WETF - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by and welcome to the WisdomTree Q3 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions]

I would now like to hand the conference over to your speaker today, Jason Weyeneth, Director of Investor Relations. Please go ahead.

Jason Weyeneth

you. Thank morning. Good

on not Reform in Form I materially available set begin, forward-looking forth to our actual WisdomTree's Securities reference presentation within and the in of A ended Factors XXXX. Before risks could Annual for December the factors forward-looking not today's would results presentation. forward-looking disclaimer in cause Litigation Private WisdomTree duty the in meaning to contain of This legal XX-K XXXX. the the number to Report statements, the year assumes statements. differ limited to, we results update any including, of like and Act of Risk but from presentation undertake section statements XX, this does may no discussed

my Amit the to call Now to turn over Muni. it's WisdomTree’s pleasure CFO,

Amit Muni

open I'll Thank walk Jono and turn morning, the quickly call the Q&A. through the we the you, good to quarter, Jason items for then up and over lines for everyone. important before

So beginning Slide X. on

Assets $XX large DXJ roughly appreciation billion continued million million quarter, from little by net outflows. and net HEDJ outflows as changed of had of We driven at under offset by market in was outflows modest client the USFR. a outflow and a management were $XXX $XXX from

DXJ, and roughly HEDJ flows Excluding breakeven. were

the for flows for industry straight second this outflows our highlights experienced quarter. Some quarter. the In markets, overall emerging

small-cap particular has continue our and to now in assets. million product our state-owned products $XXX in we enterprise However, see across XSOE, crossed demand ex suite, fund which EM

the inflows. consistent quarter, we equity with domestic generate eighth the quarter representing side, the consecutive On of inflows to third continue

fixed-income billion at $X XXXX beginning continue to almost have the domestic today. platform just from under scaling billion We to success, of $X our

is AUM environment. AGGY, the fund fund roughly $XXX inflows track of well of bond $X With inflows. million, positioned the aggregate record, current over and the billion market third very impressive for consecutive quarter an yield-enhanced of Our generated

products $XXX inflows commodity-based silver other by strength into quarter continue generated strong gold, the the gold we in generate to which And of of was our million flows platinum. our which lastly and metals, and across European led precious

market roughly XX% for strong flow for other year-to-date gold XX% metals. precious share Our and at remains

this our of on and Continuing with the all product AUM year. slide, renamed rationalization as rebranding can we ETF under Securities last brand. completed you post see and next net We a products, the WisdomTree XXX quarter million $XXX the Europe, the funds transaction representing closed

Europe as grow on ranges complete, our With now you innovative we the one slide, now of this ETFs in and this in offer most well see overall are positioned chart of the platform. to the can in

shift. the basis, million, mix or to up $X.XX were per on a average AUM turning the revenue AUM, quarter, partially capture Revenues income by $X.X lower we due $XX Slide share. under to Now just had net driven X. higher by for X% results offset GAAP of financial On million

non-operating Excluding was $XX.X or income share. million $X.XX a items, adjusted net

during non-cash the future results primary between payments reflecting for prices in increase gold adjusted The GAAP the commitment this quarter. charge a and was $X after-tax million our gold quarter difference

Turning slide. to next margins on the

the Our adjusted XX.X%, were points U.S. nearly XX which the XX% the renegotiations. points operating from up vendor up quarter, basis quarter. our segment margins margin previously for sequentially, was was for of Gross four second reflecting our discussed percentage benefit

similar at the in margins gross expect to U.S. asset XX% levels. continue of We to XX%

by over average sequentially, renegotiations. benefit three the percentage growth International Gross as driven as the AUM, points of margins segment for expanded our vendor in well

in of range. the international margins XX% closer the We segment expect XX% continue to to but the higher end gross to of

in expenses. our can On slide you the change next see the

the meaningful trending remained beginning year a we levels. at results change of gave the would and controlled. similar Compensation the compensation fourth expenses at For or within the year full quarter is U.S. barring expect environment, we the guidance market in well operating our segment, range

in costs fees effect the the took that quarter. distribution during The from third-party renegotiated benefits reflects decline

result a prior expect X% $XX segment anticipated at/or modest year we we below seasonal AUM be spending excluding reflecting in seasonal marketing sales While International to year costs, increase and into million activity. marketing guidance. and our partially the expenses full slowdown the in sales decreased driven year-end

turning Now to slide X.

