UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2018~~

2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to
.

Commission File Number

001-10932

WisdomTree Investments, Inc.

(Exact name of registrant as specified in its charter)


~~Delaware~~		~~13-3487784~~
Delaware		13-3487784
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)



245 Park Avenue, 35^th Floor New York, New York		10167
(Address of principal executive ~~officers)~~offices)		(Zip Code)

212-801-2080

(Registrant’s ~~Telephone Number, Including Area Code)~~

telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	WETF	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation

S-T (§

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ☒ Yes

No ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

~~Non-accelerated filer~~	~~☐ (Do not check if a smaller reporting company)~~
Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐

☒

As of ~~August 1, 2018,~~

July 25

, 2019, there were ~~153,079,030~~

155,099,477

shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

Table of Contents

WISDOMTREE INVESTMENTS, INC.

Form10-Q

For the Quarterly Period Ended June 30, ~~2018~~

2019

TABLE OF CONTENTS


	~~Page~~ ~~Number~~
	Page Number
PART I: FINANCIAL INFORMATION		4

Item 1. Financial Statements		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3336

Item 3. Quantitative and Qualitative Disclosures about Market Risk		5356

Item 4. Controls and Procedures		5457

PART II: OTHER INFORMATION		5457

Item 1. Legal Proceedings		5457

Item 1A. Risk Factors		5457

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5457

Item 3. Defaults Upon Senior Securities		5558

Item 4. Mine Safety Disclosures		5558

Item 5. Other Information		5558
~~Item 6. Exhibits~~		56
Item 6. Exhibits		59

Unless otherwise indicated, references to “the Company,” “we,” “us,” “our” and “WisdomTree” mean WisdomTree Investments, Inc. and its subsidiaries.

WisdomTree

and Modern Alpha

are trademarks of WisdomTree Investments, Inc. in the United States and in other countries. All other trademarks are the property of their respective owners.

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form10-Q 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 our results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” included in our Annual Report on Form10-K for the fiscal year ended December ~~31, 2017 and Quarterly Report on Form10-Q~~ ~~for the quarter ended March~~ 31, 2018. 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 Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission, or the SEC, as exhibits to this Report, 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 Report may include statements about:

anticipated trends, conditions and investor sentiment in the global markets and exchange traded products, or 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 ~~intonon-U.S.~~ ~~markets;~~

~~competition~~ in ~~our business;~~non-U.S. markets; and

the effect of laws and regulations that apply to our business.

The forward-looking statements in this Report represent our views as of the date of this Report. 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 Report.

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Per Share Amounts)

   June 30,
2018 December 31,
2017
   (Unaudited)
Assets

Current assets:

Cash and cash equivalents
   $ 70,744 $ 54,193
Securities owned, at fair value
   3,719 66,294
Securitiesheld-to-maturity
   —   1,000
Accounts receivable
   27,329 21,309
Income taxes receivable
   —   6,978
Prepaid expenses
   6,545 3,550
Other current assets
   194 1,007


Total current assets
   108,531 154,331
Fixed assets, net
   10,028 10,693
Note receivable, net (Note 8)
   24,588 18,748
Indemnification receivable (Note 20)
   28,339 —
Securitiesheld-to-maturity
   20,229 20,299
Deferred tax assets, net
   2,024 1,050
Investments, carried at cost (Note 9)
   35,187 35,187
Goodwill (Note 22)
   85,856 1,799
Intangible assets (Note 22)
   613,227 12,085
Other noncurrent assets
   2,428 793


Total assets
   $ 930,437 $ 254,985


Liabilities and stockholders’ equity

Liabilities

Current liabilities:

Fund management and administration payable
   $ 22,002 $ 20,099
Compensation and benefits payable
   13,664 28,053
Deferred consideration – gold payments (Note 11)
   11,378 —
Income taxes payable
   1,252 —
Securities sold, but not yet purchased, at fair value
   2,026 950
Payable to ETFS Capital Limited (Note 3)
   7,033 —
Accounts payable and other liabilities
   9,366 8,246


Total current liabilities
   66,721 57,348
Long-term debt (Note 12)
   193,407 —
Deferred consideration – gold payments (Note 11)
   151,470 —
Deferred rent payable
   4,608 4,686
Other noncurrent liabilities (Note 20)
   28,339 —


Total liabilities
   444,545 62,034


Preferred stock – Series ANon-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding (Note 13)
   132,569 —


Commitments and Contingencies (Note 14)

Stockholders’ equity

Preferred stock, par value $0.01; 2,000 shares authorized:
   —   —
Common stock, par value $0.01; 250,000 shares authorized; issued and outstanding: 153,142 and 136,996 at June 30, 2018 and December 31, 2017, respectively
   1,531 1,370
Additionalpaid-in capital
   359,066 216,006
Accumulated other comprehensive income
   461 291
Accumulated deficit
   (7,735 ) (24,716 )


Total stockholders’ equity
   353,323 192,951


Total liabilities and stockholders’ equity
   $ 930,437 $ 254,985

June 30,
2019

December 31,
2018

(Unaudited)

Assets

Current assets:

Cash and cash equivalents
$
79,611
$
77,784

Securities owned, at fair value

9,095

8,873

Accounts receivable

24,442

25,834

Income taxes receivable

1,235

1,181

Prepaid expenses

6,192

4,441

Other current assets

1,017

163

Total current assets

121,592

118,276

Fixed assets, net
8,604

9,122

Notes receivable, net (Note 8)
31,485

28,722

Indemnification receivable (Note 21)
30,877

34,876

Securities held-to-maturity
20,136

20,180

Deferred tax assets, net
4,599

7,042

Investments, carried at cost (Note 9)
28,080

28,080

Right of use assets – operating leases (Note 14)
18,997

—

Goodwill (Note 23)
85,856

85,856

Intangible assets (Note 23)
603,291

603,209

Other noncurrent assets
1,258

2,155

Total assets
$
954,775
$
937,518

Liabilities and stockholders’ equity

Liabilities

Current liabilities:

Fund management and administration payable $
23,753
$
22,508

Compensation and benefits payable
14,619

18,453

Deferred consideration – gold payments (Note 11)
12,857

11,765

Securities sold, but not yet purchased, at fair value
543

1,698

Operating lease liabilities (Note 14)
3,632

—

Accounts payable and other liabilities
7,738

8,377

Total current liabilities
63,142

62,801

Long-term debt (Note 12)
195,762

194,592

Deferred consideration – gold payments (Note 11)
148,416

149,775

Operating lease liabilities (Note 14)
20,190

—

Deferred rent payable
—

4,570

Other noncurrent liabilities (Note 21)
30,877

34,876

Total liabilities

458,387

446,614

Preferred stock – Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding (Note 13)
132,569

132,569

Contingencies (Note
15
)

Stockholders’ equity

Preferred stock, par value $0.01; 2,000 shares authorized:

—

—

Common stock, par value $0.01; 250,000 shares authorized; issued and outstanding: 155,108 and 153,202 at June 30, 2019 and December 31, 2018, respectively

1,551

1,532

Additional
paid-in
capital

367,750

363,655

Accumulated other comprehensive income

725

467

Accumulated deficit

(6,207
)
(7,319
)

Total stockholders’ equity

363,819

358,335

Total liabilities and stockholders’ equity
$
954,775
$
937,518

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

   Three Months Ended June 30, Six Months Ended June 30,
   2018 2017 2018 2017
Operating Revenues:

Advisory fees
   $ 73,778 $ 55,856 $ 132,234 $ 108,884
Other income
   997 386 1,445 725


Total revenues
   74,775 56,242 133,679 109,609


Operating Expenses:

Compensation and benefits
   19,301 18,421 38,133 36,295
Fund management and administration
   14,621 10,112 25,533 19,712
Marketing and advertising
   3,778 3,825 6,973 7,362
Sales and business development
   4,503 3,389 8,316 6,351
Contractual gold payments (Note 11)
   2,715 —   2,715 —
Professional and consulting fees
   1,560 1,221 3,196 2,779
Occupancy, communications and equipment
   1,574 1,371 2,937 2,724
Depreciation and amortization
   337 352 692 689
Third-party distribution fees
   1,666 670 3,391 1,602
Acquisition-related costs (Note 3)
   7,928 —   9,990 —
Other
   2,261 1,842 4,051 3,466


Total expenses
   60,244 41,203 105,927 80,980


Operating income
   14,531 15,039 27,752 28,629
Other Income/(Expenses):

Interest expense
   (2,356 ) —   (2,356 ) —
Gain on revaluation of deferred consideration – gold payments (Note 11)
   9,898 —   9,898 —
Interest income
   612 641 1,574 1,225
Settlement gain
   —   6,909 —   6,909
Other gains and losses, net
   (501 ) (364 ) (762 ) 284


Income before taxes
   22,184 22,225 36,106 37,047
Income tax expense
   5,460 10,120 9,958 18,062


Net income
   $ 16,724 $ 12,105 $ 26,148 $ 18,985


Net income per share—basic
   $ 0.10 $ 0.09 $ 0.17 $ 0.14


Net income per share—diluted
   $ 0.10 $ 0.09 $ 0.17 $ 0.14


Weighted-average common shares—basic
   149,056 134,557 142,230 134,472


Weighted-average common shares—diluted
   163,346 135,574 149,979 135,613


Cash dividends declared per common share
   $ 0.03 $ 0.08 $ 0.06 $ 0.16

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Operating Revenues:

Advisory fees
$
65,627
$
73,778
$
130,467
$
132,234

Other income

666

997

1,311

1,445

Total revenues

66,293

74,775

131,778

133,679

Operating Expenses:

Compensation and benefits
21,300

19,301

42,601

38,133

Fund management and administration
15,576

14,621

30,742

25,533

Marketing and advertising
2,910

3,778

5,590

6,973

Sales and business development
4,171

4,503

8,593

8,316

Contractual gold payments (Note 11)
3,110

2,715

6,208

2,715

Professional and consulting fees
1,296

1,560

2,778

3,196

Occupancy, communications and equipment
1,548

1,574

3,166

2,937

Depreciation and amortization
264

337

533

692

Third-party distribution fees
1,919

1,666

4,319

3,391

Acquisition-related costs (Note 3)
33

7,928

346

9,990

Other

2,255

2,261

4,308

4,051

Total expenses

54,382

60,244

109,184

105,927

Operating income

11,911

14,531

22,594

27,752

Other Income/(Expenses):

Interest expense
(2,910
)
(2,356
)
(5,802
)
(2,356
)
(Loss)/gain on revaluation of deferred consideration – gold payments (Note 11)
(4,037
)
9,898

367

9,898

Interest income
818

612

1,597

1,574

Impairment (Note 14)
—

—

(572
)
—

Other gains and losses, net
284

(501
)
(4,343
)
(762
)

Income before income taxes

6,066

22,184

13,841

36,106

Income tax expense

3,587

5,460

2,538

9,958

Net income
$
2,479
$
16,724
$
11,303
$
26,148

Earnings per share—basic
$
0.01
$
0.10
$
0.07
$
0.17

Earnings per share—diluted
$
0.01
$
0.10
$
0.07
$
0.17

Weighted-average common shares—basic

151,818

149,056

151,722

142,230

Weighted-average common shares—diluted

167,249

163,346

166,855

149,979

Cash dividends declared per common share
$
0.03
$
0.03
$
0.06
$
0.06

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In Thousands)

(Unaudited)

   Three Months Ended June 30, Six Months Ended June 30,
   2018 2017 2018 2017
Net income
   $ 16,724 $ 12,105 $ 26,148 $ 18,985
Other comprehensive (loss)/income

Change in unrealized gains/(losses) onavailable-for-sale debt securities, net of tax
   17 (31 ) 477 (134 )
Foreign currency translation adjustment
   (719 ) 194 (307 ) 439


Other comprehensive (loss)/income
   (702 ) 163 170 305


Comprehensive income
   $ 16,022 $ 12,268 $ 26,318 $ 19,290

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Net income
$
2,479
$
16,724
$
11,303
$
26,148

Other comprehensive (loss)/income

Change in unrealized gains on available-for-sale debt securities, net of tax
—

17

—

477

Foreign currency translation adjustment

(33
)
(719
)
258

(307
)

Other comprehensive (loss)/income

(33
)
(702
)
258

170

Comprehensive income
$
2,446
$
16,022
$
11,561
$
26,318

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of ~~Cash Flows~~

Changes in Stockholders’ Equity

(In Thousands)

(Unaudited)

   Six Months Ended June 30,
   2018 2017
Cash flows from operating activities:

Net income
   $ 26,148 $ 18,985
Adjustments to reconcile net income to net cash provided by operating activities:

Advisory fees paid in gold and other precious metals
   (11,033 ) —
Contractual gold payments
   2,715 —
Gain on revaluation of deferred consideration – gold payments
   (9,898 ) —
Stock-based compensation
   6,838 6,951
Deferred income taxes
   (1,055 ) 5,890
Paid-in-kind interest income (Note 8)
   (840 ) —
Settlement gain
   —   (6,909 )
Amortization of credit facility issuance costs
   637 —
Depreciation and amortization
   692 689
Other
   834 301
Changes in operating assets and liabilities, net of the effects of the ETFS Acquisition:

Securities owned, at fair value
   (2,028 ) 1,148
Accounts receivable
   2,871 (1,671 )
Income taxes receivable/payable
   8,109 2,217
Prepaid expenses
   (1,669 ) (1,405 )
Gold and other precious metals
   8,930 —
Other assets
   975 143
Acquisition payable
   —   (3,542 )
Fund management and administration payable
   (380 ) (729 )
Compensation and benefits payable
   (21,170 ) (3,958 )
Securities sold, but not yet purchased, at fair value
   1,077 (1,222 )
Payable to ETFS Capital Limited
   222 —
Accounts payable and other liabilities
   (2,961 ) 395


Net cash provided by operating activities
   9,014 17,283


Cash flows from investing activities:

Purchase of fixed assets
   (34 ) (220 )
Purchase of securitiesheld-to-maturity
   —   (759 )
Purchase of debt securitiesavailable-for-sale
   —   (38,680 )
Purchase of investments
   —   (5,000 )
Funding of AdvisorEngine note receivable (Note 8)
   (5,000 ) —
Proceeds fromheld-to-maturity securities maturing or called prior to maturity
   1,063 2,102
Proceeds from sales and maturities of debt securitiesavailable-for-sale
   64,498 46,065
Cash paid – ETFS Acquisition, net of cash acquired (Note 3)
   (233,172 ) —


Net cash (used in)/provided by investing activities
   (172,645 ) 3,508


Cash flows from financing activities:

Dividends paid
   (9,167 ) (21,872 )
Shares repurchased
   (1,006 ) (3,693 )
Credit facility issuance costs
   (8,690 ) —
Preferred stock issuance costs
   (181 ) —
Proceeds from the issuance of long-term debt (Note 12)
   200,000 —
Proceeds from exercise of stock options
   139 42


Net cash provided by/(used in) financing activities
   181,095 (25,523 )


(Decrease)/increase in cash flow due to changes in foreign exchange rate
   (913 ) 624


Net increase/(decrease) in cash and cash equivalents
   16,551 (4,108 )
Cash and cash equivalents—beginning of period
   54,193 92,722


Cash and cash equivalents—end of period
   $ 70,744 $ 88,614


Supplemental disclosure of cash flow information:

Cash paid for taxes
   $ 2,841 $ 9,708


Cash paid for interest
   $ 1,241 $ —

~~Refer to Note 3 for information regarding thenon-cash~~ ~~effects of the ETFS Acquisition, includingnon-cash~~ ~~consideration paid.~~

For the Three Months Ended June 30, 2019

Common Stock

Accumulated

Accumulated
Deficit

Total

Shares
Issued

Par
Value

Additional
Paid-In

Capital

Other
Comprehensive
Income

Balance—April 1, 2019

155,056
$
1,551
$
364,717
$
758
$
(3,592
) $
363,434

Restricted stock issued and vesting of restricted stock units, net

66

—

—

—

—

—

Shares repurchased

(14
)
—

(102
)
—

—

(102
)
Stock-based compensation

—

—

3,135

—

—

3,135

Other comprehensive loss

—

—

—

(33
)
—

(33
)
Dividends

—

—

—

—

(5,094
)
(5,094
)
Net income

—

—

—

—

2,479

2,479

Balance—June 30, 2019

155,108
$
1,551
$
367,750
$
725
$
(6,207
) $
363,819

For the Three Months Ended June 30, 2018

Common Stock

Accumulated

Accumulated
Deficit

Total

Shares
Issued

Par
Value

Additional
Paid-In

Capital

Other
Comprehensive
Income

Balance—April 1, 2018

137,751
$
1,378
$
218,488
$
1,163
$
(19,424
) $
201,605

Common stock issued (Note 3)

15,250

153

137,097

—

—

137,250

Restricted stock issued and vesting of restricted stock units, net

158

—

—

—

—

—

Shares repurchased

(27
)
—

(272
)
—

—

(272
)
Exercise of stock options, net

10

—

85

—

—

85

Stock-based compensation

—

—

3,529

—

—

3,529

Reclassification of stock issuance costs to temporary equity

—

—

139

—

—

139

Other comprehensive loss

—

—

—

(702
)
—

(702
)
Dividends

—

—

—

—

(5,035
)
(5,035
)
Net income

—

—

—

—

16,724

16,724

Balance—June 30, 2018

153,142
$
1,531
$
359,066
$
461
$
(7,735
) $
353,323

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(In Thousands)

(Unaudited)


	For the Six Months Ended June 30, 2019
	Common Stock						Additional			Accumulated Other		Accumulated Deficit			Total
	Shares Issued			Par Value			Paid-In Capital			Comprehensive Income		Accumulated Deficit			Total
Balance—January 1, 2019		153,202		$	1,532		$	363,655		$	467	$	(7,319	)	$	358,335
Restricted stock issued and vesting of restricted stock units, net		2,211			21			(21	)		—		—			—
Shares repurchased		(325	)		(2	)		(2,105	)		—		—			(2,107	)
Exercise of stock options, net		20			—			14			—		—			14
Stock-based compensation		—			—			6,207			—		—			6,207
Other comprehensive income		—			—			—			258		—			258
Dividends		—			—			—			—		(10,191	)		(10,191	)
Net income		—			—			—			—		11,303			11,303

Balance—June 30, 2019		155,108		$	1,551		$	367,750		$	725	$	(6,207	)	$	363,819

	For the Six Months Ended June 30, 2018
	Common Stock					Additional			Accumulated Other		Accumulated Deficit			Total
	Shares Issued			Par Value		Paid-In Capital			Comprehensive Income		Accumulated Deficit			Total
Balance—January 1, 2018		136,996		$	1,370	$	216,006		$	291	$	(24,716	)	$	192,951
Common stock issued (Note 3)		15,250			153		137,097			—		—			137,250
Restricted stock issued and vesting of restricted stock units, net		825			7		(7	)		—		—			—
Shares repurchased		(87	)		—		(1,006	)		—		—			(1,006	)
Exercise of stock options, net		158			1		138			—		—			139
Stock-based compensation		—			—		6,838			—		—			6,838
Other comprehensive income		—			—		—			170		—			170
Dividends		—			—		—			—		(9,167	)		(9,167	)
Net income		—			—		—			—		26,148			26,148

Balance—June 30, 2018		153,142		$	1,531	$	359,066		$	461	$	(7,735	)	$	353,323

The accompanying notes are an integral part of these consolidated financial statements

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WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	11,303		$	26,148
Adjustments to reconcile net income to net cash provided by operating activities:
Advisory fees received in gold and other precious metals		(22,872	)		(11,033	)
Contractual gold payments		6,208			2,715
Stock-based compensation		6,207			6,838
Deferred income taxes		2,443			(1,055	)
Amortization of right of use asset		1,590			—
Amortization of credit facility issuance costs		1,430			637
Paid-in-kind interest income (Note 8)		(1,223	)		(840	)
Impairment		572			—
Depreciation and amortization		533			692
Gain on revaluation of deferred consideration – gold payments		(367	)		(9,898	)
Other		5			834
Changes in operating assets and liabilities:
Securities owned, at fair value		(222	)		(2,028	)
Accounts receivable		1,833			2,871
Income taxes receivable/payable		(44	)		8,109
Prepaid expenses		(1,746	)		(1,669	)
Gold and other precious metals		16,318			8,930
Other assets		(552	)		975
Fund management and administration payable		1,231			(380	)
Compensation and benefits payable		(3,938	)		(21,170	)
Securities sold, but not yet purchased, at fair value		(1,155	)		1,077
Payable to ETFS Capital Limited		—			222
Operating lease liabilities		(1,760	)		—
Accounts payable and other liabilities		(435	)		(2,961	)

Net cash provided by operating activities		15,359			9,014

Cash flows from investing activities:
Purchase of fixed assets		(15	)		(34	)
Funding of AdvisorEngine notes receivable (Note 8)		(1,540	)		(5,000	)
Proceeds from held-to-maturity securities maturing or called prior to maturity		39			1,063
Proceeds from sales and maturities of debt securities available-for-sale		—			64,498
Cash paid – ETFS Acquisition, net of cash acquired (Note 3)		—			(233,172	)

Net cash used in investing activities		(1,516	)		(172,645	)

Cash flows from financing activities:
Dividends paid		(10,191	)		(9,167	)
Shares repurchased		(2,107	)		(1,006	)
Credit facility issuance costs		—			(8,690	)
Preferred stock issuance costs		—			(181	)
Proceeds from the issuance of long-term debt (Note 12)		—			200,000
Proceeds from exercise of stock options		14			139

Net cash (used in)/provided by financing activities		(12,284	)		181,095

Increase/(decrease) in cash flow due to changes in foreign exchange rate		268			(913	)

Net increase in cash and cash equivalents		1,827			16,551
Cash and cash equivalents—beginning of period		77,784			54,193

Cash and cash equivalents—end of period	$	79,611		$	70,744


Supplemental disclosure of cash flow information:
Cash paid for taxes	$	4,403		$	2,841

Cash paid for interest	$	4,559		$	1,241

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NON-CASH ACTIVITIES

On January 1, 2019, the Company recognized a right-of-use asset and lease liability of $19,827 and $24,817, respectively, upon the implementation of Accounting Standards Update 2016-02,

Leases.

See Note 14 for additional information.

In April 2018, the Company issued 14,750 shares of preferred stock and 15,250,000 shares of common stock to ETFS Capital in connection with the ETFS Acquisition which were collectively valued at $270,000 (See Note 3). In addition, a wholly-owned subsidiary of the Company assumed a deferred consideration obligation which was valued at $172,746 on the acquisition date (See Note 11).

The accompanying notes are an integral part of these consolidated financial statements

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WisdomTree Investments, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(In Thousands, Except Share and Per Share Amounts)

1. Organization and Description of Business

WisdomTree Investments, Inc., through its global subsidiaries (collectively, “WisdomTree” or the “Company”), is an exchange traded product (“ETP”) sponsor and asset manager headquartered in New York. WisdomTree offers ETPs covering equity, commodity, fixed income, ~~currencies, commodities~~leveraged and inverse, currency and alternative strategies. The Company has the following wholly-owned operating subsidiaries:

•

~~WisdomTree Asset Management, Inc.~~ is a New York based investment adviser registered with the SEC providing investment advisory and other management services to the WisdomTree Trust (“WTT”) and WisdomTree exchange traded funds (“ETFs”). The WisdomTree ETFs are issued in the U.S. by WTT. WTT, a~~non-consolidated~~ ~~third party, is a Delaware statutory trust registered with the SEC as anopen-end~~ ~~management investment company. The Company has licensed to WTT the use of certain of its own indexes on an exclusive basis for the WisdomTree ETFs in the U.S.~~

•

~~ETFS Management Company (Jersey) Limited~~(“ManJer”) is a Jersey based management company providing investment and other management services to nine issuers (the “ETFS Issuers”) and the ETPs issued and listed by the ETFS Issuers covering commodity, currency and~~short-and-leveraged~~ ~~strategies.~~

•

~~Boost Management Limited~~~~(“BML”) is a Jersey based management company providing investment and other management services to Boost Issuer PLC (“BI”) and Boost ETPs. The Boost ETPs are issued by BI. BI, anon-consolidated~~ ~~third party, is a public limited company domiciled in Ireland.~~

•

~~WisdomTree Management Limited~~ (“WML”) is an Ireland based management company providing investment and other management services to WisdomTree Issuer plc (“WTI”) and WisdomTree UCITS ETFs. The WisdomTree UCITS ETFs are issued by WTI. WTI, a~~non-consolidated~~ ~~third party, is a public limited company domiciled in Ireland.~~

•

~~WisdomTree UK Limited~~~~is a U.K. based company registered with the Financial Conduct Authority currently providing management and other services to ManJer, BML and WML.~~

•

~~WisdomTree Europe Limited~~ ~~is a U.K. based company registered with the Financial Conduct Authority currently providing management and other services to ManJer, BML and WML.~~

•

~~WisdomTree Japan Inc.~~(“WTJ”) is a Japan based company registered with Japan’s Ministry of Finance that serves the institutional market selling U.S. listed WisdomTree ETFs in Japan. In July 2018, the Company determined to restructure its distribution strategy in Japan. As a result, the Company will close WTJ and anticipates expanding its existing relationship with a third party to manage distribution of WisdomTree ETFs in Japan.

•

~~WisdomTree Commodity Services, LLC~~ (“WTCS”) is a New York based company that serves as the managing owner and commodity pool operator of the WisdomTree Continuous Commodity Index Fund. WTCS is registered with the Commodity Futures Trading Commission and is a member of the National Futures Association.

•

~~WisdomTree Asset Management Canada, Inc.~~ ~~(“WTAMC”) is a Canada based investment fund manager registered with the Ontario Securities Commission providing fund management services to locally-listed WisdomTree Canadian ETFs.~~

WisdomTree Asset Management, Inc.

is a New York based investment adviser registered with the SEC, providing investment advisory and other management services to the WisdomTree Trust (“WTT”) and WisdomTree exchange-traded funds (“ETFs”). The WisdomTree ETFs are issued in the U.S. by WTT. WTT, a
non-consolidated
third party, is a Delaware statutory trust registered with the SEC as an
open-end
management investment company. The Company has licensed to WTT the use of certain of its own indexes on an exclusive basis for the WisdomTree ETFs in the U.S.

ETFS Management Company (Jersey) Limited

(“ManJer”) is a Jersey based management company providing management services to nine issuers (the “ETFS Issuers”) in respect of the ETPs issued and listed by the ETFS Issuers covering commodity, currency and
leveraged-and-inverse
strategies.

Boost Management Limited

(“BML”) is a Jersey based management company providing management services to Boost Issuer PLC (“BI”) in respect of the Boost ETPs issued by BI. BI, a
non-consolidated
third party, is a public limited company domiciled in Ireland.

WisdomTree Management Limited

(“WML”)
is an Ireland based management company providing management services to WisdomTree Issuer plc (“WTI”) in respect of the WisdomTree UCITS ETFs issued by WTI. WTI, a
non-consolidated
third party, is a public limited company domiciled in Ireland.

WisdomTree UK Limited

(“WTUK”)
is a U.K. based company registered with the Financial Conduct Authority currently providing distribution and support services to ManJer, BML and WML.

WisdomTree Europe Limited

is a U.K. based company which is the legacy distributor of the Boost ETPs and WisdomTree UCITS ETFs. These services are now provided directly by WTUK. WisdomTree Europe Limited is no longer regulated and does not provide any regulated services.

WisdomTree Ireland Limited

is an Ireland based company authorized by the Central Bank of Ireland providing distribution services to ManJer, BML and WML.

WisdomTree Asset Management Canada, Inc.

(“WTAMC”) is a Canada based investment fund manager registered with the Ontario Securities Commission providing fund management services to locally-listed WisdomTree Canadian ETFs.

WisdomTree Commodity Services, LLC

(“WTCS”) is a New York based company that serves as the managing owner and commodity pool operator of the WisdomTree Continuous Commodity Index Fund. WTCS is registered with the Commodity Futures Trading Commission and is a member of the National Futures Association.

Acquisition of ETFS

On April 11, 2018, the Company acquired the European exchange-traded commodity, currency and~~short-and-leveraged~~

leveraged-and-inverse

business (“ETFS”) of ETFS Capital Limited (“ETFS Capital”, formerly known as ETF Securities Limited). This acquisition is referred to throughout the consolidated financial statements as the ETFS Acquisition. See Note 3 for additional information.

Restructuring of Distribution Strategy in Japan

In July 2018, the Company determined to restructure its distribution strategy in Japan and has expanded its existing relationship with Premia Partners Company Limited to manage distribution of the Company’s ETFs in Japan. As a result, WisdomTree Japan Inc. (“WTJ”) has ceased operations and is in the process of being liquidated. WTJ reported operating losses during the three months ended June 30, 2019 and 2018 of $35 and $1,125, respectively, and during the six months ended June 30, 2019 and 2018 of $465 and $2,357, respectively. WTJ also recognized an impairment expense of $572 in connection with the termination of its office lease during the six months ended June 30, 2019.

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2. Significant Accounting Policies

Basis of Presentation

These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and in the opinion of management reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of financial condition, results of operations, and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company’s ~~wholly owned~~wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The financial results of ETFS are included in ~~our~~the Company’s consolidated financial statements since the acquisition date, April 11, 2018 (See Note 3).

Certain accounts in the prior years’ consolidated financial statements have been reclassified to conform to the current year’s consolidated financial statement presentation. The following table summarizes these reclassifications for the three and six months ended June 30, 2017, which had no effect on previously reported net income.

Operating Revenues:    Three Months
Ended
June 30, 2017    Six Months
Ended
June 30, 2017
Advisory fees (previously reported)
   $ 56,114    $ 109,376
Other ETP fees reclassified to Other income
   (258 )    (492 )




Advisory fees (currently reported)
   $ 55,856    $ 108,884




Settlement gain (previously reported)
   $ 6,909    $ 6,909
Reclassify to Other Income/(Expenses)
   (6,909 )    (6,909 )




Settlement gain (currently reported)
   $ —      $ —




Other income (previously reported)
   $ 405    $ 1,742
Other ETP fees reclassified from Advisory fees
   258    492
Interest income reclassified to Other Income/(Expenses)
   (641 )    (1,225 )
Realized and unrealized losses reclassified to Other gains and losses, net
   364    519
Miscellaneous other income reclassified to Other gains and losses, net
   —      (803 )




Other income (currently reported)
   $ 386    $ 725




Total revenues (currently reported)
   $ 56,242    $ 109,609




Other Income/(Expenses):

Interest income reclassified from operating revenues
   $ 641    $ 1,225




Settlement gain reclassified from operating revenues
   $ 6,909    $ 6,909




Other gains and losses, net (previously reported)
   $ —      $ —
Realized and unrealized losses reclassified from operating revenues
   (364 )    (519 )
Miscellaneous other income reclassified from operating revenues
   —      803




Other gains and losses, net (currently reported)
   $ (364 )    $ 284

Consolidation

The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). The usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. If the Company has a majority voting interest in a VOE, the entity is consolidated. The Company has a controlling financial interest in a VIE when the Company has a variable interest that provides it with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company reassesses its evaluation of whether an entity is a VIE when certain reconsideration events occur.

