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 March 31, ~~2019~~

2020

☐	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 offices)		(Zip Code)

212-801-2080

(Registrant’s telephone number, including area code)

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 every Interactive Data File required to be submitted 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 such files). ☒ Yes

☒

☐ 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~~	☐
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

☐

☒

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

As of April ~~26, 2019,~~2

, 2020, there were ~~155,053,303~~156,424,840 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

Table of Contents

WISDOMTREE INVESTMENTS, INC.

Form

10-Q

For the Quarterly Period Ended March 31, ~~2019~~

2020

TABLE OF CONTENTS


	Page Number
PART I: FINANCIAL INFORMATION		4
	~~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		33 31

Item 3. Quantitative and Qualitative Disclosures about Market Risk		49 46

Item 4. Controls and Procedures		50 47

PART II: OTHER INFORMATION		50 47

Item 1. Legal Proceedings		50 47

Item 1A. Risk Factors		50 47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		50 48

Item 3. Defaults Upon Senior Securities		51 49

Item 4. Mine Safety Disclosures		51 49

Item 5. Other Information		51 49

~~Item 6. Exhibits~~		52
Item 6. Exhibits		50

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 Form

10-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 this Report and in our Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2018.~~2019. 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:

the

COVID-19

pandemic;

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 in

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)

   March 31,
2019 December 31,
2018
Assets    (unaudited)
Current assets:

Cash and cash equivalents
   $ 78,942 $ 77,784
Securities owned, at fair value
   6,419 8,873
Accounts receivable
   28,136 25,834
Income taxes receivable
   1,770 1,181
Prepaid expenses
   4,037 4,441
Other current assets
   164 163


Total current assets
   119,468 118,276
Fixed assets, net
   8,863 9,122
Note receivable, net (Note 8)
   29,317 28,722
Indemnification receivable (Note 21)
   31,593 34,876
Securitiesheld-to-maturity
   20,159 20,180
Deferred tax assets, net
   3,998 7,042
Investments, carried at cost (Note 9)
   28,080 28,080
Right of use assets – operating leases (Note 14)
   19,446 —
Goodwill (Note 23)
   85,856 85,856
Intangible assets (Note 23)
   603,251 603,209
Other noncurrent assets
   1,486 2,155


Total assets
   $ 951,517 $ 937,518


Liabilities and stockholders’ equity

Liabilities

Current liabilities:

Fund management and administration payable
   $ 26,921 $ 22,508
Compensation and benefits payable
   9,214 18,453
Deferred consideration – gold payments (Note 11)
   11,857 11,765
Securities sold, but not yet purchased, at fair value
   1,338 1,698
Operating lease liabilities (Note 14)
   3,651 —
Accounts payable and other liabilities
   9,772 8,377


Total current liabilities
   62,753 62,801
Long-term debt (Note 12)
   195,174 194,592
Deferred consideration – gold payments (Note 11)
   145,290 149,775
Operating lease liabilities (Note 14)
   20,704 —
Deferred rent payable
   —   4,570
Other noncurrent liabilities (Note 21)
   31,593 34,876


Total liabilities
   455,514 446,614


Preferred stock – Series ANon-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: 155,056 and 153,202 at March 31, 2019 and December 31, 2018, respectively
   1,551 1,532
Additionalpaid-in capital
   364,717 363,655
Accumulated other comprehensive income
   758 467
Accumulated deficit
   (3,592 ) (7,319 )


Total stockholders’ equity
   363,434 358,335


Total liabilities and stockholders’ equity
   $ 951,517 $ 937,518

March 31,
2020

December 31,
2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents
$
68,429
$
74,972

Securities owned, at fair value (including $19,636 and $16,886 invested in WisdomTree ETFs at March 31, 2020 and December 31, 2019, respectively)

20,261

17,319

Accounts receivable (including $20,169 and $25,667 due from related parties at March 31, 2020
and
December 31,
2019, respectively)

22,728

26,838

Prepaid expenses

4,221

3,724

Other current assets

171

207

Total current assets

115,810

123,060

Fixed assets, net

7,914

8,127

Notes receivable, net (Note 8)

8,500

28,172

Indemnification receivable (Note 21)

24,429

32,101

Securities
held-to-maturity

10,864

16,863

Deferred tax assets, net

2,863

7,398

Investments (Note 9)

11,192

11,192

Right of use assets – operating leases (Note 14)

17,680

18,161

Goodwill (Note 23)

85,856

85,856

Intangible assets (Note 23)

601,247

603,294

Other noncurrent assets

750

983

Total assets
$
887,105
$
935,207

Liabilities and stockholders’ equity

Liabilities

Current liabilities:

Fund management and administration payable
$
22,053
$
22,021

Compensation and benefits payable

3,424

26,501

Deferred consideration – gold payments (Note 11)

14,500

13,953

Securities sold, but not yet purchased, at fair value

469

582

Operating lease liabilities (Note 14)

3,470

3,682

Income taxes payable

1,284

3,372

Accounts payable and other liabilities

9,129

8,930

Total current liabilities

54,329

79,041

Debt (Note 12)

171,548

175,956

Deferred consideration – gold payments (Note 11)

160,800

159,071

Operating lease liabilities (Note 14)

18,661

19,057

Other noncurrent liabilities (Note 21)

24,429

32,101

Total liabilities

429,767

465,226

Preferred stock – Series A
Non-Voting
Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding
; redemption value of $50,003 and $71,980 at March 31, 2020 and December 31, 2019, respectively (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: 156,424 and 155,264 at March 31, 2020 and December 31, 2019, respectively

1,564

1,553

Additional
paid-in
capital

349,495

352,658

Accumulated other comprehensive income

92

945

Accumulated deficit

(26,382
)
(17,744
)

Total stockholders’ equity

324,769

337,412

Total liabilities and stockholders’ equity
$
887,105
$
935,207

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 March 31,
   2019 2018
Operating Revenues:

Advisory fees
   $ 64,840 $ 58,456
Other income
   645 448


Total revenues
   65,485 58,904
Operating Expenses:

Compensation and benefits
   21,301 18,832
Fund management and administration
   15,166 10,912
Marketing and advertising
   2,680 3,195
Sales and business development
   4,422 3,813
Contractual gold payments (Note 11)
   3,098 —
Professional and consulting fees
   1,482 1,636
Occupancy, communications and equipment
   1,618 1,363
Depreciation and amortization
   269 355
Third-party distribution fees
   2,400 1,725
Acquisition-related costs (Note 3)
   313 2,062
Other
   2,053 1,790


Total expenses
   54,802 45,683


Operating income
   10,683 13,221
Other Income/(Expenses):

Interest expense
   (2,892 ) —
Gain on revaluation of deferred consideration – gold payments (Note 11)
   4,404 —
Interest income
   779 962
Impairment (Note 14)
   (572 ) —
Other losses, net
   (4,627 ) (261 )


Income before taxes
   7,775 13,922
Income tax (benefit)/expense
   (1,049 ) 4,498


Net income
   $ 8,824 $ 9,424


Earnings per share—basic
   $ 0.05 $ 0.07


Earnings per share—diluted
   $ 0.05 $ 0.07


Weighted-average common shares—basic
   151,625 135,329


Weighted-average common shares—diluted
   166,811 136,468


Cash dividends declared per common share
   $ 0.03 $ 0.03

Three Months Ended March 31,

2020

2019

Operating Revenues:

