 | |||||||||||||
Add back: Severance expense, net of income taxes | — | — | 1,194 | 1,521 | 1,526 | ||||||||||||||
Add back/(deduct): Tax shortfalls/(windfalls) upon vesting and exercise of stock-based compensation awards | 142 | 30 | 76 | 971 | (403 | ) | |||||||||||||
Add back: Impairments, net of income taxes | — | — | — | 572 | 14,048 | ||||||||||||||
Add back: Acquisition and disposition-related costs, net of income taxes | 353 | 154 | 27 | 253 | 812 | ||||||||||||||
Adjusted net income | $ | 10,107 | $ | 10,642 | $ | 7,813 | $ | 7,737 | $ | 9,829 | |||||||||
Weighted average common shares – diluted | 167,203 | 167,163 | 167,249 | 166,811 | 166,686 | ||||||||||||||
Adjusted earnings per share – diluted | $ | 0.06 | $ | 0.06 | $ | 0.05 | $ | 0.05 | $ | 0.06 | |||||||||
Three Months Ended |
|||||||||||||||||||
Adjusted Operating Income and Adjusted Operating | Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
Dec. 31, |
||||||||||||||
Income Margin: | 2019 | 2019 | 2019 | 2019 | 2018 | ||||||||||||||
Operating revenues | $ | 68,907 | $ | 67,718 | $ | 66,293 | $ | 65,485 | $ | 67,867 | |||||||||
Operating income | $ | 14,809 | $ | 16,131 | $ | 11,911 | $ | 10,683 | $ | 11,819 | |||||||||
Add back: Severance expense, before income taxes | — | — | 1,475 | 2,020 | 2,014 | ||||||||||||||
Add back: Acquisition and disposition-related costs, before income taxes | 366 | 190 | 33 | 313 | 1,008 | ||||||||||||||
Adjusted operating income | $ | 15,175 | $ | 16,321 | $ | 13,419 | $ | 13,016 | $ | 14,841 | |||||||||
Adjusted operating income margin | 22.0 | % | 24.1 | % | 20.2 | % | 19.9 | % | 21.9 | % | |||||||||
Three Months Ended |
|||||||||||||||||||
Adjusted Compensation: | Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
Dec. 31, |
||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||||||
Compensation expense | $ | 19,280 | $ | 18,880 | $ | 21,300 | $ | 21,301 | $ | 18,838 | |||||||||
Deduct: Severance expense, before income taxes | — | — | (1,475 | ) | (2,020 | ) | (2,014 | ) | |||||||||||
Adjusted compensation expense | $ | 19,280 | $ | 18,880 | $ | 19,825 | $ | 19,281 | $ | 16,824 | |||||||||
Three Months Ended |
|||||||||||||||||||
Adjusted Total Operating Expenses: | Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
Dec. 31, |
||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||||||
Total operating expenses | $ | 54,098 | $ | 51,587 | $ | 54,382 | $ | 54,802 | $ | 56,048 | |||||||||
Deduct: Severance expense, before income taxes | — | — | (1,475 | ) | (2,020 | ) | (2,014 | ) | |||||||||||
Deduct: Acquisition and disposition-related costs, before income taxes | (366 | ) | (190 | ) | (33 | ) | (313 | ) | (1,008 | ) | |||||||||
Adjusted operating expenses | $ | 53,732 | $ | 51,397 | $ | 52,874 | $ | 52,469 | $ | 53,026 | |||||||||
Three Months Ended |
|||||||||||||||||||
Adjusted Income Before Income Taxes: | Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
Dec. 31, |
||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||||||
Income/(loss) before income taxes | $ | 7,783 | $ | 8,635 | $ | 6,066 | $ | 7,775 | $ | (12,597 | ) | ||||||||
Add back/(deduct): Unrealized loss/(gain) on revaluation of deferred consideration | 5,354 | 6,306 | 4,037 | (4,404) | 5,410 | ||||||||||||||
Add back: Loss recognized upon reduction of a tax-related indemnification asset | — | — | — | 4,310 | — | ||||||||||||||
Add back: Severance expense, before income taxes | — | — | 1,475 | 2,020 | 2,014 | ||||||||||||||
Add back: Impairments, before income taxes | — | — | — | 572 | 17,386 | ||||||||||||||
Add back: Acquisition and disposition-related costs, before income taxes | 366 | 190 | 33 | 313 | 1,008 | ||||||||||||||
Adjusted income before income taxes | $ | 13,503 | $ | 15,131 | $ | 11,611 | $ | 10,586 | $ | 13,221 | |||||||||
Three Months Ended |
|||||||||||||||||||
Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate: | Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
Dec. 31, |
||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||||||
Adjusted income before income taxes (above) | $ | 13,503 | $ | 15,131 | $ | 11,611 | $ | 10,586 | $ | 13,221 | |||||||||
Income tax expense/(benefit) | $ | 3,525 | $ | 4,483 | $ | 3,587 | $ | (1,049 | ) | $ | (1,033 | ) | |||||||
Add back: Tax benefit arising from reduction of a tax-related indemnification asset | — | — | — | 4,310 | — | ||||||||||||||