TD sharing made E*TRADE $XXX,XXX third-party sharing brokers, of pay the this the or Regarding online revenue we our with approximately costs and XX% relationships fees up to quarter. revenue Schwab,

of to ETFs distribution are our data fees efforts. and these to reminder support trading aid packages our a As commission-free

realize of $XXX,XXX result a the fourth to savings the eliminating quarter. in As platforms $XXX,XXX these ETFs, to range in expect we for commissions

platforms discussions We evolve fees these going potential and programs are their in may with regarding they how forward.

to Now Jono. call the like turn to over I'd

Jonathan Steinberg

everyone. morning, good and Amit, you, Thank

As you distribution to that XXXX, providing we effectiveness. beginning commission-free us to allow data agreements signed funds our know October valuable of drive distribution in trade also numerous better with

is month a clearly largest several platforms for the for Earlier commissions of eliminate their development this positive RIA decisions custodian announced This WisdomTree. ETFs. to

expenses. exclusivity platforms, lose enjoyed do on as we we reduction distribution and of Amit a the in some be will there third-party mentioned these immediate While significant

for Also were exciting opportunity at the Particularly other largest creates commission-free custodian. is the RIA Fidelity, trading at disadvantaged. the all opportunities previously move to second we platforms where

who there. are We to positioned any than other advisers better now at time custody target

to more growth We significant forward. a Fidelity our going expect to be contributor

structure us. for manager should asset commissions ETF of the Finally, a very is drive ETF adoption this as pure-play positive the and elimination ETFs accelerated of for

Model expertise prior investment Scott announced In as Partners, Switching a as the his Dynasty of to Financial team Portfolios. allocation Welch from CIO lead focus and In Portfolios role Scott this provider area for CIO September, large of created and continued gears, outsourced of solutions RIAs. in will the we Model newly an us. of committee. Scott our significant investment hiring remains brings allocation asset role, asset

and Siegel and closely since WisdomTree. is our to the associated could flows on collaborating Professor solutions our a recently enhancing Jeremy Portfolios. very This as meaningful with firm deepening has been working be exciting always model also to We're our our prove original developing very have expert with relationship future. begun relationship Siegel in Model Professor is and and launch of

insights a just Michael week to the Chairman. in serving research questions, him globally best very take WisdomTree's who Michael's have retirement. Before like after this we XXXX to to been thank as from and manager moment a take vision the your XX wish from earlier performance-oriented company are a Board transformation I invaluable asset diversified years retired to publicly WisdomTree's I'd Steinhardt we today. in

we'd you Thank to and be your take questions in interest your happy now. for WisdomTree

Operator

Instructions] with Credit from Siegenthaler Suisse. question [Operator first comes Our Craig

You may proceed with question. your

Craig Siegenthaler

Thanks. Good Jono, morning, Amit.

Amit Muni

Craig. Morning

Jonathan Steinberg

Good morning.

Craig Siegenthaler

to open on competition actually ETF if commission-free view direct the ETF a and trading the fractional investing and could more a index new the for have door you source trading share provide this if will Do actually vehicle? of

Jonathan Steinberg

I've just I And the -- how at think it will creating So, a the strong evolve. I have feels I question well, a don't of versus strong have opinion for more don't moment self-directed particular don't that market, also management but XXX(k) that a baskets competition, on -- referenced your seen on like people some but it's vehicle so sort opinion asset know think how trading have really. I I at the that moment. don't

Craig Siegenthaler

Okay.

fees ETF here. -- in but manager Just before. shelf The similar didn't second-largest as pay follow-up in the though, the world my topic

could field level looks across the like platforms. really So, this them playing for it all

because that Just manager? could see on heavier competition you trend coming -- have any thoughts that

Jonathan Steinberg

sure though platform, -- really for advisor on has been even So, The been models beta consumer they've haven't them in beginning. them lowest-fee they forced to always it little dramatically. commoditized their executions certainly where they excluded. changes guess it for they've been bit the of I incorporate every a will included demand always I'm dynamic the longer not into be lowest-fee from the but the help It may no very beta competitor,

Craig Siegenthaler

Thank you, Jono.