Segment and Geographic Information

The Company operates as an ETP sponsor and asset manager providing investment advisory services globally. These activities are reported in the Company’s U.S. Business and International Business reportable segments. The International Business reportable segment includes the results of the Company’s European operations and Canadian operations.

The financial results of ETFS are included in the International Business reportable segment as of the acquisition date.

Foreign Currency Translation

Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar are translated based on the end of period exchange rates from local currency to U.S. dollars. Results of operations are translated at the average exchange rates in effect during the period. The impact of the foreign currency translation adjustment is included in the Consolidated Statements of Comprehensive Income as a component of other comprehensive (loss)/income.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. Actual results could differ materially from those estimates.

Revenue Recognition

The Company earns substantially all of its revenue in the form of advisory fees from its ETPs and recognizes this revenue over time, as the performance obligation is satisfied. ETP advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.

Contractual Gold Payments

Contractual gold payments are measured and paid monthly based upon the average daily spot price of gold (See Note 11).

Marketing and Advertising

Advertising costs, including media advertising and production costs, are expensed when incurred.

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Depreciation and Amortization

Depreciation is provided for using the straight-line method over the estimated useful lives of the related assets as follows:



Equipment	5 years
Furniture and fixtures	~~Furniture and fixtures~~	15 years

Leasehold improvements are amortized over the term of their respective leases or service lives of the improvements, whichever is shorter. Fixed assets are recorded at cost less accumulated depreciation and amortization.

~~Occupancy~~

The Company accounts for its office lease facilities as operating leases, which may include free rent periods and escalation clauses. The Company expenses the lease payments associated with operating leases on a straight-line basis over the lease term.

Stock-Based Awards

Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all equity awards based on estimated fair values. Stock-based compensation is measured based on the grant-date fair value of the award and is amortized over the relevant service period. Forfeitures are recognized when they occur.

Third-Party Distribution Fees

The Company pays a percentage of its advisory fee revenues based on incremental growth in AUM, subject to caps or minimums, to marketing agents to sell WisdomTree ETFs and for including WisdomTree ETFs on third-party customer platforms.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of

90 days

or less at the time of purchase to be classified as cash equivalents. The Company maintains deposits with financial institutions in an amount that is in excess of federally insured limits.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are customer and other obligations due under normal trade terms. An allowance for doubtful accounts is not provided since, in the opinion of management, all accounts receivable recorded are deemed current and collectible.

Impairment of Long-Lived Assets

The Company performs a review for the impairment of long-lived assets when events or changes in circumstances indicate that the estimated undiscounted future cash flows expected to be generated by the assets are less than their carrying amounts or when other events occur which may indicate that the carrying amount of an asset may not be recoverable.

~~Note~~

Notes Receivable

~~Note~~

Notes receivable isare accounted for on an amortized cost basis, net of original issue discount. Interest income is accrued over the term of the ~~note~~notes using the effective interest method. The Company performs a review for the impairment of the ~~note~~notes receivable on a quarterly basis and provides for an allowance for credit losses if all or a portion of the ~~note is~~notes are determined to be uncollectible.

Securities Owned and Securities Sold, but not yet Purchased (at fair value)

Securities owned and securities sold, but not yet purchased are securities classified as either trading or

available-for-sale.

These securities are recorded on their trade date and are measured at fair value. All equity securities are classified by the Company as trading. Debt securities are classified based primarily on the Company’s intent to hold or sell the security. Changes in the fair value of securities classified as trading are reported in other income in the period the change occurs. Unrealized gains and losses of securities classified as

available-for-sale

are included in other comprehensive income. Once sold, amounts reclassified out of accumulated other comprehensive income and into earnings are determined using the specific identification method.

Available-for-sale

securities are assessed for impairment on a quarterly basis.

Securities

Held-to-Maturity

The Company accounts for certain of its investments as

held-to-maturity

on a trade date basis, which are recorded at amortized cost. For

held-to-maturity

investments, the Company has the intent and ability to hold investments to maturity and it is not~~more-likely-than-not~~ more-

likely-than-not

that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. On a quarterly basis, the Company reviews its portfolio of investments for impairment. If a decline in fair value is deemed to be other-than-temporary, the security is written down to its fair value through earnings.

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Investments, Carried at Cost

The Company accounts for equity investments that do not have a readily determinable fair value as cost method investments under the measurement alternative prescribed within Accounting Standards Update (“ASU”)

2016-01,

Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities

, to the extent such investments are not subject to consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment.

Goodwill

Goodwill is the excess of the fair value of the purchase price over the fair values of the identifiable net assets at the acquisition date. The Company tests its goodwill for impairment at least annually and at the time of a triggering event requiring

re-evaluation,

if one were to occur, in accordance with ASU

2017-04,

Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

. The Company early adopted the revised guidance for the impairment tests performed after January 1, 2017. Under the revised guidance, goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value. If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill. A reporting unit is an operating segment or a component of an operating segment provided that the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component.

For impairment testing purposes, goodwill has been allocated to the Company’s U.S. Business reporting unit which is assessed annually for impairment on April 30^{th (See Note 22)
. In addition, goodwill arising from the ETFS Acquisition (See Note 3) has been allocated to the European Business reporting unit, included within the International Business reportable segment and is assessed annually for impairment on November 30^{th
. When performing its goodwill impairment test, the Company considers a qualitative assessment, when appropriate, and the income approach, market approach and its market capitalization when determining the fair value of its reporting units.}}

Intangible Assets

Indefinite-lived intangible assets are tested for impairment at least annually and are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair values are less than their carrying values.

Finite-lived intangible assets, if any, are amortized over their estimated useful life, which is the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the Company. These intangible assets are tested for impairment at the time of a triggering event, if one were to occur. Finite-lived intangible assets may be impaired when the estimated undiscounted future cash flows generated from the assets are less than their carrying amounts.

The Company may rely on a qualitative assessment when performing its intangible asset impairment test. Otherwise, the impairment evaluation is performed at the lowest level of reasonably identifiable cash flows independent of other assets. The annual impairment testing date for all of the Company’s intangible assets is

November 30

Leases

Effective January 1, 2019, the Company accounts for its lease obligations in accordance with Accounting Standards Codification (“ASC”) Topic 842,

Leases

(ASC 842), ~~including intangible assets arising from~~which requires the ~~ETFS Acquisition~~recognition of both (i) a lease liability equal to the present value of the remaining lease payments and (ii) an offsetting

right-of-use

asset (See Note 3)14).

The remaining lease payments are discounted using the rate implicit in the lease, if known, or otherwise the Company’s incremental borrowing rate. After lease commencement,

right-of-use

assets are assessed for impairment and otherwise are amortized over the remaining lease term on a straight-line basis. These recognition requirements are not applied to short-term leases which are those with a lease term of 12 months or less. Instead, lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term.

ASC 842 also provides a practical expedient which allows for consideration in a contract to be accounted for as a single lease component rather than allocated between lease and
non-lease
components. The Company has elected to apply this practical expedient to all lease contracts, where applicable.

Upon adoption of ASC 842 on January 1, 2019, the Company applied the transitional practical expedients to its outstanding leases and therefore the Company did not reassess (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company also elected to apply the new lease requirements at the effective date, rather than the beginning of the earliest comparative period presented.

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Deferred Consideration

– Gold Payments

Deferred consideration represents the present value of an obligation to pay gold to a third party into perpetuity and is measured using forward-looking gold prices and a selected discount rate (See Note 5)11). Changes in the fair value of this obligation are reported as ~~gain/~~(loss)

/gain

on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations.

Long-Term Debt

Long-term debt is carried at amortized cost, net of debt issuance costs. Interest expense is recognized using the effective interest method and includes amortization of debt issuance costs over the life of the debt.

Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Net income available to common stockholders represents net income of the Company reduced by an allocation of earnings to participating securities. The preferred stock issued in connection with the ETFS Acquisition (see Note 13) and unvested share-based payment awards that contain

non-forfeitable

rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant to the

two-class

method. Share-based payment awards that do not contain such rights are not deemed participating securities and are included in diluted shares outstanding (if dilutive) under the treasury stock method. Diluted EPS reflects the reduction in earnings per share assuming dilutive options or other dilutive contracts to issue common stock were exercised or converted into common stock. Diluted EPS is calculated under the treasury stock and

if-converted

method and the

two-class

method. The calculation that results in the most dilutive EPS amount for the common stock is reported in the Company’s consolidated financial statements.

Income Taxes

The Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax ~~basis~~bases of assets and liabilities using the enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are ~~adjusted~~reduced by a valuation allowance if, based on the weight of available evidence, it is

more-likely-than-not

that some portion or all the deferred tax assets will not be realized.

Tax positions are evaluated utilizing a

two-step

process. The Company first determines whether any of its tax positions are~~more-likely-than-not~~ more-

likely-than-not

to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company records interest expense and penalties related to tax expenses as income tax expense.

Non-income

based taxes are recorded as part of other liabilities and other expenses.

Recently Issued Accounting Pronouncements

~~In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU2014-09,~~~~Revenue from Contracts with Customers~~ ~~(ASU2014-09),~~ a comprehensive revenue recognition standard on the financial reporting requirements for revenue from contracts entered into with customers. In July 2015, the FASB deferred this ASU’s effective date by one year, to interim and annual periods beginning after December 15, 2017. The deferral allows early adoption at the original effective date. During 2016, the FASB issued ASU~~2016-08,~~ ~~which clarifies principal versus agent considerations, ASU2016-10,~~ ~~which clarifies identifying performance obligations and the licensing implementation guidance, and ASU2016-12,~~ ~~which amends certain aspects of the new revenue recognition standard pursuant to ASU2014-09.~~ ~~ASU2014-09~~ ~~allows for the use of either the retrospective or modified retrospective adoption method. The guidance in ASU2014-09,~~ and the related amendments, became effective for the Company on January 1, 2018. The Company adopted this standard under the modified retrospective method and has determined the standard did not have a material impact on the Company’s historical pattern of recognizing revenue from its contracts with customers (See Note 16).

~~In January 2016, the FASB issued ASU2016-01,~~~~Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities~~ ~~(ASU2016-01).~~ The main objective of the standard is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in the update make targeted improvements to generally accepted accounting principles. These include requiring equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.~~Available-for-sale~~ classification for equity investments with readily determinable fair values will no longer be permissible. However, an entity may choose a measurement alternative to measure equity investments that do not have readily determinable fair values by recognizing these financial instruments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. ASU~~2016-01~~ is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted this standard on January 1, 2018 and has elected to apply the measurement alternative to its equity investments that do not have readily determinable fair values. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU

2016-13,

Financial Instruments-Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments ~~(ASU~~

(ASU

2016-13).

The main objective of the standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In issuing this standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain

off-balance

sheet credit exposures. The standard is applicable to loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, loan commitments and certain other

off-balance

sheet credit exposures, debt securities (including those

held-to-maturity)

and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The CECL model does not apply to

available-for-sale

debt securities. For

available-for-sale

debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities. Accordingly, the new methodology will be utilized when assessing the Company’s financial instruments for impairment. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU

2016-13

also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. ASU

2016-13

is effective for years beginning after December 15, 2019, including interim periods within those fiscal years under a modified retrospective approach. Early adoption is permitted for the periods beginning after December 15, 2018. The Company is currently evaluating the impact that ~~the~~this standard will have on its consolidated financial ~~statements.~~

statements and plans to adopt this standard on January 1, 2020.

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In ~~February 2016,~~August 2018, the FASB issued ASU~~2016-02,~~~~Leases~~ ~~(ASU2016-02)~~ 2018-13,

Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

(ASU 2018-13), which ~~requires lessees~~modifies the disclosure requirements on fair value measurements, including removing the requirement to ~~include most leases on~~disclose (1) the ~~balance sheet.~~amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy

(2)

the policy for timing of transfers between levels and

(3)

the valuation processes for Level

fair value measurements. ASU~~2016-02~~

2018-13

also added new disclosures including the requirement to disclose (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level

fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level

fair value measurements. ASU

2018-13

is effective for fiscal years (and interim reporting periods within those years) beginning after December

15 ~~2018~~

2019

and early adoption is permitted. This standard will only impact the disclosures pertaining to fair value measurements. The Company ~~is currently evaluating the impact that the~~plans to adopt this standard ~~will have~~ on ~~its consolidated financial statements and expects, at a minimum, that its implementation will result in agross-up~~ ~~on the consolidated balance sheets upon recognition ofright-of-use~~ ~~assets and lease liabilities associated with the future minimum payments required under operating leases as disclosed in Note 14.~~

January

2020

3. Business Combination

Summary

On November 13, 2017, the Company entered into a Share Sale Agreement as amended by the Waiver and Variation Agreement, dated April 11, 2018 (collectively referred to as the “Share Sale Agreement”) with ETFS Capital and WisdomTree International Holdings Ltd, an indirect wholly owned subsidiary of the Company (“WisdomTree International”), pursuant to which the Company agreed to acquire ETFS.

On April 11, 2018, the Company ~~completed the acquisition by purchasing the entire issued share capital of a subsidiary of~~acquired from ETFS Capital ~~into which ETFS Capital transferred ETFS prior to completion of the ETFS Acquisition.~~

~~Pursuant to the Share Sale Agreement, the Company acquired ETFS~~its European exchange-traded commodity, currency and

short-and-leveraged

business for a purchase price consisting of ~~(a)~~ $253,000 in cash ~~(including $53,000 paid from proceeds arising from maturities of securities owned, at fair value), subject to customary adjustments for working capital,~~ and ~~(b)~~ a fixed number of shares of the Company’s capital stock, consisting of (i) 15,250,000 shares of common stock (the “Common Shares”) and (ii) 14,750 shares of Series A

Non-Voting

Convertible Preferred Stock (the “Preferred Shares”), which are convertible ~~subject to certain restrictions,~~ into an aggregate of 14,750,000 shares of common stock.

ETFS Capital is subject to

lock-up,

standstill and voting restrictions and received registration rights with respect to the Common Shares and shares issuable upon conversion of the Preferred Shares.

Also on April 11, 2018 and in connection with the ~~ETFS Acquisition,~~acquisition, the Company ~~and WisdomTree International~~ entered into a credit agreement, (the “Credit Agreement”), by and among the Company, WisdomTree International, certain subsidiaries of the Company as guarantors, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent, collateral agent, L/C Issuer and lender. Under the Credit Agreement,pursuant to which the lenders extended a $200,000 term loan (the “Term Loan”) to WisdomTree International, the net cash proceeds of which were used by WisdomTree International, together with other cash on hand, to complete the acquisition and pay certain related fees, costs and expenses, and made available a $50,000 revolving credit facility (the “Revolver” and, together with the Term Loan, the “Credit Facility”) ~~available to the Company and WisdomTree International for revolving borrowings from time to time for working capital, capital expenditures and general corporate purposes~~ (See Note 12).

On April 11, 2018 and in connection with the acquisition, the Company and ETFS Capital also entered into an Investor Rights Agreement, pursuant to which, among other things, ETFS Capital is subject to~~lock-up,~~ standstill and voting restrictions. ETFS Capital also received certain registration rights with respect to the Common Shares and the shares of common stock issuable upon conversion of the Preferred Shares it received in the transaction.

~~Preliminary~~

Purchase Price Allocation

The ETFS Acquisition has been accounted for under the acquisition method of accounting in accordance with ASC Topic 805,

Business Combinations,

which requires an allocation of the consideration paid by the Company to the identifiable assets and liabilities of ETFS based on the estimated fair values as of the closing date of the acquisition. ~~A preliminary~~An allocation of the consideration transferred is presented below ~~based on information currently available~~ and includes the Company’s ~~preliminary~~ valuation of the fair value of tangible and intangible assets acquired and liabilities assumed.

The following table summarizes the ~~preliminary~~ allocation of the purchase price as of the acquisition date:

Purchase price

Preferred Shares issued
   14,750
Conversion ratio
   1,000


Common stock equivalents
   14,750,000
Common Shares issued
   15,250,000


Total shares issued
   30,000,000
WisdomTree stock price⁽¹⁾
   $ 9.00


Equity portion of purchase price
   $ 270,000
Cash portion of purchase price

Term Loan (See Note 12)
   200,000
Cash on hand
   53,000


Purchase price
   523,000
Deferred consideration (See Note 11)
   172,746


Total
   $ 695,746
Preliminary allocation of consideration

Cash and cash equivalents
   19,828
Receivables and other current assets
   14,069
Intangible assets⁽²⁾
   601,247
Other current liabilities
   (23,455 )


Fair value of net assets acquired
   611,689


Preliminary goodwill resulting from the ETFS Acquisition⁽³⁾
   $ 84,057


Purchase price
Preferred Shares issued		14,750
Conversion ratio		1,000

Common stock equivalents		14,750,000
Common Shares issued		15,250,000

Total shares issued		30,000,000
WisdomTree stock price (1)	$	9.00

Equity portion of purchase price	$	270,000
Cash portion of purchase price
Term Loan (See Note 12)		200,000
Cash on hand		53,000

Purchase price		523,000
Deferred consideration (See Note 11)		172,746

Total	$	695,746
Allocation of consideration
Cash and cash equivalents		13,687
Receivables and other current assets		14,069
Intangible assets (2)		601,247
Other current liabilities		(17,314	)

Fair value of net assets acquired		611,689

Goodwill resulting from the ETFS Acquisition (3)	$	84,057

(1)	The closing price of the Company’s common stock on April 10, 2018, the ~~last~~ trading day prior to the closing date of the acquisition.

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(2)

Represents purchase price allocated to customary advisory agreements. The fair value of the intangible assets was determined using an income approach (discounted cash flow analysis) which relied upon significant unobservable inputs including a revenue growth multiple of 3% to 4% and a weighted average cost of capital of 11.6%. These intangible assets were determined to have an indefinite useful life and are not deductible for tax purposes. A deferred tax liability associated with these intangible assets was not recognized as the intangibles arose in Jersey, a jurisdiction where the Company ~~will be~~is subject to a zero percent tax rate.

(3)

~~Preliminary goodwill~~Goodwill arising from the ETFS Acquisition represents the value of ~~expected~~ synergies created from combining the operations of ETFS and the Company. The goodwill is not deductible for tax purposes as the transaction was structured as a stock acquisition occurring in the United Kingdom.

~~The~~

Acquisition-Related Costs

During the three and six months ended June 30, 2019, the Company ~~has until August 31, 2018 to satisfy itself~~incurred acquisition-related costs of $33 and $346, respectively, which were predominantly associated with the ~~opening balance sheet delivered by ETFS Capital. Pursuant to Clause 4.2~~integration of the Share Sale Agreement, if the Completion Working Capital Amount (as defined) is greater than the Target Working Capital Amount (as defined), then the Company will owe ETFS Capital the excess amount. At June 30, 2018, this excess is $7,033 which is recorded as a payable to ETFS Capital on the Company’s consolidated balance sheet. Any changes to the opening balance sheet may result in an adjustment to the amount owed to ETFS Capital, or alternatively, goodwill. All other elements of the purchase price allocation are finalized.

~~Acquisition-Related Costs~~

ETFS.

During the three and six months ended June 30, 2018, the Company incurred acquisition-related costs ~~associated with the ETFS Acquisition~~ of $7,928 and $9,990, respectively, which included professional advisor fees, severance and other compensation costs, a

write-off

of the Company’s office lease and other integration costs.

Operating Results of ETFS

The Company’s Consolidated Statements of Operations include the following operating results of ETFS since the acquisition date of April 11, 2018 through June 30, 2018:

~~Revenues: $22,934~~

~~Income before taxes: $18,102 (including a gain on revaluation of deferred consideration of $9,898)~~


Revenues:		$18,218

Income before income taxes:		$18,102 (including a gain on revaluation of deferred consideration of $9,898)

Supplemental Unaudited Pro Forma Financial Information

The following table presents unaudited pro forma financial information of the Company as if the ETFS Acquisition had been consummated on January 1, ~~2017.~~2018. The information was derived from the historical financial results of the Company and ETFS for all periods presented and was adjusted to give effect to pro forma events that are directly attributable to the acquisition, factually supportable and expected to have a continuing impact on the combined results following the acquisition.

   Three Months Ended June 30,    Six Months Ended June 30,
   2018    2017    2018    2017
Revenues
   $ 78,025    $ 76,718    $ 157,796    $ 149,410
Net income
   $ 23,274    $ 15,554    $ 34,517    $ 17,451


	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Revenues:	$	78,025	$	157,796
Net income:	$	23,274	$	34,517

Included within the proforma financial information above is a ~~gain/(loss)~~gain on revaluation of deferred consideration of $8,326 and ~~$319 for~~$5,771 during the three ~~months ended June 30, 2018~~ and ~~2017, respectively, and $5,771 and ($8,039) for the~~ six months ended June 30, 2018, ~~and 2017,~~ respectively. Significant adjustments to the unaudited pro forma financial information above include the recognition of interest expense associated with the Credit Facility for the periods presented, eliminating acquisition-related costs directly attributable to the acquisition and adjusting consolidated income tax expense based upon the Company’s anticipated normalized consolidated effective tax rate.

The unaudited pro forma financial information above is not necessarily indicative of what the combined results of the Company would have been had the acquisition been completed as of January 1, ~~2017~~2018 and does not purport to project the future results of the combined company. In addition, the unaudited pro forma financial information does not reflect any future planned cost savings initiatives following the completion of the acquisition.

4. Cash and Cash Equivalents

Cash and cash equivalents of approximately ~~$31,805~~$71,564 and ~~$24,103~~$60,779 at June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, were held at ~~one~~two financial ~~institution.~~institutions. At June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, cash equivalents were approximately ~~$4,701~~$1,811 and ~~$26,548,~~$24, respectively.

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In addition, certain of the Company’s subsidiaries of its International Business segment are required to maintain a minimum level of net liquid assets, which was $12,255 and $11,005 at June 30, 2019 and December 31, 2018, respectively. These requirements are generally satisfied by cash on hand.

5. Fair Value Measurements

~~Securities owned and securities sold, but not yet purchased are measured at fair value.~~

The fair value of ~~securities~~financial instruments is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., “the exit price”) in an orderly transaction between market participants at the measurement date. ~~Accounting Standards Codification (“ASC”)~~ASC 820,

Fair Value Measurements

, establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the transparency of inputs as follows:


Level 1 –	–	Quoted prices for identical instruments in active markets.

~~Level 2~~
Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

~~Level 3~~
Level 3 –	Instruments whose significant drivers are unobservable.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The tables below summarize the categorization of the Company’s assets and liabilities measured at fair value. During the three and six months ended June ~~2018~~30, 2019 and ~~2017~~2018, there were no transfers between Levels 1, 2 and 3.

   June 30, 2018
   Total    Level 1    Level 2    Level 3
Assets:

Recurring fair value measurements:

Cash and cash equivalents
   $ 70,744    $ 70,744    $ —      $ —
Securities owned, at fair value
   3,719    3,719    —      —








Total
   $ 74,463    $ 74,463    —      $ —








Non-recurring fair value measurements:

AdvisorEngine Inc. – Option⁽¹⁾
   $ 3,278    $ —      $ —      $ 3,278
Thesys Group, Inc. – Series Y preferred stock⁽²⁾
   6,909    —      —      6,909








Total
   $ 10,187    $ —      $ —      $ 10,187








Liabilities:

Recurring fair value measurements:

Deferred consideration (Note 11)
   $ 162,848    $ —      $ —      $ 162,848
Securities sold, but not yet purchased
   2,026    2,026    —      —








Total
   $ 164,874    $ 2,026    $ —      $ 162,848


	June 30, 2019
	Total		Level 1		Level 2		Level 3
Assets:
Recurring fair value measurements:
Cash equivalents	$	1,811	$	1,811	$	—	$	—
Securities owned, at fair value		9,095		9,095		—		—

Total	$	10,906	$	10,906		—	$	—


Liabilities:
Recurring fair value measurements:
Deferred consideration (Note 11)	$	161,273	$	—	$	—	$	161,273
Securities sold, but not yet purchased		543		543		—		—

Total	$	161,816	$	543	$	—	$	161,273

   December 31, 2017
   Total    Level 1    Level 2    Level 3
Assets:

Recurring fair value measurements:

Cash and cash equivalents
   $ 54,193    $ 54,193    $ —      $ —
Securities owned, at fair value
   66,294    1,691    64,603    —








Total
   $ 120,487    $ 55,884    $ 64,603    $ —








Non-recurring fair value measurements:

AdvisorEngine Inc. – Option⁽¹⁾
   $ 3,278    —      —      $ 3,278
Thesys Group, Inc. – Series Y preferred stock⁽²⁾
   6,909    —      —      6,909








Total
   $ 10,187    $ —      $ —      $ 10,187








Liabilities:

Recurring fair value measurements:

Securities sold, but not yet purchased
   $ 950    $ 950    $ —      $ —








Total
   $ 950    $ 950    $ —      $ —

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	December 31, 2018
	Total		Level 1		Level 2		Level 3
Assets:
Recurring fair value measurements:
Cash and cash equivalents	$	24	$	24	$	—	$	—
Securities owned, at fair value		8,873		8,873		—		—

Total	$	8,897	$	8,897	$	—	$	—


Non-recurring fair value measurements:
Thesys Group, Inc. – Series Y preferred stock (1)	$	3,080		—		—	$	3,080

Total	$	3,080	$	—	$	—	$	3,080


Liabilities:
Recurring fair value measurements:
Deferred consideration (Note 11)	$	161,540	$	—	$	—	$	161,540
Securities sold, but not yet purchased		1,698		1,698		—		—

Total	$	163,238	$	1,698	$	—	$	161,540

(1)	Fair value determined on December ~~29, 2017~~31, 2018 (See Note 9) .

~~(2)~~

~~Fair value determined on June 20, 2017 (See Note 9)~~

Recurring Fair Value ~~Measurements—~~Measurements - Methodology

~~Cash and~~

Cash Equivalents (Note 4)

– These financial assets represent ~~cash in banks or~~ cash invested in highly liquid investments with original maturities of less than 90 days. These investments are valued at par, which approximates fair value, and are considered Level 1.

Securities Owned/Sold but Not Yet Purchased (Note

–

Securities owned and sold, but not yet purchased ~~include~~are investments in ~~ETFs and short-term investment grade corporate bonds.~~ETFs. ETFs are generally traded in active, quoted and highly liquid markets and are therefore classified as Level

in the fair value hierarchy. ~~Investments in short-term investment grade corporate bonds are classified as Level 2 as fair value is generally derived from observable bids for these financial instruments.~~

Deferred Consideration

–

Deferred consideration represents the present value of an obligation to pay gold into perpetuity and iswas measured at

June

2019

using forward-looking gold prices ranging from ~~$1,256~~ $

1,417

per ounce to ~~$2,839~~ $

2,201

per ounce ($

1,294

per ounce to $

2,621

per ounce at December

2018)

which are extrapolated from the last observable price (beyond ~~2024)~~

2025)

, discounted at a rate of ~~10%~~

% and includes a perpetual growth rate of

1.5

%. This obligation is classified as Level

as the discount rate, perpetual growth rate and extrapolated forward-looking gold prices are significant unobservable inputs. An increase in forward-looking gold prices would result in an increase in deferred consideration, whereas an increase in the discount rate would reduce the fair value. See Note

for additional information.

The following table presents a reconciliation of beginning and ending balances of recurring fair value measurements classified as Level 3:

   Three Months Ended
June 30,    Six Months Ended
June 30,
   2018    2017    2018    2017
Deferred consideration (See Note 11)

Beginning balance⁽¹⁾
   $ 172,746    $ —      $ 172,746    $ —
Net realized losses/(gains)⁽²⁾
   2,715    —      2,715    —
Net unrealized losses/(gains)⁽³⁾
   (9,898 )    —      (9,898 )    —
Settlements
   (2,715 )    —      (2,715 )    —








Ending balance
   $ 162,848    $ —      $ 162,848    $ —


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Deferred consideration (See Note 11)
Beginning balance	$	157,147		$	172,746		$	161,540		$	172,746
Net realized losses/(gains) (1)		3,110			2,715			6,208			2,715
Net unrealized losses/(gains) (2)		4,037			(9,898	)		(367	)		(9,898	)
Settlements		(3,021	)		(2,715	)		(6,108	)		(2,715	)

Ending balance	$	161,273		$	162,848		$	161,273		$	162,848

(1)	~~Arose in connection with the completion of the ETFS Acquisition on April 11, 2018 (See Note 3).~~

~~(2)~~

Recorded as contractual gold payments on the Company’s Consolidated Statements of Operations.

~~(3)~~(2)

Recorded as (loss)/gain on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations.

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6. Securities Owned/Sold, but Not Yet Purchased

These securities consist of the following:


	June 30, 2019		December 31, 2018
Securities Owned
Trading securities	$	9,095	$	8,873

Securities Sold, but not yet Purchased
Trading securities	$	543	$	1,698

The Company had no

available-for-sale

debt securities ~~classified as trading~~at June 30, 2019 and~~available-for-sale,~~ ~~as follows:~~

   June 30,
2018    December 31,
2017
Securities Owned

Trading securities
   $ 3,719    $ 1,691
Available-for-sale debt securities
   —      64,603




Total
   $ 3,719    $ 66,294




Securities Sold, but not yet Purchased

Trading securities
   $ 2,026    $ 950
Available-for-sale debt securities
   —      —




Total
   $ 2,026    $ 950

~~Available-for-Sale~~ ~~Debt Securities~~

~~The following table summarizes unrealized gains, losses and fair value of theavailable-for-sale~~ ~~debt securities:~~

   June 30,
2018    December 31,
2017
Cost
   $ —      $ 65,237
Gross unrealized gains in other comprehensive income
   —      —
Gross unrealized losses in other comprehensive income
   —      (634 )




Fair value
   $ —      $ 64,603

December 31, 2018. During the three and six months ended June 30, 2018, the Company received $4,000 and $64,498, respectively, of proceeds from the sale and maturity of

available-for-sale

securities and recognized gross realized losses of $23 and $739, respectively.

~~During the three and six months ended June 30, 2017, the Company received $25,065 and $46,065, respectively, of proceeds from the sale and maturity ofavailable-for-sale~~ ~~securities and recognized gross realized~~ Those losses ~~of $236 and $412, respectively.~~

~~Realized losses have been~~were reclassified out of accumulated other comprehensive income and into the Consolidated Statements of Operations.