Add back: Tax benefit arising from severance expense | — | — | 281 | 499 | 488 | ||||||||||||||
Add back: Tax benefit arising from impairments | — | — | — | — | 3,338 | ||||||||||||||
Add back/(deduct): Tax windfalls/(shortfalls) upon vesting and exercise of stock-based compensation awards | (142 | ) | (30 | ) | (76 | ) | (971 | ) | 403 | ||||||||||
Add back: Tax benefit arising from acquisition and disposition-related costs | 13 | 36 | 6 | 60 | 196 | ||||||||||||||
Adjusted income tax expense | $ | 3,396 | $ | 4,489 | $ | 3,798 | $ | 2,849 | $ | 3,392 | |||||||||
Adjusted effective income tax rate | 25.1 | % | 29.7 | % | 32.7 | % | 26.9 | % | 25.7 | % | |||||||||
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION (SEGMENTS)
(in thousands)
(Unaudited)
Three Months Ended | |||||||||||||||||||
Gross Margin and Gross Margin Percentage (U.S. Business): | Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
||||||||||||||
Operating revenues | $ | 43,028 | $ | 42,031 | $ | 43,146 | $ | 42,623 | $ | 45,759 | |||||||||
Less: Fund management and administration | (8,070 | ) | (8,072 | ) | (8,505 | ) | (8,340 | ) | (9,038 | ) | |||||||||
Gross margin | $ | 34,958 | $ | 33,959 | $ | 34,641 | $ | 34,283 | $ | 36,721 | |||||||||
Gross margin percentage (U.S. Business) | 81.2 | % | 80.8 | % | 80.3 | % | 80.4 | % | 80.2 | % | |||||||||
Three Months Ended | |||||||||||||||||||
Adjusted Operating Income Margin (U.S. Business): | Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
||||||||||||||
Operating revenues | $ | 43,028 | $ | 42,031 | $ | 43,146 | $ | 42,623 | $ | 45,759 | |||||||||
Operating income | $ | 9,021 | $ | 8,554 | $ | 6,739 | $ | 5,447 | $ | 8,771 | |||||||||
Add back: Severance expense, before income taxes | — | — | 1,366 | 2,020 | 2,014 | ||||||||||||||
Add back: Acquisition and disposition-related costs, before income taxes | 170 | — | — | 11 | 72 | ||||||||||||||
Adjusted operating income | $ | 9,191 | $ | 8,554 | $ | 8,105 | $ | 7,478 | $ | 10,857 | |||||||||
Adjusted operating income margin (U.S. Business) | 21.4 | % | 20.4 | % | 18.8 | % | 17.5 | % | 23.7 | % | |||||||||
Three Months Ended | |||||||||||||||||||
Gross Margin and Gross Margin Percentage (International): | Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
||||||||||||||
Operating revenues | $ | 25,879 | $ | 25,687 | $ | 23,147 | $ | 22,862 | $ | 22,108 | |||||||||
Less: Fund management and administration | (7,580 | ) | (7,038 | ) | (7,071 | ) | (6,826 | ) | (6,823 | ) | |||||||||
Gross margin | $ | 18,299 | $ | 18,649 | $ | 16,076 | $ | 16,036 | $ | 15,285 | |||||||||
Gross margin percentage (International) | 70.7 | % | 72.6 | % | 69.5 | % | 70.1 | % | 69.1 | % | |||||||||
Three Months Ended | |||||||||||||||||||
Adjusted Operating Income Margin (International): | Dec. 31, 2019 |
Sept. 30, 2019 |
June 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
||||||||||||||
Operating revenues | $ | 25,879 | $ | 25,687 | $ | 23,147 | $ | 22,862 | $ | 22,108 | |||||||||
Operating income | $ | 5,788 | $ | 7,577 | $ | 5,172 | $ | 5,236 | $ | 3,048 | |||||||||
Add back: Severance expense, before income taxes | — | — | 109 | — | — | ||||||||||||||
Add back: Acquisition and disposition-related costs, before income taxes | 196 | 190 | 33 | 302 | 936 | ||||||||||||||
Adjusted operating income | $ | 5,984 | $ | 7,767 | $ | 5,314 | $ | 5,538 | $ | 3,984 | |||||||||
Adjusted operating income margin (International) | 23.1 | % | 30.2 | % | 23.0 | % | 24.2 | % | 18.0 | % | |||||||||
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, the risks described below. If one or more of these or other risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this press release completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
In particular, forward-looking statements in this press release may include statements about
- anticipated trends, conditions and investor sentiment in the global markets and ETPs;
- anticipated levels of inflows into and outflows out of our ETPs;
- our ability to deliver favorable rates of return to investors;
- competition in our business;
- our ability to develop new products and services;
- our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;
- our ability to successfully operate and expand our business in non-U.S. markets; and
- the effect of laws and regulations that apply to our business.