Operator

you. Thank

with comes from Fannon Dan Jefferies. question next Our

proceed You your with question. may

James Steele

This in for filling is actually morning. Good James Dan. Steele

just a equities for throughout seems curious on So, remained European strong. bit performance absolute toward improve sentiment as seemed HEDJ quarter it and quite to -- the though

-- So up have of turned flows. things terms quarter-to-date in and of kind

or So, kind clients improving indicate just there you're with an is trough conversations here? having reaching there's kind that could of that if HEDJ any a curious outlook of

Jeremy Schwartz

really Schwartz, Jeremy in pointed I of the remain platform. across Head certainly very incredibly performance you Global both We committed and Research. the HEDJ currency the run. has this hi, year-to-date mean broader over to Yes, been strong hedging both is out long

the growth. ISDG of a basically beating European today fund is quality But the every fund a years. over five broader HEDJ X-star X-star last fund is in HEDJ our growth international like category. large-cap things foreign

in hedging with get broad there's think broader we our that really We record. starting dynamic like innovating international and traditional and funds DWM, things So, are and DDLS still dynamic opportunity more DDWM, also category. track with take X-star to share from meaningful small-cap keep to unhedged that

the of of and we markets China improves, starting more towards that to it's But to come and global-focused Europe any in whether you're sentiment the you're sentiment generally a U.S. firms bottoming a right deal, interest Japan as too, emerging see believe. from trade

Jonathan Steinberg

Jono. is This

haven't or product. We seen creations really a in the change HEDJ

We have DXJ some spotty, positive seen in recently. flows but

turning shows in So, maybe some it of sentiment. signal

James Steele

Great. you of relationships. your part the that relationship the that data -- Thanks. on with is And secondly third-party you efforts. just Understanding distribution helps some distribution

there? effect be Just what any is, the curious on still receiving that that? Or you'll update if

Amit Muni

are of it's the to they that still programs. their there offer look data mean, evolve how be that some working do Amit. package platforms going I We sort still to Yes, would through expect Yes, would they're us.

fixed -- be nature to be than expect variable seen would the as of our I going in rather So, past. more a to we've forward fees

James Steele

Got it. Thank you.

Operator

you. Thank

Our America. Bank Carrier next of from comes question with Mike

with proceed question. may You your

Sean Colman

for is Sean actually guys, Hi this Colman Mike. on

platform, And benefit could quarter. temporary? is a Just these commission-free with going to you more would back next that benefit so renegotiation that expect it's platforms? next the quarter mean obviously But the

Amit Muni

Amit. Hi. It's

it'll they're with as don't them. still discussions So, platforms, eventually the We in programs. end I've their up. know evolving We're how mentioned,

So it's expect do will hard savings. I to will they there be be. say what

mentioned, scenario a of I tied more will to that's I've a to minimum, AUM. we as as fee fixed-fee be And variable think, probably going a versus

today. it I significantly less paying expect So than to be what we're do

forward So expect see carry of I XXXX. savings into QX do you into to that some cost

Shaun Calnan

be been past just they then, on over so And of flows, at strong it. times. commodity couple Got but quarters, the they've can volatile

overall -- that benefiting is are taking more from you're competitors? an you flows? trend industry with are share it Or your So positive products from

Jonathan Steinberg

This Hi. Jono. is

been So share gold taking really is, commodity year-to-date. States, category. like which We're in AUM in commodities share the very benefiting of our We've we've subset -- the in general. a of competitive flow our pretty strong of our interest flow, flow been in United from

grains and on competition we before, are you metals in this low mid-XXs. market In in broader less numbers the have some to go When much commodities, broader share touched and the other commodities. Amit cases,

very And so that -- positive it's for general just commodities us. in very,

Shaun Calnan

Okay. Thank you.

Operator

Thank you.

