Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WisdomTree Inc (WT, Financial) achieved record assets under management (AUM) of $113 billion, highlighting the robustness of its business model.
- The company reported a significant 80% increase in earnings per share year-over-year, demonstrating strong financial performance.
- WisdomTree Inc (WT) successfully executed strategic capital management actions, including a 9% accretive transaction through stock repurchases and convertible note issuance.
- The company expanded its operating margin by 800 basis points to 37.3%, reflecting effective cost management and scale benefits.
- WisdomTree Inc (WT) is positioning itself as an early mover in the tokenization space, with platforms like WisdomTree Prime and WisdomTree Connect, which are expected to create meaningful revenue opportunities.
Negative Points
- WisdomTree Inc (WT) experienced $2.4 billion in outflows during the third quarter, primarily from its currency-hedged Japan product and other tactical products.
- The company faced headwinds from falling interest rates, a weaker dollar, and profit-taking in commodities, impacting net flows.
- WisdomTree Inc (WT) had to raise financing through new convertible notes to facilitate stock repurchases, increasing its interest expense guidance.
- The rollout of WisdomTree Prime has been slower than anticipated due to regulatory challenges, delaying its full availability across the U.S.
- Despite growth in the models business, penetration remains limited with only 2,500 advisors actively using at least one model, indicating room for improvement in adoption.
Q & A Highlights
Q: What are the implications of the election on your broad market outlook for the next year and WisdomTree's product suite in particular?
A: Jeremy Schwartz, Executive Vice President and Global Head of Research, explained that the election impacts market outlook through three core issues: US markets appear more expensive, leading to lower forward-looking returns; debt and deficits raise sustainability questions, often leading to inflation; and investors seek inflation-protective assets. WisdomTree's product suite, including stocks and commodities, is well-positioned to address these concerns, offering attractive value propositions and inflation hedges.
Q: Can WisdomTree still expand operating margins from current levels?
A: R. Jarrett Lilien, President and COO, expressed confidence in continued margin expansion due to strong growth prospects, high incremental margins, and smart management. The company's broad product suite and strategic initiatives, such as tokenization and models business, support this outlook.
Q: What is the impact of Prime investments on the P&L, and what is the annual spend on its development?
A: Bryan Edmiston, CFO, stated that the forecasted spend for Prime investments is in the low to mid-20s million for the year, up from high 10s million a few years ago. Jonathan Steinberg, CEO, added that more detailed statistics on digital assets will be provided in the next call.
Q: How embedded are you with the 2,500 advisors using your models, and what steps can drive greater adoption?
A: Jonathan Steinberg, CEO, noted that it's early days with many advisors, but performance has been strong, and they anticipate broader rollout within advisors' full book of business. R. Jarrett Lilien, President and COO, added that the trend towards model usage by financial advisors is growing, and WisdomTree is well-positioned to capitalize on this trend.
Q: What are two major priorities for 2025 to maintain business momentum?
A: Jonathan Steinberg, CEO, indicated that the company will continue investing in global product development, portfolio solutions, digital assets, and tokenization, while also focusing on creating efficiencies throughout the business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