Our business is subject to many risks and uncertainties, including without limitation:
- declining prices of securities, precious metals and other commodities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETP investors to sell their fund shares and trigger redemptions;
- fluctuations in the amount and mix of our AUM, whether caused by disruptions in the financial markets or otherwise, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity, increase the cost of borrowing or result in our debt being called prior to maturity;
- withdrawals or broad changes in investments in our ETPs by investors with significant positions may negatively impact revenues and operating margins;
- competitive pressures could reduce revenues and profit margins;
- we derive a substantial portion of our revenues from a limited number of products, and as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products and market-specific and political and economic risk;
- a significant portion of our AUM is held in ETPs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks;
- net outflows in our two largest currency hedged ETPs – the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund – have had, and in the future could continue to have, a negative impact on our revenues;
- over the last few years, we have expanded our business globally. This expansion subjects us to increased operational, regulatory, financial and other risks;
- many of our ETPs have a limited track record, and poor investment performance could cause our revenues to decline; and
- we depend on third parties to provide many critical services to operate our business and our ETPs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETP investors.
Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. For a more complete description of the risks noted above and other risks that could cause our actual results to differ from our current expectations, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.
The forward-looking statements in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this press release.
Artificial Intelligence
Building Energy Management Systems Market Projected to Reach $67.69 billion by 2030 – Exclusive Report by 360iResearch
PUNE, India, April 24, 2024 /PRNewswire/ — The report titled “Building Energy Management Systems Market by Component (Hardware, Services, Software), Type (Integrated Building Energy Management Systems, Standalone Building Energy Management Systems), Application, Deployment Mode, End-Use – Global Forecast 2024-2030” is now available on 360iResearch.com’s offering, presents an analysis indicating that the market projected to grow from a size of $34.52 billion in 2023 to reach $67.69 billion by 2030, at a CAGR of 10.09% over the forecast period.
“Revolutionizing Energy Efficiency Globally With The Evolution of Building Energy Management Systems (BEMS)”
In an era where energy conservation and efficiency have become paramount, building energy management systems (BEMS) are at the forefront of this transformation, offering solutions that monitor, control, and optimize energy usage within buildings. These advanced systems, leveraging real-time data analytics, automate energy control, enhance energy savings, reduce costs, and contribute to a greener planet. Primarily utilized in commercial spaces, residential areas, and industrial sectors, BEMS has a broad application scope, covering HVAC, lighting, and security systems. Factors driving the expansion of the BEMS market include escalating energy expenses, heightened awareness of environmental impacts, and the increasing incorporation of Internet of Things (IoT) and cloud-based technologies, coupled with supportive government initiatives promoting energy-efficient infrastructures. Although challenges such as high initial costs and technology integration barriers exist, the advent of AI and IoT technologies within BEMS heralds a future of predictive energy management and remote operational capabilities, with a growing emphasis on integrating renewable energy sources. Regions such as the United States, Canada, the European Union, and emerging economies such as China and India are witnessing significant growth in BEMS adoption, spurred by regulatory policies and a shift towards sustainable building practices. This global movement toward BEMS signals a step toward reducing carbon footprints and highlights the collective effort to embrace technology for a sustainable future.