KBW. from question Robert next comes Lee with Our

proceed your You may with question.

Jeff Drezner

or flows taking Hi. for you I for proportion Rob can Thanks This from wanted just the sales my portfolios. coming is Lee. on if quantify Jeff know question. to model of perhaps Drezner

Amit Muni

Yes. It's Amit.

So broadly. it we meaningful at gets haven't to bit talking we'll Once time. that about a amount, a those number numbers this more disclosed start little

Jonathan Steinberg

of effort and Professor it's smaller we're recent But a a It's Scott making but announcements WisdomTree, off with that for we're the base. relatively efforts but of refinements new excited growing those about the to Siegel. quickly,

Jeff Drezner

it. Got

And to be on Thanks. advertising the Okay. on is with that force I spending commissions, gets then, going as these can more platforms? the of crowded elimination if it perhaps follow-up, to more

Jonathan Steinberg

diversified what track that, highly a scaled with program. got on you're excellent solutions differentiated you got and compete. a is and think records recognition WisdomTree product among left brand advisers. strong I how We've has with a offering

merit. So on winning we plan on

to And an with the data very We is marketing. effectiveness question, digital those the standpoint. to your support digital track easy efforts also ties from capabilities strong element marketing this and very targeted

think, I only very -- it's but controlled you'll also when be effective. controlled so, And do it very it'll and

that no. it think from will standpoint, a increase meaningful don't be I in So marketing

Jeff Drezner

Okay, you. great. Thank

Operator

you. Thank

comes from question Michael Morgan next Our Stanley. with Cyprys

with may You your question. proceed

Michael Cyprys

Thanks Hey, for good question. morning. taking the

you're update Just that as products out Also on release in hear some saw XXXX. hoping development you here. like in maybe to cutting an to product the look initiatives look

If you the more about bit a and new thinking could how around probably product of talk pruning development. little shelf you're that areas versus

Jonathan Steinberg

in we just make just there so were restructuring Europe then, Particularly that didn't cleaning a were company that our sense. economic and up. small our Europe post some just business of acquired and a overlap going our Securities. between in natural up, certain with very of some those products was planned was also ETF a And that costs of lot products of merging as the European So, was part pruning the

and well States it's as the gate. States, United in nice United been both product quickly of of exposures. the simultaneously newer repurposing Europe funds. launched efficient been cloud some our older we In as very our tactical Most part in and as launching funds trading getting recently recently in we fund we've development, out traction very which selectively emerging launched Most some

fixed effort over should a see more so it's on can't you'll some we've year, doing income where because We'll product would We the anyway, I think there. think and -- I some last standpoint. pretty had specific so see very product say development development. more you'll be active, get efforts around we be on too competitive I

Michael Cyprys

Great. then guys update could you advisor talked maybe in bit have that you a on a And just of know us I an give lot little engine. the past. about

guys from where we Just you're remaining part and option rest the we we of today have know that or in thinking assets you of platform forward the I an the How thinking are to on How look about here? terms stand -- I trends about as buy there? stake. think the

Jonathan Steinberg

President and answer that I'm let appointed Jarrett COO Perfect. to question. recently our Lilien going

know you of AdvisorEngine Board. He's joined Emerging for years those representative WisdomTree that don't yet, And ago Board our team the years. on WisdomTree's as For actually Head few Technologies. last on Board, management of to eight he's that for he years the Jarrett with our prior of been the been two

distinguished extremely we well just prior had joining WisdomTree. to financial know him services so in he's career And and a

So Jarrett, on could answer AE. you maybe that question

Jarrett Lilien

Jono. Thanks Sure.

some very currently approach about business both there customers. Our on our I investment but and we're optimizing new is only particular the confident They're not of the on strong. partnership, feel AdvisorEngine In AdvisorEngine really those. itself doing there all pipeline remains onboarding that important the

ways see. that been wins where solutions But clients nice advisor for really of program joint be AdvisorEngine really part is to have looking broader some help our successful. to had more our we're We've

doing overall, optimizing we're So partnership both. again our about our and it's and investment

Michael Cyprys

you. Thank Okay.