Advisory fees
$
62,950
$
64,840

Other income

924

645

Total revenues

63,874

65,485

Operating Expenses:

Compensation and benefits

17,295

21,301

Fund management and administration

14,485

15,166

Marketing and advertising

2,468

2,680

Sales and business development

3,417

4,422

Contractual gold payments (Note 11)

3,760

3,098

Professional and consulting fees

1,273

1,482

Occupancy, communications and equipment

1,551

1,618

Depreciation and amortization

256

269

Third-party distribution fees

1,355

2,400

Acquisition and disposition-related costs

383

313

Other

1,997

2,053

Total expenses

48,240

54,802

Operating income

15,634

10,683

Other Income/(Expenses):

Interest expense

(2,419
)
(2,892
)
(Loss)/gain on revaluation of deferred consideration – gold payments (Note 11)

(2,208
)
4,404

Interest income

163

779

Impairments (Notes 7 and 24)

(19,672
)
(572
)
Other losses, net

(2,507
)
(4,627
)

(Loss)/income before income taxes

(11,009
)
7,775

Income tax benefit

(2,371
)
(1,049
)

Net (loss)/income
$
(8,638
) $
8,824

(Loss)/earnings per share – basic (Note 20)
$
(0.06
) $
0.05

(Loss)/earnings per share – diluted (Note 20)
$
(0.06
) $
0.05

Weighted-average common shares – basic (Note 20)

152,519

151,625

Weighted-average common shares – diluted (Note 20)

152,519

166,811

Cash dividends declared per common share
$
0.03
$
0.03

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

Table of Contents

WisdomTree Investments, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss)/Income

(In Thousands)

(Unaudited)

   Three Months Ended March 31,
   2019    2018
Net income
   $ 8,824    $ 9,424
Other comprehensive income

Change in unrealized gains onavailable-for-sale debt securities, net of tax
   —      460
Foreign currency translation adjustment
   291    412




Other comprehensive income
   291    872




Comprehensive income
   $ 9,115    $ 10,296

Three Months Ended March 31,

2020

2019

Net (loss)/income
$
(8,638
) $
8,824

Other comprehensive (loss)/income

Reclassification of foreign current translation adjustment to other losses, net, upon the sale of WisdomTree Asset Management Canada, Inc. (“WTAMC” or “Canadian ETF business”) (Note 24)

(167
)
—

Foreign currency translation adjustment

(686
)
291

Other comprehensive (loss)/income

(853
)
291

Comprehensive (loss)/income
$
(9,491
) $
9,115

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

(In Thousands)

(Unaudited)

   For the Three Months Ended March 31, 2019
   Common Stock Additional
Paid-In
Capital Accumulated
Other    Accumulated
Deficit Total
   Shares
Issued Par
Value Comprehensive
Income
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
   2,145 21 (21 ) —      —   —
Shares repurchased
   (311 ) (2 ) (2,003 ) —      —   (2,005 )
Exercise of stock options, net
   20 —   14 —      —   14
Stock-based compensation
   —   —   3,072 —      —   3,072
Other comprehensive income
   —   —   —   291    —   291
Dividends
   —   —   —   —      (5,097 ) (5,097 )
Net income
   —   —   —   —      8,824 8,824




Balance—March 31, 2019
   155,056 $ 1,551 $ 364,717 $ 758    $ (3,592 ) $ 363,434

   For the Three Months Ended March 31, 2018
   Common Stock    Additional
Paid-In
Capital Accumulated
Other    Accumulated
Deficit Total
   Shares
Issued Par
Value Comprehensive
Income
Balance—January 1, 2018
   136,996 $ 1,370    $ 216,006 $ 291    $ (24,716 ) $ 192,951
Restricted stock issued and vesting of restricted stock units, net
   667 7    (7 ) —      —   —
Shares repurchased
   (60 ) —      (734 ) —      —   (734 )
Exercise of stock options, net
   148 1    53 —      —   54
Stock-based compensation
   —   —      3,309 —      —   3,309
Stock issuance costs
   —   —      (139 ) —      —   (139 )
Other comprehensive income
   —   —      —   872    —   872
Dividends
   —   —      —   —      (4,132 ) (4,132 )
Net income
   —   —      —   —      9,424 9,424






Balance—March 31, 2018
   137,751 $ 1,378    $ 218,488 $ 1,163    $ (19,424 ) $ 201,605

For the Three Months Ended March 31, 2020

Common Stock

Additional
Paid-In
Capital

Accumulated
Other

Accumulated
Deficit

Total

Shares
Issued

Par
Value

Comprehensive
Income

Balance

–

January 1, 2020

155,264
$
1,553
$
352,658
$
945
$
(17,744
) $
337,412

Restricted stock issued and vesting of restricted stock units, net

1,438

14

(14
)
—

—

—

Shares repurchased

(385
)
(3
)
(1,492
)
—

—

(1,495
)
Exercise of stock options, net

107

—

240

—

—

240

Stock-based compensation

—

—

3,239

—

—

3,239

Other comprehensive loss

—

—

—

(853
)
—

(853
)
Dividends

—

—

(5,136
)
—

—

(5,136
)
Net
loss

—

—

—

—

(8,638
)
(8,638
)

Balance

–

March 31, 2020

156,424
$
1,564
$
349,495
$
92
$
(26,382
) $
324,769

For the Three Months Ended March 31, 2019

Common Stock

Additional
Paid-In
Capital

Accumulated
Other

Accumulated Deficit

Total

Shares
Issued

Par
Value

Comprehensive
Income

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

2,145

21

(21
)
—

—

—

Shares repurchased

(311
)
(2
)
(2,003
)
—

—

(2,005
)
Exercise of stock options, net

20

—

14

—

—

14

Stock-based compensation

—

—

3,072

—

—

3,072

Other comprehensive income

—

—

—

291

—

291

Dividends

—

—

—

—

(5,097
)
(5,097
)
Net income

—

—

—

—

8,824

8,824

Balance

–

March 31, 2019

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

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

(In Thousands)

(Unaudited)

   Three Months Ended March 31,
   2019 2018
Cash flows from operating activities:

Net income
   $ 8,824 $ 9,424
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:

Advisory fees received in gold and other precious metals
   (11,389 ) —
Gain on revaluation of deferred consideration
   (4,404 ) —
Contractual gold payments
   3,098 —
Stock-based compensation
   3,072 3,309
Deferred income taxes
   3,048 (136 )
Amortization of right of use asset
   798 —
Amortization of credit facility issuance costs
   711 —
Paid-in-kind interest income (Note 8)
   (595 ) (416 )
Impairment
   572 —
Depreciation and amortization
   269 355
Other
   3 661
Changes in operating assets and liabilities:

Securities owned, at fair value
   2,454 1,106
Accounts receivable
   (1,939 ) 606
Income taxes receivable/payable
   (604 ) 4,297
Prepaid expenses
   419 (360 )
Gold and other precious metals
   7,975 —
Other assets
   182 160
Fund management and administration payable
   4,274 (1,744 )
Compensation and benefits payable
   (9,250 ) (22,003 )
Securities sold, but not yet purchased, at fair value
   (360 ) (950 )
Operating lease liabilities
   (881 ) —
Accounts payable and other liabilities
   1,575 855


Net cash provided by/(used in) operating activities
   7,852 (4,836 )


Cash flows from investing activities:

Purchase of fixed assets
   (7 ) (17 )
Proceeds fromheld-to-maturity securities maturing or called prior to maturity
   18 32
Proceeds from sales and maturities of debt securitiesavailable-for-sale
   —   60,498