Download Sample Report @ https://www.360iresearch.com/library/intelligence/building-energy-management-systems
“Harnessing Energy Management for Sustainability and Efficiency”
Data centers are pivotal infrastructures in the digital transformation era, consuming up to 50 times more energy than typical commercial spaces. This energy demand positions data centers as key contributors to the U.S.’s overall electricity consumption. Recognizing this, implementing building energy management systems (BEMS) is crucial in mitigating the environmental impact and operational costs associated with data centers. BEMS optimizes cooling systems to prevent equipment overheating, thereby enhancing energy efficiency by leveraging real-time data. Such systems reduce the power usage effectiveness (PUE) ratio, highlighting a move toward more sustainable consumption patterns and ensuring data centers’ operational continuity. Integrating seamlessly with existing infrastructure, BEMS offers a comprehensive approach to energy management, enabling more innovative cooling, efficient power usage, and predictive maintenance. This transition highlights a commitment to environmental responsibility and fosters operational efficiency, setting a new standard for data center operations worldwide.
“Revolutionizing Building Efficiency With Advanced Energy Management Systems Optimized Usage”
In push toward sustainability, building energy management systems (BEMS) stands at the forefront of innovation, integrating sophisticated hardware such as sensors, actuators, controllers, and more to manage and reduce energy consumption in buildings meticulously. These systems work in concert to monitor environmental conditions and adjust heating, ventilation, and air conditioning (HVAC) settings in real time, leading to significant energy savings. BEMS provides valuable data that helps identify savings opportunities, while networking tools ensure seamless communication between devices by precisely tracking energy flow through meters. Servers process vast amounts of data, enabling detailed analysis and actionable insights to refine energy use further. Additionally, comprehensive services, including customized consultations and dedicated support, ensure that each BEMS is tailored to a building’s unique needs, providing efficient operation and extended system longevity. BEMS exemplifies the strategic shift toward more sustainable and operationally excellent building management through the collaborative synergy of hardware, software, and expert services.
Request Analyst Support @ https://www.360iresearch.com/library/intelligence/building-energy-management-systems
“Schneider Electric SE at the Forefront of Building Energy Management Systems Market with a Strong 13.97% Market Share”
The key players in the Building Energy Management Systems Market include Schneider Electric SE, Honeywell International Inc., Azbil Corporation, Emerson Electric Co., Johnson Controls International PLC, and others. These prominent players focus on strategies such as expansions, acquisitions, joint ventures, and developing new products to strengthen their market positions.
“Introducing ThinkMi: Revolutionizing Market Intelligence with AI-Powered Insights for the Building Energy Management Systems Market”
We proudly unveil ThinkMi, a cutting-edge AI product designed to transform how businesses interact with the Building Energy Management Systems Market. ThinkMi stands out as your premier market intelligence partner, delivering unparalleled insights with the power of artificial intelligence. Whether deciphering market trends or offering actionable intelligence, ThinkMi is engineered to provide precise, relevant answers to your most critical business questions. This revolutionary tool is more than just an information source; it’s a strategic asset that empowers your decision-making with up-to-the-minute data, ensuring you stay ahead in the fiercely competitive Building Energy Management Systems Market. Embrace the future of market analysis with ThinkMi, where informed decisions lead to remarkable growth.
Ask Question to ThinkMi @ https://app.360iresearch.com/library/intelligence/building-energy-management-systems
“Dive into the Building Energy Management Systems Market Landscape: Explore 180 Pages of Insights, 566 Tables, and 26 Figures”
PrefaceResearch MethodologyExecutive SummaryMarket OverviewMarket InsightsBuilding Energy Management Systems Market, by ComponentBuilding Energy Management Systems Market, by TypeBuilding Energy Management Systems Market, by ApplicationBuilding Energy Management Systems Market, by Deployment ModeBuilding Energy Management Systems Market, by End-UseAmericas Building Energy Management Systems MarketAsia-Pacific Building Energy Management Systems MarketEurope, Middle East & Africa Building Energy Management Systems MarketCompetitive LandscapeCompetitive PortfolioInquire Before Buying @ https://www.360iresearch.com/library/intelligence/building-energy-management-systems
Related Reports:
Home Energy Management System Market – Global Forecast 2024-2030Energy Management System Market – Global Forecast 2024-2030Intelligent Building Automation Technologies Market – Global Forecast 2024-2030About 360iResearch
Founded in 2017, 360iResearch is a market research and business consulting company headquartered in India, with clients and focus markets spanning the globe.
We are a dynamic, nimble company that believes in carving ambitious, purposeful goals and achieving them with the backing of our greatest asset — our people.
Quick on our feet, we have our ear to the ground when it comes to market intelligence and volatility. Our market intelligence is diligent, real-time and tailored to your needs, and arms you with all the insight that empowers strategic decision-making.