Operator

you. Thank

Brennan Our next with question UBS. Hawken from comes

You with proceed may question. your

Brennan Hawken

to the Good Thanks taking morning. back commission-free to platforms. I just for the get question. wanted

that rate your about your about AUM. second that times was deck X I was trailing rate that think represented you in growth XX-month X/X that growth of the XX% disclosed it quarter organic and U.S.

and rough into I way right billion about backing about sure platforms. the that's think like to those numbers, but it. wanted reasonably $X just DXJ, it ex-HEDJ flows that's looks So from make in to that understand

And and you what's think think that going offset happens think drop rate? that forward? existing to of you Do some about growth Fidelity? there's do the Like partial with that the to then what kind platforms way

Jonathan Steinberg

take you the and Amit part then why don't I'll... first

Amit Muni

way numbers you correct. math The Yes. is the about thinking did it. in right That's the of

Jonathan Steinberg

on is, And to I modest had we of were say many guess I have exclusivity. of lowered levels open what And various just that of would regardless. playing those ETFs or eliminated an field them commissions

don't to a I so, be And negative. think it's going

you'll flows resistance more I much think all ETFs now you can pretty less general well the with more uptick system. competitively Fidelity get just into know ETF access because get investors as in and the that friction as to lend

net-net positive. think we I net be So expect a to it

Brennan Hawken

ongoing. that. for discussions you Thank then are the Okay. platforms the question. follow-up And I with a know

their a in shelf different of couple a shares as of for consideration an platform space there's options such potential that fee flagged like they're them have rev of maybe component. calls attractive a some Some considering

the you a thinking that you ETFs being of know benefit that to I actually that some for stage? actually Do think space are guys? you the about be into included set you probably might a commission-free negotiations How flows Do as shelf this you on attractive that go-forward? in would enter think that provide before. that had benefits at

Jonathan Steinberg

got this Jono. I is to think you –

to they're to know. they're more of of early hear certainly that, those they I forward. exclusive into to make are enter relationships think prior a Certainly, because wait evaluations put you we to have see commission-free to our we'll to we but have see wait But willingness It's we what what little comfortable to when and doing. going all what offering. considering them sort

Brennan Hawken

Yeah. But worth a shot. Jono. Thanks,

Jonathan Steinberg

welcome. You’re

Operator

you. Thank

from comes Research. question with next Our Northcoast Housum Keith

proceed may with You your question.

Keith Housum

the in with the some in products over significant in extra the closure see Europe? expenses expect decrease of we XXX a to of So, should over Europe, operating

Amit Muni

We think for we we higher margins net why us a – I of so the It's have range Amit. gross one gross reasons, the did end that's it say be was on the margin of some will significant. positive slightly the that wouldn't perspective from gave.

Jonathan Steinberg

regulatory the to action of were expenses anticipated sort to some And took prior that. so rise we and of and

we worse would've what saying. it I'm hadn't, So I just been is if guess,

Keith Housum

year enough. tide rising it then Fair funds kind asked following And sign all as there raising Or share for guys. any there? commodity that pointed of is the boats? had Okay. income are Is the you was taking out fixed up as has good like on a question earlier is a you guys about that you well well

Jeremy Schwartz

Yeah.

a of combined year. traditional the about spread. long of over Morningstar sort that's shortest positions. few and rate curve were interestingly, basis anchor there XX And that's treasury calling highest-yielding barbell generated T-Bills. And of So has yield a at that X-star bond And the it our treasury billion two end one making it's of point the floating fund fixed-income core there's that this $X yield of actually leader fund cash-like them And treasury a sort it's unique end, at the floating-rate yield-enhanced security. have for floating the the treasury ag. a spread where in And product. of over been it's the – our as duration both AGGY treasuries of because anchors flows Amit the with the team we're short rate talked We type core AGGY over this ag increasing WisdomTree today a there's inversions securities really the the while is that that really our an

both offerings long short two end those end. the share. be competitive will very at They're believe the and we so And gaining they're

as for Model think fixed-income talking suite. our over those records great resonate. barbell been about we their is delivering Model going And returns Portfolios we that will that so Portfolios have and whole to track fixed-income think attractive the been we've be And

Keith Housum

summarize sounds So, fixed income world answer taking that it like correct? sounds it a that space. share in believe your if perforated we're you I guys like in Is

Jeremy Schwartz

Yeah.