Net cash provided by investing activities
   11 60,513


Cash flows from financing activities:

Dividends paid
   (5,097 ) (4,132 )
Shares repurchased
   (2,005 ) (734 )
Proceeds from exercise of stock options
   14 54


Net cash used in financing activities
   (7,088 ) (4,812 )


Increase in cash flow due to changes in foreign exchange rate
   383 593


Net increase in cash and cash equivalents
   1,158 51,458
Cash and cash equivalents—beginning of period
   77,784 54,193


Cash and cash equivalents—end of period
   $ 78,942 $ 105,651


Supplemental disclosure of cash flow information:

Cash paid for taxes
   $ 707 $ 339


Cash paid for interest
   $ 2,224 $ —

~~NON-CASH~~ ~~ACTIVITIES~~

~~On January 1, 2019, the Company recognized aright-of-use~~ ~~asset and lease liability of $19,827 and $24,817, respectively, upon the implementation of Accounting Standards Update2016-02~~~~Leases.~~~~See Note 14 for additional information.~~

Three Months Ended March 31,

2020

2019

Cash flows from operating activities:

Net (loss)/income
$
(8,638
) $
8,824

Adjustments to reconcile net
(loss)/
income to net cash (used in)/provided by operating activities:

Impairments

19,672

572

Advisory fees received in gold and other precious metals

(13,860
)
(11,389
)
Deferred income taxes

4,526

3,048

Contractual gold payments

3,760

3,098

Stock-based compensation

3,239

3,072

Gain on sale – Canadian ETF business

(2,877
)
—

(Loss)/gain on revaluation of deferred consideration

2,208

(4,404
)
Amortization of right of use asset

798

798

Amortization of credit facility issuance costs

723

711

Paid-in-kind
interest income

—

(595
)
Depreciation and amortization

256

269

Other

(31
)
3

Changes in operating assets and liabilities:

Securities owned, at fair value

(2,942
)
2,454

Accounts receivable

5,850

(1,939
)
Income taxes payable

(2,032
)
(604
)
Prepaid expenses

(616
)
419

Gold and other precious metals

9,838

7,975

Other assets

139

182

Fund management and administration payable

537

4,274

Compensation and benefits payable

(22,688
)
(9,250
)
Securities sold, but not yet purchased, at fair value

(112
)
(360
)
Operating lease liabilities

(926
)
(881
)
Accounts payable and other liabilities

542

1,575

Net cash (used in)/provided by operating activities

(2,634
)
7,852

Cash flows from investing activities:

Purchase of fixed assets

(50
)
(7
)
Proceeds from
held-to-maturity
securities maturing or called prior to maturity

6,030

18

Proceeds from sale of Canadian ETF business, net

2,774

—

Net cash provided by investing activities

8,754

11

Cash flows from financing activities:

Dividends paid

(5,136
)
(5,097
)
Repayment of debt

(5,000
)
—

Shares repurchased

(1,495
)
(2,005
)
Proceeds from exercise of stock options

240

14

Net cash used in financing activities

(11,391
)
(7,088
)

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

(1,272
)
383

Net (decrease)/increase in cash and cash equivalents

(6,543
)
1,158

Cash and cash equivalents

–

beginning of period

74,972

77,784

Cash and cash equivalents

–

end of period
$
68,429
$
78,942

Supplemental disclosure of cash flow information:

Cash paid for taxes
$
1,147
$
707

Cash paid for interest
$
2,312
$
2,224

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, 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~~

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, anon-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, anon-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~~

certain of its own indexes on an exclusive basis for the WisdomTree ETFs in the U.S.

WisdomTree Management Jersey Limited

(“ManJer”) is a Jersey based management company providing management services to eight issuers (the “ManJer Issuers”) in respect of the ETPs issued and listed by the ManJer Issuers covering commodity, currency, cryptocurrency and

leveraged-and-inverse

strategies.

WisdomTree Multi Asset Management Limited

(“WTMAML”) is a Jersey based management company providing management services to WisdomTree Multi Asset Issuer PLC (“WMAI”) in respect of the ETPs issued by WMAI. WMAI, 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, WTMAML and WML.

WisdomTree Europe Limited

is a U.K. based company which is the legacy distributor of the WMAI 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, WTMAML and WML.

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.

Sale of Canadian ETF Business

On ~~April 11, 2018,~~February 19, 2020, the Company ~~acquired~~completed the ~~European exchange-traded commodity, currency andleveraged-and-inverse~~ ~~business (“ETFS”)~~sale of ~~ETFS Capital Limited (“ETFS Capital”, formerly known as ETF Securities Limited). This acquisition is referred~~WTAMC to ~~throughout the consolidated financial statements as the ETFS Acquisition. See~~CI Financial Corp. (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. During the three months ended March 31, 2019 and 2018, WTJ reported an operating loss of $430 and $1,232, respectively. WTJ also recognized an impairment expense of $572 in connection with the termination of its office lease on March 31, 2019.

24).

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 subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

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

Certain accounts in the consolidated financial statements for the three months ended March 31, 2018 have been reclassified to conform to the current year’s consolidated financial statement presentation. The following table summarizes these reclassifications which had no effect on previously reported net income.

Operating Revenues:    Three Months
Ended
March 31, 2018
Advisory fees (previously reported)
   $ 58,756
Other ETP fees reclassified to Other income
   (300 )


Advisory fees (currently reported)
   $ 58,456


Other income (previously reported)
   $ 849
Other ETP fees reclassified from Advisory fees
   300
Interest income reclassified to Other Income/(Expenses)
   (962 )
Realized and unrealized losses reclassified to Other losses, net
   261


Other income (currently reported)
   $ 448


Total revenues (currently reported)
   $ 58,904



Other Income/(Expenses):

Interest income reclassified from operating revenues
   $ 962


Other losses, net (previously reported)
   $ —
Realized and unrealized losses reclassified from operating revenues
   (261 )


Other losses, net (currently reported)
   $ (261 )

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.

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

Segment and Geographic Information

~~The~~

Effective January 1, 2020, the Company, ~~operates~~through its subsidiaries in the U.S. and Europe, conducts business as a single operating segment as an ETP sponsor and asset manager ~~providing investment advisory services globally. These activities are~~which is based upon the Company’s current organizational and management structure, as well as information used by the chief operating decision maker to allocate resources and other factors. Previously, the Company’s financial results were reported in ~~the Company’s~~its 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 (Loss)/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~~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~~(Note 11).

Marketing and Advertising

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

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 5��years
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.

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.

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Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are customer and other obligations due under normal trade terms. ~~An allowance~~The Company measures credit losses by applying historical loss rates, adjusted for ~~doubtful accounts is not provided since, in~~current conditions and supportable forecasts to amounts outstanding using the ~~opinion of management, all accounts receivable recorded are deemed current and collectible.~~

aging method.

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, including accrued interest and net of original issue ~~discount.~~discount and impairments, if any. Interest income is accrued over the term of the ~~note~~notes using the effective interest method. ~~The~~Notes receivable are placed on

non-accrual

status when the Company is in receipt of information indicating collection of interest is doubtful. Cash received on notes receivable placed on

non-accrual

status is recognized on a cash basis as interest income if and when received.

