WisdomTree, Inc. (WT) Q4 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the WisdomTree Fourth Quarter and Year End 2011 Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to WisdomTree. Please go ahead.

Thank you. Good morning. Before we begin, I would like to reference our legal disclaimer available in today's presentation. This presentation may contain forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as believe, expect, anticipate and similar expressions suggesting future outcomes or events. Such forward-looking statements reflect our current expectations regarding future events and operating performance and speak only as of the date of this presentation. Such forward-looking statements are based on a number of assumptions, which may prove to be incorrect. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or result, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved. A number of risks and other factors could cause actual results to differ materially from the results discussed in forward-looking statements, including but not limited to, the risks set forth in this presentation and in the Risk Factors section in the most recent filings under the Securities Act of 1933 and Exchange -- Securities Exchange Act of 1934. Now it is my pleasure to turn the call over to WisdomTree's CEO, Jonathan Steinberg.

Thank you. Before I begin today's call, I'd like to reference the registration statement on Form-S1 for a public offering of our common stock, which we filed with the SEC. This registration statement has not yet become effective and we are in what is commonly referred to as a quiet period. Therefore, the company's communications are restricted by securities law. As a result, today's call will be limited to a discussion of our financial results for the fourth quarter ending and for the year ending December 31, 2011, and we unfortunately will not be able to hold our normal Q&A session. Let's begin. Fellow shareholders, 2011 was simply our best year ever. With $3.9 billion of inflows for the year, we set a new company record. That represents 3.4% of the ETF industry's total inflows, which is another company record. What really set 2011 apart from other years is the completeness of our execution. From new ETFs launched successfully, to the performance of our equity funds to the listing of our corporate stock on NASDAQ, the full team at WisdomTree executed against our plans and priorities, as well as handling all unexpected events that came our way without losing focus on our day-to-day business. The fourth quarter was solid. Inflows rebounded to $756 million or 1.9% of the industry's total. Revenues for the year were 57% to over $65 million. The company also reported its first full year of profitability with net income of $3 million. Recently, WisdomTree announced 2 new relationships, first with E*TRADE, where on a commission-free basis, they will market our ETFs to their customers, and second with Western Asset Management, a division of Legg Mason. Western will act as a new sub-advisor to WisdomTree on ETFs in the international fixed income, focusing on the credit space.…

Thank you, Jono, and good morning, everyone. I'd like to begin by first reviewing our overall financial results. We achieved another strong revenue quarter year-over-year with revenues increasing 21% to $16.2 million. However, as I mentioned on our last call, the third and fourth quarters were challenging market environments and because of that, our revenues declined 9% compared to the third quarter. Our total expenses increased 9% compared to the fourth quarter of last year and declined 7% from the third quarter. We had net income of $900,000 in the fourth quarter compared to $1.4 million in the third quarter, and a loss of $600,000 in the first quarter of last year. On an annual basis, we generated record results. Revenues increased 57% to a record $65.2 million, yet expenses only increased 26% and we had our first full year of net income of $3.1 million. You can see the operating leverage in our business model in our full year results. Revenue's up 57%, yet expenses up only 26%. Let's review our ETF revenues on the next slide. As expected, on the chart on the left, our ETF revenues reached $16 million in the fourth quarter. This was up from $13 million in the fourth quarter of last year due to higher average assets under management. However, ETF revenues declined compared to the third quarter due to lower average assets. The significant volatility in the market, which led to $1.9 billion of negative market movements in the third quarter and outflows, where emerging market currency and fixed-income ETFs, offset the inflows and positive market movements in the fourth quarter and led to lower average assets. However, despite these challenges, we generated record revenues for the full year from a diversified product offering. Both our equity and our non-equity ETFs experienced…

Thank you, Amit. In summary, we are the only public pure play in the fastest-growing segment of the asset management industry. We are the fastest-growing publicly traded asset manager for each of the past 3 years. We were the fastest growing of the top 10 ETF sponsors in 2011. We have a very strong mainstream, defensible product set with an enviable performance record. We've built a great brand. We have a superior business model and a truly talented operating team. Our goal for the coming year is to continue executing at these very high levels and maintain high relative growth rates by achieving our target of 3% to 5% of industry inflows. This ends the planned portion of today's call. Again, we regret that we cannot take your questions at this time, but I look forward to speaking with you next quarter. I thank you for your interest and support of WisdomTree.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.