Jonathan Steinberg

very development us so wise product relatively a for this the the but traction domestic receiving. – has few new And we're with We're last income fixed we're over in space years. been effort that concerted pleased

Keith Housum

guys the with Okay. disadvantaged. field? commission-free provide at the you you relationship finally, everybody little the a now and that fact And you just there color more Is part level on guys not could it's then of a why platform maybe were Fidelity were playing

Jonathan Steinberg

Yeah.

So one of of levels exclusivity. of was elements the trading commission-free

the So one through exclusive have ETF their with all been it sheer their we than able now at so eventually because significantly others. And sponsor to about to, number platform of it's larger the a we're open constructive. And be We really only Fidelity's opened size time. but mutual could might not excited Fidelity in we why target to a of had chance ETF program relationship crack more of to particular fund solutions partners that us had and we just now our up to that's RIAs. thought it. sponsors this And platform, has can Fidelity then

Keith Housum

Great. Thank you.

Operator

Thank you.

comes Gabelli. with Sykes next from Our Mac question

proceed question. may You with your

Mac Sykes

the also seems products? everyone. from current What Good and Cloud Yeah. for terrific if it's different The in partner. the well your the interim funds strategy timed announcement are morning, goals a for marketing and on Fund

Jeremy Schwartz

growth-oriented Cloud I investing content. collaborated their Venture on space. now products had of some well create I with dividend with sort their our WisdomTree this a in was more Bessemer index with of sort great known absolutely think some you're the and and of very modern and for this tech working our CEOs who computing Partners went NASDAQ our this platform was And Mac event partners to XXX trying podcast. cloud Yeah. right value get We before to and and Private partner created we've to think

and so, the And in new it we're for that growth is about a us space potential space. excited

Jonathan Steinberg

offering. diversifies really product It our

on some of a And play the you opportunities. those got trading does new might the continue more as to specific of efforts see build right to often that we so in out might fund launches very quick marketing spaces gate. see in tactical sort I say momentum role and will You

Mac Sykes

Thank you.

Operator

Thank you.

Robert Our next from Lee question comes KBW. with

You may proceed with your question.

Jeff Drezner

Hi. Rob, is for Jeff again. on This

out cost follow-up. due launching for period let maybe cost almost longer the the In to products, much changed, to had that that maybe the were products, linger Will Just time? you while. of philosophy quick or of to any a willing to much past there philosophy for regards it confusion? launching perhaps Has try be fact creates you didn't willing of product higher leave too essentially less a one to products that in it

Jonathan Steinberg

So this is Jono.

very, think, space were product, was we would the and as on In firm. launching So the I lots aggressive to in knew really be that a of more I that market. fill very We sought little launched the voids existed nuanced white we answer. we there

Now that just you have you general specific. in have be -- so there's more to less just be very to

You can differentiated more want product. stand in to product we We clearly have out differentiated if always, crowded that a have market. can, defined

think, I our say, just offerings. would I so, of selection fund new we're prudent And in

again, And like a multi-factor thought was repurposed I earlier, currency things said some better actually funds, taking and what turn dynamic into a a we execution of positioning. in them we've hedging number what

as much we've more there, efficient product that than think been is so it set nuanced that the today I ever exists been. So very it's

about very good feel strategy I product So always.

Jeff Drezner

Thanks very much. Okay. Great.

Operator

remarks. further not this questions further over I'm the WisdomTree at like CEO, call now Steinberg, Thank to you. I back for any time. turn showing would Jonathan any to

Jonathan Steinberg

everyone you. to morning you time I thank good Have want just your and next a speak Thank interest day. this we'll for to and quarter.

Operator

participating. call. and concludes for today's you Thank Thank conference you. Ladies gentlemen, this

may disconnect. You now

WisdomTree (WT) 25 Oct 192019 Q3 Earnings call transcript