Effective January 1, 2020, the Company performs a review for the impairment of the ~~note~~notes receivable and accrued interest on a quarterly basis using the current expected credit loss model and provides for an allowance for credit losses ~~if all or a portion of~~by applying an estimated loss rate to amounts outstanding at the ~~note is determined to be uncollectible.~~

balance sheet date. Previously, credit losses were measured using an incurred loss approach.

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.~~

available-for-sale

(“AFS”). 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 debt securities classified as trading and AFS are reported in other income and other comprehensive income, respectively, in the period the change occurs. ~~Unrealized gains and losses of~~Debt 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~~ AFS are assessed for impairment on a quarterly basis and an estimate for credit loss is provided when the fair value of the AFS debt security is below its amortized cost basis.

Credit-related impairments are recognized as an allowance with a corresponding adjustment to earnings, while impairments resulting from noncredit-related factors are recognized in other comprehensive income. Amounts recorded in other comprehensive income are reclassified into earnings upon sale of the AFS debt security using the specific identification method.

Securities

Held-to-Maturity

The Company accounts for certain of its ~~investments~~securities as

held-to-maturity

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

held-to-maturity ~~investments,~~

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

than-not

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

Held-to-maturity

securities are placed on

non-accrual

status when the Company is in receipt of information indicating collection of interest is doubtful. Cash received on

held-to-maturity

securities placed on

non-accrual

status is recognized on a ~~quarterly~~cash basis as interest income if and when received.

Effective January 1, 2020, the Company reviews its portfolio of ~~investments~~

held-to-maturity

securities for ~~impairment. If~~impairment on a quarterly basis by applying an estimated loss rate after consideration for the nature of collateral securing the financial asset as well as potential future changes in collateral values and historical loss information for financial assets secured with similar collateral. Previously, these securities were evaluated for impairment on a quarterly basis and if a decline in fair value iswas deemed to be other-than-temporary, the ~~security is~~securities was written down to its fair value through earnings.

Investments ~~Carried at Cost~~

in pass-through government-sponsored enterprises (“GSEs”) are determined to have an estimated loss rate of zero due to an implicit U.S. government guarantee.

Investments

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

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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 ASU2017-04,~~~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for~~occur. 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~~

Goodwill is allocated to the Company’s U.S. Business and European Business components. Effective January 1, 2020, for impairment testing purposes, these components are aggregated as a single reporting unit ~~which~~as they fall under the same operating segment and have similar economic characteristics. Previously, these components were tested separately for impairment when Company was operating as more than one operating segment.

Goodwill is assessed ~~annually~~ for impairment ~~on April 30~~^th. 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 itsthe reporting units.
units, in the aggregate.}

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^th
.

Leases

Effective January 1, 2019, the Company accounts for its lease obligations in accordance with Accounting Standards Codification (“ASC”) Topic 842,Leases (“
(ASC ~~842”)~~842), which requires the 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 14).~~

asset. 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;~~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.

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~~(Note 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~~

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Debt

~~Long-term debt~~

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 Series A

non-voting

convertible preferred stock ~~issued in connection with the ETFS Acquisition (see Note 13)~~(Note 20) 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~~lowest diluted 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 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 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.

Going Concern

The Company performs a quarterly assessment of its ability to continue as a going concern within one year of the date the financial statements are issued. This assessment include
s
evaluating the impact of outstanding debt of $174,000 which is scheduled to mature on April 11, 2021. The Company is actively exploring refinancing and extension alternatives to mitigate the risk that it will be unable to satisfy its outstanding debt at maturity.

Recently Issued Accounting Pronouncements

In ~~June 2016,~~December 2019, the FASB issued ASU

2019-12,

Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes

(ASU

2019-12).

;

(2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment

;

(3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary

;

and (4) exception to the general methodology for calculating income taxes in an interim period when a

year-to-date

loss exceeds the anticipated loss for the year. The standard also simplifies the accounting for income taxes by enacting the following: (a) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount as a

non-income-based

tax

;

(b) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered as a separate transaction

;

(c) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements

;

and (d) requiring that an entity reflect the enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. ASU

2019-12

is effective for years beginning after December 15, 2020, including the interim periods within those reporting periods. Early adoption is permitted. The Company has determined that this standard will not have a material impact on its financial statements.

Recently Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted 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

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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~~prior guidance ~~delays~~delayed recognition of credit losses. The standard ~~will replace today’s~~replaced the prior guidance’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, ~~will apply~~applies 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~~ AFS debt securities. For~~available-for-sale~~ AFS debt securities with unrealized losses, entities ~~will~~ measure credit losses in a manner similar to ~~what they do today,~~prior guidance, except that the credit losses ~~will be~~are recognized as allowances rather than reductions in the amortized cost of the securities. Accordingly, the new methodology ~~will be~~is 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.~~time. The ASU also ~~simplifies~~simplified the accounting model for purchased credit-impaired debt securities and loans.

ASU

2016-13

also ~~expands~~expanded the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. ~~ASU2016-13~~ ~~is effective for years beginning after December 15, 2019, including interim periods within those fiscal years under a modified retrospective approach. Early~~The adoption ~~is permitted for the periods beginning after December 15, 2018. The Company is currently evaluating the impact that~~of this standard, ~~will~~which is applicable to the Company’s trade receivables

, notes receivable

and

held-to-maturity

securities did not have a material impact on ~~its~~the Company’s consolidated financial ~~statements and plans to adopt this standard on~~statements.

On January

1 ~~2020.~~

~~In August 2018,~~

2020

, the ~~FASB issued~~Company adopted ASU

2018-13,

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

(ASU

2018-13),

which ~~modifies~~modified the disclosure requirements on fair value measurements, including removing the requirement to disclose

(1)

the amount of and reasons for transfers between Level

and Level

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

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. ~~ASU2018-13~~ ~~is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019 and early adoption is permitted.~~ This standard ~~will~~ only ~~impact~~impacted the disclosures pertaining to fair value ~~measurements. The Company plans~~measurements and were incorporated into the notes to ~~adopt this standard on January 1, 2020.~~

~~3. Business Combination~~

~~Summary~~

~~On April 11, 2018, the Company acquired from ETFS Capital its European exchange-traded commodity, currency andshort-and-leveraged~~ ~~business for a purchase price consisting of $253,000 in cash, and 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 ANon-Voting~~ ~~Convertible Preferred Stock (the “Preferred Shares”), which are convertible into an aggregate of 14,750,000 shares of common stock. ETFS Capital is subject tolock-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 acquisition, the Company entered into a credit agreement, pursuant to which the lenders extended a $200,000 term loan (the “Term Loan”) and made available a $50,000 revolving credit facility (the “Revolver” and, together with the Term Loan, the “Credit Facility”) (See Note 12).

~~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. An allocation of the consideration transferred is presented below and includes the Company’s valuation of the fair value of tangible and intangible assets acquired and liabilities assumed.

~~The following table summarizes the 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
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 trading day prior to the closing date of the acquisition.~~

~~(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 is subject to a zero percent tax rate.

~~(3)~~

Goodwill arising from the ETFS Acquisition represents the value of 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.

~~Acquisition-Related Costs~~

~~During the three months ended March 31, 2019 and 2018, the Company incurred acquisition-related costs of $313 and $2,062, respectively.~~

~~Supplemental Unaudited Pro Forma Financial Information~~

~~The following table presents unaudited pro forma~~consolidated financial information of the Company as if the ETFS Acquisition had been consummated on January 1, 2017. 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
March 31, 2018
Revenues
$ 79,771
Net income
$ 11,243 (including a loss on revaluation of deferred consideration of $2,555)

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 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.statements.