7. Securities

Held-to-Maturity

The following table is a summary of the Company’s securities

held-to-maturity:

   June 30,
2018    December 31,
2017
Federal agency debt instruments (amortized cost)
   $ 20,229    $ 21,299


	June 30, 2019		December 31, 2018
Federal agency debt instruments (amortized cost)	$	20,136	$	20,180

The following table summarizes unrealized gains, losses, and fair value (classified as Level 2 within the fair value hierarchy) of securities

held-to-maturity:

   June 30,
2018    December 31,
2017
Cost/amortized cost
   $ 20,229    $ 21,299
Gross unrealized gains
   5    9
Gross unrealized losses
   (1,950 )    (1,257 )




Fair value
   $ 18,284    $ 20,051


	June 30, 2019			December 31, 2018
Cost/amortized cost	$	20,136		$	20,180
Gross unrealized gains		8			5
Gross unrealized losses		(505	)		(1,679	)

Fair value	$	19,639		$	18,506

The Company assesses these securities for other-than-temporary impairment on a quarterly basis. No securities were determined to be other-than-temporarily impaired at June 30, ~~2018~~2019 or December 31, ~~2017.~~2018. The Company does not intend to sell these securities and it is not

more-likely-than-not

that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity.

The following table sets forth the maturity profile of the securities

held-to-maturity;

however, these securities may be called prior to maturity date:

   June 30,
2018    December 31,
2017
Due within one year
   $ —      $ 1,000
Due one year through five years
   6    11
Due five years through ten years
   6,025    6,027
Due over ten years
   14,198    14,261




Total
   $ 20,229    $ 21,299


	June 30, 2019		December 31, 2018
Due within one year	$	—	$	—
Due one year through five years		—		—
Due five years through ten years		7,517		7,521
Due over ten years		12,619		12,659

Total	$	20,136	$	20,180

8. ~~Note~~Notes Receivable

~~On December 29, 2017,~~

The following table sets forth the Company’s notes receivable:


	June 30, 2019		December 31, 2018
AdvisorEngine Inc. – Unsecured non-convertible note	$	29,935	$	28,722
AdvisorEngine Inc. – Unsecured convertible note		1,550		—

Total	$	31,485	$	28,722

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During the three months ended June 30, 2019 and 2018, the Company ~~committed to provide up to $30,000 in additional working capital to~~recognized interest income of $628 and $421, respectively. During the six months ended June 30, 2019 and 2018, the Company recognized interest income of $1,223 and $840, respectively. Interest income included original issue discount

(“OID”)

amortization and accrued

paid-in-kind (“PIK”)

interest. The Company determined that an allowance for credit loss was not necessary at June 30, 2019 and December 31, 2018 as there have been no adverse events or circumstances since the notes were issued which may indicate that their carrying amounts may not be recoverable.

Unsecured Non-Convertible Note

The Company has an outstanding unsecured promissory note from AdvisorEngine Inc. (“AdvisorEngine”) ~~pursuant to an unsecured promissory note (of which $27,000 is currently funded) (See Note 9)~~. The majority of the funds were used by AdvisorEngine to acquire CRM Software, Inc., known as Junxure, a comprehensive client relationship management software and technology provider for financial advisors.

All principal amounts under the note bear interest from the date such amounts are advanced until repaid at a rate of 5% per annum, provided that immediately upon the occurrence and during the continuance of an event of default (as defined), interest will be increased to 10% per annum. All accrued and unpaid interest is treated as~~paid-in-kind~~ ~~(“PIK”)~~ PIK by capitalizing such amount and adding it to the principal amount of the original note. AdvisorEngine has the option to prepay the note, in whole or in part, at any time without premium or penalty. All borrowings under the promissory note mature on December 29, 2021.

In connection with providing funding to AdvisorEngine for the acquisition of Junxure, the Company secured an option to purchase the remaining equity interests in AdvisorEngine. The option was ascribed a fair value of $3,278 (See Note 9) which gave rise to original issue discount reducing the carrying value of the note.

The following is a summary of the outstanding unsecured non-convertible note receivable balance:

   June 30,
2018    December 31,
2017
Note receivable (face value)
   $ 27,000    $ 22,000
Less: Original issue discount (“OID”), unamortized
   (2,970 )    (3,252 )
Plus: PIK interest
   558    —




Total note receivable, net
   $ 24,588    $ 18,748




Commitment remaining
   $ 3,000    $ 8,000

~~During~~


	June 30, 2019			December 31, 2018
Note receivable (face value)	$	30,000		$	30,000
Less: OID, unamortized		(2,167	)		(2,582	)
Plus: PIK interest		2,102			1,304

Total note receivable, net	$	29,935		$	28,722

The fair value of the ~~three~~note receivable (classified as Level 2 within the fair value hierarchy and ~~six months ended June 30, 2018, the Company recognized interest income of $421~~determined using high yield credit spreads) was $29,703 and ~~$840, respectively, which included OID amortization and accrued PIK interest. The Company determined that an allowance for credit loss was not necessary~~$27,618 at June 30, ~~2018~~2019 and December 31, ~~2017~~2018, respectively.

Unsecured Convertible Note

In April 2019, the Company participated in a private convertible note financing round of AdvisorEngine by advancing $1,540 in consideration for a convertible note, which was issued as part of a series of convertible notes pursuant to a Convertible Note Purchase Agreement entered into among AdvisorEngine, the Company and the other purchasers thereto. The convertible note ~~receivable was recently~~bears interest at a rate of 3% per annum, with all or any unpaid portion being treated as PIK by capitalizing such amount and adding it to the principal amount outstanding, is unsecured, and matures on April 11, 2021. All principal (and, at the option of AdvisorEngine if not paid in cash, accrued interest) under the convertible note will automatically convert into a class or series of preferred stock substantially identical to that issued in a qualified financing (as defined), but at a price per share equal to 80% of the price per share sold in such transaction. In the event of a corporate transaction (as defined) the

convertible note would be repaid in cash from the proceeds of such transaction in the amount of 1.5 times the outstanding principal amount, plus any accrued and ~~no adverse events or circumstances have occurred which may indicate that its carrying~~unpaid interest

. If neither a qualified financing nor a corporate transaction occurs prior to the maturity date, the

convertible note is repaid at a rate of 1.25 times the outstanding principal amount, plus accrued and unpaid interest

. The convertible note may not be ~~recoverable.~~ prepaid by AdvisorEngine without the prior consent of the requisite holders (which includes the Company).

The following is a summary of the outstanding unsecured convertible note receivable balance:


	June 30, 2019
Note receivable (face value)	$	1,540
Plus: PIK interest		10

Total note receivable, net	$	1,550

The carrying value of the note receivable approximates fair value at June 30, ~~2018 and December 31, 2017 approximates fair value as the implied discount rate of the note is similar~~2019 due to ~~observable high yield credit spreads.~~

The Company’s remaining commitment to provide working capital to AdvisorEngine is $3,000 at June 30, 2018 pursuant to the terms of the note. The additional funding is scheduled to be provided on September 30, 2018 if no event of default (as defined) has occurred and is continuing.

its short-term nature.

9. Investments, Carried at Cost

The following table sets forth the Company’s investments, carried at cost:

   June 30,
2018    December 31,
2017
AdvisorEngine – Preferred stock
   $ 25,000    $ 25,000
AdvisorEngine – Option
   3,278    3,278
Thesys Group, Inc. (“Thesys”).
   6,909    6,909




Total
   $ 35,187    $ 35,187


	June 30, 2019		December 31, 2018
AdvisorEngine – Preferred stock	$	25,000	$	25,000
Thesys Group, Inc. (“Thesys”)		3,080		3,080

Total	$	28,080	$	28,080

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AdvisorEngine

Preferred Stock

~~On November 18, 2016, the~~

The Company ~~made~~owns approximately 46% (or 41% on a ~~$20,000 strategic investment in~~fully-diluted basis) of AdvisorEngine, an~~end-to-end~~a digital wealth management platform, ~~which enables individual customization~~through strategic investments totaling $25,000. In consideration of its investment, ~~philosophies.~~the Company received 11,811,856 shares and 2,646,062 shares of Series A and Series

A-1

convertible preferred stock, respectively. The Series A and Series

A-1

preferred shares have substantially the same terms, are convertible into common stock at the option of the Company and contain various rights and protections including a

non-cumulative

6.0% dividend, payable if and when declared by the board of directors, and a liquidation preference that is senior to all other holders of capital stock of AdvisorEngine. The Company and AdvisorEngine also entered into an agreement whereby the Company’s asset allocation models are made available through AdvisorEngine’s open architecture platform and the Company actively introduces the platform to its distribution network. ~~In consideration of its investment, the Company received 11,811,856 shares of Series A convertible preferred shares (“Series A Preferred”).~~

~~The Series A Preferred is convertible into common stock at the option of the Company and contains various rights and protections including anon-cumulative~~ ~~6.0% dividend, payable if and when declared by the board of directors, and a liquidation preference that is senior to all other holders of capital stock of AdvisorEngine.~~

On April 27, 2017, the Company invested an additional $5,000 in AdvisorEngine to help facilitate AdvisorEngine’s acquisition of Kredible Technologies, Inc., a technology enabled, research-driven practice management firm designed to help advisors acquire new clients, and to continue to fuel AdvisorEngine’s growth, leadership and innovation in the advisor solutions space. The Company received 2,646,062 shares of Series~~A-1~~ ~~convertible preferred stock which has substantially the same terms as the Series A Preferred.~~

~~The Company’s aggregate equity ownership interest in AdvisorEngine is approximately 47% (or 41% on a fully-diluted basis).~~

The investment is accounted for under the cost method of accounting as it is not considered to be

in-substance

common stock. NoThe Company quantitatively assessed its investment for impairment at December 31, 2018. The table below presents the ranges and weighted averages of significant unobservable inputs used in this assessment:


	Range (Weighted Average)
Market Approach
Revenue multiple		4.7x - 5.4x	(5.0x)
Income Approach
Weighted average cost of capital (“WACC”)		26.0	%

An increase in the revenue multiple would result in a higher enterprise value, whereas an increase in the WACC would reduce fair value. The results of the quantitative assessment noted no impairment at December 31, 2018. In addition, no impairment existed at June 30, ~~2018 or December 31, 2017 and there~~2019 based upon a qualitative assessment. There were also no observable price changes during the ~~three and six months ended June 30, 2018.~~

~~Option~~

On December 29, 2017, the Company secured an option to purchase the remaining equity interests in AdvisorEngine, in connection with its commitment to provide up to $30,000 of additional working capital (See Note 8). The option is for a period of approximately one year and is exercisable at a price derived from an agreed-upon enterprise valuation of AdvisorEngine. If exercised, closing of the acquisition would occur no later than January 15, 2019. The fair value of the option was determined to be $3,278 on December 29, 2017, using a Monte Carlo simulation which was predominantly based on unobservable inputs and is therefore classified as Level 3. The enterprise value was derived from unobservable inputs including a weighted average cost of capital (“WACC”) of 27% and an option volatility of 40%. An increase in the WACC would reduce AdvisorEngine’s enterprise value which would reduce the fair value of the option, whereas an increase in the option volatility would increase the fair value of the option.

The option is not accounted for as a derivative as it cannot be net settled and is not readily convertible to cash. Therefore, the option is accounted for under the cost method of accounting and is assessed for impairment on a quarterly basis. No impairment existed at June 30, 2018 or December 31, 2017.

applicable reporting periods.

Thesys

On June 20, 2017, the Company was issued 7,797,533 newly authorized shares of Series Y preferred stock (“Series Y Preferred”) of Thesys in connection with the resolution of a dispute related to the Company’s ownership stake in Thesys. The Series Y Preferred represents current ownership of ~~18.8%~~approximately 19% of Thesys on a fully diluted basis (excluding certain reserved shares). In addition, the Company was issued a warrant to purchase 3,898,766 shares of Series Y Preferred.

The Series Y Preferred ranks

pari passu

in priority with Thesys’s current preferred stockholders, has a liquidation preference of $0.231 per share, contains various rights and protections and is convertible into common stock at the option of the Company. The warrant is exercisable for five years after closing, at varying exercise prices that increase over time and set at multiples of a

pre-determined

Thesys valuation (or new valuation if Thesys completes a qualified financing, as defined, within two years). If a claim is brought against Thesys or the Company relating to the settlement, the warrant will be exercisable for 100% of the number of shares of Series Y Preferred issued to the Company at closing.

~~The Company recorded the Series Y Preferred at its fair value of $6,909 during the second quarter of 2017.~~

The Series Y Preferred is ~~not considered to bein-substance~~ ~~common stock and is therefore~~ accounted for under the cost method of ~~accounting.~~accounting as it is not considered to be

in-substance

common stock. The Company quantitatively assessed its investment for impairment at December 31, 2018. The table below presents the ranges and weighted averages of significant unobservable inputs used in this assessment:


	Range (Weighted Average)
Income Approach (1)
Weighted average cost of capital (“WACC”)		3.8% - 15.5% (14.1%	)

(1)	The inputs selected varied, based upon the Thesys business line being valued. An increase in the WACC would result in a lower enterprise value.

The quantitative assessment performed resulted in the recognition of an impairment in the fourth quarter of 2018. No additional impairment ~~existed~~was recognized at June 30, ~~2018 or December 31, 2017 and there~~2019 based upon a qualitative assessment. There were also no observable price changes during the ~~three and six months ended~~applicable reporting periods.

The carrying value of the Series Y Preferred was $3,080 at June 30, ~~2018.~~2019 and December 31, 2018, respectively. The fair value of the warrant was determined to be insignificant. The warrant is not accounted for as a derivative as it cannot be net settled and is not readily convertible to cash.

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10. Fixed Assets, net

The following table summarizes fixed assets:

   June 30,
2018    December 31,
2017
Equipment
   $ 2,031    $ 1,879
Furniture and fixtures
   2,391    2,449
Leasehold improvements
   10,882    11,037
Less: accumulated depreciation and amortization
   (5,276 )    (4,672 )




Total
   $ 10,028    $ 10,693


	June 30, 2019			December 31, 2018
Equipment	$	2,259		$	2,244
Furniture and fixtures		2,218			2,218
Leasehold improvements		10,964			10,964
Less: accumulated depreciation and amortization		(6,837	)		(6,304	)

Total	$	8,604		$	9,122

11. Deferred Consideration

~~ETFS Capital first acquired Gold Bullion Securities Ltd. (“GBS Issuer”), one of the issuers that~~

Deferred consideration represents an obligation the Company ~~acquired as part of~~assumed in connection with the ETFS ~~Acquisition, paying no upfront consideration. Instead, the consideration was deferred and contracted~~Acquisition. The obligation is for fixed payments to ~~be paid by~~ ETFS Capital ~~in fixed payments~~ of physical gold bullion equating to

9,500

ounces of gold per year through March 31, 2058 and then subsequently reduced to

6,333

ounces of gold continuing into perpetuity ~~(the “Contractual~~(“Contractual Gold Payments”).

ETFS Capital’s deferred consideration obligation did not terminate upon the Company’s acquisition of ETFS. Instead, a wholly-owned subsidiary of the Company assumed the obligation by entering into a Gold Royalty Agreement with ETFS Capital, which provides for the same Contractual Gold Payments payable to ETFS Capital in order for ETFS Capital to continue to satisfy its deferred consideration obligation.

The Contractual Gold Payments are paid from advisory fee income generated by ~~the physically backed gold exchange-traded products issued by GBS Issuer and~~ any ~~other Company sponsored~~Company-sponsored financial product backed by physical gold ~~(the “Gold ETCs”). The Contractual Gold Payments~~and are subject to adjustment and reduction for declines in advisory fee income generated by ~~the Gold ETCs,~~such products, with any reduction remaining due and payable until paid in full. ETFS Capital’s recourse is limited to such advisory fee income and it has

recourse back to the Company for any unpaid amounts that exceed advisory fees earned. ETFS Capital ultimately has the right to claw back ~~GBS Issuer~~Gold Bullion Securities Ltd. (a physically backed gold ETP issuer) if the Company fails to remit any amounts due.

The Company determined the present value of the deferred consideration of ~~$172,746~~$161,273 and ~~$162,848~~$161,540 at ~~April 11, 2018 (date of acquisition)~~June 30, 2019 and ~~June 30,~~December 31, 2018, respectively, using forward-looking gold prices which were extrapolated from the last observable price (beyond ~~2024)~~2025), discounted at a rate of 10.0% and a perpetual growth rate of 1.5%. Current amounts payable were $12,857 and $11,765 and long-term amounts payable were $148,416 and $149,775, respectively, at June 30, 2019 and December 31, 2018, ~~were $11,378 and $151,470,~~ respectively.

During the three and six months ended June 30, 2019 and 2018, the Company recognized ~~Contractual Gold Payments expense of $2,715 arising from~~ the ~~fixed payments of physical gold bullion of 2,085 ounces (or 9,500 ounces per annum) and the unwinding of the discount (representing the increase~~following in ~~the carrying amount of the deferred consideration for the passage of time), as well as a gain on the revaluation~~respect of deferred ~~consideration of $9,898 due to changes in gold prices.~~

~~See Note 5 for a reconciliation of changes in the deferred consideration balance for the three months ended June 30, 2018.~~

consideration:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019		2018

Contractual Gold Payments	$	3,110		$	2,715		$	6,208	$	2,715
Contractual Gold Payments – gold ounces paid		2,375			2,085	(1)		4,750		2,085	(1)
(Loss)/gain on revaluation of deferred consideration – gold payments (2)	$	(4,037	)	$	9,898		$	367	$	9,898

(1)	Represents payments during the period April 11, 2018 through June 30, 2018.

(2)	Gains/(losses) arise due to (decreases)/increases in the forward-looking price of gold and the magnitude of any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold. See Note 5 for a reconciliation of changes in the deferred consideration balances.

12. Long-Term Debt

On April 11, 2018 and in connection with the ETFS Acquisition, the Company ~~and WisdomTree International~~ entered into a Credit Agreement, by and among the Company, WisdomTree International, certain subsidiaries of the Company as guarantors, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent, collateral agent, L/C Issuer and lender. Under the Credit ~~Agreement,~~Facility pursuant to which the lenders extended a $200,000 Term Loan to WisdomTree International, the net cash proceeds of which were used by WisdomTree International, together with other cash on hand, to complete the ETFS Acquisition and pay certain fees, costs and expenses, and made available a $50,000 ~~Revolver available to the Company and WisdomTree International for revolving borrowings from time to time for working capital, capital expenditures and general corporate purposes.~~Revolver. Interest on the Term Loan accrues at aan annual rate ~~per annum~~ equal to LIBOR, plus up to ~~2.00%~~

2.00

% (commencing at

LIBOR

, plus ~~1.75%~~

1.75

%), and interest on the Revolver accrues at aan annual rate ~~per annum~~ equal to LIBOR, plus up to ~~1.50%~~

1.50

% (commencing at LIBOR, plus ~~1.25%~~

1.25

%), in each case, with the exact interest rate margin determined based on the Total Leverage Ratio (as defined below). The Revolver is also subject to a facility fee equal to aan annual rate ~~per annum~~ of up to 0.50% of the actual daily amount of the aggregate commitments (whether used or unused) under the Revolver, with the exact facility fee rate determined based on the Total Leverage Ratio. The Credit Facility matures on April 11, ~~2021 (the “Maturity Date”).~~2021. The Term Loan does not amortize and the entire principal balance is due in a single payment on the ~~Maturity Date.~~

maturity date.

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The following table provides a summary of the Company’s outstanding borrowings under the Credit Facility:

   June 30, 2018
   Term Loan Revolver
Amount borrowed
   $ 200,000 $ —
Unamortized issuance costs
   (6,593 ) 1,460


Carrying amount
   $ 193,407 $ 1,460


Effective interest rate⁽¹⁾
   4.92 % n/a


	June 30, 2019					December 31, 2018
	Term Loan			Revolver (1)		Term Loan			Revolver (1)
Amount borrowed	$	200,000		$	—	$	200,000		$	—
Unamortized issuance costs		(4,238	)		935		(5,408	)		1,195

Carrying amount	$	195,762		$	935	$	194,592		$	1,195

Effective interest rate (2)		5.46	%		n/a		5.09	%		n/a

(1)	The available capacity under the Revolver is subject to compliance with the Total Leverage Ratio.
(2)	Includes amortization of issuance costs.

~~During~~

Interest expense recognized on the Credit Facility during the three months ended June 30, 2019 and 2018 was $2,910 and $2,356, respectively, and during the ~~Company recognized~~six months ended June 30, 2019 and 2018 was $5,802 and $2,356, ~~of interest expense on the Credit Facility.~~respectively. Unamortized issuance costs ~~of $1,460~~ related to the Revolver of $935 and $1,195 at June 30, 2019 and December 31, 2018, respectively, are included ~~within~~in other noncurrent assets on the Consolidated Balance Sheet.

The ~~Credit Agreement~~fair value of the Company’s long-term debt (classified as Level 2 within the fair value hierarchy) was $197,500 and $196,126 at June 30, 2019 and December 31, 2018, respectively.

The credit agreement includes a financial covenant that requires ~~that~~ the Company to maintain a Total Leverage Ratio (as defined below), calculated as of the last day of each fiscal quarter, ~~commencing with the fiscal quarter ending September 30, 2018,~~ equal to or less than the ratio set forth opposite such fiscal quarter:


~~Fiscal Quarter Ending~~	~~Total Leverage Ratio~~
~~September 30, 2018~~		~~2.75:1.00~~
~~December 31, 2018~~ Fiscal Quarter Ending	Total Leverage Ratio
June 30, 2019		~~2.75:~~ 2.50:1.00
~~March 31,~~ September 30, 2019		~~2.75:~~ 2.50:1.00
~~June 30,~~ December 31, 2019		2.50:1.00
~~September 30, 2019~~ March 31, 2020		~~2.50:~~ 2.25:1.00
~~December 31, 2019~~ June 30, 2020		~~2.50:~~ 2.25:1.00
~~March 31, 2020~~		~~2.25:1.00~~
~~June 30, 2020~~		~~2.25:1.00~~
September 30, 2020 and each subsequent fiscal quarter ending on or before the ~~Maturity Date~~ maturity date		2.00:1.00

Total Leverage Ratio means, as of the last day of any fiscal quarter, the ratio of Consolidated Total Debt of the Company and its restricted subsidiaries (as defined in the ~~Credit Agreement)~~credit agreement) as of such date to Consolidated EBITDA of the Company and its restricted subsidiaries (as defined in the ~~Credit Agreement)~~credit agreement) for the four consecutive fiscal quarters ended on such date.

~~WisdomTree International’s~~

The Company’s obligations under the Term Loan and Revolver are unconditionally guaranteed by the Company and certain of its subsidiaries and secured by a lien on substantially all of the present and future property and assets of the Company, WisdomTree International and such subsidiaries, in each case, subject to customary exceptions and exclusions. The Company’s obligations under the Revolver are unconditionally guaranteed by certain of the Company’s wholly-owned domestic subsidiaries and secured by substantially all of the present and future property and assets of the Company and such subsidiaries, in each case, subject to customary exceptions and exclusions.

The ~~Credit Agreement~~credit agreement contains customary affirmative covenants for transactions of this type and other affirmative covenants agreed to by the parties, including, among others, the provision of annual and quarterly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters. The ~~Credit Agreement~~credit agreement contains customary negative covenants, including among others, restrictions on the incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, repurchasing equity interests of the Company, entering into affiliate transactions and asset sales. The ~~Credit Agreement~~credit agreement also provides for a number of customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control and judgment defaults.

The Company is in compliance with its covenants under the credit agreement.

13. Preferred Shares

On April 10, 2018, the Company filed a Certificate of Designations of Series A

Non-Voting

Convertible Preferred Stock with the Secretary of State of the State of Delaware establishing the rights, preferences, privileges, qualifications, restrictions, and limitations relating to the Preferred Shares. The Preferred Shares are intended to provide ETFS Capital with economic rights equivalent to the Company’s common stock on an

as-converted

basis. The Preferred Shares have no voting rights, are not transferable and have the same priority with regard to dividends, distributions and payments as the common stock.

As described in the Certificate of Designations, the Company will not issue, and ETFS Capital does not have the right to require the Company to issue, any shares of common stock upon conversion of the Preferred Shares, if, as a result of such conversion, ETFS Capital (together with certain attribution parties) would beneficially own more than ~~9.99%~~

.99% of the Company’s outstanding common stock immediately after giving effect to such conversion.

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In connection with the completion of the ETFS Acquisition, the Company issued 14,750 Preferred Shares, which are convertible into an aggregate of 14,750,000 shares of common stock. The fair value of this consideration was $132,750, based on the closing price of the Company’s common stock on April 10, 2018 of $9.00 per share, the ~~last~~ trading day prior to the closing of the acquisition.

The following is a summary of the Preferred Share balance:

   June 30,
2018
Issuance of Preferred Shares
   $ 132,750
Less: Issuance costs
   (181 )


Preferred Shares – carrying value
   $ 132,569


	June 30, 2019			December 31, 2018
Issuance of Preferred Shares	$	132,750		$	132,750
Less: Issuance costs		(181	)		(181	)

Preferred Shares – carrying value	$	132,569		$	132,569

Temporary equity classification is required for redeemable instruments for which redemption triggers are outside of the issuer’s control. ETFS Capital has the right to redeem all the Preferred Shares specified to be converted during the period of time specified in the Certificate of Designations in the event that: (a) the number of shares of the Company’s common stock authorized by its certificate of incorporation is insufficient to permit the Company to convert all of the Preferred Shares requested by ETFS Capital to be converted; or (b) ETFS Capital does not, upon completion of a change of control of the Company, receive the same amount per Preferred Share as it would have received had each outstanding Preferred Share been converted into common stock immediately prior to the change of control. However, the Company will not be obligated to make any such redemption payments to the extent such payments would be a breach of any covenant or obligation the Company owes to any of its secured creditors or is otherwise prohibited by applicable law.

Any such redemption will be at a price per Preferred Share equal to the dollar volume-weighted average price for a share of common stock for the

30-trading

day period ending on the date of such attempted conversion or change of control, as applicable, multiplied by 1,000. Such redemption payment will be made in one payment no later than 10 business days following the last day of the Company’s

first fiscal quarter that begins on a date following the date ETFS Capital exercises such redemption right.

The carrying amount of the Preferred Shares ~~were~~was not adjusted ~~during the three months ended June 30, 2018~~ as it was not probable that ~~they~~the Preferred Shares would become redeemable.

14. ~~Commitments and Contingencies~~

~~Contractual Obligations~~

Leases

The Company has entered into ~~obligations under~~ operating leases for its corporate headquarters and other office facilities, financial data terminals and equipment. The Company has no finance leases.

Upon the adoption of ASC 842 on January 1, 2019, the Company recognized a

right-of-use

asset and lease liability of $19,827 and $24,817, respectively. The

right-of-use

asset was equal to the lease liability, less accrued lease payments and remaining unamortized lease incentives.

The following table provides additional information regarding the Company’s leases:


	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Lease cost:
Operating lease cost	$	795		$	857	$	1,590		$	1,600
Short-term lease cost		383			432		772			716

Total lease cost	$	1,178		$	1,289	$	2,362		$	2,316

Other information:
Cash paid for amounts included in the measurement of operating liabilities (operating leases)	$	875			n/a	$	1,760			n/a

Right-of-use assets obtained in exchange for new operating lease liabilities		n/a			n/a		n/a			n/a

Weighted-average remaining lease term (in years) – operating leases		9.8			n/a		9.8			n/a

Weighted-average discount rate – operating leases		6.3	%		n/a		6.3	%		n/a

None of the Company’s leases include variable payments, residual value guarantees or any restrictions or covenants relating to the Company’s ability to pay dividends or incur additional financing obligations.

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The Company’s lease of its headquarters, which expires on August 20, 2029, includes an option to extend for an additional five years. Rent payable under the option is equal to the fair market rent of the premise as determined by the landlord approximately six months prior to the commencement of the extension term. The lease also includes a cancellation option which is effective on August 21, 2024 and requires notice to be provided to the landlord at least 12 months prior. Triggering this option requires a cancellation payment of $4,236. The cancellation and extension options were not reasonably certain of being exercised and were therefore not recognized as part of the

right-of-use

asset and lease liability.

Other leases also include extension, automatic renewal and termination provisions. These provisions were also not reasonably certain of being exercised and were therefore not recognized as part of the

right-of-use

asset and lease liability.

The following table discloses future minimum lease payments at June 30, 2019 with ~~initialnon-cancelable~~ ~~terms~~respect to the Company’s operating lease liabilities:


Remainder of 2019	$	1,832
2020		3,676
2021		2,958
2022		2,958
2023		2,958
2024 and thereafter		17,641

Total future minimum lease payments (undiscounted)	$	32,023

The following table reconciles the future minimum lease payments (disclosed above) at June 30, 2019 to the operating lease liabilities recognized in ~~excess of one year for office space, telephone and data services. Expenses recorded under these agreements for~~ the ~~three months ended~~Company’s Consolidated Balance Sheet:


Amounts recognized in the Company’s Consolidated Balance Sheet
Lease liability – short term	$	3,632
Lease liability – long term		20,190

Subtotal		23,822
Difference between undiscounted and discounted cash flows		8,201

Total future minimum lease payments (undiscounted)	$	32,023

The following table discloses the future minimum lease payments at June 30, 2018 ~~and 2017 were approximately $1,289 and $1,030, respectively, and for~~(prior period), which is required as the Company elected to apply the new lease requirements at the effective date, rather than the beginning of the earliest comparative period presented:


Remainder of 2018	$	1,948
2019		3,764
2020		3,516
2021		3,146
2022		2,958
2023 and thereafter		20,599

Total future minimum lease payments (undiscounted)	$	35,931

Lease Termination – Japan Office

During the six months ended June 30, ~~2018 and 2017 were $2,316 and $2,150, respectively.~~

~~Future minimum lease payments with respect tonon-cancelable~~ ~~operating leases at June 30, 2018 were approximately as follows:~~

Remainder of 2018
   $ 2,432
2019
   4,332
2020
   3,915
2021
   3,088
2022 and thereafter
   21,300


Total
   $ 35,067

~~AdvisorEngine~~

~~At June 30, 2018,~~2019, the Company ~~had a commitment to provide $3,000~~recognized an impairment expense of ~~additional working capital to AdvisorEngine which is scheduled to be provided on September 30, 2018 if no event~~$572 in connection with the termination of ~~default (as defined) has occurred and is continuing (See Note 8).~~

its Japan office lease.

Letter of Credit

The Company collateralized its U.S. office lease through a standby letter of credit totaling $1,384. The collateral is included in cash and cash equivalents on the Company’s Consolidated Balance Sheets.