Our clientele encompasses about 80% of the Fortune Global 500, and leading consulting and research companies and academic institutions that rely on our expertise in compiling data in niche markets. Our meta-insights are intelligent, impactful and infinite, and translate into actionable data that support your quest for enhanced profitability, tapping into niche markets, and exploring new revenue opportunities.
Contact 360iResearchMr. Ketan Rohom360iResearch Private Limited,Office No. 519, Nyati Empress,Opposite Phoenix Market City,Vimannagar, Pune, Maharashtra,India – 411014.Email: [email protected]: +1-530-264-8485India: +91-922-607-7550
To learn more, visit 360iresearch.com or follow us on LinkedIn, Twitter, and Facebook.
Logo: https://mma.prnewswire.com/media/2359256/360iResearch_Logo.jpg
View original content:https://www.prnewswire.co.uk/news-releases/building-energy-management-systems-market-projected-to-reach-67-69-billion-by-2030—exclusive-report-by-360iresearch-302124905.html
Artificial Intelligence
Terra Drone, Unifly, and Aloft Launch UTM Development for AAM Targeting Global Markets
TOKYO, April 25, 2024 /PRNewswire/ — Terra Drone Corporation, a leading drone and Advanced Air Mobility (AAM) technology provider headquartered in Japan, announced today the launch of joint development with its Group companies Unifly NV (“Unifly”) and Aloft Technologies Inc. (“Aloft”) focused on UAS Traffic Management (UTM) for AAMs targeting global markets. Terra Drone has been making strides in its pioneering UTM business via strategic investments in Unifly, a leading UTM technology provider based in Belgium, and Aloft, which has the top UTM market share in the U.S. This collaboration marks the world’s first-ever joint UTM development for AAMs by multiple companies with extensive track records in UTM implementation and operation.
The three companies pursue joint UTM development to capitalize on the rapid global progress in electric vertical take-off and landing aircrafts (eVTOLs), set to revolutionize transportation. Morgan Stanley forecasts the Urban Air Mobility (UAM) market to reach $1 trillion by 2040 and $9 trillion by 2050 (1), with eVTOLs gaining global recognition through test flights and prototype showcases.
The companies proudly announce initiatives to enhance their existing UTM platforms in anticipation of the surge in eVTOL aircraft and drone activities. The shared vision for the UTM platform is to enable safe and efficient flight operations for eVTOLs and drones in the foreseeable future.
Recognizing the evolving needs of the AAM industry, they are dedicated to extending their platform by incorporating crucial additional functions. These enhancements, designed with automation at their core, aim to streamline operational efficiencies and pave the way for the integration of their increasingly automated UTM technology into the design and operational framework of AAMs. Through these efforts, they aim to set new standards in UTM and to facilitate the seamless integration of eVTOLs and drones into the national airspace, bolstering the potential for the AAM industry.
Through this initiative, they aim to build a global UTM infrastructure that kickstarts the AAM industry worldwide, creating a cohesive ecosystem that supports AAM growth and addresses broader challenges of urban mobility, sustainability, and air traffic safety.
Notes to Editor:
Research by Morgan Stanley in a report titled “eVTOL/Urban Air Mobility TAM Update: A Slow Take-Off, But Sky’s the Limit” https://advisor.morganstanley.com/the-busot-group/documents/field/b/bu/busot-group/Electric%20Vehicles.pdf]
Photo – https://mma.prnewswire.com/media/2396553/Terra_Drone.jpgLogo – https://mma.prnewswire.com/media/2186129/Terra_Drone_Logo.jpg
View original content:https://www.prnewswire.co.uk/news-releases/terra-drone-unifly-and-aloft-launch-utm-development-for-aam-targeting-global-markets-302126451.html
Artificial Intelligence
IBM to Acquire HashiCorp, Inc. Creating a Comprehensive End-to-End Hybrid Cloud Platform
$6.4 billion acquisition adds suite of leading hybrid and multi-cloud lifecycle management products to help clients grappling with today’s AI-driven application growth and complexity
HashiCorp’s capabilities to drive significant synergies across multiple strategic growth areas for IBM, including Red Hat, watsonx, data security, IT automation and Consulting
As a part of IBM, HashiCorp is expected to accelerate innovation and enhance its go-to-market, growth and monetization initiatives
Transaction expected to be accretive to Adjusted EBITDA within the first full year, post close, and free cash flow in year two
ARMONK, N.Y. and SAN FRANCISCO, April 24, 2024 /PRNewswire/ — IBM (NYSE: IBM) and HashiCorp Inc. (NASDAQ: HCP), a leading multi-cloud infrastructure automation company, today announced they have entered into a definitive agreement under which IBM will acquire HashiCorp for $35 per share in cash, representing an enterprise value of $6.4 billion. HashiCorp’s suite of products provides enterprises with extensive Infrastructure Lifecycle Management and Security Lifecycle Management capabilities to enable organizations to automate their hybrid and multi-cloud environments. Today’s announcement is a continuation of IBM’s deep focus and investment in hybrid cloud and AI, the two most transformational technologies for clients today.