3. Cash and Cash Equivalents

~~Cash~~

Of the total cash and cash equivalents of ~~approximately $34,029~~$68,429 and ~~$34,398~~$74,972 at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, $62,655 and $72,120 were held at ~~one~~two financial ~~institution.~~institutions. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, cash equivalents were approximately ~~$566~~$3,885 and ~~$24,~~$317, respectively.

~~In addition, certain~~

Certain of ~~our~~the Company’s international subsidiaries ~~of our International Business segment~~ are required to maintain a minimum level of ~~net liquid assets,~~regulatory capital, which was ~~$12,164~~$10,398 and ~~$11,005~~$12,312 at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. These requirements are generally satisfied by cash on hand.

In addition, the Company collateralized its U.S. office lease through a standby letter of credit totaling $1,384 which is restricted from further use.

4. Fair Value Measurements

The fair value of 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. 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~~	–
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

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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 months ended March 31, ~~2019~~2020 and ~~2018,~~2019, there were no transfers between Levels 1, 2 and 3.

   March 31, 2019
   Total    Level 1    Level 2    Level 3
Assets:

Recurring fair value measurements:

Cash equivalents
   $ 566    $ 566    $ —      $ —
Securities owned, at fair value
   6,419    6,419    —      —








Total
   $ 6,985    $ 6,985    $ —      $ —









Liabilities:

Recurring fair value measurements:

Deferred consideration (Note 11)
   $ 157,147    $ —      $ —      $ 157,147
Securities sold, but not yet purchased
   1,338    1,338    —      —








Total
   $ 158,485    $ 1,338    $ —      $ 157,147

   December 31, 2018
   Total    Level 1    Level 2    Level 3
Assets:

Recurring fair value measurements:

Cash equivalents
   $ 24    $ 24    $ —      $ —
Securities owned, at fair value
   8,873    8,873    —      —








Total
   $ 8,897    $ 8,897    $ —      $ —









Non-recurring fair value measurements:

Thesys – 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


	March 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Recurring fair value measurements:
Cash equivalents	$	3,885	$	3,885	$	—	$	—
Securities owned, at fair value		20,261		20,261		—		—

Total	$	24,146	$	24,146	$	—	$	—


Non-recurring fair value measurements:
AdvisorEngine , Inc. – Financial interests (1)	$	8,500	$	—	$	—	$	8,500

Total	$	8,500	$	—	$	—	$	8,500
Liabilities:
Recurring fair value measurements:
Deferred consideration (Note 11)	$	175,300	$	—	$	—	$	175,300
Securities sold, but not yet purchased		469		469		—		—

Total	$	175,769	$	469	$	—	$	175,300

(1)	Fair value determined on March 31, 2020 (Note 7).


	December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets:
Recurring fair value measurements:
Cash equivalents	$	317	$	317	$	—	$	—
Securities owned, at fair value		17,319		17,319		—		—

Total	$	17,636	$	17,636	$	—	$	—


Non-recurring fair value measurements:
AdvisorEngine , Inc. – Financial interests (2)	$	28,172	$	—	$	—	$	28,172

Total	$	28,172	$	—	$	—	$	28,172

Liabilities:
Recurring fair value measurements:
Deferred consideration (Note 11)	$	173,024	$	—	$	—	$	173,024
Securities sold, but not yet purchased		582		582		—		—

Total	$	173,606	$	582	$	—	$	173,024

(2)	Fair value determined on December 31, ~~2018 (See Note 9).~~ 2019.

Recurring Fair Value ~~Measurements—~~Measurements – Methodology

Cash Equivalents (Note 4)3)

– These financial assets represent 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 6)5)

– Securities owned and sold, but not yet purchased are investments in ETFs. ETFs are generally traded in active, quoted and highly liquid markets and are therefore classified as Level 1 in the fair value hierarchy.

Deferred Consideration

– Deferred consideration represents the present value of an obligation to pay gold into perpetuity and was measured at March 31, ~~2019~~2020 using forward-looking gold prices ranging from ~~$1,303~~$1,597 per ounce to ~~$2,394~~$2,275 per ounce ~~($1,294~~(weighted average of $1,775 per ~~ounce to $2,621 per ounce at December 31, 2018)~~ounce) 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%. Forward-looking gold prices ranged from $1,535 per ounce to $2,328 per ounce (weighted

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average of $1,757 per ounce) at December 31, 2019. The weighted-average price per ounce was derived from the relative present values of the annual payment obligations. This obligation is classified as Level 3 as the discount rate, perpetual growth rate and extrapolated forward-looking gold prices are significant unobservable inputs. An increase in forward-looking gold prices

and the perpetual growth rate

would result in an increase in deferred consideration, whereas an increase in the discount rate would reduce the fair value. See Note 11 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
March 31,
   2019    2018
Deferred consideration (See Note 11)

Beginning balance
   $ 161,540    $ —
Net realized losses/(gains)⁽¹⁾
   3,098    —
Net unrealized losses/(gains)⁽²⁾
   (4,404 )    —
Settlements
   (3,087 )    —




Ending balance
   $ 157,147    $ —


	Three Months Ended March 31,
	2020			2019
Deferred consideration (Note 11)
Beginning balance	$	173,024		$	161,540
Net realized losses (1)		3,760			3,098
Net unrealized losses/(gains) (2)		2,208			(4,404	)
Settlements		(3,692	)		(3,087	)

Ending balance	$	175,300		$	157,147

(1)	Recorded as contractual gold payments expense on the Company’s Consolidated Statements of Operations.

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

5. Securities Owned/Sold, but Not Yet Purchased

These securities consist of the following:


	March 31, 2020		December 31, 2019
Securities Owned
Trading securities	$	20,261	$	17,319

Securities Sold, but not yet Purchased
Trading securities	$	469	$	582

The Company had no AFS debt securities at March 31, 2020 and December 31, 2019.

6. Securities

Held-to-Maturity

The following table is a summary of the Company’s securities ~~owned and securities sold but not yet purchased:~~

   March 31,
2019    December 31,
2018
Securities Owned

Trading securities
   $ 6,419    $ 8,873




Securities Sold, but not yet Purchased

Trading securities
   $ 1,338    $ 1,698

~~The Company had noavailable-for-sale~~ ~~debt securities at March 31, 2019 and December 31, 2018.~~

held-to-maturity:


	March 31, 2020		December 31, 2019
Debt instruments: Pass-through GSEs (amortized cost)	$	10,864	$	16,863

During the three months ended March 31, ~~2018,~~2020, the Company received ~~$60,498~~proceeds of ~~proceeds~~$6,030 from ~~the sale and maturity ofavailable-for-sale~~ ~~debt~~

held-to-maturity

securities ~~and recognized gross realized losses of $716. Those losses were reclassified out of accumulated other comprehensive income and into the Consolidated Statements of Operations.~~

~~7. SecuritiesHeld-to-Maturity~~

~~The following table is a summary of the Company’s securitiesheld-to-maturity:~~

   March 31,
2019    December 31,
2018
Federal agency debt instruments (amortized cost)
   $ 20,159    $ 20,180




maturing or being called prior to maturity.