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15. Contingencies

The Company may be subject to reviews, inspections and investigations by regulatory authorities as well as legal proceedings arising in the ordinary course of business. The Company is not currently party to any litigation that is expected to have a material adverse impact on its business, financial position, results of operations or cash flows.

~~15.~~

16. Variable Interest Entity

VIEs are entities with any of the following characteristics: (i) the entity does not have enough equity to finance its activities without additional financial ~~support,~~support; (ii) the equity holders, as a group, lack the characteristics of a controlling financial ~~interest~~interest; or (iii) the entity is structured with

non-substantive

voting rights. The Company determined that AdvisorEngine has the characteristics of a VIE.

Consolidation of a VIE is required for the party deemed to be the primary beneficiary, if any. The primary beneficiary is the party who has both (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. The Company is not the primary beneficiary of AdvisorEngine as it does not have the power to direct the activities that most significantly impact AdvisorEngine’s economic performance. Such power is conveyed through AdvisorEngine’s ~~Board~~board of ~~Directors~~directors and the Company does not have control over the board.

The following table presents information about the Company’s variable interests in AdvisorEngine (a

non-consolidated

VIE):

   June 30,
2018    December 31,
2017
Carrying Amount—Assets

Preferred stock
   $ 25,000    $ 25,000
Note receivable—unsecured
   24,588    18,748
Option
   3,278    3,278




Total carrying amount—Assets
   $ 52,866    $ 47,026




Maximum exposure to loss
   $ 55,866    $ 55,026

The Company has a remaining commitment to provide working capital to AdvisorEngine of $3,000 at June 30, 2018 pursuant to the terms of the unsecured promissory note (See Note 8). The additional funding is scheduled to be provided on September 30, 2018 if no event of default (as defined) has occurred or is continuing.

~~16.~~


	June 30, 2019		December 31, 2018
Carrying Amount—Assets
Preferred stock	$	25,000	$	25,000
Unsecured non-convertible note receivable		29,935		28,722
Unsecured convertible note receivable		1,550		—

Total carrying amount—Assets	$	56,485	$	53,722

Maximum exposure to loss	$	56,485	$	53,722

17. Revenues from Contracts with Customers

The following table presents the Company’s total revenues from contracts with customers:

   Three Months
Ended
June 30,
2018    Six Months
Ended
June 30,
2018
Revenues from contracts with customers:

Advisory fees
   $ 73,778    $ 132,234
Other
   997    1,445




Total operating revenues
   $ 74,775    $ 133,679


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Revenues from contracts with customers:
Advisory fees	$	65,627	$	73,778	$	130,467	$	132,234
Other		666		997		1,311		1,445

Total operating revenues	$	66,293	$	74,775	$	131,778	$	133,679

The Company recognizes revenues from contracts with customers when the performance obligation is satisfied, which is when the promised goods or services are transferred to the customer. A good or service is considered to be transferred when the customer obtains control, which is represented by the transfer of rights with regard to the good or service. Transfer of control happens either over time or at a point in time. When a performance obligation is satisfied over time, an entity is required to select a single method of measuring progress for each performance obligation that depicts the entity’s performance in transferring control of goods or services to the customer.

Substantially all the Company’s revenues from contracts with customers are derived primarily from investment advisory agreements with related parties (See Note ~~17)~~18). These advisory fees are recognized over time, are earned from the Company’s ETPs and are calculated based on a percentage of the ETPs’ average daily net assets. There is no significant judgment in calculating amounts due which are invoiced monthly in arrears and are not subject to any potential reversal. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.

There are no contract assets or liabilities that arise in connection with the recognition of advisory fee revenue. In addition, there are no costs incurred to obtain or fulfill the contracts with customers, all of which are investment advisory agreements with related parties.

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See Note 1718 for further information including disaggregation of advisory fee revenue and amounts due from customers, all of which are derived from related parties. Advisory fee revenues are also reported by segment as disclosed in Note ~~23.~~

~~17.~~24.

18. Related Party Transactions

The Company’s revenues are derived primarily from investment advisory agreements with related parties. Under these agreements, the Company has licensed to related parties the use of certain of its own indexes for the U.S. and Canadian WisdomTree ETFs and WisdomTree UCITS ETFs. The Board of Trustees and Board of Directors (including certain officers of the Company) of the related parties are primarily responsible for overseeing the management and affairs of the entities for the benefit of their stakeholders and have contracted with the Company to provide for general management and administration services. The Company is also responsible for certain expenses of the related parties, including the cost of transfer agency, custody, fund administration and accounting, legal, audit, and other

non-distribution

services, excluding extraordinary expenses, taxes and certain other expenses, which is included in fund management and administration on the Company’s Consolidated Statements of Operations. In exchange, the Company receives fees based on a percentage of the ~~ETF~~ETFs’ average daily net assets. The advisory agreements may be terminated by the related parties upon notice.

The following table summarizes accounts receivable from related parties which are included as a component of ~~Accounts~~accounts receivable on the Company’s Consolidated Balance Sheets:

   June 30,
2018    December 31,
2017
Receivable from WTT
   $ 17,035    $ 19,433
Receivable from ETFS Issuers
   8,369    —
Receivable from BI and WTI
   957    979
Receivable from WTCS
   110    97
Receivable from WTAMC
   137    87




Total
   $ 26,608    $ 20,596


	June 30, 2019		December 31, 2018
Receivable from WTT	$	13,920	$	14,678
Receivable from ETFS Issuers		8,573		8,779
Receivable from BI and WTI		853		951
Receivable from WTAMC		196		167
Receivable from WTCS		80		95

Total	$	23,622	$	24,670

The following table summarizes revenues from advisory services provided to related parties:

   Three Months Ended
June 30,    Six Months Ended
June 30,
   2018    2017    2018    2017
Advisory services provided to WTT
   $ 52,591    $ 53,311    $ 107,792    $ 103,767
Advisory services provided to ETFS Issuers
   17,720    —      17,720    —
Advisory services provided to BI and WTI
   2,724    2,125    5,351    4,046
Advisory services provided to WTCS
   340    330    656    900
Advisory services provided to WTAMC
   403    90    715    171








Total
   $ 73,778    $ 55,856    $ 132,234    $ 108,884


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Advisory services provided to WTT	$	42,817	$	52,591	$	85,040	$	107,792
Advisory services provided to ETFS Issuers		19,367		17,720		38,640		17,720
Advisory services provided to BI and WTI		2,583		2,724		5,087		5,351
Advisory services provided to WTAMC		607		403		1,153		715
Advisory services provided to WTCS		253		340		547		656

Total	$	65,627	$	73,778	$	130,467	$	132,234

The Company also has investments in certain WisdomTree ETFs of approximately ~~$2,588~~$3,193 and ~~$1,691~~$7,117 at June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. ~~Losses for~~Gains and losses related to these ETFs during the three months ended June 30, 2019 and 2018 were ($205) and ($67), respectively, and during the six months ended June 30, 2019 and 2018 were $148 and ~~2017 were less than $100.~~

), respectively.

~~18.~~

Table of Contents

19. Stock-Based Awards

The Company grants equity awards to employees and directors which include restricted stock awards, restricted stock units and stock options. Stock options may be issued for terms of ten years and may vest after at least one year and have an exercise price equal to the Company’s stock price on the grant date. Restricted stock awards and restricted stock units are generally valued based on the Company’s stock price on the grant date. The Company estimates the fair value for stock options (when granted) using the Black-Scholes option pricing model. All restricted stock awards, restricted stock units and stock option awards require future service as a condition of vesting with certain awards subject to acceleration under certain conditions.

On June 20, 2016, the Company’s stockholders approved a new equity award plan under which the Company can issue up to 10,000,000 shares of common stock (less one share for every share granted under prior plans since March 31, 2016 and inclusive of shares available under the prior plans as of March 31, 2016) in the form of stock options and other stock-based awards. The Company also has issued from time to time stock-based awards outside a plan.

The Company grants equity awards to employees and directors which include restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and stock options. Certain awards described below are subject to acceleration under certain conditions.

Stock options:		Generally issued for terms of ten years and may vest after at least one year of service and have an exercise price equal to the Company’s stock price on the grant date. The Company estimates the fair value of stock options (when granted) using the Black-Scholes option pricing model.

RSAs/RSUs:		Awards are valued based on the Company’s stock price on grant date and generally vest ratably over three years.

PRSUs:		These awards cliff vest three years from grant date and contain a market condition whereby the number of PRSUs ultimately vesting is tied to how the Company’s total shareholder return (“TSR”) compares to a peer group of other publicly traded asset managers over the three-year period. A Monte Carlo simulation is used to value these awards.

		The number of PRSUs vesting ranges from 0% to 200% of the target number of PRSUs granted, as follows:

If the relative TSR is below the 25

percentile, then 0% of the target number of PRSUs granted will vest;

If the relative TSR is at the 25

percentile, then 50% of the target number of PRSUs granted will vest; and

If the relative TSR is above the 25

percentile, then linear scaling is applied such that the percent of the target number of PRSUs vesting is 100% at the 50

percentile and capped at 200% of the target number of PRSUs granted for performance at the 100

percentile.

Stock-based compensation ~~for~~during the three months ended June 30, 2019 and 2018 was $3,135 and ~~2017 was~~ $3,529, ~~and $3,530,~~ respectively, and ~~for~~during the six months ended June 30, 2019 and 2018 was $6,207 and ~~2017 was~~ $6,838, ~~and $6,951,~~ respectively.

A summary of unrecognized stock-based compensation expense and average remaining vesting period is as follows:

   June 30, 2018
   Unrecognized Stock-
Based
Compensation    Average
Remaining
Vesting Period (Years)
Employees and directors restricted stock awards
   $ 19,646    1.85


	June 30, 2019
	Unrecognized Stock- Based Compensation		Average Remaining Vesting Period (Years)
Employees and directors	$	21,078		2.16

A summary of ~~stock options, restricted stock and restricted stock unit~~stock-based compensation award activity ~~for~~during the three months ended June 30, ~~2018~~2019 is as follows:

   Stock
Options    Restricted
Stock
Awards    Restricted
Stock
Units
Balance at April 1, 2018
   985,537    2,319,057    12,096
Granted
   —      173,203    —
Exercised/vested
   (10,000 )    (145,383 )    —
Forfeitures
   —      (14,931 )    —






Balance at June 30, 2018
   975,537    2,331,946    12,096

~~19.~~


	Stock Options		RSAs			RSUs		PRSUs
Balance at April 1, 2019		550,537		3,270,065			40,436		270,872	(1)
Granted		—		97,649			—		—
Exercised/vested		—		(105,319	)		—		—
Forfeitures		—		(31,142	)		—		—

Balance at June 30, 2019		550,537		3,231,253			40,436		270,872	(1)

(1)

Represents the target number of PRSUs granted and outstanding. The number of PRSUs that ultimately vest ranges from 0% to 200% of this amount. A Monte Carlo simulation was used to value these awards using the following assumptions for the Company and the peer group: (i) beginning

90-day

average stock prices; (ii) valuation date stock prices; (iii) historical stock price volatilities ranging from 22% to 42% (average 28%); (iv) correlation coefficients based upon the price data used to calculate the historical volatilities; (v) a risk free interest rate of 2.56%; and (vi) an expected dividend yield of 0%.

Table of Contents

20. Earnings Per Share

The following tables set forth reconciliations of the basic and diluted earnings per share computations for the periods presented:

   Three Months Ended
June 30,    Six Months Ended
June 30,
Basic Earnings per Share    2018    2017    2018    2017
Net income
   $ 16,724    $ 12,105    $ 26,148    $ 18,985
Less: Income distributed to participating securities
   (513 )    (178 )    (584 )    (348 )
Less: Undistributed income allocable to participating securities
   (1,101 )    (19 )    (999 )    —








Net income available to common stockholders
   $ 15,110    $ 11,908    $ 24,565    $ 18,637
Weighted average common shares (in thousands)
   149,056    134,557    142,230    134,472








Basic earnings per share
   $ 0.10    $ 0.09    $ 0.17    $ 0.14


	Three Months Ended June 30,						Six Months Ended June 30,
Basic Earnings per Share	2019			2018			2019			2018
Net income	$	2,479		$	16,724		$	11,303		$	26,148
Less: Income distributed to participating securities		(539	)		(513	)		(1,083	)		(584	)
Less: Undistributed income allocable to participating securities		—			(1,101	)		(117	)		(999	)

Net income available to common stockholders	$	1,940		$	15,110		$	10,103		$	24,565
Weighted average common shares (in thousands)		151,818			149,056			151,722			142,230

Basic earnings per share	$	0.01		$	0.10		$	0.07		$	0.17

   Three Months Ended
June 30,    Six Months Ended
June 30,
Diluted Earnings per Share    2018    2017    2018    2017
Net income
   $ 16,724    $ 12,105    $ 26,148    $ 18,985








Weighted Average Diluted Shares (in thousands):

Weighted average common shares
   149,056    134,557    142,230    134,472
Dilutive effect of common stock equivalents
   14,290    1,017    7,749    1,141








Weighted average diluted shares
   163,346    135,574    149,979    135,613








Diluted earnings per share
   $ 0.10    $ 0.09    $ 0.17    $ 0.14

	Three Months Ended June 30,				Six Months Ended June 30,
Diluted Earnings per Share	2019		2018		2019		2018
Net income	$	2,479	$	16,724	$	11,303	$	26,148

Weighted Average Diluted Shares (in thousands) :
Weighted average common shares		151,818		149,056		151,722		142,230
Dilutive effect of common stock equivalents		15,431		14,290		15,133		7,749

Weighted average diluted shares		167,249		163,346		166,855		149,979

Diluted earnings per share	$	0.01	$	0.10	$	0.07	$	0.17

Diluted earnings per share is calculated under the treasury stock and

if-converted

method and the

two-class

method and reflects the reduction in earnings per share assuming options or other contracts to issue common stock were exercised or converted into common stock (if dilutive). The calculation that results in the most dilutive earnings per share amount for common stock is reported in the Company’s consolidated financial statements. The Company excluded ~~869,288~~920,166 and ~~1,951,683~~869,288 common stock equivalents from its computation of diluted earnings per share ~~for~~during the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~1,140,659~~1,239,431 and ~~1,780,397~~1,140,659 common stock equivalents from its computation of diluted earnings per share ~~for~~during the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, as they were determined to be anti-dilutive.

~~20.~~

21. Income Taxes

Effective Income Tax Rate – Three and Six Months Ended June 30, 2019

The Company’s effective income tax rate during the three months ended June 30, 2019 of 59.1% resulted in income tax expense of $3,587. The Company’s effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a valuation allowance on foreign net operating losses,
non-deductible
executive compensation, a
non-deductible
loss on revaluation of deferred consideration and state and local income taxes, partly offset by a lower tax rate on foreign earnings.

The Company’s effective income tax rate during the six months ended June 30, 2019 of 18.3% resulted in income tax expense of $2,538. The Company’s effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a $4,309 reduction in unrecognized tax benefits, a lower tax rate on foreign earnings and a
non-taxable
gain on revaluation of deferred consideration, partly offset by a valuation allowance on foreign net operating losses, tax shortfalls associated with the vesting and exercise of stock-based compensation awards,
non-deductible
executive compensation and state and local income taxes.

Effective Income Tax Rate – Three and Six Months Ended June 30, 2018

The Company’s ~~estimated~~ effective income tax rate ~~for~~during the three and six months ended June 30, 2018 of 24.6% and 27.6%, respectively, resulted in income tax expense of $5,460 and $9,958, respectively. The Company’s effective income tax rate differs from the federal statutory tax rate of 21% primarily due to

non-deductible

acquisition-related costs, a valuation allowance on foreign net operating losses and state and local income taxes, partly offset by ~~the~~ a

non-taxable

gain on revaluation of deferred consideration and a lower tax rate on foreign earnings. ~~The gain on revaluation is not adjusted for income taxes as~~

Table of Contents

Deferred Tax Assets

A summary of the ~~obligation was assumed by a wholly-owned subsidiary~~components of ~~ours that is based in Jersey, a jurisdiction where~~ the ~~Company is subject to a zero percent~~Company’s deferred tax ~~rate.~~

~~Effective Income Tax Rate – Three and Six Months Ended~~assets at June 30, ~~2017~~

The Company’s estimated effective income tax rate for the three months ended June 30, 2017 of 45.5% resulted in income tax expense of $10,120. The Company’s tax rate differs from the federal statutory tax rate of 35% primarily due to a valuation allowance on foreign net operating losses2019 and ~~state and local income taxes.~~

The Company’s estimated effective income tax rate for the six months ended June 30, 2017 of 48.8% resulted in income tax expense of $18,062. The Company’s tax rate differs from the federal statutory tax rate of 35% primarily due to a valuation allowance on foreign net operating losses, tax shortfalls associated with the vesting of stock-based compensation awards and state and local income taxes.

December 31, 2018 are as follows:

June 30,
2019

December 31,
2018

Deferred tax assets:

NOLs – International
$
8,992
$
6,605

Accrued expenses

1,837

2,699

Goodwill and intangible assets

1,746

1,841

Stock-based compensation

1,189

2,673

Net lease liability

1,160

1,184

Capital losses

794

794

NOLs – U.S.

635

762

Other

272

40

Deferred tax assets

16,625

16,598

Deferred tax liabilities:

Fixed assets and prepaid assets

1,480

1,433

Unrealized gains

760

724

Deferred tax liabilities

2,240

2,157

Total deferred tax assets less deferred tax liabilities

14,385

14,441

Less: valuation allowance

(9,786
)
(7,399
)

Deferred tax assets, net
$
4,599
$
7,042

Net Operating Losses – U.S

The Company’s~~pre-tax~~ tax effected federal net operating losses ~~for tax purposes~~ (“NOLs”) at June 30, ~~2018~~2019 were ~~$3,147,~~$635 which expire in 2024. The net operating loss carryforwards have been reduced by the impact of annual limitations described in ~~the~~ Internal Revenue Code Section 382 that arose as a result of an ownership change.

The Company’s tax effected capital losses at June 30, 2019 was $794. A full valuation allowance was established as it is
more-likely-than-not
that the deferred tax assets will not be realized.

Net Operating Losses – International

~~The~~

Certain of the Company’s European subsidiaries and its Canadian ~~subsidiaries~~subsidiary generated NOLs outside the U.S. These tax effected NOLs were ~~$5,137~~$8,992 and $6,605 at June 30, ~~2018.~~2019 and December 31, 2018, respectively. The Company established a full valuation allowance related to these NOLs as it is

more-likely-than-not

that ~~some portion, or all, of~~ the deferred tax assets will not be realized.

~~Deferred Tax Assets~~

~~A summary~~ Approximately $4,315 of ~~the components of the Company’s deferred tax assets~~these NOLs at June 30, ~~2018~~2019 expire between 2036 and ~~December 31, 2017 are as follows:~~

   June 30,
2018    December 31,
2017
Deferred tax assets:

NOLs – Foreign
   $ 5,137    $ 3,841
Stock-based compensation
   2,034    1,474
Deferred rent liability
   1,233    1,257
NOLs – U.S.
   779    909
Accrued expenses
   1,410    526
Other
   298    488




Deferred tax assets
   10,891    8,495




Deferred tax liabilities:

Unrealized gains
   1,718    1,718
Fixed assets
   1,527    1,498
Goodwill and intangible assets
   485    388




Deferred tax liabilities
   3,730    3,604




Total deferred tax assets less deferred tax liabilities
   7,161    4,891
Less: valuation allowance
   (5,137 )    (3,841 )




Deferred tax assets, net
   $ 2,024    $ 1,050

2039. The remainder is carried forward indefinitely.

Uncertain Tax Positions

Tax positions are evaluated utilizing a

two-step

process. The Company first determines whether any of its tax positions are~~more-likely-than-not~~ more-

likely-than-not

In connection with the ETFS Acquisition, the Company accrued a liability ~~of £18,102 ($25,631)~~ for uncertain tax positions and ~~£3,415 ($4,835) for~~ interest and penalties at the acquisition date.

The table below sets forth the aggregate changes in the balance of these gross unrecognized tax ~~benefits:~~

   Total    Unrecognized
Tax Benefits    Interest
and
Penalties
Balance on January 1, 2018
   $ —      $ —      $ —
Accrued in connection with the ETFS Acquisition
   30,466    25,631    4,835
Increases
   37    —      37
Foreign currency translation⁽¹⁾
   (2,164 )    (1,820 )    (344 )






Balance at June 30, 2018
   $ 28,339    $ 23,811    $ 4,528

benefits during the three and six months ended June 30, 2019:

Table of Contents


	Total			Unrecognized Tax Benefits			Interest and Penalties
Balance on January 1, 2019	$	34,876		$	28,101		$	6,775
Decrease—Lapse of statute of limitations		(4,309	)		(2,999	)		(1,310	)
Increases		101			—			101
Foreign currency translation (1)		925			745			180

Balance at March 31, 2019	$	31,593		$	25,847		$	5,746
Increases		101			—			101
Foreign currency translation (1)		(817	)		(668	)		(149	)

Balance at June 30, 2019	$	30,877		$	25,179		$	5,698

(1)	The gross unrecognized tax benefits were accrued in British pounds sterling.

The Company also recorded an offsetting indemnification asset provided by ETFS Capital as part of its agreement to indemnify the Company for any potential claims, for which an amount is being held in escrow. ETFS Capital has also agreed to provide additional collateral by maintaining a minimum working capital balance up to a stipulated amount. The decrease resulting from the lapsing of the statute of limitations of $4,309, was recorded as an income tax benefit and an equal and offsetting amount to reduce the indemnification asset was recorded in other losses, net, during the six months ended June 30, 2019.

The gross unrecognized tax benefits and interest and penalties totaling ~~$28,339~~$30,877 and $34,876 at June 30, 2019 and December 31, 2018, respectively, are included in other

non-current

liabilities on the Consolidated Balance Sheet. It is expected that the amount of unrecognized tax benefits will change in the next 12 ~~months,~~months; however, the Company does not expect the change to have a material impact on its consolidated financial statements.

At June 30, ~~2018,~~2019, there were ~~$23,811~~$25,179 of unrecognized tax benefits that, if recognized, would impact the effective tax rate. The recognition of any unrecognized tax benefits would result in an equal and offsetting adjustment to the indemnification asset which would be recorded in income before ~~taxes.~~

taxes due to the indemnity for any potential claims.

Income Tax Examinations

The Company is subject to U.S. federal income tax as well as income tax of multiple state, local and certain foreign jurisdictions. The Company’s federal tax return and ManJer’s tax return (a Jersey-based subsidiary) for the year ended December 31, 2016 ~~of ManJer, the Company’s Jersey-based subsidiary, is~~are currently under review by the relevant tax ~~authority.~~authorities. The Company is indemnified by ETFS Capital for any potential ~~exposure.~~

exposure associated with ManJer’s tax return under audit.

The Company is not currently under audit in any other income tax jurisdictions. As of June 30, ~~2018,~~2019, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before ~~2014.~~

2015.

~~21.~~

Undistributed Earnings of Foreign Subsidiaries

The Company recognizes deferred tax liabilities for withholding taxes that may become payable, where applicable, upon the distribution of earnings and profits from foreign subsidiaries unless considered permanent in duration. As of June 30, 2019, the Company considers all undistributed foreign earnings and profits to be permanent in duration.

22. Shares Repurchased

On ~~October 29, 2014,~~April 24, 2019, the Company’s Board of Directors ~~authorized a three-year share repurchase program~~extended the term of ~~up to $100,000. On April 27, 2016, the Board of Directors approved a $60,000 increase to~~ the Company’s share repurchase program ~~and extended the term~~for three years through April 27, ~~2019.~~2022. Included under this program are purchases to offset future equity grants made under the Company’s equity plans and ~~are~~purchases made in open market or privately negotiated transactions. This authority may be exercised from time to time, ~~and in such amounts as market conditions warrant, and~~ subject to the terms of the credit agreement described below and regulatory considerations. The timing and actual number of shares repurchased ~~depends~~will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The repurchase program may be suspended or terminated at any time without prior notice. Shares repurchased under this program are returned to the status of authorized and unissued on the Company’s books and records.

As more fully disclosed in Note 3, the Company completed the ETFS Acquisition on April 11, 2018. To partially finance the acquisition, the Company ~~and WisdomTree International~~ entered into a ~~Credit Agreement~~credit agreement which contains customary negative covenants, including, among others, a covenant which may restrict the Company’s ability to repurchase equity interests. Share repurchases only are permitted to the extent the Total Leverage Ratio (as defined in the ~~Credit Agreement)~~credit agreement) does not exceed

1.75

1.00

and no event of default (as defined in the ~~Credit Agreement)~~credit agreement) has occurred and is continuing at the time the share repurchase is made. However, the Company’s ability to purchase shares of its common stock withheld pursuant to the terms of equity awards granted to employees to satisfy tax withholding obligations is not restricted.

Table of Contents

During the three and six months ended June 30, 2019, the Company repurchased 14,065 shares and 325,278 shares of its common stock, respectively, under this program for an aggregate cost of $102 and $2,107, respectively.

During the three and six months ended June 30, 2018, the Company repurchased 26,717 shares and 87,225 shares of its common stock, respectively, under this program for an aggregate cost of $272 and $1,006, respectively.

During the three and six months ended June 30, 2017, the Company repurchased 7,967 shares and 354,496 shares of its common stock, respectively, under this program for an aggregate cost of $65 and $3,693, respectively.

As of June 30, ~~2018, $87,608 remains~~2019, $83,622 remained under this program for future purchases.

~~22.~~

23. Goodwill and Intangible Assets

Goodwill

The table below sets forth goodwill by reporting unit. Goodwill allocated to the U.S. Business reporting unit is tested annually for impairment on April 30^{th
. Goodwill allocated to the European Business reporting unit is tested annually for impairment on November 30^{th
.
   Reporting Unit
   European
Business⁽¹⁾    U.S. Business    Total
Balance at January 1, 2018    $ —      $ 1,799    $ 1,799
Increases/(decreases)    84,057    —      84,057

Balance at June 30, 2018    $ 84,057    $ 1,799    $ 85,856}}


	Reporting Unit
	European Business (1)		U.S. Business		Total
Balance at January 1, 2019	$	84,057	$	1,799	$	85,856
Changes		—		—		—

Balance at June 30, 2019	$	84,057	$	1,799	$	85,856

(1)	~~Europe~~The European Business is included in the Company’s International Business reportable segment.

~~Goodwill allocated to the U.S. Business reporting unit was tested for impairment on April 30, 2018.~~

The ~~fair value of the reporting unit exceeded its carrying value and therefore no impairment was recognized.~~

~~European Business Reporting Unit— ETFS Acquisition~~

~~As more fully disclosed in Note 3, the Company completed the ETFS Acquisition on April 11, 2018. In connection with the acquisition, the Company recognized $84,057 of~~ goodwill ~~which was~~ allocated to the European Business reporting ~~unit. The goodwill represents the value of expected synergies created from combining the operations of ETFS and the Company. The goodwill~~unit is not deductible for tax purposes as the transaction was structured as a stock acquisition occurring in the United Kingdom.

~~U.S. Business Reporting Unit— WisdomTree Continuous Commodity Index Fund~~

Effective January 1, 2016, the Company acquired the outstanding membership interest in GreenHaven Commodity Services, LLC, the managing owner of the Greehaven Continuous Commodity Index Fund (renamed the WisdomTree Continuous Commodity Index Fund, or “GCC”). In connection with the acquisition, the Company recognized $1,799 ofThe goodwill ~~which was~~ allocated to the ~~U.S~~U.S. Business reporting ~~unit. The goodwill primarily represents the potential future performance of the fund and~~unit is deductible for tax purposes.

Goodwill allocated to the U.S. Business reporting unit was tested for impairment on April 30, 2019. The fair value of the reporting unit exceeded its carrying value and therefore
no
impairment was recognized.

Intangible Assets (Indefinite-Lived)

   Advisory
Agreements
(ETFS)    Advisory
Agreements
(Questrade
AUM)    Advisory
Agreement
(GCC)    Total
Balance at January 1, 2018
   $ —      $ 2,132    $ 9,953    $ 12,085
Foreign currency translation
   —      (105 )    —      (105 )
Other increases/(decreases)
   601,247    —      —      601,247








Balance at June 30, 2018
   $ 601,247    $ 2,027    $ 9,953    $ 613,227

Advisory
Agreements
(ETFS)

Advisory
Agreements
(Questrade
AUM)

Total

Balance at January 1, 2019
$
601,247
$
1,962
$
603,209

Foreign currency translation

—

82

82

Balance at June 30, 2019
$
601,247
$
2,044
$
603,291

ETFS

In connection with the ETFS Acquisition which was completed on April 11, 2018 (see Note 3), the Company identified intangible assets valued at $601,247 related to the right to manage AUM through customary advisory agreements. The fair value of the intangible assets was determined using an income approach (discounted cash flow analysis) which relied upon significant unobservable inputs including a revenue growth multiple of 3% to 4% and a weighted average cost of capital of 11.6%. The intangible assets were determined to have indefinite useful lives and are not deductible for tax purposes. The Company has designated November 30^{th
as its annual impairment testing date for these intangible assets.}

Questrade ETFs

During the fourth quarter of

2017

, the Company acquired ~~a suite of~~

eight ~~Canadian listed~~

Canadian-listed ETFs from Questrade, Inc. (the “Questrade ETFs”) ~~with approximately CAD $99,108 (USD $77,403) in AUM at closing.~~. The entire purchase price ~~was CAD $2,675 (USD $2,132), all of which~~ was allocated to the Company’s right to manage AUM in the form of advisory contracts. ~~This~~These intangible ~~asset is~~assets are translated based on the end of period exchange rates from local currency to U.S. dollars.

Most of the Questrade ETFs were merged into the Company’s existing ~~Canadian listed~~Canadian-listed ETFs. The intangible assets (which are deductible for tax purposes) were determined to have an indefinite useful life. The Company has designated November 30^{th
as its annual impairment testing date for these intangible assets.
GCC
As part}

Table of the GreenHaven acquisition which occurred on January 1, 2016, the Company identified an intangible asset valued at $9,953 related to its customary advisory agreement with GCC. This intangible asset (which is deductible for tax purposes) was determined to have an indefinite useful life. The Company has designated November 30^th ~~as its annual impairment testing date for this indefinite-lived intangible asset.~~

~~23.~~Contents

24. Segment Reporting

The Company operates as an ETP sponsor and asset manager providing investment advisory services globally. These activities are reported in the Company’s U.S. Business and International Business reportable segments. The ~~International~~U.S. Business ~~reportable~~ segment includes the results of the Company’s ~~European~~U.S. operations and wind down costs associated with the Japan sales office. The results of the Company’s European and Canadian ~~operations.~~

operations are reported as the International Business segment.