“Enterprise clients are wrestling with an unprecedented expansion in infrastructure and applications across public and private clouds, as well as on-prem environments. The global excitement surrounding generative AI has exacerbated these challenges and CIOs and developers are up against dramatic complexity in their tech strategies,” said Arvind Krishna, IBM chairman and chief executive officer. “HashiCorp has a proven track record of enabling clients to manage the complexity of today’s infrastructure and application sprawl. Combining IBM’s portfolio and expertise with HashiCorp’s capabilities and talent will create a comprehensive hybrid cloud platform designed for the AI era.”
The rise of cloud-native workloads and associated applications is driving a radical expansion in the number of cloud workloads enterprises are managing. In addition, generative AI deployment continues to grow alongside traditional workloads. As a result, developers are working with increasingly heterogeneous, dynamic, and complex infrastructure strategies. This represents a massive challenge for technology professionals.
HashiCorp’s capabilities enable enterprises to use automation to deliver lifecycle management for infrastructure and security, providing a system of record for the critical workflows needed for hybrid and multi-cloud environments. HashiCorp’s Terraform is the industry standard for infrastructure provisioning in these environments. HashiCorp’s offerings help clients take a cloud-agnostic, and highly interoperable approach to multi-cloud management, and complement IBM’s commitment to industry collaboration (including deep and expanding partnerships with hyperscale cloud service providers), developer communities, and open-source hybrid cloud and AI innovation.
“Our strategy at its core is about enabling companies to innovate in the cloud, while providing a consistent approach to managing cloud at scale. The need for effective management and automation is critical with the rise of multi-cloud and hybrid cloud, which is being accelerated by today’s AI revolution,” said Armon Dadgar, HashiCorp co-founder and chief technology officer. “I’m incredibly excited by today’s news and to be joining IBM to accelerate HashiCorp’s mission and expand access to our products to an even broader set of developers and enterprises.”
“Today is an exciting day for our dedicated teams across the world as well as the developer communities we serve,” said Dave McJannet, HashiCorp chief executive officer. “IBM’s leadership in hybrid cloud along with its rich history of innovation, make it the ideal home for HashiCorp as we enter the next phase of our growth journey. I’m proud of the work we’ve done as a standalone company, I am excited to be able to help our customers further, and I look forward to the future of HashiCorp as part of IBM.”
Transaction Rationale
Strong Strategic Fit – The acquisition of HashiCorp by IBM creates a comprehensive end-to-end hybrid cloud platform built for AI-driven complexity. The combination of each company’s portfolio and talent will deliver clients extensive application, infrastructure and security lifecycle management capabilitiesAccelerates growth in key focus areas – Upon close, HashiCorp is expected to drive significant synergies for IBM, including across multiple strategic growth areas like Red Hat, watsonx, data security, IT automation and Consulting. For example, the powerful combination of Red Hat’s Ansible Automation Platform’s configuration management and Terraform’s automation will simplify provisioning and configuration of applications across hybrid cloud environments. The two companies also anticipate an acceleration of HashiCorp’s growth initiatives by leveraging IBM’s world-class go-to-market strategy, scale, and reach, operating in more than 175 countries across the globeExpands Total Addressable Market (TAM) – The acquisition will create the opportunity to deliver more comprehensive hybrid and multi-cloud offerings to enterprise clients. HashiCorp’s offerings, combined with IBM and Red Hat, will give clients a platform to automate the deployment and orchestration of workloads across evolving infrastructure including hyperscale cloud service providers, private clouds and on-prem environments. This will enhance IBM’s ability to address the total cloud opportunity, which according to IDC had a TAM of $1.1 trillion in 2023, with a compound annual growth rate in the high teens through 2027.1Attractive Financial Opportunity – The transaction will accelerate IBM’s growth profile over time driven by go-to-market and product synergies. This growth combined with operating efficiencies, is expected to achieve substantial near-term margin expansion for the acquired business. It is anticipated that the transaction will be accretive to Adjusted EBITDA within the first full year, post close, and free cash flow in year two.HashiCorp boasts a roster of more than 4,400 clients, including Bloomberg, Comcast, Deutsche Bank, GitHub, J.P Morgan Chase, Starbucks and Vodafone. HashiCorp’s offerings have widescale adoption in the developer community and are used by 85% of the Fortune 500. Their community products across infrastructure and security were downloaded more than 500 million times in HashiCorp’s FY2024 and include:
Terraform – provides organizations with a single workflow to provision their cloud, private datacenter, and SaaS infrastructure and continuously manage infrastructure throughout its lifecycleVault – provides organizations with identity-based security to automatically authenticate and authorize access to secrets and other sensitive dataAdditional products – Boundary for secure remote access; Consul for service-based networking; Nomad for workload orchestration; Packer for building and managing images as code; and Waypoint internal developer platformTransaction Details
Under the terms of the agreement, IBM will acquire HashiCorp for $35 per share in cash, or $6.4 billion enterprise value, net of cash. HashiCorp will be acquired with available cash on hand.