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

held-to-maturity:

   March 31,
2019    December 31,
2018
Cost/amortized cost
   $ 20,159    $ 20,180
Gross unrealized gains
   6    5
Gross unrealized losses
   (1,083 )    (1,679 )




Fair value
   $ 19,082    $ 18,506

~~The Company assesses these~~


	March 31, 2020			December 31, 2019
Cost/amortized cost	$	10,864		$	16,863
Gross unrealized gains		102			38
Gross unrealized losses		(17	)		(297	)

Fair value	$	10,949		$	16,604

An allowance for credit losses was not provided on the Company’s

held-to-maturity

securities ~~for other-than-temporary impairment on a quarterly basis. No~~as all securities are investments in pass-through GSEs which are determined to have an estimated loss rate of zero due to an implicit U.S. government guarantee. In addition, no securities were determined to be other-than-temporarily impaired at ~~March 31, 2019 or~~ December 31, ~~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~~2019.

Table of ~~their amortized cost bases, which may be maturity.~~

Contents

The following table sets forth the maturity profile of the securities

held-to-maturity;

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

   March 31,
2019    December 31,
2018
Due within one year
   $ —      $ —
Due one year through five years
   —      —
Due five years through ten years
   7,519    7,521
Due over ten years
   12,640    12,659




Total
   $ 20,159    $ 20,180

~~8. Note Receivable~~


	March 31, 2020		December 31, 2019
Due within one year	$	—	$	—
Due one year through five years		2,000		2,000
Due five years through ten years		3,494		7,494
Due over ten years		5,370		7,369

Total	$	10,864	$	16,863

7. AdvisorEngine

Inc. – Financial Interests

The ~~Company has an outstanding unsecured promissory note from~~following table sets forth the Company’s financial interests in AdvisorEngine

Inc. (“AdvisorEngine”)~~. All principal amounts under~~:


	March 31, 2020					December 31, 2019
	Amortized Cost, plus Accrued Interest		Net Carrying Value			Amortized Cost, plus Accrued Interest		Net Carrying Value
Unsecured convertible note (Note 8)	$	2,126	$	—		$	2,126	$	2,126
Unsecured non-convertible note (Note 8)		31,184		8,500			31,184		26,046
Preferred stock (Note 9)		25,000		—			25,000		—

Total (1)	$	58,310	$	8,500	(1)	$	58,310	$	28,172	(1)

(1)	Net of an impairment of $49,810 and $30,138 in the aggregate at March 31, 2020 and December 31, 2019, respectively.

On May 4, 2020, the ~~note bear interest~~Company closed a transaction to exit from its investment in AdvisorEngine. The fair value of consideration payable to the ~~date such amounts are advanced until repaid at a rate of 5% per annum, provided that immediately~~Company was estimated to

be $8,500.

Consideration payable to the Company also includes contingent payments totaling

$11,500

which will be payable only upon ~~the occurrence and~~AdvisorEngine achieving certain revenue milestones during the ~~continuance~~first through fourth anniversaries of ~~an event of default (as defined), interest will be increased to 10% per annum. All accrued and unpaid interest is treated aspaid-in-kind~~ ~~(“PIK”) by capitalizing~~ such ~~amount and adding it to the principal amount~~exit. The fair value of the ~~original note. AdvisorEngine has~~contingent payments was determined to be insignificant and were measured using a Monte-Carlo simulation whereby forecasted revenues assumed during the ~~option~~first, second, third and fourth years were simulated forward in a risk-neutral framework to ~~prepay~~determine whether the ~~note,~~revenues would exceed the pre-defined revenue targets.

The table below presents the range and weighted averages of significant unobservable inputs utilized in ~~whole or~~the Monte-Carlo simulation (classified as Level 3 in ~~part, at any time without premium or penalty. All borrowings under~~ the ~~promissory note mature on December 29, 2021.~~

fair value hierarchy):


Unobservable Inputs		March 31, 2020
Forecasted revenue simulated forward as a percentage of the pre-defined revenue targets		34% – 71% (47% weighted average)
Revenue volatility		25%

The ~~following is~~weighted-average forecasted revenue simulated forward as a ~~summary~~percentage of the

pre-defined

revenue targets represents the arithmetic average of the ~~outstanding note receivable balance:~~

   March 31,
2019    December 31,
2018
Note receivable (face value)
   $ 30,000    $ 30,000
Less: Original issue discount (“OID”), unamortized
   (2,378 )    (2,582 )
Plus: PIK interest
   1,695    1,304




Total note receivable, net
   $ 29,317    $ 28,722

percentages for each of the four years. An increase in the forecasted revenue percentages and revenue volatility input would result in a higher fair value.

During the three months ended March 31, ~~2019 and~~2020, the Company recognized an impairment of $19,672 to adjust the carrying value of its financial interests in AdvisorEngine to fair value. Fair value was allocated to the unsecured

non-convertible

note at March 31, ~~2018,~~2020.

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8. Notes Receivable

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


	March 31, 2020			December 31, 2019
AdvisorEngine – Unsecured convertible notes	$	—		$	2,126
AdvisorEngine – Unsecured non-convertible note		8,500			26,046

Subtotal	$	8,500		$	28,172
Less: Allowance for credit loss (1)		(—	)		(—	)

Carrying value, net (1)	$	8,500		$	28,172

(1)

Credit losses of $19,672 were recognized as impairment on the Company’s Statements of Operations during the three months ended March 31, 2020 which resulted in a

write-off

of the carrying value of the notes receivable rather than an increase in the allowance for credit loss. This was comprised of write-offs of the carrying values of the unsecured convertible notes and unsecured

non-convertible

note of $2,126 and $17,546, respectively

, during the three months ended March 31, 2020

. See Note 7 for additional information.

Allowance for Credit Loss

The following table sets for a rollforward of the Company’s allowance for credit loss on notes receivable:


	Total			Notes Receivable			Accrued Interest
Unsecured Convertible Note:
Balance on January 1, 2020	$	—		$	—		$	—
Increase in allowance for credit loss (1)		(2,126	)		(2,090	)		(36	)
Write-offs charged against the allowance (1)		2,126			2,090			36

Balance on March 31, 2020	$	(—	)	$	(—	)	$	(—	)

Unsecured Non-Convertible Note:
Balance on January 1, 2020	$	—		$	—		$	—
Increase in allowance for credit loss (1)		(17,546	)		(14,618	)		(2,928	)
Write-offs charged against the allowance (1)		17,546			14,618			2,928

Balance on March 31, 2020	$	(—	)	$	(—	)	$	(—	)

Allowance for credit losses – Total:	$	(—	)	$	(—	)	$	(—	)

(1)

Total increase in allowance for credit loss of $19,672 was recorded as impairment on the Company’s Consolidated Statements of Operations. Write-offs were charged against the allowance as the Company

is in receipt of information

that contractual amounts of principal and interest due will not be paid in connection with the exit from its investment in AdvisorEngine. See Note 7 for additional information.

Accrued Interest

Effective January 1, 2020, notes receivable were placed on non-accrual status. During the three months ended March 31, 2020 and 2019, the Company recognized interest income of $0 and $595, ~~and $416, respectively, which~~respectively. Interest income included ~~OID~~original issue discount (“OID”) amortization and accrued PIK interest. The Company determined that an allowance for credit loss was not necessary at March 31, 2019 and December 31, 2018 as there have been no adverse events or circumstances since the note was issued which may indicate that its carrying amount may not be recoverable. The fair value of the note receivable (classified as Level 2 within the fair value hierarchy and determined using high yield credit spreads) was $28,802 and $27,618 at March 31, 2019 and December 31, 2018, respectively.

paid-in-kind

(“PIK”) interest, where applicable.