Information concerning these reportable segments are as follows:

   Three Months Ended June 30,    Six Months Ended June 30,
   2018    2017    2018    2017
U.S. Business Segment

Operating revenues

Advisory fees
   $ 52,931    $ 53,641    $ 108,449    $ 104,667
Other income
   162    128    309    231








Total operating revenues
   $ 53,093    $ 53,769    $ 108,758    $ 104,898








Total operating expenses
   $ (42,638 )    $ (35,748 )    $ (81,668 )    $ (70,178 )








Other income/(expenses)

Interest expense
   $ (173 )    $ —      $ (173 )    $ —
Interest income
   612    641    1,574    1,225
Settlement gain
   —      6,909    —      6,909
Other gains and losses, net
   (66 )    (261 )    (292 )    364








Total other income/(expenses)
   $ 373    $ 7,289    $ 1,109    $ 8,498








Total income before taxes (U.S. Business Segment)
   $ 10,828    $ 25,310    $ 28,199    $ 43,218








International Business Segment⁽¹⁾

Operating revenues

Advisory fees
   $ 20,847    $ 2,215    $ 23,785    $ 4,217
Other income
   835    258    1,136    494








Total operating revenues
   $ 21,682    $ 2,473    $ 24,921    $ 4,711








Total operating expenses
   $ (17,606 )    $ (5,455 )    $ (24,259 )    $ (10,802 )








Other income/(expenses)

Interest expense
   $ (2,183 )    $ —      $ (2,183 )    $ —
Interest income
   —      —      —      —
Gain on revaluation of deferred consideration
   9,898    —      9,898    —
Other gains and losses, net
   (435 )    (103 )    (470 )    (80 )








Total other income/(expenses)
   $ 7,280    $ (103 )    $ 7,245    $ (80 )








Total income/(loss) before taxes (International Business Segment)
   $ 11,356    $ (3,085 )    $ 7,907    $ (6,171 )








Income/(loss) before taxes

U.S. Business segment
   $ 10,828    $ 25,310    $ 28,199    $ 43,218
International Business segment
   11,356    (3,085 )    7,907    (6,171 )








Total income before taxes
   $ 22,184    $ 22,225    $ 36,106    $ 37,047


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
U.S. Business Segment
Operating revenues
Advisory fees	$	43,070		$	52,931		$	85,587		$	108,449
Other income		76			162			182			309

Total operating revenues	$	43,146		$	53,093		$	85,769		$	108,758

Total operating expenses	$	(36,407	)	$	(42,638	)	$	(73,583	)	$	(81,668	)

Other income/(expenses)
Interest expense	$	(194	)	$	(173	)	$	(386	)	$	(173	)
Interest income		818			612			1,597			1,574
Impairment		—			—			(572	)		—
Other gains and losses, net		(54	)		(66	)		91			(292	)

Total other income	$	570		$	373		$	730		$	1,109

Total income before income taxes (U.S. Business Segment)	$	7,309		$	10,828		$	12,916		$	28,199

International Business Segment (1)
Operating revenues
Advisory fees	$	22,557		$	20,847		$	44,880		$	23,785
Other income		590			835			1,129			1,136

Total operating revenues	$	23,147		$	21,682		$	46,009		$	24,921

Total operating expenses	$	(17,975	)	$	(17,606	)	$	(35,601	)	$	(24,259	)

Other income/(expenses)
Interest expense	$	(2,716	)	$	(2,183	)	$	(5,416	)	$	(2,183	)
(Loss)/gain on revaluation of deferred consideration		(4,037	)		9,898			367			9,898
Other gains and losses, net		338			(435	)		(4,434	)		(470	)

Total other income/(expenses)	$	(6,415	)	$	7,280		$	(9,483	)	$	7,245

Total (loss)/income before income taxes (International Business Segment)	$	(1,243	)	$	11,356		$	925		$	7,907

Income/(loss) before income taxes
U.S. Business segment	$	7,309		$	10,828		$	12,916		$	28,199
International Business segment		(1,243	)		11,356			925			7,907

Total income before income taxes	$	6,066		$	22,184		$	13,841		$	36,106

Assets are not reported by segment as such information is not utilized by the chief operating decision maker.

(1)	The financial results of ETFS are included in the International Business reportable segment as of April 11, 2018.

~~24.~~

Table of Contents

25. Subsequent Events

The Company evaluated subsequent events through the date of issuance of the accompanying consolidated financial statements. There were no events requiring ~~disclosure, other than the matter below.~~

~~Restructuring~~disclosure.

Table of ~~Distribution Strategy in Japan~~

As previously disclosed in Note 1, in July 2018, the Company determined to restructure its distribution strategy in Japan. As a result, the Company will close WTJ and anticipates expanding its existing relationship with a third party to manage distribution of WisdomTree ETFs in Japan. During the three months ended June 30, 2018 and 2017, WTJ reported an operating loss of $1,125 and $1,232, respectively. During the six months ended June 30, 2018 and 2017, WTJ reported an operating loss of $2,357 and $2,365, respectively.

Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below. For a more complete description of the risks noted above and other risks that could cause our actual results to materially differ from our current expectations, please see Item 1A “Risk Factors” in our Annual Report on Form
10-K
for the fiscal year ended December ~~31, 2017 and Quarterly Report on Form10-Q~~ ~~for the quarter ended March~~ 31, 2018. We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Executive Summary

Introduction

We are the only publicly-traded asset management company that focuses exclusively on exchange-traded products, or ETPs, and are one of the leading ETP sponsors in the world based on assets under management, or AUM, with AUM of ~~$60.0~~$60.4 billion globally as of June 30, ~~2018.~~2019. An ETP is a pooled investment vehicle that holds a basket of securities, financial instruments or other assets and generally seeks to track (index-based) or outperform (actively managed) the performance of a broad or specific equity, fixed income or alternatives market segment, commodity or currency (or an inverse or multiple thereof). ETPs are listed on an exchange with their shares traded in the secondary market at market prices, generally at approximately the same price as the net asset value of their underlying components. ETP is an umbrella term that includes exchange-traded funds, or ETFs, exchange-traded notes and exchange-traded commodities.

On November 13, 2017, we entered into a Share Sale Agreement as amended by the Waiver and Variation Agreement, dated April 11, 2018 (collectively referred to as the “Share Sale Agreement”) with ETFS Capital Limited (“ETFS Capital,” formerly known as ETF Securities Limited) and WisdomTree International Holdings Ltd, an indirect wholly owned subsidiary of ours (“WisdomTree International”), pursuant to which we agreed to acquire the European exchange-traded commodity, currency and~~short-and-leveraged~~ business, or ETFS, of ETFS Capital. On April 11, 2018, we completed the acquisition of ETFS, or the ETFS Acquisition, by purchasing the entire issued share capital of a subsidiary of ETFS Capital into which ETFS Capital transferred ETFS prior to completion of the ETFS Acquisition. ETFS had approximately $17.6 billion of AUM as of April 10, 2018. The ETFS Acquisition elevated us to the ninth largest ETP sponsor globally and the largest global independent ETP provider based on AUM, with significant scale and presence in the U.S. and Europe, the two largest ETP markets.

Our U.S. listed ETFs make up a majority of our global AUM. Our family of ETFs include funds that track our own indexes, funds that track third-party indexes and actively managed funds. We distribute our ETFs through all major channels within the asset management industry, including brokerage firms, registered investment advisers and institutional investors.

We focus on creating ETFs for investors that offer thoughtful innovation, smart engineering and redefined investing. ~~Most~~We have launched many

first-to-market

ETFs in the United States and pioneered alternative weighting and performance methods commonly referred to as “smart beta.” However, our U.S. listed ETFs are not beta, but rather an investment innovation we call “Modern Alpha.” Our Modern Alpha approach combines the outperformance potential of ~~our index-based funds employ a fundamentally weighted investment methodology, which weights securities on~~active management with the ~~basis~~benefits of ~~factors such as dividends or earnings, whereas most other ETF industry indexes use a capitalization weighted methodology. We also~~passive management to offer ~~actively managed ETFs, which are~~investors cost-effective ETFs that are ~~not~~built to perform.

Through our operating subsidiaries, we provide investment advisory and other management services to our ETPs collectively offering ETPs covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. In exchange for providing these services, we receive advisory fee revenues based on a ~~particular index~~percentage of the ETPs’ average daily AUM. Our expenses are predominantly related to selling, operating and marketing our ETPs. We have contracted with third parties to provide certain operational services for the ETPs. We distribute our ETPs through all major channels within the asset management industry, including brokerage firms, registered investment advisers, institutional investors, private wealth managers and discount brokers primarily through our sales force. Our sales efforts are not directed towards the retail segment but rather are ~~actively managed with complete transparency into~~directed towards financial or investment advisers that act as intermediaries between the ~~ETF’s portfolio on a daily basis. Our broad exemptive relief enables us to use our own indexes for certain of our ETFs~~

end-client

and ~~actively manage other ETFs.~~

us.

We strive to deliver a better investing experience through innovative solutions. ~~Recent~~Continued investments in technology-enabled services and the launch of our Advisor Solutions program in October 2017, which includes portfolio construction, asset allocation, practice management services and wealth management technology, ~~via the AdvisorEngine platform,~~ have been made to differentiate us in the market, expand our distribution and further enhance our relationships with financial advisors.

We were incorporated under the laws of the state of Delaware on September 19, 1985 as Financial Data Systems, Inc.

Acquisition of ETFS

In April 2018, we acquired the European exchange-traded commodity, currency and
short-and-leveraged
business of ETFS Capital Limited, or ETFS Capital. Throughout this Report, we refer to the acquired business as ETFS and the acquisition as the ETFS Acquisition. Following the ETFS Acquisition we became the largest global independent ETP provider based on AUM, with significant scale and presence in the U.S. and Europe, the two largest ETP markets.

Our operating results for the prior periods reported in this Report are not directly comparable to the current periods as the ETFS Acquisition was completed on April 11, 2018.

Table of Contents

Industry Developments

~~Rule6c-11~~

On June ~~28, 2018,~~5, 2019, the SEC ~~proposed Rule6c-11~~ ~~under~~adopted Regulation Best Interest, which requires broker-dealers to act in the ~~Investment Company Act~~best interest of ~~1940. If~~their retail customers when making a recommendation. The SEC also adopted the ~~proposal would, among other things, (i) allow most ETFs~~Form CRS relationship summary, which requires registered investment advisers and broker-dealers to ~~operate without first obtaining exemptive relief, which would reduce~~deliver to retail investors a succinct, plain English summary about the ~~time~~relationship and ~~costs needed to bring products to market; (ii) provide greater flexibility~~services provided by the firm and the required standard of conduct associated with ~~respect to aspects of ETF operations than exists under exemptive relief issued in recent years, including~~ the ~~use of “custom baskets” for creation~~relationship and ~~redemption transactions;~~services. Regulation Best Interest, Form CRS and ~~(iii) require additional disclosures regarding ETFs’ trading costs, including certainbid-ask~~ ~~spread information. The proposal also would rescind existing exemptive relief for ETFs that are eligible to rely on~~ the ~~proposed rule. The SEC has requested public comments on the proposed~~related rule ~~which are due within~~will become effective 60 days after ~~the proposal is published~~their publication in the Federal Register. ~~While the rule as proposed would level the playing field~~The compliance date for ~~new entrants~~both rules is June 30, 2020. Congress and individual state legislatures have continued to debate, and in some ~~respects, we~~instances taken further action, in seeking to ensure heightened standards. We believe that the ~~barriers~~increased focus on fiduciary and best interest standards will continue to ~~success in the ETF industry remain unaffected and we are well positioned to take advantage~~raise investor awareness of the ~~flexibility~~benefits that ~~the rule would provide.~~

ETFs provide – transparency, tax efficiency and liquidity – which we believe will expand ETFs’ competitiveness generally.

Assets Under Management

WisdomTree ETPs

The ~~following~~ chart below sets forth the asset mix of our ~~WisdomTree~~ ETPs ~~as of June 30, 2018:~~

A significant portion of our AUM is held in ETFs that invest in foreign securities. Therefore, our AUM and revenues are affected by movements in global capital market levels and the strengthening or weakening of the U.S. dollar against other currencies. As the chart above reflects, as ofat June 30, 2018, ~~approximately 19% of our U.S. AUM was concentrated~~March 31, 2019 and June 30, 2019:

Over the last few years, concentrations in ~~two products with similar strategies –~~ HEDJ, our European equity ETF which hedges exposure to the ~~Euro,~~euro, and DXJ, our Japanese equity ETF which hedges exposure to the ~~Yen. The strengthening of~~yen, have declined dramatically as negative investor sentiment toward these products has led to considerable net outflows. Recently, these outflows have largely been offset by strong inflows into our fixed income, U.S. equity and emerging markets products. In addition, the ~~Euro or Yen against the U.S. dollar, or the decline in European or Japanese equity markets, may have an adverse effect on~~ETFS Acquisition has further diversified our ~~results.~~

~~The addition of the AUM of ETFS improves both fund and~~ investment theme concentrations ~~resulting in a well-diversified mix with immediate scale in commodities~~by adding commodity exposures, predominantly gold.

Market Environment

During the second quarter of 2019, U.S. and ~~an industry leading position in European-listed gold products. These products historically have been negatively correlated with our two largest ETFs, HEDJ~~European markets experienced bouts of volatility and DXJ, and therefore we may experience improved stability of AUM and lower overall AUM volatility. However, we can provide no assurance that the negative historical correlation between the AUM of ETFS and the AUM of our two largest ETFs will continue in the future.

Asultimately performed favorably as a result of accommodative monetary policies and continued progress in the ~~ETFS Acquisition, our client base has been further diversified with increased exposure to European domiciled investors, commodity focused investors~~U.S. and~~new-to-firm~~ ~~clients.~~ China trade dispute. Emerging markets were largely unchanged as a result of global trade uncertainties, while the Japanese markets suffered as the yen strengthened during the quarter. In addition, ~~our average global ETP advisory fee has declined by approximately 0.02% to 0.48% due to the ETFS Acquisition and change in product mix.~~

~~Market Environment~~

~~Overview~~

~~U.S. and international markets~~gold advanced ~~in the second quarter~~ as ~~earnings momentum and positive economic data overshadowed U.S. trade policies towards China and its other trading partners. However, escalating trade tensions coupled with~~ a ~~strengthening~~result of geopolitical issues, a weakening U.S. dollar ~~resulted in sharp declines in emerging markets. The dollar’s strength, as well as the rising~~and a declining interest rate environment ~~also negatively impacted~~during the ~~price of gold.~~

quarter.

The S&P 500 rose ~~3.4%~~4.3%, MSCI EAFE (local currency) rose ~~3.9%~~3.1%, MSCI Emerging Markets Index (U.S. dollar) ~~declined 7.7%~~rose 0.8% and gold prices ~~declined 5.4%~~rose 8.8% during the second ~~quarter.~~quarter of 2019. In addition, the European ~~and Japan~~ equity ~~markets both~~market appreciated with the MSCI EMU Index rising ~~3.2% and~~4.9%, while the Japanese equity market depreciated with the MSCI Japan Index ~~rising 2.0%~~declining 1.6%, ~~respectively,~~both in local currency terms for the quarter. Also, the U.S. dollar ~~strengthened 4.2%~~weakened 2.7% versus the ~~Yen~~yen and ~~5.4%~~1.4% versus the ~~Euro~~euro during the ~~second~~ quarter.

Table of Contents

U.S. listed ETF Industry Flows

~~Our U.S. listed ETFs make up a majority of our global AUM.~~

As the charts below reflect, ~~industry~~U.S. listed ETF net flows for the ~~second quarter of 2018~~three months ended June 30, 2019 were ~~$55.8~~$79.8 billion. ~~U.S.~~Fixed income, U.S equity and ~~fixed income~~international equity gathered the majority of those flows.

Source: Bloomberg, Investment Company Institute, WisdomTree

~~Europe listed ETF~~

International ETP Industry Flows

As the ~~chart~~charts below ~~reflects, Europe listed ETF~~reflect, international ETP net flows ~~of $3.7~~were $17.1 billion ~~declined 85.1% as compared to~~for the ~~prior quarter. Commodity~~three months ended June 30, 2019. Fixed income and ~~fixed income~~commodities gathered the majority of those flows.

Source: ~~Bloomberg, WisdomTree~~

Morningstar

Business Segments

We operate as an ETP sponsor and asset manager providing investment advisory services globally. These activities are reported in our U.S. Business and International Business segments.

U.S. Business Segment

Our U.S. Business ~~includes~~segment included our Japan sales office, WTJ, which engaged in selling our U.S. listed ETFs to Japanese institutions. In July 2018, we determined to restructure our distribution strategy in Japan and expanded our existing relationship with Premia Partners Company Limited to manage distribution of our ETFs in Japan. As a result, ~~we will be closing~~WTJ has ceased operations and is in the ~~sales~~process of being liquidated. WTJ reported operating losses for the three months ended June 30, 2019 and 2018 of $0.04 million and $1.1 million, respectively, and for the six months ended June 30, 2019 and 2018 of $0.5 million and $2.4 million, respectively. WTJ also recognized an impairment expense of $0.6 million in connection with the termination of its office ~~and anticipate expanding our existing relationship with a third party to manage distribution of WisdomTree’s ETFs in Japan.~~ lease during the six months ended June 30, 2019.

International Business Segment

The International Business segment includes our European business ~~(which now includes ETFS)~~ and our Canadian business.

Table of Contents

Our Operating and Financial Results

U.S. Business Segment

Our U.S. listed ETFs’ AUM ~~decreased~~was $39.2 billion at June 30, 2019, essentially unchanged from ~~$42.9 billion as of~~ March 31, ~~2018 to $41.3 billion as of June 30, 2018 primarily due to net outflows from our two largest ETFs, DXJ and HEDJ and market depreciation.~~

2019.

International Business Segment

Our international ~~ETFs~~ETPs’ AUM increased from ~~$2.1~~$19.7 billion at March 31, ~~2018~~2019 to ~~$18.6~~$21.2 billion at June 30, ~~2018 primarily~~2019 due to ~~the $17.6 billion~~market appreciation and net inflows.

Table of ~~AUM acquired in connection with the ETFS Acquisition and partly offset by market depreciation.~~

Contents

Consolidated Operating Results

The following table sets forth our revenues and net income for the most recent five quarters. ~~Prior period amounts previously disclosed have been reclassified~~

Revenues

– We recorded operating revenues of $66.3 million during the three months ended June 30, 2019, down 11.3% from the three months ended June 30, 2018 primarily due to ~~conform with~~lower average AUM of our ~~current presentation. These reclassifications had no effect~~U.S. Business segment, partly offset by higher average AUM of our International Business segment as well as the recognition of a full quarter of revenues from ETFS.

Expenses

– Total operating expenses decreased 9.7% from the three months ended June 30, 2018 to $54.4 million primarily due to lower acquisition-related costs.

Other Income/(Expenses)

– Other income/(expenses) includes interest income and interest expense, gains/(losses) on ~~previously reported net income.~~

•

~~Revenues~~– Total operating revenues increased 33.0% from the three months ended June 30, 2017 to $74.8 million due to an increase in our average global AUM. Our average global AUM increased primarily due the $17.6 billion of AUM acquired in connection with the ETFS Acquisition as well as market appreciation and net inflows into certain of our ETFs. These increases were partly offset by outflows from our two largest U.S. listed ETFs.

•

~~Expenses~~ – Total operating expenses increased 46.2% from the three months ended June 30, 2017 to $60.2 million. Operating expenses increased primarily due to the ETFS Acquisition. In addition, included in the three months ended June 30, 2018 were acquisition-related costs of $7.9 million.

•

~~Other Income/(Expenses)~~ ~~– Other income/(expense) includes interest income and interest expense, gains/(losses) on revaluation of deferred consideration and other gains and losses. These items are further described below.~~

•

~~Net income~~ ~~– Net income increased 38.2% from the three months ended June 30, 2017 to $16.7 million.~~

revaluation of deferred consideration – gold payments, impairment and other gains and losses. For the three months ended June 30, 2018 and June 30, 2019, the gains/(losses) on revaluation of deferred consideration – gold payments were $9.9 million and ($4.0) million, respectively.

Net income

– Net income decreased 85.2% from the three months ended June 30, 2018 to $2.5 million, which was impacted by the changes in revenues and expenses described above as well as a change in the (loss)/gain on revaluation of deferred consideration – gold payments of ($13.9) million.

Table of Contents

Key Operating Statistics

The following table presents key operating statistics that serve as indicators for the performance of our business:

   Three Months Ended Six Months Ended
   June 30,
2018 March 31,
2018 June 30,
2017 June 30,
2018 June 30,
2017
U.S. LISTED ETFs (in millions)

Beginning of period assets
   $ 42,886 $ 46,827 $ 41,940 $ 46,827 $ 40,164
Inflows/(outflows)
   (1,231 ) (2,167 ) 605 (3,398 ) 547
Market appreciation/(depreciation)
   (315 ) (1,774 ) 638 (2,089 ) 2,472


End of period assets
   $ 41,340 $ 42,886 $ 43,183 $ 41,340 $ 43,183


Average assets during the period
   $ 43,464 $ 45,618 $ 42,961 $ 44,541 $ 42,128
Average ETF advisory fee during the period
   0.49 % 0.49 % 0.50 % 0.49 % 0.50 %
Revenue days
   91 90 91 181 181
Number of ETFs – end of the period
   81 81 90 81 90
INTERNATIONAL LISTED ETPs (in millions)

Beginning of period assets
   $ 2,075 $ 2,110 $ 1,424 $ 2,110 $ 1,093
Assets acquired
   17,641 —   —   17,641 —
Inflows/(outflows)
   (25 ) (45 ) 163 (70 ) 487
Market appreciation/(depreciation)
   (1,062 ) 10 (40 ) (1,052 ) (33 )


End of period assets
   $ 18,629 $ 2,075 $ 1,547 $ 18,629 $ 1,547


Average assets during the period
   $ 17,837 $ 2,106 $ 1,446 $ 9,971 $ 1,363
Average ETP advisory fee during the period
   0.47 % 0.57 % 0.61 % 0.48 % 0.62 %
Revenue days
   91 90 91 181 181
Number of ETPs—end of period
   445 99 93 445 93
PRODUCT CATEGORIES (in millions)

International Developed Market Equity

Beginning of period assets
   $ 22,432 $ 25,950 $ 24,057 $ 25,950 $ 23,105
Inflows/(outflows)
   (1,502 ) (2,705 ) 125 (4,207 ) (134 )
Market appreciation/(depreciation)
   (599 ) (813 ) 465 (1,412 ) 1,676


End of period assets
   $ 20,331 $ 22,432 $ 24,647 $ 20,331 $ 24,647


Average assets during the period
   $ 22,455 $ 24,435 $ 24,794 $ 23,445 $ 24,282
Commodity & Currency

Beginning of period assets
   $ 416 $ 445 $ 519 $ 445 $ 564
Assets acquired
   16,778 —   —   16,778 —
Inflows/(outflows)
   (99 ) (28 ) (44 ) (127 ) (86 )
Market appreciation/(depreciation)
   (928 ) (1 ) (11 ) (929 ) (14 )


End of period assets
   $ 16,167 $ 416 $ 464 $ 16,167 $ 464


Average assets during the period
   $ 15,316 $ 426 $ 488 $ 7,871 $ 516
U.S. Equity

Beginning of period assets
   $ 13,359 $ 14,234 $ 12,516 $ 14,234 $ 12,111
Inflows/(outflows)
   114 48 248 162 466
Market appreciation/(depreciation)
   828 (923 ) 124 (95 ) 311


End of period assets
   $ 14,301 $ 13,359 $ 12,888 $ 14,301 $ 12,888


Average assets during the period
   $ 14,021 $ 14,122 $ 12,629 $ 14,071 $ 12,486
Emerging Market Equity

Beginning of period assets
   $ 6,289 $ 5,887 $ 4,563 $ 5,887 $ 3,917
Inflows/(outflows)
   (120 ) 425 191 305 348
Market appreciation/(depreciation)
   (526 ) (23 ) 74 (549 ) 563


End of period assets
   $ 5,643 $ 6,289 $ 4,828 $ 5,643 $ 4,828


Average assets during the period
   $ 6,116 $ 6,259 $ 4,742 $ 6,188 $ 4,498


	Three Months Ended									Six Months Ended
	June 30, 2019			March 31, 2019			June 30, 2018			June 30, 2019			June 30, 2018
GLOBAL ETPs (in millions)
Beginning of period assets	$	59,112		$	54,094		$	44,962		$	54,094		$	48,937
Assets acquired		—			—			17,641			—			17,641
Inflows/(outflows)		337			561			(1,223	)		898			(3,442	)
Market appreciation/(depreciation)		938			4,544			(1,402	)		5,482			(3,104	)
Fund closures		—			(87	)		(9	)		(87	)		(63	)

End of period assets	$	60,387		$	59,112		$	59,969		$	60,387		$	59,969

Average assets during the period	$	58,569		$	57,683		$	61,301		$	58,126		$	54,512
Average ETP advisory fee during the period		0.45	%		0.46	%		0.48	%		0.45	%		0.49	%
Revenue days		91			90			91			181			181
Number of ETPs—end of period		536			534			526			457			526
U.S. LISTED ETFs (in millions)
Beginning of period assets	$	39,366		$	35,486		$	42,886		$	35,486		$	46,827
Inflows/(outflows)		(166	)		147			(1,231	)		(19	)		(3,397	)
Market appreciation/(depreciation)		20			3,820			(306	)		3,840			(2,027	)
Fund closures		—			(87	)		(9	)		(87	)		(63	)

End of period assets	$	39,220		$	39,366		$	41,340		$	39,220		$	41,340

Average assets during the period	$	38,945		$	38,061		$	43,464		$	38,503		$	44,541
Average ETF advisory fee during the period		0.44	%		0.45	%		0.49	%		0.45	%		0.49	%
Number of ETFs – end of the period		79			77			81			79			81
INTERNATIONAL LISTED ETPs (in millions)
Beginning of period assets	$	19,746		$	18,608		$	2,076		$	18,608		$	2,110
Assets acquired		—			—			17,641			—			17,641
Inflows/(outflows)		503			414			8			917			(45	)
Market appreciation/(depreciation)		918			724			(1,096	)		1,642			(1,077	)

End of period assets	$	21,167		$	19,746		$	18,629		$	21,167		$	18,629

Average assets during the period	$	19,624		$	19,622		$	17,837		$	19,623		$	9,971
Average ETP advisory fee during the period		0.46	%		0.47	%		0.47	%		0.47	%		0.48	%
Number of ETPs—end of period		457			457			445			457			445
PRODUCT CATEGORIES (in millions)
Commodity & Currency
Beginning of period assets	$	17,015		$	16,251		$	399		$	16,251		$	427
Assets acquired		—			—			16,778			—			16,778
Inflows/(outflows)		558			227			(77	)		785			(103	)
Market appreciation/(depreciation)		905			537			(945	)		1,442			(947	)

End of period assets	$	18,478		$	17,015		$	16,155		$	18,478		$	16,155

Average assets during the period	$	16,940		$	17,033		$	15,301		$	16,987		$	7,855
U.S. Equity
Beginning of period assets	$	15,880		$	13,334		$	13,359		$	13,334		$	14,234
Inflows/(outflows)		103			632			114			735			160
Market appreciation/(depreciation)		38			1,914			828			1,952			(93	)

End of period assets	$	16,021		$	15,880		$	14,301		$	16,021		$	14,301

Average assets during the period	$	15,807		$	14,947		$	14,021		$	15,377		$	14,071
International Developed Market Equity
Beginning of period assets	$	14,417		$	14,532		$	22,287		$	14,532		$	25,836
Inflows/(outflows)		(729	)		(1,553	)		(1,466	)		(2,282	)		(4,215	)
Market appreciation/(depreciation)		1			1,438			(604	)		1,439			(1,404	)

End of period assets	$	13,689		$	14,417		$	20,217		$	13,689		$	20,217

Average assets during the period	$	13,960		$	14,521		$	22,319		$	14,241		$	23,307

Leveraged & Inverse

Beginning of period assets
   $ 872 $ 930 $ 773 $ 930 $ 624
Assets acquired
   863 —   —   863 —
Inflows/(outflows)
   (71 ) (133 ) 101 (204 ) 263
Market appreciation/(depreciation)
   (133 ) 75 (65 ) (58 ) (78 )


End of period assets
   $ 1,531 $ 872 $ 809 $ 1,531 $ 809


Average assets during the period
   $ 1,592 $ 877 $ 733 $ 1,235 $ 718
Fixed Income

Beginning of period assets
   $ 1,101 $ 862 $ 572 $ 862 $ 504
Inflows/(outflows)
   349 253 43 602 96
Market appreciation/(depreciation)
   (39 ) (14 ) 5 (53 ) 20


End of period assets
   $ 1,411 $ 1,101 $ 620 $ 1,411 $ 620


Average assets during the period
   $ 1,230 $ 1,014 $ 604 $ 1,122 $ 572
Alternatives

Beginning of period assets
   $ 492 $ 582 $ 276 $ 582 $ 287
Inflows/(outflows)
   66 (70 ) 122 (4 ) 118
Market appreciation/(depreciation)
   20 (20 ) 6 —   (1 )


End of period assets
   $ 578 $ 492 $ 404 $ 578 $ 404


Average assets during the period
   $ 564 $ 547 $ 348 $ 555 $ 313
Closed ETPs

Beginning of period assets
   $ —   $ 47 $ 88 $ 47 $ 145
Inflows/(outflows)
   7 (2 ) (18 ) 5 (37 )
Market appreciation/(depreciation)
   —   (45 ) —   (45 ) (38 )


End of period assets
   $ 7 $ —   $ 70 $ 7 $ 70


Average assets during the period
   $ 7 $ 44 $ 69 $ 25 $ 106
Headcount: U.S. Business Segment
   155 157 166 155 166
Headcount: International Business Segment
   76 34 46 76 46

Table of Contents


	Three Months Ended									Six Months Ended
	June 30, 2019			March 31, 2019			June 30, 2018			June 30, 2019			June 30, 2018
Emerging Market Equity
Beginning of period assets	$	5,730		$	5,278		$	6,289		$	5,278		$	5,887
Inflows/(outflows)		367			(84	)		(119	)		283			304
Market appreciation/(depreciation)		(7	)		536			(527	)		529			(548	)

End of period assets	$	6,090		$	5,730		$	5,643		$	6,090		$	5,643

Average assets during the period	$	5,785		$	5,502		$	6,116		$	5,643		$	6,187
Fixed Income
Beginning of period assets	$	4,023		$	2,570		$	1,083		$	2,570		$	844
Inflows/(outflows)		208			1,418			349			1,626			601
Market appreciation/(depreciation)		26			35			(32	)		61			(45	)

End of period assets	$	4,257		$	4,023		$	1,400		$	4,257		$	1,400

Average assets during the period	$	4,119		$	3,511		$	1,219		$	3,815		$	1,106
Leveraged & Inverse
Beginning of period assets	$	1,419		$	1,282		$	872		$	1,282		$	930
Assets acquired		—			—			863			—			863
Inflows/(outflows)		(62	)		67			(62	)		5			(195	)
Market appreciation/(depreciation)		(19	)		70			(142	)		51			(67	)

End of period assets	$	1,338		$	1,419		$	1,531		$	1,338		$	1,531

Average assets during the period	$	1,384		$	1,408		$	1,593		$	1,396		$	1,235
Alternatives
Beginning of period assets	$	628		$	755		$	492		$	755		$	582
Inflows/(outflows)		(108	)		(141	)		66			(249	)		(4	)
Market appreciation/(depreciation)		(6	)		14			20			8			—

End of period assets	$	514		$	628		$	578		$	514		$	578

Average assets during the period	$	574		$	666		$	564		$	620		$	555
Closed ETPs
Beginning of period assets	$	—		$	92		$	181		$	92		$	197
Inflows/(outflows)		—			(5	)		(28	)		(5	)		10
Market appreciation/(depreciation)		—			—			—			—			—
Fund closures		—			(87	)		(9	)		(87	)		(63	)

End of period assets	$	—		$	—		$	144		$	—		$	144

Average assets during the period	$	—		$	95		$	168		$	47		$	196
Headcount: U.S. Business Segment		143			141			155			143			155
Headcount: International Business Segment		71			75			76			71			76

Note: Previously issued statistics may be restated due to fund closures and trade adjustments

Source: WisdomTree

Table of Contents

Three Months Ended June 30, ~~2018~~2019 Compared to Three Months Ended June 30, ~~2017~~

2018

Selected Operating and Financial Information

   Three Months Ended
June 30,    Change    Percent
Change
   2018    2017
Global AUM (in millions)

Average global AUM
   $ 61,301    $ 44,407    $ 16,894    38.0 %





Operating Revenues (in thousands)

Advisory fees
   $ 73,778    $ 55,856    $ 17,922    32.1 %
Other income
   997    386    611    158.3 %







Total revenues
   $ 74,775    $ 56,242    $ 18,533    33.0 %

Three Months Ended
June 30,

Change

Percent
Change

2019

2018

Global AUM (in millions)

Average global AUM
$
58,569
$
61,301
$
(2,732
)
(4.4
%)

Operating Revenues (in thousands)

Advisory fees
$
65,627
$
73,778
$
(8,151
)
(11.0
%)
Other income

666

997

(331
)
(33.2
%)

Total revenues
$
66,293
$
74,775
$
(8,482
)
(11.3
%)

Average Global AUM

Our average global AUM ~~increased 38.0%~~decreased 4.4% from ~~$44.4~~$61.3 billion inat June 30, 2018 to $58.6 billion at June 30, 2019 primarily due to outflows from HEDJ and DXJ, largely offset by net inflows into our fixed income, U.S. equity and commodity ETPs and market appreciation.