The boards of directors of IBM and HashiCorp have both approved the transaction. The acquisition is subject to approval by HashiCorp shareholders, regulatory approvals and other customary closing conditions.
The Company’s largest shareholders and investors, who collectively hold approximately 43% of the voting power of HashiCorp’s outstanding common stock, entered into a voting agreement with IBM pursuant to which each has agreed to vote all of their common shares in favor of the transaction and against any alternative transactions.
The transaction is expected to close by the end of 2024.
____________________1 The total cloud opportunity is the sum of the cloud-directed spends across Hardware, IT services and SW for Private and Public cloud implementation, sourced from IDC’s Worldwide Black Book Live Edition, March 2024 (V1 2024)
Conference Call Details
IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed here. Presentation charts will be available shortly before the Webcast.
About IBM
IBM is a leading provider of global hybrid cloud and AI, and consulting expertise. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Thousands of government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM’s hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM’s breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and consulting deliver open and flexible options to our clients. All of this is backed by IBM’s legendary commitment to trust, transparency, responsibility, inclusivity and service. Visit www.ibm.com for more information.
About HashiCorp
HashiCorp is The Infrastructure Cloud™ company, helping organizations automate multi-cloud and hybrid environments with Infrastructure Lifecycle Management and Security Lifecycle Management. HashiCorp offers The Infrastructure Cloud on the HashiCorp Cloud Platform (HCP) for managed cloud services, as well as self-hosted enterprise offerings and community source-available products. The company is headquartered in San Francisco, California. For more information, visit HashiCorp.com.
Press Contacts:
IBM:Tim Davidson, [email protected]
HashiCorp:Matthew Sherman / Jed Repko / Haley Salas / Joycelyn BarnettJoele Frank, Wilkinson Brimmer Katcher212-355-4449
Additional Information and Where to Find It
HashiCorp, Inc. (“HashiCorp”), the members of HashiCorp’s board of directors and certain of HashiCorp’s executive officers are participants in the solicitation of proxies from stockholders in connection with the pending acquisition of HashiCorp (the “Transaction”). HashiCorp plans to file a proxy statement (the “Transaction Proxy Statement”) with the Securities and Exchange Commission (the “SEC”) in connection with the solicitation of proxies to approve the Transaction. David McJannet, Armon Dadgar, Susan St. Ledger, Todd Ford, David Henshall, Glenn Solomon and Sigal Zarmi, all of whom are members of HashiCorp’s board of directors, and Navam Welihinda, HashiCorp’s chief financial officer, are participants in HashiCorp’s solicitation. Information regarding such participants, including their direct or indirect interests, by security holdings or otherwise, will be included in the Transaction Proxy Statement and other relevant documents to be filed with the SEC in connection with the Transaction. Additional information about such participants is available under the captions “Board of Directors and Corporate Governance,” “Executive Officers” and “Security Ownership of Certain Beneficial Owners and Management” in HashiCorp’s definitive proxy statement in connection with its 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”), which was filed with the SEC on May 17, 2023 (and is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1720671/000114036123025250/ny20008192x1_def14a.htm). To the extent that holdings of HashiCorp’s securities have changed since the amounts printed in the 2023 Proxy Statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC (which are available at https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001720671&type=&dateb=&owner=only&count=40&search_text=). Information regarding HashiCorp’s transactions with related persons is set forth under the caption “Related Person Transactions” in the 2023 Proxy Statement. Certain illustrative information regarding the payments to that may be owed, and the circumstances in which they may be owed, to HashiCorp’s named executive officers in a change of control of HashiCorp is set forth under the caption “Executive Compensation—Potential Payments upon Termination or Change in Control” in the 2023 Proxy Statement. With respect to Ms. St. Ledger, certain of such illustrative information is contained in the Current Report on Form 8-K filed with the SEC on June 7, 2023 (and