9. Investments ~~Carried at Cost~~

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

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




Total
   $ 28,080    $ 28,080

investments:

March 31,
2020

December 31,
2019

AdvisorEngine – Preferred stock
$
—
$
—

Securrency, Inc. – Preferred stock

8,112

8,112

Thesys Group, Inc. (“Thesys”) – Preferred stock

3,080

3,080

Total
$
11,192
$
11,192

18

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AdvisorEngine

– Preferred Stock

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

A-1

convertible preferred stock, respectively. The investment is accounted for under the measurement alternative prescribed within ASU

2016-01,

as it is not considered to be

in-substance

common stock.

The carrying value of the AdvisorEngine preferred stock was $0 at March 31, 2020 and December 31, 2019, respectively. See Note 7 for additional information.

Securrency, Inc. – Preferred Stock

On December 27, 2019, the Company made a $8,112 strategic investment in Securrency, Inc. (“Securrency”), a leading developer of institutional-grade blockchain-based financial and regulatory technology. In consideration of its investment, the Company received 5,178,488 shares of Series A ~~and~~convertible preferred stock representing approximately 25% ownership of Securrency (or approximately 20% on a fully diluted basis). The shares of Series~~A-1~~ A preferred ~~shares have substantially the same terms,~~stock 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 of Securrency, and a liquidation preference that is senior to ~~all other~~the 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 andcommon stock. In addition, the Company ~~actively introduces~~has redemption rights which provide that, at any time on or after December 31, 2029, upon approval by holders of at least 60% of the ~~platform~~Series A preferred stock then outstanding, Securrency will be required to ~~its distribution network.~~

redeem all of the outstanding shares of Series A preferred stock for the original issue price thereof, plus all declared and unpaid dividends.

The investment is accounted for under the ~~cost method of accounting~~ measurement alternative prescribed within ASU

2016-01,

as it is not considered to be

in-substance

common ~~stock. The Company quantitatively~~stock and is 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~~similar observable transactions on a ~~higher enterprise value, whereas an increase in the WACC would reduce fair value. The results of the quantitative assessment noted~~quarterly basis. There was no impairment ~~at December 31, 2018. In addition, no impairment existed at~~recognized during the three months ended March 31, ~~2019~~2020 based upon a qualitative assessment. ~~There~~In addition, there were ~~also~~ no observable price changes during the ~~applicable~~ reporting ~~periods.~~

period.

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 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).~~valuation. 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 Series Y Preferred is accounted for under the ~~cost method of accounting~~ measurement alternative prescribed within ASU

2016-01

as it is not considered to be

in-substance

common ~~stock. The Company quantitatively~~stock and is assessed ~~its investment~~ for impairment ~~at December 31, 2018. The table below presents~~and similar observable transactions on a quarterly basis. There was no impairment recognized during 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 was recognized at~~three months ended March 31, 2020 and 2019, respectively, based upon a qualitative ~~assessment. There~~assessments. In addition, there were ~~also~~ no observable price changes during the applicable reporting periods.

The carrying value of the Series Y Preferred was $3,080 at March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. 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.

10. Fixed Assets, net

The following table summarizes fixed assets:

   March 31,
2019    December 31,
2018
Equipment
   $ 2,284    $ 2,244
Furniture and fixtures
   2,218    2,218
Leasehold improvements
   10,982    10,964
Less: accumulated depreciation and amortization
   (6,621 )    (6,304 )




Total
   $ 8,863    $ 9,122


	March 31, 2020			December 31, 2019
Equipment	$	2,290		$	2,330
Furniture and fixtures		2,222			2,218
Leasehold improvements		10,951			10,989
Less: accumulated depreciation and amortization		(7,549	)		(7,410	)

Total	$	7,914		$	8,127

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11. Deferred Consideration

Deferred consideration represents an obligation the Company assumed in connection with its acquisition of the European exchange-traded commodity, currency and

leveraged-and-inverse

business of ETFS ~~Acquisition.~~Capital Limited (“ETFS Capital”) which occurred on April 11, 2018 (“ETFS Acquisition”). The obligation is for fixed payments to ETFS Capital 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 (“Contractual Gold Payments”).

The Contractual Gold Payments are paid from advisory fee income generated by any Company-sponsored financial product backed by physical gold and are subject to adjustment and reduction for declines in advisory fee income generated by 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 no recourse back to the Company for any unpaid amounts that exceed advisory fees earned. ETFS Capital ultimately has the right to claw back 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 ~~$157,147~~$175,300 and ~~$161,540~~$173,024 at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, 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 $14,500 and $13,953 and long-term amounts payable were $160,800 and $159,071, respectively at March 31, 2020 and December 31, 2019, ~~were $11,857 and $145,290,~~ respectively.

During the three months ended March 31, 2020 and 2019, the Company recognized ~~Contractual Gold Payments expense of $3,098, arising from~~ the ~~fixed payments of physical gold bullion of 2,375 ounces and the unwinding of the discount (representing the increase~~following in ~~the carrying amount of the deferred consideration for the passage of time). A gain on the revaluation~~respect of deferred consideration of $4,404 was recognized during the three months ended March 31, 2019 due to flattening of the forward-looking gold curve as compared to the forward-looking gold curve on December 31, 2018, the date on which the deferred consideration was last measured.

~~See Note 5 for a reconciliation of changes in the deferred consideration balances.~~

consideration:

	Three Months Ended March 31,
	2020			2019

Contractual Gold Payments	$	3,760		$	3,098
Contractual Gold Payments – gold ounces paid		2,375			2,375
(Loss)/gain on revaluation of deferred consideration – gold payments (1)	$	(2,208	)	$	4,404

(1)

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 4 for significant unobservable assumption and a reconciliation of changes in the deferred consideration balances.

12. ~~Long-Term Debt~~

Credit Facility

On April 11, 2018, ~~and in connection with the ETFS Acquisition,~~ the Company entered into ~~the Credit Facility~~a credit agreement, pursuant to which the lenders extended a $200,000 ~~Term Loan~~term loan (the “Term Loan”) and made available a $50,000 ~~Revolver.~~revolving credit facility (the “Revolver” and, together with the Term Loan, the “Credit Facility”). Interest on the Term Loan accrues at an annual rate equal to LIBOR, plus up to 2.00% (commencing at LIBOR, plus 1.75%), and interest on the Revolver accrues at an annual rate 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 an annual rate 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 Term Loan does not amortize and the entire principal balance is due in a single payment on the maturity date.