Operating Revenues

Advisory fees

Advisory fee revenues decreased 11.0% from $73.8 million during the three months ended June 30, ~~2017~~2018 to $61.3 billion in the comparable period in 2018 primarily due to the $17.6 billion of AUM acquired in connection with the ETFS Acquisition as well as market appreciation and net inflows into certain of our ETFs. These increases were partly offset by outflows from our two largest U.S. listed ETFs.

~~Operating Revenues~~

~~Advisory fees~~

~~Advisory fees revenues increased 32.1% from $55.9 million in the three months ended June 30, 2017 to $73.8~~$65.6 million in the comparable period in ~~2018 primarily~~2019 due to ~~an increase in our~~lower average ~~global AUM. Our average global advisory fee was 0.48% during the second quarter of 2018.~~

~~Other income~~

Other income increased 158.3% from $0.4 million in the three months ended June 30, 2017 to $1.0 million in the comparable period in 2018 primarily due to creation/redemption fees earned from the ETFS exchange-traded products.

~~Operating Expenses~~

   Three Months Ended
June 30,    Change    Percent
Change
(in thousands)    2018    2017
Compensation and benefits
   $ 19,301    $ 18,421    $ 880    4.8 %
Fund management and administration
   14,621    10,112    4,509    44.6 %
Marketing and advertising
   3,778    3,825    (47 )    (1.2 %)
Sales and business development
   4,503    3,389    1,114    32.9 %
Contractual gold payments
   2,715    —      2,715    n/a
Professional and consulting fees
   1,560    1,221    339    27.8 %
Occupancy, communications and equipment
   1,574    1,371    203    14.8 %
Depreciation and amortization
   337    352    (15 )    (4.3 %)
Third-party distribution fees
   1,666    670    996    148.7 %
Acquisition-related costs
   7,928    —      7,928    n/a
Other
   2,261    1,842    419    22.7 %








Total expenses
   $ 60,244    $ 41,203    $ 19,041    46.2 %

   Three Months Ended
June 30,
As a Percent of Revenues:
   2018 2017
Compensation and benefits
   25.8 % 32.8 %
Fund management and administration
   19.6 % 18.0 %
Marketing and advertising
   5.1 % 6.8 %
Sales and business development
   6.0 % 6.0 %

   Three Months Ended
June 30,
As a Percent of Revenues:
   2018 2017
Contractual gold payments
   3.6 % n/a
Professional and consulting fees
   2.1 % 2.2 %
Occupancy, communications and equipment
   2.1 % 2.4 %
Depreciation and amortization
   0.5 % 0.6 %
Third-party distribution fees
   2.2 % 1.2 %
Acquisition-related costs
   10.6 % n/a
Other
   3.0 % 3.3 %


Total expenses
   80.6 % 73.3 %

~~Compensation and benefits~~

Compensation and benefits expense increased 4.8% from $18.4 million in the three months ended June 30, 2017 to $19.3 million in the comparable period in 2018 due to the ETFS Acquisition, partly offset by lower accrued incentive compensation in our U.S. Business segment. HeadcountAUM of our U.S. Business segment, ~~was 166 and our International Business segment was 46 at June 30, 2017 compared to 155 and 76, respectively, at June 30, 2018.~~

~~Fund management and administration~~

~~Fund management and administration expense increased 44.6% from $10.1 million in the three months ended June 30, 2017 to $14.6 million in the comparable period in 2018 due to~~partly offset by higher average AUM of our International Business segment as well as the recognition of a full quarter of revenues from ETFS. Our average global ETP advisory fee declined 3 basis points, from 0.48% during the three months ended June 30, 2018 to 0.45% during the three months ended June 30, 2019 primarily ~~associated with~~due to a change in product mix in our U.S. Business segment.

Other income

Other income decreased 33.2% from $1.0 million during the ~~ETFS Acquisition. We had 90~~three months ended June 30, 2018 to $0.7 million in the comparable period in 2019 primarily due to lower creation/redemption fees of our International Business segment.

Operating Expenses


	Three Months Ended June 30,				Change			Percent Change
(in thousands)	2019		2018		Change			Percent Change
Compensation and benefits	$	21,300	$	19,301	$	1,999			10.4	%
Fund management and administration		15,576		14,621		955			6.5	%
Marketing and advertising		2,910		3,778		(868	)		(23.0	%)
Sales and business development		4,171		4,503		(332	)		(7.4	%)
Contractual gold payments		3,110		2,715		395			14.5	%
Professional and consulting fees		1,296		1,560		(264	)		(16.9	%)
Occupancy, communications and equipment		1,548		1,574		(26	)		(1.7	%)
Depreciation and amortization		264		337		(73	)		(21.7	%)
Third-party distribution fees		1,919		1,666		253			15.2	%
Acquisition-related costs		33		7,928		(7,895	)		(99.6	%)
Other		2,255		2,261		(6	)		(0.3	%)

Total expenses	$	54,382	$	60,244	$	(5,862	)		(9.7	%)


	Three Months Ended June 30,
As a Percent of Revenues:	2019			2018
Compensation and benefits		32.1	%		25.8	%
Fund management and administration		23.5	%		19.6	%
Marketing and advertising		4.4	%		5.1	%
Sales and business development		6.3	%		6.0	%

Table of Contents


	Three Months Ended June 30,
As a Percent of Revenues:	2019			2018
Contractual gold payments		4.7	%		3.6	%
Professional and consulting fees		1.9	%		2.1	%
Occupancy, communications and equipment		2.3	%		2.1	%
Depreciation and amortization		0.4	%		0.5	%
Third-party distribution fees		2.9	%		2.2	%
Acquisition-related costs		0.1	%		10.6	%
Other		3.4	%		3.0	%

Total expenses		82.0	%		80.6	%

Compensation and benefits

Compensation and benefits expense increased 10.4% from $19.3 million during the three months ended June 30, 2018 to $21.3 million in the comparable period in 2019 due to severance expense of $1.5 million and higher incentive compensation. Headcount of our U.S. ~~listed ETFs~~Business segment was 155 and 93our International ~~listed ETPs~~Business segment was 76 at June 30, ~~2017~~2018 compared to 143 and 71, respectively, at June 30, 2019.

Fund management and administration

Fund management and administration expense increased 6.5% from $14.6 million during the three months ended June 30, 2018 to $15.6 million in the comparable period in 2019 due to the recognition of a full quarter of expense from ETFS, partly offset by lower average AUM of our U.S. Business segment. We had 81 U.S. listed ETFs and 445 International listed ETPs at June 30, ~~2018.~~

2018 compared to 79 U.S. listed ETFs and 457 International listed ETPs at June 30, 2019.

Marketing and advertising

Marketing and advertising expense decreased 23.0% from $3.8 million during the three months ended June 30, 2018 to $2.9 million in the comparable period in 2019 due to lower global spending.

Sales and business development

Sales and business development expense decreased 7.4% from $4.5 million during the three months ended June 30, 2018 to $4.2 million in the comparable period in 2019 primarily due to lower spending on sales related activities of our U.S. Business segment.

Contractual gold payments

Contractual gold payments expense increased 14.5% from $2.7 million during the three months ended June 30, 2018 to $3.1 million in the comparable period in 2019. This expense was associated with the payment of 2,375 ounces of gold (2,085 ounces for the period April 11 through June 30, 2018) and was calculated using the average daily spot price of $1,302 and $1,310 per ounce during the three months ended of 2018 and 2019, respectively.

Professional and consulting fees

Professional and consulting fees decreased 16.9% from $1.6 million during the three months ended June 30, 2018 to $1.3 million in the comparable period in 2019 due to lower spending on corporate consulting-related expenses.

Occupancy, communications and equipment

Occupancy, communications and equipment expense decreased 1.7% from $1.6 million during the three months ended June 30, 2018 to $1.5 million in the comparable period in 2019 due to the closure of our office in Japan partly offset by additional office space associated with the ETFS Acquisition.

Depreciation and amortization

Depreciation and amortization expense decreased 21.7% from the three months ended June 30, 2018 to $0.3 million primarily due to the closure of our office in Japan.

Table of Contents

Third-party distribution fees

Third-party distribution fees increased 15.2% from $1.7 million during the three months ended June 30, 2018 to $1.9 million in the comparable period in 2019 primarily due to higher fees paid for platform relationships partly offset by lower fees paid to our third-party marketing agent in Latin America.

Acquisition-related costs

Acquisition-related costs decreased 99.6% from $7.9 million during the three months ended June 30, 2018 to $0.03 million in the comparable period in 2019 as the integration of ETFS is essentially complete. We expect to have additional acquisition-related expenses in the third quarter as we rationalize our product offering in Europe following the ETFS Acquisition.

Other

Other expenses were essentially unchanged from the three months ended June 30, ~~2017.~~

~~Sales and business development~~

~~Sales and business development~~2018.

Other Income/(Expenses)


	Three Months Ended June 30,						Change			Percent Change
(in thousands)	2019			2018			Change			Percent Change
Interest expense	$	(2,910	)	$	(2,356	)	$	(554	)		23.5	%
(Loss)/gain on revaluation of deferred consideration – gold payments		(4,037	)		9,898			(13,935	)		n/a
Interest income		818			612			206			33.7	%
Other gains and losses, net		284			(501	)		785			n/a

Total other income/(expenses)	$	(5,845	)	$	7,653		$	(13,498	)		n/a


	Three Months Ended June 30,
As a Percent of Revenues:	2019			2018
Interest expense		(4.4	%)		(3.1	%)
(Loss)/gain on revaluation of deferred consideration – gold payments		(6.1	%)		13.2	%
Interest income		1.2	%		0.8	%
Other gains and losses, net		0.4	%		(0.7	%)

Total other income/(expenses)		(8.8	%)		10.2	%

Interest expense

Interest expense increased ~~32.9%~~23.5% from ~~$3.4~~$2.4 million ~~in the three months ended June 30, 2017 to $4.5 million in the comparable period in 2018 due to higher spending on sales related activities globally.~~

~~Contractual gold payments~~

Contractual gold payments expense represents an ongoing obligation of ETFS Capital that we assumed in connection with the ETFS Acquisition. This ongoing obligation requires us to pay 9,500 ounces of gold annually from the advisory fee income we earn for managing physically backed gold ETPs. Duringduring the three months ended June 30, 2018 ~~we recognized $2.7~~to $2.9 million in the comparable period in 2019 due to higher interest rates as well as the recognition of ~~contractual gold payments~~a full quarter of expense ~~associated with~~as the ~~payment of 2,085 ounces of gold at an average daily spot price of $1,302 per ounce.~~

~~Professional~~borrowing under our term loan commenced on April 11, 2018. Our effective interest rate during April 11, 2018 through June 30, 2018 and ~~consulting fees~~

~~Professional and consulting fees increased 27.8% from $1.2 million in~~during the three months ended June 30, ~~2017 to $1.6 million in the comparable period in 2018 due to higher professional~~2019 was 4.9% and ~~corporate consulting-related expenses globally.~~

~~Occupancy, communications and equipment~~

Occupancy, communications and equipment expense increased 14.8% from $1.4 million in the three months ended June 30, 2017 to $1.6 million in the comparable period in 2018 primarily due to higher headcount associated with the ETFS Acquisition.

~~Depreciation and amortization~~

~~Depreciation and amortization expense of $0.3 million was essentially unchanged from the three months ended June 30, 2017.~~

~~Third-party distribution fees~~

Third-party distribution fees increased 148.7% from $0.7 million in the three months ended June 30, 2017 to $1.7 million in the comparable period in 2018 primarily due to a new distribution relationship announced in the fourth quarter of 2017 and higher fees paid to our third-party marketing agent in Latin America.

~~Acquisition-related costs~~

During the three months ended June 30, 2018, we incurred acquisition-related costs associated with the ETFS Acquisition of $7.9 million which included professional advisor fees payable upon completion of the acquisition, a~~write-off~~ ~~of our office lease and compensation and other integration costs.~~

~~Other~~

Other expenses increased 22.7% from $1.8 million in the three months ended June 30, 2017 to $2.3 million in the comparable period in 2018 primarily due to higher International Business segment office expenses associated with an increase in headcount from the ETFS Acquisition.

~~Other Income/(Expenses)~~

   Three Months Ended
June 30,    Change    Percent
Change
(in thousands)    2018    2017
Interest expense
   $ (2,356 )    $ —      $ (2,356 )    n/a
Gain on revaluation of deferred consideration
   9,898    —      9,898    n/a
Interest income
   612    641    (29 )    (4.5 %)
Settlement gain
   —      6,909    (6,909 )    n/a
Other gains and losses, net
   (501 )    (364 )    (137 )    37.6 %








Total other income/(expenses)
   $ 7,653    $ 7,186    $ 467    6.5 %

   Three Months Ended
June 30,
As a Percent of Revenues:
   2018 2017
Interest expense
   (3.1 %) n/a
Gain on revaluation of deferred consideration
   13.2 % n/a
Interest income
   0.8 % 1.1 %
Settlement gain
   n/a 12.3 %
Other gains and losses, net
   (0.7 %) (0.6 %)


Total other income/(expenses)
   10.2 % 12.8 %

~~Interest expense~~

Interest expense for the three months ended June 30, 2018 of $2.4 million was incurred principally in connection with a newly raised $200.0 million term loan (the “Term Loan”) to facilitate the ETFS Acquisition. Our effective interest rate during the period was 4.9%5.5%, respectively, and includes our cost of borrowing and amortization of issuance costs.

~~Gain~~

(Loss)/gain on revaluation of deferred consideration

~~Gain~~ – gold payments

We recognized a gain on revaluation of deferred consideration of $9.9 million arose from the ongoing contractual gold payment obligation described above that we assumed from ETFS Capital in connection with the ETFS Acquisition. The present value of the ongoing obligation to pay 9,500 ounces of gold until March 2058, which is then reduced to 6,333 ounces into perpetuity is recorded on our Consolidated Balance Sheet as deferred consideration, which is~~re-measured~~ ~~each quarter based upon forward-looking gold prices. A gain was recognized~~ during the three months ended June 30, 2018 as ~~the price of gold has declined when~~ compared to ~~April 11, 2018, the date in which the deferred consideration was originally measured.~~

~~Interest income~~

~~Interest income~~a loss of ~~$0.6~~($4.0) million ~~was essentially unchanged from the three months ended June 30, 2017.~~

~~Settlement gain~~

~~A settlement gain of $6.9 million was recorded~~ during the three months ended June 30, ~~2017 representing~~2019. The loss arose in the ~~fair value~~current quarter due to an increase in the price of gold, partly offset by a flattening of the ~~preferred stock~~forward-looking gold curve when compared to the forward-looking gold curve on March 31, 2019, the date on which the deferred consideration was last measured. The magnitude of ~~Thesys Group, Inc. (“Thesys”) that~~any gain or loss is highly correlated to the ~~Company received~~magnitude of the change in ~~connection with~~ the ~~resolution~~forward-looking price of ~~a dispute regarding its ownership stake in Thesys, which occurred in June 2017.~~

gold.

~~Other gains and losses, net~~

~~Other net losses~~

Interest income

Interest income increased ~~37.6%~~33.7% from ~~$0.4~~$0.6 million induring the three months ended June 30, ~~2017~~2018 to ~~$0.5~~$0.8 million in the comparable period in ~~2018~~2019 primarily due to ~~realized~~higher

paid-in-kind

interest, or PIK, on notes receivable from AdvisorEngine.

Other gains and losses, ~~arising~~net

Other gains and losses, net were ($0.5) million and $0.3 million during the three months ended June 30, 2018 and 2019, respectively. Gains and losses generally arise from the sale of gold earned onfrom management fees paid by our physically-backed gold ETPs, ~~associated with the ETFS Acquisition, as well as miscellaneous~~ foreign exchange ~~losses.~~

fluctuations, securities owned and other miscellaneous items.

Table of Contents

Income taxes

Our ~~estimated~~effective income tax rate for the three months ended June 30, 2019 of 59.1% resulted in income tax expense of $3.6 million. Our effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a valuation allowance on foreign net operating losses,

non-deductible

executive compensation, a

non-deductible

loss on revaluation of deferred consideration and state and local taxes, partly offset by a lower tax rate on foreign earnings.

Our effective income tax rate for the three months ended June 30, 2018 of 24.6% resulted in income tax expense of $5.5 million. Our effective income tax rate differs from the federal statutory tax rate of 21% primarily due to

non-deductible

acquisition-related costs, a valuation allowance on foreign net operating losses and state and local income taxes, partly offset by ~~the~~ a

non-taxable

gain on revaluation of deferred consideration and a lower tax rate on foreign earnings. The gain on revaluation of deferred consideration is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a region where we are subject to a zero percent tax rate.

Our estimated effective income tax rate for the three months ended June 30, 2017 of 45.5% resulted in income tax expense of $10.1 million. The Company’s tax rate differs from the federal statutory tax rate of 35% primarily due to a valuation allowance on foreign net operating losses and state and local income taxes.

Six Months Ended June 30, ~~2018~~2019 Compared to Six Months Ended June 30, ~~2017~~

2018

Selected Operating and Financial Information

   Six Months Ended
June 30,    Change    Percent
Change
   2018    2017
Global AUM (in millions)

Average global AUM
   $ 54,512    $ 43,491    $ 11,021    25.3 %





Revenues (in thousands)

Advisory fees
   $ 132,234    $ 108,884    $ 23,350    21.4 %
Other income
   1,445    725    720    99.3 %







Total revenues
   $ 133,679    $ 109,609    $ 24,070    22.0 %

Six Months Ended
June 30,

Change

Percent
Change

2019

2018

Global AUM (in millions)

Average global AUM
$
58,126
$
54,512
$
3,614

6.6
%

Revenues (in thousands)

Advisory fees
$
130,467
$
132,234
$
(1,767
)
(1.3
%)
Other income

1,311

1,445

(134
)
(9.3
%)

Total revenues
$
131,778
$
133,679
$
(1,901
)
(1.4
%)

Average Global AUM

Our average global AUM increased ~~25.3%~~6.6% from ~~$43.5~~$54.5 billion induring the six months ended June 30, ~~2017~~2018 to ~~$54.5~~$58.1 billion in the comparable period in ~~2018. See~~2019 primarily due to the ~~section above titled “Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017 – Average Global AUM” for further information.~~

full year effect of AUM from ETFS, net inflows into our fixed income, U.S. equity and commodity ETPs and market appreciation, partly offset by outflows from HEDJ and DXJ.

Operating Revenues

Advisory fees

Advisory ~~fees~~fee revenues ~~increased 21.4%~~decreased 1.3% from ~~$108.9~~$132.2 million induring the six months ended June 30, ~~2017~~2018 to ~~$132.2~~$130.5 million in the comparable period in ~~2018 primarily~~2019 due to ~~an increase in~~lower average AUM of our ~~average global AUM.~~

U.S. Business segment, partly offset by higher revenues earned from ETFS, the acquisition of which was completed on April 11, 2018.

Other income

Other income ~~increased 99.3%~~decreased 9.3% from ~~$0.7~~$1.4 million induring the six months ended June 30, ~~2017~~2018 to ~~$1.4~~$1.3 million in the comparable period in ~~2018~~2019 primarily due ~~to creation/redemption fees earned from the ETFS exchange-traded products.~~

lower licensing fee revenues of our U.S. Business segment.

Operating Expenses

   Six Months Ended
June 30,    Change    Percent
Change
(in thousands)    2018    2017
Compensation and benefits
   $ 38,133    $ 36,295    $ 1,838    5.1 %
Fund management and administration
   25,533    19,712    5,821    29.5 %
Marketing and advertising
   6,973    7,362    (389 )    (5.3 %)
Sales and business development
   8,316    6,351    1,965    30.9 %
Contractual gold payments
   2,715    —      2,715    n/a


	Six Months Ended June 30,				Change			Percent Change
(in thousands)	2019		2018		Change			Percent Change
Compensation and benefits	$	42,601	$	38,133	$	4,468			11.7	%
Fund management and administration		30,742		25,533		5,209			20.4	%
Marketing and advertising		5,590		6,973		(1,383	)		(19.8	%)
Sales and business development		8,593		8,316		277			3.3	%
Contractual gold payments		6,208		2,715		3,493			128.7	%
Professional and consulting fees		2,778		3,196		(418	)		(13.1	%)
Occupancy, communications and equipment		3,166		2,937		229			7.8	%
Depreciation and amortization		533		692		(159	)		(23.0	%)
Third-party distribution fees		4,319		3,391		928			27.4	%
Acquisition-related costs		346		9,990		(9,644	)		(96.5	%)
Other		4,308		4,051		257			6.3	%

Total expenses	$	109,184	$	105,927	$	3,257			3.1	%

   Six Months Ended
June 30,    Change    Percent
Change
(in thousands)    2018    2017
Professional and consulting fees
   3,196    2,779    417    15.0 %
Occupancy, communications and equipment
   2,937    2,724    213    7.8 %
Depreciation and amortization
   692    689    3    0.4 %
Third-party distribution fees
   3,391    1,602    1,789    111.7 %
Acquisition-related costs
   9,990    —      9,990    n/a
Other
   4,051    3,466    585    16.9 %








Total expenses
   $ 105,927    $ 80,980    $ 24,947    30.8 %

   Six Months Ended
June 30,
As a Percent of Revenues:
   2018 2017
Compensation and benefits
   28.5 % 33.1 %
Fund management and administration
   19.1 % 18.0 %
Marketing and advertising
   5.2 % 6.7 %
Sales and business development
   6.2 % 5.8 %
Contractual gold payments
   2.0 % n/a
Professional and consulting fees
   2.4 % 2.5 %
Occupancy, communications and equipment
   2.2 % 2.5 %
Depreciation and amortization
   0.5 % 0.6 %
Third-party distribution fees
   2.6 % 1.5 %
Acquisition-related costs
   7.5 % n/a
Other
   3.0 % 3.2 %


Total expenses
   79.2 % 73.9 %

Table of Contents

Six Months Ended
June 30,

As a Percent of Revenues:

2019

2018

Compensation and benefits

32.3
%
28.5
%
Fund management and administration

23.3
%
19.1
%
Marketing and advertising

4.3
%
5.2
%
Sales and business development

6.5
%
6.2
%
Contractual gold payments

4.7
%
2.0
%
Professional and consulting fees

2.1
%
2.4
%
Occupancy, communications and equipment

2.4
%
2.2
%
Depreciation and amortization

0.4
%
0.5
%
Third-party distribution fees

3.3
%
2.6
%
Acquisition-related costs

0.3
%
7.5
%
Other

3.3
%
3.0
%

Total expenses

82.9
%
79.2
%

Compensation and benefits

Compensation and benefits expense increased ~~5.1%~~11.7% from ~~$36.3~~$38.1 million induring the six months ended June 30, ~~2017~~2018 to ~~$38.1~~$42.6 million in the comparable period in ~~2018~~2019 primarily due toseverance expense of $3.5 million, the full year effect of the ETFS ~~Acquisition.~~

Acquisition and higher incentive compensation.

Fund management and administration

Fund management and administration expense increased ~~29.5%~~20.4% from ~~$19.7~~$25.5 million induring the six months ended June 30, ~~2017~~2018 to ~~$25.5~~$30.7 million in the comparable period in ~~2018~~2019 primarily due to ~~higher average AUM associated with~~the full year effect of the ETFS Acquisition, ~~and to a lesser extent, higher~~partly offset by lower average AUM of our U.S. Business segment.

Marketing and advertising

Marketing and advertising expense decreased ~~5.3%~~19.8% from ~~$7.4~~$7.0 million induring the six months ended June 30, ~~2017~~2018 to ~~$7.0~~$5.6 million in the comparable period in ~~2018~~2019 primarily due to lower ~~levels of advertising related activities of~~spending in our U.S. Business segment.

Sales and business development

Sales and business development expense increased ~~30.9%~~3.3% from ~~$6.4~~$8.3 million induring the six months ended June 30, ~~2017~~2018 to ~~$8.3~~$8.6 million in the comparable period in ~~2018~~2019 primarily due to ~~higher~~the full year effect of the ETFS Acquisition, partly offset by lower spending on sales related activities in our U.S. Business segment.

Contractual gold payments

Contractual gold payments expense ~~was~~increased 128.7% from $2.7 million ~~for~~during the ~~three and six months ended June 30, 2018. See the section above titled “Three Months Ended~~period April 11, 2018 through June 30, 2018 ~~Compared~~ to ~~Three Months Ended June 30, 2017 – Operating Expenses – Contractual gold payments” for further information.~~

~~Professional and consulting fees~~

~~Professional and consulting fees increased 15.0% from $2.8~~$6.2 million induring the six months ended June 30, ~~2017~~2019. This expense was associated with the payment of 4,750 ounces of gold (2,085 ounces for the period April 11 through June 30, 2018) and was calculated using the average daily spot price of $1,302 and $1,307 per ounce during the year to date periods of 2018 and 2019, respectively.

Professional and consulting fees

Professional and consulting fees decreased 13.1% from $3.2 million during the six months ended June 30, 2018 to $2.8 million in the comparable period in 2019 due to lower spending on corporate consulting-related expenses of our U.S. Business segment.

Occupancy, communications and equipment

Occupancy, communications and equipment expense increased 7.8% from $2.9 million during the six months ended June 30, 2018 to $3.2 million in the comparable period in ~~2018~~2019 primarily due to ~~higher professional~~the full year effect of the ETFS Acquisition, partly offset by the closure of our office in Japan.

Depreciation and ~~corporate consulting-related expenses globally.~~

amortization

~~Occupancy, communications~~

Depreciation and ~~equipment~~

~~Occupancy, communications and equipment~~amortization expense ~~increased 7.8%~~decreased 23.0% from ~~$2.7~~$0.7 million induring the six months ended June 30, ~~2017~~2018 to ~~$2.9~~$0.5 million in the comparable period in ~~2018~~2019 primarily due to ~~higher headcount associated with~~ the ~~ETFS Acquisition.~~

~~Depreciation and amortization~~

~~Depreciation and amortization expense~~closure of ~~$0.7~~our office in Japan.

Table of Contents

Third-party distribution fees

Third-party distribution fees increased 27.4% from $3.4 million ~~was essentially unchanged from~~during the six months ended June 30, ~~2017.~~

~~Third-party distribution fees~~

~~Third-party distribution fees increased 111.7% from $1.6 million in the six months ended June 30, 2017~~2018 to ~~$3.4~~$4.3 million in the comparable period in ~~2018~~2019 primarily due to ~~a new distribution relationship announced in the fourth quarter of 2017 and~~ higher fees paid for platform relationships partly offset by lower fees paid to our third-party marketing agent in Latin America.

Acquisition-related costs

~~During~~

Acquisition-related costs decreased 96.5% from $10.0 million during the six months ended June 30, 2018 to $0.3 million in the comparable period in 2019 as the integration of ETFS is essentially complete. We expect to have additional acquisition-related expenses in the third quarter as we ~~incurred acquisition-related costs associated with~~rationalize our product offering in Europe following the ETFS ~~Acquisition of $10.0 million which included professional advisor fees, severance and other compensation costs, awrite-off~~ ~~of our office lease and other integration costs.~~

Acquisition.

Other

Other expenses increased ~~16.9%~~6.3% from ~~$3.5~~$4.1 million induring the six months ended June 30, ~~2017~~2018 to ~~$4.1~~$4.3 million in the comparable period in ~~2018~~2019 primarily due to the full year effect of higher ~~International Business segment~~ office expenses associated with an increase in headcount from the ETFS Acquisition.