is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1720671/000162828023021270/hcp-20230607.htm). Promptly after filing the definitive Transaction Proxy Statement with the SEC, HashiCorp will mail the definitive Transaction Proxy Statement and a WHITE proxy card to each stockholder entitled to vote at the special meeting to consider the Transaction. STOCKHOLDERS ARE URGED TO READ THE TRANSACTION PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT HASHICORP WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders may obtain, free of charge, the preliminary and definitive versions of the Transaction Proxy Statement, any amendments or supplements thereto, and any other relevant documents filed by HashiCorp with the SEC in connection with the Transaction at the SEC’s website (http://www.sec.gov). Copies of HashiCorp’s definitive Transaction Proxy Statement, any amendments or supplements thereto, and any other relevant documents filed by HashiCorp with the SEC in connection with the Transaction will also be available, free of charge, at HashiCorp’s investor relations website (https://ir.hashicorp.com/), or by emailing HashiCorp’s investor relations department ([email protected]).
Forward-Looking Statements
Certain statements contained in this communication may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially.
Statements in this communication regarding IBM and HashiCorp that are forward-looking may include statements regarding: (i) the Transaction; (ii) the expected timing of the closing of the Transaction; (iii) considerations taken into account in approving and entering into the Transaction; (iv) the anticipated benefits to, or impact of, the Transaction on IBM’s and HashiCorp’s businesses; and (v) expectations for IBM and HashiCorp following the closing of the Transaction. There can be no assurance that the Transaction will be consummated.
Risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, in addition to those identified above, include: (i) the possibility that the conditions to the closing of the Transaction are not satisfied, including the risk that required approvals from HashiCorp’s stockholders for the Transaction or required regulatory approvals to consummate the Transaction are not obtained, on a timely basis or at all; (ii) the occurrence of any event, change or other circumstance that could give rise to a right to terminate the Transaction, including in circumstances requiring HashiCorp to pay a termination fee; (iii) possible disruption related to the Transaction to IBM’s and HashiCorp’s current plans, operations and business relationships, including through the loss of customers and employees; (iv) the amount of the costs, fees, expenses and other charges incurred by IBM and HashiCorp related to the Transaction; (v) the risk that IBM’s or HashiCorp’s stock price may fluctuate during the pendency of the Transaction and may decline if the Transaction is not completed; (vi) the diversion of IBM and HashiCorp management’s time and attention from ongoing business operations and opportunities; (vii) the response of competitors and other market participants to the Transaction; (viii) potential litigation relating to the Transaction; (ix) uncertainty as to timing of completion of the Transaction and the ability of each party to consummate the Transaction; and (x) other risks and uncertainties detailed in the periodic reports that IBM and HashiCorp filed with the SEC, including IBM’s and HashiCorp’s respective Annual Reports on Form 10-K. All forward-looking statements in this communication are based on information available to IBM and HashiCorp as of the date of this communication, and, except as required by law, IBM and HashiCorp do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Logo – https://mma.prnewswire.com/media/2319830/IBM_LOGO_1.jpg
View original content:https://www.prnewswire.co.uk/news-releases/ibm-to-acquire-hashicorp-inc-creating-a-comprehensive-end-to-end-hybrid-cloud-platform-302126677.html
-
Uncategorized6 days ago
Generative AI gold rush drives IT spending — with payoff in question
-
Uncategorized6 days ago
Do underwriters trust artificial intelligence?
-
Uncategorized6 days ago
Hans Jonas on Responsibility in the Age of Artificial Intelligence
-
Uncategorized6 days ago
Meta AI Assistant Adds Website, Expands Beyond US
-
Artificial Intelligence6 days ago
Free Your Hands, QIDI Vida Smart AR Glasses Lead the Way in New Sports Experience.
-
Uncategorized6 days ago
Can artificial intelligence reduce vehicle time to market?
-
Uncategorized6 days ago
The Ottawa Hospital doctors to try AI for patient notes
-
Artificial Intelligence5 days ago
Aurionpro Solutions acquires Arya.ai, to power next generation Enterprise AI platforms for Financial Institutions