WisdomTree (WSDT) Reports 2009 Earnings

by on February 8, 2010

WisdomTree, the New York-based ETF issuer best known for its line of fundamentals-weighted and currency ETFs, reported on Monday its operating results for the fourth quarter of 2009. Most ETF issuers are either privately held or operated as divisions of larger public companies, meaning that gaining insight into the financial health of the industry can be challenging. So WisdomTree’s results are often eagerly-anticipated within the ETF community since they shed some light on an otherwise murky area.

“WisdomTree achieved our best fourth quarter in Company history,” said CEO Jonathan Steinberg in a press release. “We are encouraged to see the market responding to our innovations in the emerging markets – namely the industry’s first India, and emerging markets small cap ETFs, as well as the first “1940 Act” family of currency ETFs which collectively were responsible for the majority of the $911 million net inflows in the fourth quarter.”

Dwindling Cash

WisdomTree Financial Summary
$ in 000s Q1 ’09 Q2 ’09 Q3 ’09 Q4 ’09
Revenue $3,695 $4,441 $5,716 $7,636
Net Income ($6,011) ($5,197) ($4,998) ($5,032)
Cash* $10,563 $9,295 $8,340 $11,636
*Excludes investments

WisdomTree reported a GAAP net loss of $5.0 million in the fourth quarter and $21.2 million for the full year. But the company’s cash loss was far less. Excluding stock-based compensation, depreciation and amortization, and interest and investment income, the operating loss was only $1.5 million for the quarter and $11.3 million for the year. WisdomTree finished 2009 with $11.5 million of cash on hand, as cash actually increased in the fourth quarter due to the completion of a common equity offering. The net decrease in cash for the year was $1.8 million, including an offset of $5.0 million from the sale of common stock. Excluding this equity raise, the company’s change in cash for the year would have been $6.8 million, more than half the amount on hand at the end of the year.

Signs Of Improvements

WisdomTree’s fourth quarter results showed significant improvement in a number of areas, as revenue, total assets,  average ETF advisory fee both improved over year-ago levels.  WisdomTree has also beefed up its marketing and business development operations, which accounted for about 23% of total operating expenses in the fourth quarter. Business development and marketing accounted for just under 14% of expenses in the fourth quarter of 2008.

WisdomTree’s revenue surged throughout last year, as assets under management grew from both strong equity market performance and continued cash inflows throughout the year. Of the $2.8 billion increase in assets during 2009, cash inflows accounted for $1.8 billion, while market appreciation drove another $1.0 billion increase. For the full year, currency ETF assets increased by a whopping 305%, followed by international ETFs (+96%), sector ETFs (+45%), and U.S. ETFs (+35%).

Declines in domestic and international equity markets in 2010 will present a challenging environment in the first quarter. But WisdomTree continues to haul in the cash. Although the latest data from the National Stock Exchange shows outflows of about $200 million in January, the red ink is primarily related to the unwinding of two WisdomTree “funds of funds,” DEW and DWM, which started in 2009 and ended in January 2010. Excluding this unwinding, WisdomTree actually saw $245 million of cash inflows, behind only Vanguard, Van Eck, and ETF Securities for the month.

WisdomTree shares declined more than 5% on Monday, and are down nearly 35% over the last three weeks.

See a full copy of the WisdomTree press release here (PDF). For more updates on the ever-changing state of the ETF industry, sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.