Other Income/(Expenses)

   Six Months Ended
June 30,    Change    Percent
Change
(in thousands)    2018    2017
Interest expense
   $ (2,356 )    $ —      $ (2,356 )    n/a
Gain on revaluation of deferred consideration
   9,898    —      9,898    n/a
Interest income
   1,574    1,225    349    28.5 %
Settlement gain
   —      6,909    (6,909 )    n/a
Other gains and losses, net
   (762 )    284    (1,046 )    n/a








Total other income/(expenses)
   $ 8,354    $ 8,418    $ (64 )    (0.1 %)

   Six Months Ended
June 30,
As a Percent of Revenues:
   2018 2017
Interest expense
   (1.8 %) n/a
Gain on revaluation of deferred consideration
   7.4 % n/a
Interest income
   1.2 % 1.1 %
Settlement gain
   n/a 6.3 %
Other gains and losses, net
   (0.6 %) 0.3 %


Total other income/(expenses)
   6.2 % 7.7 %

Six Months Ended
June 30,

Change

Percent
Change

(in thousands)

2019

2018

Interest expense
$
(5,802
) $
(2,356
) $
(3,446
)
146.3
%
Gain on revaluation of deferred consideration – gold payments

367

9,898

(9,531
)
(96.3
%)
Interest income

1,597

1,574

23

1.5
%
Impairment

(572
)
—

(572
)
n/a

Other losses, net

(4,343
)
(762
)
(3,581
)
469.9
%

Total other income/(expenses)
$
(8,753
) $
8,354
$
(17,107
)
n/a

Six Months Ended
June 30,

As a Percent of Revenues:

2019

2018

Interest expense

(4.4
%)
(1.8
%)
Gain on revaluation of deferred consideration – gold payments

0.3
%
7.4
%
Interest income

1.2
%
1.2
%
Impairment

(0.4
%)
n/a

Other losses, net

(3.3
%)
(0.6
%)

Total other income/(expenses)

(6.6
%)
6.2
%

Interest expense

Interest expense ~~was~~increased 146.3% from $2.4 million ~~for~~during the ~~three and~~ six months ended June 30, 2018 to $5.8 million in the comparable period in 2019 as borrowing under our term loan commenced on April 11, 2018. ~~See~~In addition, the ~~section above titled “Three Months Ended~~increase was attributable to higher interest rates. Our effective interest rate during April 11, 2018 through June 30, 2018 ~~Compared to Three Months Ended~~and during the six months ended June 30, ~~2017 – Other Income/(Expenses) – Interest expense” for further information.~~

~~Gain on revaluation~~2019 was 4.9% and 5.5%, respectively, and includes our cost of ~~deferred consideration~~

borrowing and amortization of issuance costs.

Gain on revaluation of deferred consideration ~~was~~– gold payments

We recognized a gain on revaluation of deferred consideration of $9.9 million ~~for~~during the ~~three and~~ six months ended June 30, 2018 as compared to a gain of $0.4 million during the six months ended June 30, 2019. The gain arose in the current year as the forward-looking curve flattened when compared to the forward-looking curve on December 31, 2018. ~~See~~The magnitude of any gain or loss is highly correlated to the ~~section above titled “Three Months Ended~~magnitude of the change in the forward-looking price of gold.

Table of Contents

Interest income

Interest income was essentially unchanged from the six months ended June 30, 2018 ~~Compared to Three Months Ended~~as PIK interest received on notes receivable from AdvisorEngine was offset by the maturity of our short-term investment grade portfolio which occurred in the prior year.

Impairment

We recognized an impairment of $0.6 million during the six months ended June 30, ~~2017 –~~ 2019 in connection with the termination of our Japan office lease.

Other ~~Income/(Expenses) – Gain on revaluation~~losses, net

Other losses, net were $0.8 million and $4.3 million during the six months ended June 30, 2018 and 2019, respectively. Included in the loss recognized during the six months ended June 30, 2019 is a charge of ~~deferred consideration” for further information.~~

$4.3 million arising from the release of a

tax-related

~~Interest income~~

~~Interest~~indemnification asset upon the expiration of the statute of limitations. The indemnification arose from the ETFS Acquisition. An equal and offsetting benefit has been recognized in income ~~increased 28.5%~~tax expense. In addition, gains and losses generally arise from ~~$1.2 million~~the sale of gold earned from management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations, securities owned and other miscellaneous items.

Income taxes

Our effective income tax rate for the six months ended June 30, ~~2017 to $1.6 million for~~2019 of 18.3% resulted in an income tax expense of $2.5 million. Our effective income tax rate differs from the ~~six months ended June 30, 2018,~~federal statutory tax rate of 21% primarily due to~~paid-in-kind~~ ~~(“PIK”) interest~~ a $4.3 million reduction in unrecognized tax benefits, a lower tax rate on foreign earnings and a ~~note receivable from AdvisorEngine Inc.,~~

non-taxable

gain on revaluation of deferred consideration, partly offset by ~~lower interest income~~a valuation allowance on ~~our short-term investment grade bond portfolio which has matured.~~

~~Settlement gain~~

Settlement gain was $6.9 million for the three and six months ended June 30, 2017. See discussion above with the section titled “Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017” for further information.

~~Other gains and~~foreign net operating losses, ~~net~~

Other losses, net for the six months ended June 30, 2018 was $0.8 million and included losses on our short-term investment grade bond portfolio, realized losses arising from the sale of gold earned on management fees paid by physically-backed gold ETPstax shortfalls associated with the ~~ETFS Acquisition~~vesting and ~~miscellaneous foreign exchange losses, partly offset by an insurance claim receivable.~~

~~Other gains, net for the six months ended June 30, 2017 was $0.3 million which included a reimbursement~~exercise of ~~fund-related costs partly offset by realized losses on our short-term investment grade bond portfolio.~~

~~Income taxes~~

stock-based compensation awards,

non-deductible

executive compensation and state and local income taxes.

Our ~~estimated~~ effective income tax rate for the six months ended June 30, 2018 of 27.6% resulted in income tax expense of $10.0 million. Our effective tax rate differs from the federal statutory tax rate of 21% primarily due to

non-deductible

acquisition-related costs, a valuation allowance on foreign net operating losses and state and local income taxes, partly offset by the

non-taxable

gain on revaluation of deferred consideration and a lower tax rate on foreign earnings. ~~The gain on revaluation is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary~~

Table of ~~ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.~~

Our estimated effective income tax rate for the six months ended June 30, 2017 of 48.8% resulted in income tax expense of $18.1 million. Our tax rate differs from the federal statutory tax rate of 35% primarily due to a valuation allowance on foreign net operating losses, tax shortfalls associated with the vesting of stock-based compensation awards and state and local income taxes.

Contents

Segment Results

The table below presents the results of our U.S. Business and International Business reportable ~~segments.~~

   Three Months Ended June 30, Six Months Ended June 30,
   2018 2017 2018 2017
U.S. Business Segment

Operating revenues

Advisory fees
   $ 52,931 $ 53,641 $ 108,449 $ 104,667
Other income
   162 128 309 231


Total operating revenues
   $ 53,093 $ 53,769 $ 108,758 $ 104,898


Total operating expenses
   $ (42,638 ) $ (35,748 ) $ (81,668 ) $ (70,178 )


Other income/(expenses)

Interest expense
   $ (173 ) $ —   $ (173 ) $ —
Interest income
   612 641 1,574 1,225
Settlement gain
   —   6,909 —   6,909
Other gains and losses, net
   (66 ) (261 ) (292 ) 364


Total other income/(expenses)
   $ 373 $ 7,289 $ 1,109 $ 8,498


Total income before taxes (U.S. Business Segment)
   $ 10,828 $ 25,310 $ 28,199 $ 43,218


Average assets during the period (in millions)
   $ 43,464 $ 42,961 $ 44,541 $ 42,128
Average ETF advisory fee during the period
   0.49 % 0.50 % 0.49 % 0.50 %
International Business Segment

Operating revenues

Advisory fees
   $ 20,847 $ 2,215 $ 23,785 $ 4,217
Other income
   835 258 1,136 494


Total operating revenues
   $ 21,682 $ 2,473 $ 24,921 $ 4,711


Total operating expenses
   $ (17,606 ) $ (5,455 ) $ (24,259 ) $ (10,802 )


Other income/(expenses)

Interest expense
   $ (2,183 ) $ —   $ (2,183 ) $ —
Interest income
   —   —   —   —
Gain on revaluation of deferred consideration
   9,898 —   9,898 —
Other gains and losses, net
   (435 ) (103 ) (470 ) (80 )


Total other income/(expenses)
   $ 7,280 $ (103 ) $ 7,245 $ (80 )


Total income/(loss) before taxes (International Business Segment)
   $ 11,356 $ (3,085 ) $ 7,907 $ (6,171 )


Average assets during the period (in millions)
   $ 17,837 $ 1,446 $ 9,971 $ 1,363
Average ETP advisory fee during the period
   0.47 % 0.61 % 0.48 % 0.62 %
Income/(loss) before taxes

U.S. Business segment
   $ 10,828 $ 25,310 $ 28,199 $ 43,218
International Business segment
   11,356 (3,085 ) 7,907 (6,171 )


Total income before taxes
   $ 22,184 $ 22,225 $ 36,106 $ 37,047


segments (in thousands, except for average assets during the period, which are in millions).


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
U.S. Business Segment
Operating revenues
Advisory fees	$	43,070		$	52,931		$	85,587		$	108,449
Other income		76			162			182			309

Total operating revenues	$	43,146		$	53,093		$	85,769		$	108,758

Total operating expenses	$	(36,407	)	$	(42,638	)	$	(73,583	)	$	(81,668	)

Other income/(expenses)
Interest expense	$	(194)		$	(173)		$	(386)		$	(173	)
Interest income		818			612			1,597			1,574
Impairment		—			—			(572	)		—
Other gains and losses, net		(54	)		(66	)		91			(292	)

Total other income	$	570		$	373		$	730		$	1,109

Total income before income taxes (U.S. Business Segment)	$	7,309		$	10,828		$	12,916		$	28,199

Average assets during the period (in millions)	$	38,945		$	43,464		$	38,503		$	44,541
Average ETF advisory fee during the period		0.44	%		0.49	%		0.45	%		0.49	%
International Business Segment
Operating revenues
Advisory fees	$	22,557		$	20,847		$	44,880		$	23,785
Other income		590			835			1,129			1,136

Total operating revenues	$	23,147		$	21,682		$	46,009		$	24,921

Total operating expenses	$	(17,975	)	$	(17,606	)	$	(35,601	)	$	(24,259	)

Other income/(expenses)
Interest expense	$	(2,716	)	$	(2,183	)	$	(5,416	)	$	(2,183	)
(Loss)/gain on revaluation of deferred consideration		(4,037	)		9,898			367			9,898
Other gains and losses, net		338			(435	)		(4,434	)		(470	)

Total other income/(expenses)	$	(6,415	)	$	7,280		$	(9,483	)	$	7,245

Total (loss)/income before income taxes (International Business Segment)	$	(1,243	)	$	11,356		$	925		$	7,907

Average assets during the period (in millions)	$	19,624		$	17,837		$	19,623		$	9,971
Average ETP advisory fee during the period		0.46	%		0.47	%		0.47	%		0.48	%
Income/(loss) before income taxes
U.S. Business segment	$	7,309		$	10,828		$	12,916		$	28,199
International Business segment		(1,243	)		11,356			925			7,907

Total income before income taxes	$	6,066		$	22,184		$	13,841		$	36,106

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Three Months Ended June 30, ~~2018~~2019 Compared to Three Months Ended June 30, ~~2017~~

2019

U.S. Business segment

Operating revenues ~~of the U.S. Business segment of~~decreased 18.7% from $53.1 million ~~were essentially unchanged from~~in the three months ended June 30, ~~2017 as slightly~~2018 to $43.1 million in the comparable period in 2019. The decrease was attributable to lower average AUM due to net outflows from HEDJ and DXJ, market depreciation and lower average U.S. listed ETF advisory fees due to a change in product mix. These decreases were partly offset by net inflows into our fixed income and U.S. equity ETFs. Our average U.S. advisory fee was 0.49% and 0.44% during the three months ended June 30, 2018 and 2019, respectively.

Operating expenses decreased 14.6% from $42.6 million during the three months ended June 30, 2018 to $36.4 million in the comparable period in 2019 primarily due to lower acquisition-related costs, lower marketing and advertising expense and lower sales and business development expense. These decreases were partly offset by higher incentive compensation and severance expense of $1.4 million. Headcount of our U.S. Business segment was 155 and 143 at June 30, 2018 and 2019, respectively.

Other income/(expenses) were $0.6 million during the three months ended June 30, 2019, which were comprised of interest income of $0.8 million, partly offset by interest expense of ($0.2) million. Other income/(expenses) for the three months ended June 30, 2018 were $0.4 million, which were comprised of interest income of $0.6 million, partly offset by interest expense of ($0.2) million.

International Business segment

Operating revenues increased 6.8% from $21.7 million during the three months ended June 30, 2018 to $23.1 million in the comparable period in 2019. The increase was attributable to higher average AUM ~~was largely~~due to net inflows into our commodity ETPs and market appreciation as well as the recognition of a full quarter of revenues from ETFS. These increases were partly offset by lower average ~~U.S.~~International listed ETP advisory fees due to a change in product mix. Our average ~~U.S.~~International listed ETP advisory fee was ~~0.49%~~0.47% and ~~0.50%~~0.46% during the three months ended June 30, 2018 and ~~June 30, 2017,~~2019, respectively.

Operating expenses ~~of the U.S. Business segment~~ increased ~~19.3%~~2.1% from ~~$35.7~~$17.6 million induring the three months ended June 30, ~~2017~~2018 to ~~$42.6~~$18.0 million in the comparable period in ~~2018. Included in~~2019 primarily due to the recognition of a full quarter of fund management and administration expense from ETFS, partly offset by lower acquisition-related costs. Headcount of our International Business segment was 76 and 71 at June 30, 2018 and 2019, respectively.

Other income/(expenses) were ($6.4) million during the three months ended June 30, 2019, which were comprised of a loss on revaluation of deferred consideration of ($4.0) million and interest expense of ($2.7) million, partly offset by and other net gains of $0.3 million. Other income/(expenses) for the three months ended June 30, 2018 were acquisition-related costs of $6.8 million. These costs included professional advisor fees payable upon completion of the ETFS Acquisition and integration costs. The increase was also attributable to higher third-party distribution fees expense due to a new relationship announced in the fourth quarter of 2017. These increases were partly offset by compensation expenses due to lower accrued incentive compensation. Headcount of our U.S. Business segment was 166 and 155 at June 30, 2017 and 2018, respectively.

~~Other income, net declined by $6.9 million, from~~ $7.3 million in the three months ended June 30, 2017 to $0.4 million in the comparable period in 2018. This decline was primarily due to the $6.9 million settlement gain included in the three months ended June 30, 2017.

~~International Business segment~~

Operating revenues of the International Business segment increased $19.2 million, from $2.5 million in the three months ended June 30, 2017 to $21.7 million in the comparable period in 2018. This increase was attributable to higher average AUM which increased primarily due to $17.6 billion of AUM acquired in connection with the ETFS Acquisition.

Operating expenses of the International Business segment increased 222.7% from $5.5 million in the three months ended June 30, 2017 to $17.6 million in the comparable period in 2018, primarily due to the ETFS Acquisition. Fund management and administration expense and compensation expense increased due to higher average AUM and higher headcount, respectively. In addition, during the three months ended June 30, 2018 we recognized contractual gold payments expense of $2.7 million and acquisition-related costs of $1.2 million associated with the ETFS Acquisition. Headcount of our International Business segment was 46 and 76 at June 30, 2017 and 2018, respectively.

~~Other income, net was $7.3 million for the three months ended June 30, 2018, which was~~were comprised of a gain on revaluation of deferred consideration of $9.9 million, partly offset by interest expense of ~~$2.2~~($2.2) million ~~incurred principally in connection with the Term Loan~~ and other net losses of ~~$0.4~~($0.4) million. The other losses represent realized losses arising from the sale of gold earned on management fees paid by physically-backed gold ETPs associated with the ETFS Acquisition and miscellaneous foreign exchange losses.

Six Months Ended June 30, ~~2018~~2019 Compared to Six Months Ended June 30, ~~2017~~

2018

U.S. Business segment

Operating revenues ~~of the U.S. Business segment increased 3.7%~~decreased 21.1% from ~~$104.9~~$108.8 million in the six months ended June 30, ~~2017~~2018 to ~~$108.8~~$85.8 million in the comparable period in ~~2018.~~2019. The ~~increase~~decrease was attributable due to ~~higher~~lower average AUM ~~partly offset by~~and lower average U.S. listed ETF advisory fees due to a change in product mix. ~~Average AUM increased by approximately 5.7%, primarily due~~See “Three Months Ended June 30, 2019 Compared to ~~market appreciation and net inflows into certain of our ETFs, partly offset by outflows primarily from our two largest U.S. listed ETFs, HEDJ and DXJ.~~Three Months Ended June 30, 2018” above for additional information. Our average U.S. advisory fee was 0.49% and ~~0.50%~~0.45% during the six months ended June 30, 2018 and ~~June 30, 2017,~~2019, respectively.

Operating expenses ~~of the U.S. Business segment increased 16.4%~~decreased 9.9% from ~~$70.2~~$81.7 million induring the six months ended June 30, ~~2017~~2018 to ~~$81.7~~$73.6 million in the comparable period in ~~2018. Included~~2019 primarily due to lower acquisition-related costs, lower fund management and administration expense, lower marketing and advertising expense and lower sales and business development expense. These decreases were partly offset by severance expenses of $3.4 million, higher incentive compensation and higher third-party distribution fees.

Other income/(expenses) were $0.7 million during the six months ended June 30, 2019, which were comprised of interest income of $1.6 million and other net gains of $0.1 million, partly offset by an impairment of ($0.6) million recognized in connection with the termination of our Japan office lease and interest expense of ($0.4) million. Other income/(expenses) for the six months ended June 30, 2018 were acquisition-related costs associated with the ETFS Acquisition of $8.0 million. These costs included professional advisor fees and integration costs. In addition, the increase was also attributable to higher spending on sales related activities, higher third-party distribution fees expense due to a new distribution relationship announced in the fourth quarter of 2017 and higher fund management and administration expense due to higher average AUM.

~~Other income, net declined 86.9% from $8.5 million in the six months ended June 30, 2017 to~~ $1.1 million ~~in the comparable period in 2018. This decline was principally due to the previously mentioned settlement gain~~and were comprised of ~~$6.9~~interest income of $1.6 million, partly offset by interest expense of ($0.2) million and other net losses of ($0.3) million.

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International Business segment

Operating revenues ~~of the International Business segment~~ increased ~~$20.2 million,~~84.6% from ~~$4.7 million in the six months ended June 30, 2017 to~~ $24.9 million ~~in the comparable period in 2018. This increase was attributable to higher average AUM which increased primarily due to $17.6 billion of AUM acquired in connection with the ETFS Acquisition.~~

Operating expenses of the International Business segment increased 124.6% from $10.8 million in the six months ended June 30, 2017 to $24.3 million in the comparable period in 2018, primarily due to the ETFS Acquisition. Fund management and administration expense and compensation expense increased due to higher average AUM and higher headcount, respectively. In addition, during the six months ended June 30, 2018 weto $46.0 million in the comparable period in 2019 primarily due higher revenues earned from ETFS, the acquisition of which was completed on April 11, 2018.

Operating expenses increased 46.8% from $24.3 million during the six months ended June 30, 2018 to $35.6 million in the comparable period in 2019 primarily due to higher expenses from ETFS, which were recognized ~~contractual gold payments~~for the entire six months of 2019. These increases were partly offset by lower acquisition-related costs.

Other income/(expenses) were ($9.5) million during the six months ended June 30, 2019, which were comprised of interest expense of ~~$2.7~~($5.4) million and ~~acquisition-related costs~~other net losses of ~~$2.0 million associated with~~($4.4) million. Other net losses primarily arose from the ~~ETFS Acquisition.~~

reduction of a

tax-related

indemnification asset upon the expiration of the statute of limitations. These losses were partly offset by a gain on revaluation of deferred consideration of $0.4 million. Other ~~income, net was $7.2 million~~income/(expenses) for the six months ended June 30, 2018 ~~which was~~were $7.2 million and were comprised of a gain on revaluation of deferred consideration of $9.9 million, partly offset by interest expense of ~~$2.2~~($2.2) million ~~incurred principally in connection with the Term Loan~~ and other net losses of ~~$0.5~~($0.5) million. The other losses represent realized losses arising from the sale of gold earned on management fees paid by physically-backed gold ETPs associated with the ETFS Acquisition and miscellaneous foreign exchange losses.

Liquidity and Capital Resources

The following table summarizes key data regarding our liquidity, capital resources and use of capital to fund our operations:

   June 30,
2018    December 31,
2017
Balance Sheet Data (in thousands):

Cash and cash equivalents
   $ 70,744    $ 54,193
Securities owned, at fair value
   3,719    66,294
Securitiesheld-to-maturity
   20,229    21,299
Accounts receivable
   27,329    21,309




Total: Liquid assets
   122,021    163,095
Less: Total current liabilities
   (66,721 )    (57,348 )




Subtotal
   55,300    105,747
Plus: Revolving credit facility—undrawn
   50,000    —




Total: Available liquidity
   $ 105,300    $ 105,747

   Six Months Ended June 30,
   2018    2017
Cash Flow Data (in thousands):

Operating cash flows
   $ 9,014    $ 17,283
Investing cash flows
   (172,645 )    3,508
Financing cash flows
   181,095    (25,523 )
Foreign exchange rate effect
   (913 )    624




Increase/(decrease) in cash and cash equivalents
   $ 16,551    $ (4,108 )

June 30,
2019

December 31,
2018

Balance Sheet Data (in thousands)
:

Cash and cash equivalents
$
79,611
$
77,784

Accounts receivable

24,442

25,834

Securities
held-to-maturity

20,136

20,180

Securities owned, at fair value

9,095

8,873

Total: Liquid assets

133,284

132,671

Less: Total current liabilities

(63,142
)
(62,801
)
Less: Net liquid asset requirement – certain subsidiaries (International Business segment)

(12,255
)
(11,005
)

Subtotal

57,887

58,865

Plus: Revolving credit facility – available capacity

25,140

50,000

Total: Available liquidity
$
83,027
$
108,865

Six Months Ended June 30,

2019

2018

Cash Flow Data (in thousands)
:

Operating cash flows
$
15,359
$
9,014

Investing cash flows

(1,516
)
(172,645
)
Financing cash flows

(12,284
)
181,095

Foreign exchange rate effect

268

(913
)

Increase in cash and cash equivalents
$
1,827
$
16,551

Liquidity

We consider our available liquidity to be our liquid assets and available borrowings under our revolving credit facility, less our current ~~liabilities.~~liabilities and net liquid asset requirements of certain subsidiaries of our International Business segment. Liquid assets consist of cash and cash equivalents, accounts receivable, securities

held-to-maturity

and securities owned, at fair ~~value, securitiesheld-to-maturity~~ and accounts receivable. Cash and cash equivalents include cash on hand with financial institutions and all highly liquid investments with an original maturity of 90 days or less at the time of purchase.value. Our securities owned, at fair value are highly liquid ~~investments in a portfolio of short-duration investment grade corporate bonds.~~investments. Certain securities are accounted for as

held-to-maturity

securities and we have the intention and ability to hold them to maturity. However, these securities are also readily traded and, if needed, could be sold for liquidity. Accounts receivable are current assets and primarily represent receivables from advisory fees we earn from our ETPs. Our current liabilities consist primarily of payments owed to vendors and third parties in the normal course of business, ~~as well as~~deferred consideration and accrued ~~year end~~incentive compensation for employees.

See the section below titled “Credit Facility” for a discussion of our revolving credit facility.

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Cash and cash equivalents increased $1.8 million during the six months ended June 30, 2019 due to net cash provided by operating activities of $15.4 million and $0.3 million from changes in foreign exchange rates. These increases were partly offset by $10.2 million used to pay dividends on our common stock, $2.1 million used to repurchase our common stock and $1.5 million used to fund the AdvisorEngine unsecured convertible note receivable and $0.1 million used for other activities.

Cash and cash equivalents increased $16.6 million induring the six months ended June 30, 2018 due to $200.0 million proceeds from the issuance of long-term debt, $64.5 million from sales and maturities of debt securities

available-for-sale, ~~$9.0~~

$9.0 million of cash generated by our operating activities and $1.1 million from

held-to-maturity

securities called or maturing during the period. These increases were partly offset by $233.2 million of cash paid upon closing of the ETFS Acquisition, net of cash acquired, $9.2 million used to pay dividends on our common stock, $8.7 million used to pay credit facility issuance costs, $5.0 million used to fund the AdvisorEngine unsecured

non-convertible

note receivable, $1.0 million used to repurchase our common stock and $0.9 million used for other activities.

~~Cash and cash equivalents decreased $4.1 million in the six months ended June 30, 2017 due to $38.7 million used to purchase securitiesavailable-for-sale,~~ $21.9 million used to pay dividends on our common stock, $5.0 million invested in AdvisorEngine, $3.7 million used to repurchase our common stock and $0.2 million used for other activities. These decreases were partly offset by $17.2 million of cash generated by our operating activities, $46.1 million from sales and maturities of securities~~available-for-sale~~ ~~and $2.1 million fromheld-to-maturity~~ ~~securities called or maturing during the period.~~

Credit Facility

On April 11, 2018 and in connection with the ETFS Acquisition, we ~~and WisdomTree International~~ entered into a credit agreement ~~(the “Credit Agreement”), by and among us, WisdomTree International, certain subsidiaries of ours as guarantors, the lenders party thereto and~~with Credit Suisse AG ~~Cayman Islands Branch, as administrative agent, collateral agent, L/C Issuer~~ and ~~lender.~~certain other lenders. Under the ~~Credit Agreement,~~credit agreement, the lenders extended us a $200.0 million Term Loan, ~~to WisdomTree International,~~ the net cash proceeds of which were used, ~~by WisdomTree International,~~ together with other cash on hand, to complete the acquisition and pay certain related fees, costs and expenses, and made a $50.0 million revolving credit facility, ~~(the “Revolver” and, together with~~or the ~~Term Loan, the “Credit Facility”)~~Revolver, available to ~~the Company and WisdomTree International~~us for revolving borrowings from time to time for working capital, capital expenditures and general corporate purposes.

The Term Loan, together with the Revolver, are referred to in this Report as the Credit Facility. The available capacity under the Revolver is subject to compliance with the Total Leverage Ratio as further described below.

Interest on the Term Loan accrues at aan annual rate ~~per annum~~ equal to LIBOR, plus up to 2.00% (commencing at LIBOR, plus 1.75%), and interest on the Revolver accrues at aan annual rate ~~per annum~~ equal to LIBOR, plus up to 1.50% (commencing at LIBOR, plus 1.25%), in each case, with the exact interest rate margin determined based on the Total Leverage Ratio (as defined below). The Revolver is also subject to a facility fee equal to aan annual rate ~~per annum~~ of up to 0.50% of the actual daily amount of the aggregate commitments (whether used or unused) under the Revolver, with the exact facility fee rate determined based on the Total Leverage Ratio. The Credit Facility matures on April 11, ~~2021 (the “Maturity Date”).~~2021. The Term Loan does not amortize and the entire principal balance is due in a single payment on the ~~Maturity Date.~~

maturity date.

The ~~Credit Agreement~~credit agreement governing the terms of the Credit Facility includes a financial covenant that requires that we maintain a Total Leverage Ratio, calculated as of the last day of each fiscal quarter, ~~commencing with the fiscal quarter ending September 30, 2018,~~ equal to or less than the ratio set forth opposite such fiscal quarter:


~~Fiscal Quarter Ending~~	~~Total Leverage Ratio~~
~~September 30, 2018~~		~~2.75:1.00~~
~~December 31, 2018~~ Fiscal Quarter Ending	Total Leverage Ratio
June 30, 2019		~~2.75:~~ 2.50:1.00
~~March 31,~~ September 30, 2019		~~2.75:~~ 2.50:1.00
~~June 30,~~ December 31, 2019		2.50:1.00
~~September 30, 2019~~ March 31, 2020		~~2.50:~~ 2.25:1.00
~~December 31, 2019~~ June 30, 2020		~~2.50:~~ 2.25:1.00
~~March 31, 2020~~		~~2.25:1.00~~
~~June 30, 2020~~		~~2.25:1.00~~
September 30, 2020 and each subsequent fiscal quarter ending on or before the ~~Maturity Date~~ maturity date		2.00:1.00

Total Leverage Ratio means, as of the last day of any fiscal quarter, the ratio of Consolidated Total Debt of ours and our restricted subsidiaries (as defined in the ~~Credit Agreement)~~credit agreement) as of such date to Consolidated EBITDA of ours and our restricted subsidiaries (as defined in the ~~Credit Agreement)~~credit agreement) for the four consecutive fiscal quarters ended on such date.

WisdomTree International’s obligations under the Term Loan and Revolver are unconditionally guaranteed by us and certain of our subsidiaries and secured by a lien on substantially all of the present and future property and assets of ours, WisdomTree International and such subsidiaries, in each case, subject to customary exceptions and exclusions. Our obligations under the Revolver are unconditionally guaranteed by certain of our wholly-owned domestic subsidiaries and secured by substantially all of the present and future property and assets of ours and such subsidiaries, in each case, subject to customary exceptions and exclusions.

customary negative covenants, including among others, restrictions on the incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, repurchasing equity interests of ~~our,~~ours, entering into affiliate transactions and asset sales. The ~~Credit Agreement~~credit agreement also provides for a number of customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control and judgment defaults.

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We are in compliance with our covenants under the credit agreement.

Capital Resources

Our principal source of financing is our operating cash flow. We believe that current cash flows generated by our operating activities and existing cash balances should be sufficient for us to fund our operations for at least the next 12 months. In addition, we have access to the Revolver for working capital, capital expenditures and general corporate purposes. No amounts are currently outstanding under the Revolver.

Use of Capital

Our business does not require us to maintain a significant cash position. ~~We potentially may use~~However, certain of our subsidiaries of our International Business segment are required to maintain a minimum level of net liquid assets, which at June 30, 2019 was approximately $12.3 million in the aggregate. Notwithstanding these net liquid asset requirements, we expect that our main uses of cash ~~to exercise our option to acquire the remaining equity interests in AdvisorEngine (See Note 9 to our Consolidated Financial Statements). Otherwise, our cash position is available~~will be to fund the ongoing operations of our business. Also, as part of our capital management, we maintain a capital return program which includes a $0.03 per share quarterly cash dividend and authority to purchase our common stock through April 27, ~~2019,~~2022, including purchases to offset future equity grants made under our equity plans. As previously mentioned, under the terms of the ~~Credit Agreement,~~credit agreement, we are subject to various covenants including compliance with the Total Leverage Ratio. A quarterly dividend payment in excess of $0.03 per share and repurchases of our common stock (excluding purchases of our common stock withheld pursuant to the terms of equity awards granted to employees to satisfy tax withholding obligations) are permitted only to the extent the Total Leverage Ratio does not exceed 1.75 to 1.00 and no event of default (as defined in the ~~Credit Agreement)~~credit agreement) has occurred and is continuing at the time the cash dividend payment or stock repurchase is made.

During the three months ended June 30, ~~2018,~~2019, we repurchased ~~26,717~~14,065 shares of our common stock under the repurchase program for an aggregate cost of ~~$0.3~~$0.1 million. ~~Currently, $87.6~~At June 30, 2019, $83.6 million ~~remains~~remained under this program for future purchases.

Contractual Obligations

The following table summarizes our future cash payments associated with contractual obligations as of June 30, ~~2018:~~

   Total    Payments Due by Period
   (in thousands)
   Less than 1
year    1 to 3 years    3 to 5 years    More than 5
years
Term Loan
   $ 200,000    $ —      $ 200,000    $ —      $ —
Operating leases
   35,067    2,432    8,247    8,644    15,744
Commitment to provide working capital – AdvisorEngine
   3,000    3,000    —      —      —










Total
   $ 238,067    $ 5,432    $ 208,247    $ 8,644    $ 15,744

~~Commitment to Provide Working Capital – AdvisorEngine~~

In December 2017, we committed to provide up to $30.0 million in additional working capital to AdvisorEngine pursuant to an unsecured promissory note (of which $27.0 million is currently funded). Pursuant to the terms of the promissory note, we will advance an additional $3.0 million on September 30, 2018 so long as no event of default (as defined) has occurred or is continuing.

2019:

Total

Payments Due by Period

(in thousands)

Less than 1
year

1 to 3 years

3 to 5 years

More than 5
years

Term Loan
$
200,000
$
—
$
200,000
$
—
$
—

Operating leases

32,023

3,632

6,313

5,916

16,162

Total
$
232,023
$
3,632
$
206,313
$
5,916
$
16,162

Off-Balance
Sheet Arrangements

~~Other than operating leases, which are included in the table above, we~~

We do not have any

off-balance

sheet financing or other ~~arrangements. We~~arrangements and have neither created nor are party to any special-purpose or

off-balance

sheet entities for the purpose of raising capital, incurring debt or operating our business.

Critical Accounting Policies

Business Combinations

We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805,
Business Combinations,
which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition. The excess of the fair value of purchase price over the fair values of these identifiable assets, intangible assets and liabilities is recorded as goodwill.

Goodwill and Intangible Assets

Goodwill is the excess of the fair value of the purchase price over the fair values of the identifiable net assets at the acquisition date. ~~The Company tests its~~We test our goodwill for impairment at least annually and at the time of a triggering event requiring

re-evaluation,

if one were to occur, in accordance with Accounting Standards Update, or ASU,

2017-04,

Intangibles-Goodwill and Other (Topic 350): Simplifying

the Test for Goodwill ~~Impairment.~~Impairment

. We early adopted the revised guidance for impairment tests performed after January 1, 2017. Under the revised guidance, goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value. If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill. A reporting unit is an operating segment or a component of an operating segment provided that the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component.

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For impairment testing purposes, goodwill has been allocated to our U.S. Business reporting unit which is assessed annually for impairment on April ~~30th.~~30

. In addition, goodwill arising from the ETFS Acquisition (See Note 3 to our Consolidated Financial Statements) has been allocated to the European Business reporting unit included in the International Business reportable segment and assessed annually for impairment on November 30^{th
. When performing our goodwill impairment test, we consider a qualitative assessment, when appropriate, and the income approach, market approach and our market capitalization when determining the fair value of our reporting units. Goodwill allocated to our U.S. Business reporting unit was assessed for impairment as of April 30, 2018.2019. The results of this analysis indicated no impairment.}

Indefinite-lived intangible assets are tested for impairment at least annually and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair value is less than their carrying value. We may rely on a qualitative assessment when performing our intangible asset impairment test. Otherwise, the impairment evaluation is performed at the lowest level of reasonably identifiable cash flows independent of other assets. The annual impairment testing date for all ~~the Company’s~~our intangible assets is November 30^th
.

Investments, Carried at Cost

We account for equity investments that do not have a readily determinable fair value as cost method investments under the measurement alternative prescribed within ASU

2016-01,

Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities

, ~~including intangible assets arising~~to the extent such investments are not subject to consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the ~~ETFS Acquisition.~~

same issuer. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment.

Revenue Recognition

We earn substantially all of our revenue in the form of advisory fees from our ETPs and recognize this revenue over time, as the performance obligation is satisfied. ETP advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which we have a right to invoice.

Recently Issued Accounting Pronouncements

~~In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU2014-09,~~~~Revenue from Contracts with Customers~~ ~~(ASU2014-09),~~ a comprehensive revenue recognition standard on the financial reporting requirements for revenue from contracts entered into with customers. In July 2015, the FASB deferred this ASU’s effective date by one year, to interim and annual periods beginning after December 15, 2017. The deferral allows early adoption at the original effective date. During 2016, the FASB issued ASU~~2016-08,~~ ~~which clarifies principal versus agent considerations, ASU2016-10,~~ ~~which clarifies identifying performance obligations and the licensing implementation guidance, and ASU2016-12,~~ ~~which amends certain aspects of the new revenue recognition standard pursuant to ASU2014-09.~~ ~~ASU2014-09~~ ~~allows for the use of either the retrospective or modified retrospective adoption method. The guidance in ASU2014-09,~~ and the related amendments, became effective for us on January 1, 2018. We adopted this standard under the modified retrospective method and determined the standard did not have a material impact on our historical pattern of recognizing revenue from contracts with customers in our consolidated financial statements (See Note 16 to our Consolidated Financial Statements).

~~In January 2016, the FASB issued ASU2016-01,~~~~Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities~~ ~~(ASU2016-01).~~ The main objective of the standard is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in the update make targeted improvements to generally accepted accounting principles. These include requiring equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.~~Available-for-sale~~ classification for equity investments with readily determinable fair values will no longer be permissible. However, an entity may choose a measurement alternative to measure equity investments that do not have readily determinable fair values by recognizing these financial instruments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. ASU~~2016-01~~ is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We adopted this standard on January 1, 2018 and have elected to apply the measurement alternative to our equity investments that do not have readily determinable fair values. The adoption of this standard did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU

2016-13,

Financial Instruments-Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments ~~(ASU~~

(ASU

2016-13).

The main objective of the standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In issuing ~~the~~this standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss, ~~(“CECL”)~~or CECL, model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain

off-balance

sheet credit exposures. The standard is applicable to loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, loan commitments and certain other

off-balance

sheet credit exposures, debt securities (including those

held-to-maturity)

and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The CECL model does not apply to

available-for-sale

debt securities. For

available-for-sale

debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities. Accordingly, the new methodology will be utilized when assessing our financial instruments for impairment. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU

2016-13

also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. ASU

2016-13

is effective for years beginning after December 15, 2019, including interim periods within those fiscal years under a modified retrospective approach. Early adoption is permitted for the periods beginning after December 15, 2018. We are currently evaluating the impact that ~~the~~this standard will have on our consolidated financial ~~statements.~~

statements and plan to adopt this standard on January 1, 2020.

In ~~February 2016,~~August 2018, the FASB issued ASU~~2016-02,~~~~Leases~~ ~~(ASU2016-02)~~

2018-13,

Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

(ASU

2018-13),

which ~~requires lessees~~modifies the disclosure requirements on fair value measurements, including removing the requirement to ~~include most leases on~~disclose (1) the ~~balance sheet.~~amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels and (3) the valuation processes for Level 3 fair value

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measurements. ASU~~2016-02~~

2018-13

also added new disclosures including the requirement to disclose (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU

2018-13

is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, ~~2018~~2019 and early adoption is permitted. ~~We are currently evaluating the impact that the~~This standard will ~~have~~only impact the disclosures pertaining to fair value measurements. We plan to adopt this standard on ~~our consolidated financial statements and expect, at a minimum, that its implementation will result in agross-up~~ ~~on the consolidated balance sheets upon recognition ofright-of-use~~ ~~assets and lease liabilities associated with the future minimum payments required under operating leases as disclosed in Note 14 to our Consolidated Financial Statements.~~

January 1, 2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following information, together with information included in other parts of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, describes key aspects of our market risk.

Market Risk

Market risk to us generally represents the risk of changes in the value of ~~securities held in the portfolios of the WisdomTree~~our ETPs that ~~generally~~ results from fluctuations in securities or commodity prices, foreign currency exchange rates against the U.S. dollar, and interest rates. Nearly all of our revenues are derived from advisory agreements for the WisdomTree ~~ETFs.~~ETPs. Under these agreements, the advisory fee we receive is based on the average market value of the assets in the WisdomTree ~~ETF~~ETP portfolios we manage.

Fluctuations in the value of ~~these securities~~the ETPs are common and are generated by numerous factors such as market volatility, the overall economy, inflation, changes in investor strategies and sentiment, availability of alternative investment vehicles, government regulations and others. Accordingly, changes in any one or a combination of these factors may reduce the value of investment securities and, in turn, the underlying AUM on which our revenues are earned. These declines may cause investors to withdraw funds from our ETPs in favor of investments that they perceive as offering greater opportunity or lower risk, thereby compounding the impact on our revenues. We believe challenging and volatile market conditions will continue to be present in the foreseeable future.

Interest Rate Risk

~~To maximize yields, we~~

We invest our corporate cash in short-term interest earning assets, primarily money market instruments at a commercial bank, federal agency debt instruments and ~~short-term investment grade corporate bonds~~other securities which totaled ~~$113.1~~$27.4 million and ~~$26.6~~$30.5 million as of December 31, ~~2017~~2018 and June 30, ~~2018,~~2019, respectively. We do not anticipate that changes in interest rates will have a material impact on our financial condition, operating results or cash flows.

In addition, in connection with the ETFS Acquisition, we obtained a $250.0 million Credit Facility consisting of a $200.0 million Term Loan and $50.0 million Revolver. Interest rate risk is not significant as borrowings under these facilities accrue interest at variable rates (See Note 12 to our Consolidated Financial Statements).

Exchange Rate Risk

Over the last few years, we have expanded our business globally and are subject to currency translation exposure on the results of our

non-U.S.

operations, primarily in Europe and Canada. Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to our reporting currency (the U.S. dollar) for consolidation purposes. Historically we generated the vast majority of our revenues and expenses in the U.S. dollar. However, upon completion of the ETFS Acquisition our exposure to exchange rate risk has increased. While the advisory fees earned by ETFS are predominantly in U.S. dollars (and also paid in gold ounces, as described below), expenses for corporate overhead are generally incurred in British pounds. Currently, we do not enter into derivative financial instruments aimed at offsetting certain exposures in the statement of operations or the balance sheet but may seek to do so in the future.

Exchange rate risk associated with the ~~Euro~~euro and Canadian ~~Dollar~~dollar is not considered to be significant.

Commodity Price Risk

The completion of the ETFS Acquisition has provided us with an industry leading position in European-listed gold and commodity products. Fluctuations in the prices of commodities that are linked to certain of these ETPs could have a material adverse effect on ETFS’s AUM and revenues. In addition, a portion of the advisory fee revenues we receive on our ETPs backed by gold are paid in gold ounces. In addition, we pay gold ounces to satisfy our deferred consideration obligation that we assumed in connection with the ETFS Acquisition (See Note 11 to our Consolidated Financial Statements). While we may readily sell the gold that we earn under these advisory contracts, we still may maintain a position. We currently do not enter into arrangements to hedge against fluctuations in the price of gold and any hedging we may undertake in the future may not be cost-effective or sufficient to hedge against this gold exposure.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of June 30, ~~2018,~~2019, our management, with the participation of our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule

13a-15(b)

promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that, as of June 30, ~~2018,~~2019, our disclosure controls and procedures were effective at a reasonable assurance level in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules, regulations and forms of the SEC, including ensuring that such material information is accumulated by and communicated to our management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. See “Changes in Internal Control over Financial Reporting” below for a discussion regarding the ETFS Acquisition which we completed on April 11, 2018 (See Note 3 to our Consolidated Financial Statements).

Changes in Internal Control over Financial Reporting

~~As of~~

During the ~~date of this Report,~~quarter ended June 30, 2019, we ~~are in~~completed the ~~process of integrating the acquired operations~~integration of ETFS into our overall internal control over financial reporting (“ICFR”). We currently anticipate that we will be deferring our assessment of the ICFR related to ETFS, which for the three months ended June 30, 2018 represented approximately 24% of our total revenues.

~~Notwithstanding the recently completed ETFS Acquisition, during the quarter ended June 30, 2018, there~~reporting. There were no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

You should carefully consider the information set forth in this Report, as well as the information in Part 1, Item 1A. “Risk Factors” in our ~~annual~~Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2017 and Quarterly Report on Form10-Q~~ ~~for the quarter ended March 31,~~ 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent sales of Unregistered Securities

None.

Use of Proceeds

Not applicable.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” of shares of our common stock.

   Total Number
of Shares
Purchased    Average Price
Paid Per Share    Total Number of
Shares Purchased
as
Part of Publicly
Announced Plans
or
Programs⁽¹⁾    Approximate
Dollar
Value of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
Period
            (in thousands)
April 1, 2018 to April 30, 2018
   13,468    $ 9.56    13,468
May 1, 2018 to May 31, 2018
   9,345    $ 10.85    9,345
June 1, 2018 to June 30, 2018
   3,904    $ 10.62    3,904





Total
   26,717    $ 10.17    26,717    $ 87,608


	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Period							(in thousands)
April 1, 2019 to April 30, 2019		5,060	$	7.59		5,060
May 1, 2019 to May 31, 2019		9,005	$	7.03		9,005
June 1, 2019 to June 30, 2019		—	$	—		—

Total		14,065	$	7.23		14,065	$	83,622

(1)

On ~~October 29, 2014,~~April 24, 2019, our Board of Directors ~~authorized a three-year~~extended the term of our share repurchase program ~~of up to $100.0 million. On April 27, 2016, the Board approved a $60.0 million increase to this program and extended the term~~for three years through April 27, ~~2019, increasing the total authorized repurchase amount to $100.3 million.~~2022. During the three months ended June 30, ~~2018,~~2019, we repurchased ~~26,717~~14,065 shares of our common stock under this program for an aggregate cost of ~~$0.3~~approximately $0.1 million. As of June 30, ~~2018, $87.6~~2019, $83.6 million remained under this program for future purchases. Under the terms of the ~~Credit Agreement governing the Credit Facility,~~credit agreement, share repurchases are permitted only to the extent the Total Leverage Ratio does not exceed 1.75 to 1.00 and no event of default (as defined in the ~~Credit Agreement)~~credit agreement) has occurred and is continuing at the time the stock repurchase is ~~made (See Note 12 to our Consolidated Financial Statements).~~made. However, our ability to purchase shares of our common stock withheld pursuant to the terms of equity awards granted to employees to satisfy tax withholding obligations ~~will~~is not be restricted.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


~~Exhibit No.~~		~~Description~~

~~3.1~~
Exhibit No.			Description

	3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)

~~3.2~~
	3.2		Certificate of Designations of Series ANon-Voting Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form8-K filed with the SEC on April 13, 2018)

~~3.3~~
	3.3		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)

~~4.1~~
	4.1		Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)

~~4.2~~
	4.2		Amended and Restated Stockholders Agreement among the Registrant and certain investors dated December 21, 2006 (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)

~~4.3~~
	4.3		Securities Purchase Agreement among the Registrant and certain investors dated December 21, 2006 (incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)

~~4.4~~
	4.4		Securities Purchase Agreement among the Registrant and certain investors dated October 15, 2009 (incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)

~~4.5~~
	4.5		Third Amended and Restated Registration Rights Agreement dated October 15, 2009 (incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)

~~4.6~~
	4.6		Investor Rights Agreement, dated April 11, 2018, between the Registrant and ~~ETF Securities Limited~~ETFS Capital (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form8-K filed with the SEC on April 13, 2018)

~~31.1 (1)~~
	31.1 (1)		Certification of Chief Executive Officer and Principal Executive Officer pursuant to Rule13a-14 of the Exchange Act

~~31.2 (1)~~
	31.2 (1)		Certification of Chief Financial Officer and Principal Financial Officer pursuant to Rule13a-14 of the Exchange Act

~~31.3 (1)~~
	31.3 (1)		Certification of Chief Accounting Officer and Principal Accounting Officer pursuant to Rule13a-14 of the Exchange Act

~~32 (1)~~
	32 (1)		Section 1350 Certification

~~101 (1)~~
	101 (1)		Financial Statements from the Quarterly Report on Form 10-Q of the Company for the ~~quarter~~three months ended June 30, ~~2018,~~2019, formatted in XBRL: (i) Consolidated Balance ~~Sheets;~~Sheets at June 30, 2019 (Unaudited) and December 31, 2018; (ii) Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2019 and June 30, 2018 (Unaudited); (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2019 and June 30, 2018 (Unaudited) (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and June 30, 2018 (Unaudited); and ~~(iv)~~(v) Notes to Consolidated Financial Statements, as blocks of text and in detail.

~~101.INS (1)~~		~~XBRL Instance Document~~

~~101.SCH (1)~~
	101.SCH (1)		Inline XBRL Taxonomy Extension Schema Document

~~101.CAL (1)~~
	101.CAL (1)		Inline XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF (1)~~
	101.DEF (1)		Inline XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB (1)~~
	101.LAB (1)		Inline XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE (1)~~
	101.PRE (1)		Inline XBRL Taxonomy Extension Presentation Linkbase Document

	104 (1)		Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

(1)	Filed herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized on this 9^th31

day of ~~August 2018.~~

July 2019.


WISDOMTREE INVESTMENTS, INC.

~~By:~~
By:		/s/ Jonathan L. Steinberg
		Jonathan L. Steinberg
		President and Chief Executive Officer ~~and President (Authorized Officer and~~ (Principal Executive Officer)

WISDOMTREE INVESTMENTS, INC.

~~By:~~
By:		/s/ Amit Muni
		Amit Muni
		Chief Financial Officer ~~(Authorized Officer and~~ (Principal Financial Officer)

WISDOMTREE INVESTMENTS, INC.

~~By:~~
By:		/s/ Bryan Edmiston
		Bryan Edmiston
		Chief Accounting Officer ~~(Authorized Officer and~~ (Principal Accounting Officer)


	June 30, 2018			December 31, 2017
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	70,744		$	54,193
Securities owned, at fair value		3,719			66,294
Securitiesheld-to-maturity		—			1,000
Accounts receivable		27,329			21,309
Income taxes receivable		—			6,978
Prepaid expenses		6,545			3,550
Other current assets		194			1,007

Total current assets		108,531			154,331
Fixed assets, net		10,028			10,693
Note receivable, net (Note 8)		24,588			18,748
Indemnification receivable (Note 20)		28,339			—
Securitiesheld-to-maturity		20,229			20,299
Deferred tax assets, net		2,024			1,050
Investments, carried at cost (Note 9)		35,187			35,187
Goodwill (Note 22)		85,856			1,799
Intangible assets (Note 22)		613,227			12,085
Other noncurrent assets		2,428			793

Total assets	$	930,437		$	254,985

Liabilities and stockholders’ equity
Liabilities
Current liabilities:
Fund management and administration payable	$	22,002		$	20,099
Compensation and benefits payable		13,664			28,053
Deferred consideration – gold payments (Note 11)		11,378			—
Income taxes payable		1,252			—
Securities sold, but not yet purchased, at fair value		2,026			950
Payable to ETFS Capital Limited (Note 3)		7,033			—
Accounts payable and other liabilities		9,366			8,246

Total current liabilities		66,721			57,348
Long-term debt (Note 12)		193,407			—
Deferred consideration – gold payments (Note 11)		151,470			—
Deferred rent payable		4,608			4,686
Other noncurrent liabilities (Note 20)		28,339			—

Total liabilities		444,545			62,034

Preferred stock – Series ANon-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding (Note 13)		132,569			—

Commitments and Contingencies (Note 14)
Stockholders’ equity
Preferred stock, par value $0.01; 2,000 shares authorized:		—			—
Common stock, par value $0.01; 250,000 shares authorized; issued and outstanding: 153,142 and 136,996 at June 30, 2018 and December 31, 2017, respectively		1,531			1,370
Additionalpaid-in capital		359,066			216,006
Accumulated other comprehensive income		461			291
Accumulated deficit		(7,735	)		(24,716	)

Total stockholders’ equity		353,323			192,951

Total liabilities and stockholders’ equity	$	930,437		$	254,985


	For the Three Months Ended June 30, 2019
	Common Stock								Accumulated			Accumulated Deficit			Total
	Shares Issued			Par Value		Additional Paid-In Capital			Other Comprehensive Income			Accumulated Deficit			Total
Balance—April 1, 2019		155,056		$	1,551	$	364,717		$	758		$	(3,592	)	$	363,434
Restricted stock issued and vesting of restricted stock units, net		66			—		—			—			—			—
Shares repurchased		(14	)		—		(102	)		—			—			(102	)
Stock-based compensation		—			—		3,135			—			—			3,135
Other comprehensive loss		—			—		—			(33	)		—			(33	)
Dividends		—			—		—			—			(5,094	)		(5,094	)
Net income		—			—		—			—			2,479			2,479

Balance—June 30, 2019		155,108		$	1,551	$	367,750		$	725		$	(6,207	)	$	363,819

	For the Three Months Ended June 30, 2018
	Common Stock								Accumulated			Accumulated Deficit			Total
	Shares Issued			Par Value		Additional Paid-In Capital			Other Comprehensive Income			Accumulated Deficit			Total
Balance—April 1, 2018		137,751		$	1,378	$	218,488		$	1,163		$	(19,424	)	$	201,605
Common stock issued (Note 3)		15,250			153		137,097			—			—			137,250
Restricted stock issued and vesting of restricted stock units, net		158			—		—			—			—			—
Shares repurchased		(27	)		—		(272	)		—			—			(272	)
Exercise of stock options, net		10			—		85			—			—			85
Stock-based compensation		—			—		3,529			—			—			3,529
Reclassification of stock issuance costs to temporary equity		—			—		139			—			—			139
Other comprehensive loss		—			—		—			(702	)		—			(702	)
Dividends		—			—		—			—			(5,035	)		(5,035	)
Net income		—			—		—			—			16,724			16,724

Balance—June 30, 2018		153,142		$	1,531	$	359,066		$	461		$	(7,735	)	$	353,323


Operating Revenues:	Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
Advisory fees (previously reported)	$	56,114		$	109,376
Other ETP fees reclassified to Other income		(258	)		(492	)

Advisory fees (currently reported)	$	55,856		$	108,884


Settlement gain (previously reported)	$	6,909		$	6,909
Reclassify to Other Income/(Expenses)		(6,909	)		(6,909	)

Settlement gain (currently reported)	$	—		$	—


Other income (previously reported)	$	405		$	1,742
Other ETP fees reclassified from Advisory fees		258			492
Interest income reclassified to Other Income/(Expenses)		(641	)		(1,225	)
Realized and unrealized losses reclassified to Other gains and losses, net		364			519
Miscellaneous other income reclassified to Other gains and losses, net		—			(803	)

Other income (currently reported)	$	386		$	725


Total revenues (currently reported)	$	56,242		$	109,609

Other Income/(Expenses):
Interest income reclassified from operating revenues	$	641		$	1,225


Settlement gain reclassified from operating revenues	$	6,909		$	6,909


Other gains and losses, net (previously reported)	$	—		$	—
Realized and unrealized losses reclassified from operating revenues		(364	)		(519	)
Miscellaneous other income reclassified from operating revenues		—			803

Other gains and losses, net (currently reported)	$	(364	)	$	284


	June 30, 2018
	Total		Level 1		Level 2		Level 3
Assets:
Recurring fair value measurements:
Cash and cash equivalents	$	70,744	$	70,744	$	—	$	—
Securities owned, at fair value		3,719		3,719		—		—

Total	$	74,463	$	74,463		—	$	—

Non-recurring fair value measurements:
AdvisorEngine Inc. – Option⁽¹⁾	$	3,278	$	—	$	—	$	3,278
Thesys Group, Inc. – Series Y preferred stock⁽²⁾		6,909		—		—		6,909

Total	$	10,187	$	—	$	—	$	10,187

Liabilities:
Recurring fair value measurements:
Deferred consideration (Note 11)	$	162,848	$	—	$	—	$	162,848
Securities sold, but not yet purchased		2,026		2,026		—		—

Total	$	164,874	$	2,026	$	—	$	162,848


	December 31, 2017
	Total		Level 1		Level 2		Level 3
Assets:
Recurring fair value measurements:
Cash and cash equivalents	$	54,193	$	54,193	$	—	$	—
Securities owned, at fair value		66,294		1,691		64,603		—

Total	$	120,487	$	55,884	$	64,603	$	—

Non-recurring fair value measurements:
AdvisorEngine Inc. – Option⁽¹⁾	$	3,278		—		—	$	3,278
Thesys Group, Inc. – Series Y preferred stock⁽²⁾		6,909		—		—		6,909

Total	$	10,187	$	—	$	—	$	10,187

Liabilities:
Recurring fair value measurements:
Securities sold, but not yet purchased	$	950	$	950	$	—	$	—

Total	$	950	$	950	$	—	$	—


	June 30, 2018		December 31, 2017
Securities Owned
Trading securities	$	3,719	$	1,691
Available-for-sale debt securities		—		64,603

Total	$	3,719	$	66,294

Securities Sold, but not yet Purchased
Trading securities	$	2,026	$	950
Available-for-sale debt securities		—		—

Total	$	2,026	$	950


	June 30, 2018		December 31, 2017
Cost	$	—	$	65,237
Gross unrealized gains in other comprehensive income		—		—
Gross unrealized losses in other comprehensive income		—		(634	)

Fair value	$	—	$	64,603


	June 30, 2018
	Term Loan			Revolver
Amount borrowed	$	200,000		$	—
Unamortized issuance costs		(6,593	)		1,460

Carrying amount	$	193,407		$	1,460

Effective interest rate⁽¹⁾		4.92	%		n/a


Remainder of 2018	$	2,432
2019		4,332
2020		3,915
2021		3,088
2022 and thereafter		21,300

Total	$	35,067


	June 30, 2018		December 31, 2017
Carrying Amount—Assets
Preferred stock	$	25,000	$	25,000
Note receivable—unsecured		24,588		18,748
Option		3,278		3,278

Total carrying amount—Assets	$	52,866	$	47,026

Maximum exposure to loss	$	55,866	$	55,026


	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Revenues from contracts with customers:
Advisory fees	$	73,778	$	132,234
Other		997		1,445

Total operating revenues	$	74,775	$	133,679


	June 30, 2018
	Unrecognized Stock- Based Compensation		Average Remaining Vesting Period (Years)
Employees and directors restricted stock awards	$	19,646		1.85


	Stock Options			Restricted Stock Awards			Restricted Stock Units
Balance at April 1, 2018		985,537			2,319,057			12,096
Granted		—			173,203			—
Exercised/vested		(10,000	)		(145,383	)		—
Forfeitures		—			(14,931	)		—

Balance at June 30, 2018		975,537			2,331,946			12,096


	June 30, 2019			December 31, 2018
Deferred tax assets:
NOLs – International	$	8,992		$	6,605
Accrued expenses		1,837			2,699
Goodwill and intangible assets		1,746			1,841
Stock-based compensation		1,189			2,673
Net lease liability		1,160			1,184
Capital losses		794			794
NOLs – U.S.		635			762
Other		272			40

Deferred tax assets		16,625			16,598

Deferred tax liabilities:
Fixed assets and prepaid assets		1,480			1,433
Unrealized gains		760			724

Deferred tax liabilities		2,240			2,157

Total deferred tax assets less deferred tax liabilities		14,385			14,441
Less: valuation allowance		(9,786	)		(7,399	)

Deferred tax assets, net	$	4,599		$	7,042


	Reporting Unit
	European Business⁽¹⁾		U.S. Business		Total
Balance at January 1, 2018	$	—	$	1,799	$	1,799
Increases/(decreases)		84,057		—		84,057

Balance at June 30, 2018	$	84,057	$	1,799	$	85,856


	Advisory Agreements (ETFS)		Advisory Agreements (Questrade AUM)			Advisory Agreement (GCC)		Total
Balance at January 1, 2018	$	—	$	2,132		$	9,953	$	12,085
Foreign currency translation		—		(105	)		—		(105	)
Other increases/(decreases)		601,247		—			—		601,247

Balance at June 30, 2018	$	601,247	$	2,027		$	9,953	$	613,227


	Advisory Agreements (ETFS)		Advisory Agreements (Questrade AUM)		Total
Balance at January 1, 2019	$	601,247	$	1,962	$	603,209
Foreign currency translation		—		82		82

Balance at June 30, 2019	$	601,247	$	2,044	$	603,291


	June 30, 2018			December 31, 2017
Balance Sheet Data (in thousands):
Cash and cash equivalents	$	70,744		$	54,193
Securities owned, at fair value		3,719			66,294
Securitiesheld-to-maturity		20,229			21,299
Accounts receivable		27,329			21,309

Total: Liquid assets		122,021			163,095
Less: Total current liabilities		(66,721	)		(57,348	)

Subtotal		55,300			105,747
Plus: Revolving credit facility—undrawn		50,000			—

Total: Available liquidity	$	105,300		$	105,747


	June 30, 2019			December 31, 2018
Balance Sheet Data (in thousands) :
Cash and cash equivalents	$	79,611		$	77,784
Accounts receivable		24,442			25,834
Securities held-to-maturity		20,136			20,180
Securities owned, at fair value		9,095			8,873

Total: Liquid assets		133,284			132,671
Less: Total current liabilities		(63,142	)		(62,801	)
Less: Net liquid asset requirement – certain subsidiaries (International Business segment)		(12,255	)		(11,005	)

Subtotal		57,887			58,865
Plus: Revolving credit facility – available capacity		25,140			50,000

Total: Available liquidity	$	83,027		$	108,865


	Total		Payments Due by Period
			(in thousands)
			Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Term Loan	$	200,000	$	—	$	200,000	$	—	$	—
Operating leases		35,067		2,432		8,247		8,644		15,744
Commitment to provide working capital – AdvisorEngine		3,000		3,000		—		—		—

Total	$	238,067	$	5,432	$	208,247	$	8,644	$	15,744