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

   March 31, 2019    December 31, 2018
   Term Loan Revolver    Term Loan Revolver
Amount borrowed
   $ 200,000 $ —      $ 200,000 $ —
Unamortized issuance costs
   (4,826 ) 1,066    (5,408 ) 1,195




Carrying amount
   $ 195,174 $ 1,066    $ 194,592 $ 1,195




Effective interest rate⁽¹⁾
   5.47 % n/a    5.09 % n/a


	March 31, 2020					December 31, 2019
	Term Loan			Revolver (1)		Term Loan			Revolver (1)
Amount borrowed	$	179,000		$	—	$	200,000		$	—
Amounts repaid		(5,000	)		—		(21,000	)		—

Amounts outstanding		174,000			—		179,000			—
Unamortized issuance costs		(2,452	)		540		(3,044	)		671

Carrying amount	$	171,548		$	540	$	175,956		$	671

Effective interest rate (2)		5.00	%		n/a		5.32	%		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~~

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Interest expense recognized on the Credit Facility during the three months ended March 31, 2020 and 2019 ~~the Company recognized~~was $2,419 and $2,892, ~~of interest expense on the Credit Facility.~~respectively. Unamortized issuance costs related to the Revolver of ~~$1,066~~$540 and ~~$1,195~~$671 at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, are included ~~within~~in other noncurrent assets on the Consolidated Balance Sheet. The fair value of the Company’s ~~long-term~~ debt (classified as Level 2 within the fair value hierarchy) was ~~$194,876~~$168,128 and ~~$196,126~~$176,986 at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

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


~~Fiscal Quarter Ending~~	~~Total Leverage Ratio~~
~~March 31, 2019~~		~~2.75:1.00~~
~~June 30, 2019~~ Fiscal Quarter Ending	Total Leverage Ratio
March 31, 2020		~~2.50:~~ 2.25:1.00
~~September~~ June 30, ~~2019~~ 2020		~~2.50:~~ 2.25:1.00
~~December 31, 2019~~		~~2.50:1.00~~
~~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		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) as of such date to Consolidated EBITDA of the Company and its restricted subsidiaries (as defined in the credit agreement) for the four consecutive fiscal quarters ended on such date.

The Company’s obligations under the Term Loan and Revolver are unconditionally guaranteed by the Company and certain of its 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 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 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 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.~~

agreement and is actively exploring refinancing and extension alternatives as the facility matures within approximately the next 12 months.

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.~~Shares (defined below). 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% of the Company’s outstanding common stock immediately after giving effect to such conversion.

In connection with the completion of the ETFS Acquisition, the Company issued 14,750

shares of Series A Non-Voting Convertible Preferred Stock (the “

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 trading day prior to the closing of the acquisition.

The following is a summary of the Preferred Share balance:

   March 31,
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


	March 31, 2020			December 31, 2019
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

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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 was not adjusted as it was not probable that the Preferred Shares would become redeemable.

14. Leases

The Company has entered into 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 aright-of-use~~ ~~asset and lease liability of $19,827 and $24,817, respectively. Theright-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 March 31,
   2019 2018
Lease cost:

Operating lease cost
   $ 798 $ 743
Short-term lease cost
   389 284


Total lease cost
   $ 1,187 $ 1,027


Other information:

Cash paid for amounts included in the measurement of operating liabilities (operating leases)
   $ 881 n/a


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


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


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


	Three Months Ended March 31,
	2020			2019
Lease cost:
Operating lease cost	$	798		$	798
Short-term lease cost		342			389

Total lease cost	$	1,140		$	1,187

Other information:
Cash paid for amounts included in the measurement of operating liabilities (operating leases)	$	926		$	881

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

Weighted-average remaining lease term (in years) – operating leases		9.2			10.0

Weighted-average discount rate – operating leases		6.3	%		6.3	%

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.

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 March 31, ~~2019~~2020 with respect to the Company’s operating lease liabilities:

Remainder of 2019
   $ 2,723
2020
   3,695
2021
   2,958
2022
   2,958
2023
   2,958
2024 and thereafter
   17,641


Total future minimum lease payments (undiscounted)
   $ 32,933


Remainder of 2020	$	2,740
2021		2,958
2022		2,958
2023		2,958
2024		3,037
2025 and thereafter		14,604

Total future minimum lease payments (undiscounted)	$	29,255

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The following table reconciles the future minimum lease payments (disclosed above) at March 31, ~~2019~~2020 to the operating lease liabilities recognized in the Company’s Consolidated Balance Sheet:

Amounts recognized in the Company’s Consolidated Balance Sheet

Lease liability – short term
   $ 3,651
Lease liability – long term
   20,704


Subtotal
   24,355
Difference between undiscounted and discounted cash flows
   8,578


Total future minimum lease payments (undiscounted)
   $ 32,933

The following table discloses the future minimum lease payments at March 31, 2018 (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
   $ 3,072
2019
   3,764
2020
   3,516
2021
   3,146
2022
   2,958
2023 and thereafter
   20,599


Total future minimum lease payments (undiscounted)
   $ 37,055

~~Lease Termination – Japan Office~~

~~The Company recognized an impairment expense of $572 in connection with the termination of 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.


Amounts recognized in the Company’s Consolidated Balance Sheet
Lease liability – short term	$	3,470
Lease liability – long term		18,661

Subtotal		22,131
Difference between undiscounted and discounted cash flows		7,124

Total future minimum lease payments (undiscounted)	$	29,255

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.

16. Variable Interest ~~Entity~~

Entities

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; (ii) the equity holders, as a group, lack the characteristics of a controlling financial 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~~any entities in which it has a variable interest as it does not have the power to direct the activities that most significantly impact ~~AdvisorEngine’s~~the entities’ economic performance. Such power is conveyed through ~~AdvisorEngine’s board~~the entities’ boards of directors and the Company does not have control over the ~~board.~~

boards.

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

non-consolidated ~~VIE):~~

   March 31,
2019    December 31,
2018
Carrying Amount - Assets

Preferred stock
   $ 25,000    $ 25,000
Note receivable - unsecured
   29,317    28,722




Total carrying amount - Assets
   $ 54,317    $ 53,722




Maximum exposure to loss
   $ 54,317    $ 53,722

VIEs:


	March 31, 2020		December 31, 2019
Carrying Amount – Assets (Securrency)
Preferred stock (Note 9 )	$	8,112	$	8,112

Carrying Amount – Assets (AdvisorEngine)
Unsecured convertible notes receivable	$	—	$	2,126
Unsecured non-convertible note receivable		8,500		26,046
Preferred stock		—		—

Total carrying amount (Note 7)	$	8,500	$	28,172

Total carrying amount – Assets	$	8,500	$	36,284

Maximum exposure to loss	$	16,612	$	36,284

17. Revenues from Contracts with Customers

The following table presents the Company’s total revenues ~~categorized as revenues~~ from contracts with ~~customers and other sources~~customers:


	Three Months Ended
	March 31, 2020		March 31, 2019
Revenues from contracts with customers:
Advisory fees	$	62,950	$	64,840
Other		924		645

Total operating revenues	$	63,874	$	65,485

Table of ~~revenues:~~

   Three Months Ended
   March 31,
2019    March 31,
2018
Revenues from contracts with customers:

Advisory fees
   $ 64,840    $ 58,456
Other
   645    448




Total operating revenues
   $ 65,485    $ 58,904

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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~~(Note 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 no0 contract assets or liabilities that arise in connection with the recognition of advisory fee revenue. In addition, there are no0 costs incurred to obtain or fulfill the contracts with customers, all of which are investment advisory agreements with related parties.

~~See Note 18 for further information including disaggregation~~

Geographic Distribution of ~~advisory fee revenue and amounts due from customers, all of which are derived from related parties. Advisory fee~~Revenue

The following table presents the Company’s total revenues ~~are also reported~~geographically as determined by ~~segment as disclosed in Note 24.~~

where the respective management companies reside:


	Three Months Ended
	March 31, 2020		March 31, 2019
United States	$	39,870	$	42,623
Jersey		22,525		21,161
Ireland		1,114		1,155
Canada (Note 24)		365		546

Total operating revenues	$	63,874	$	65,485

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 ~~ETFs’~~ETPs’ 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 receivable on the Company’s Consolidated Balance Sheets:

   March 31,
2019    December 31,
2018
Receivable from WTT
   $ 15,036    $ 14,678
Receivable from ETFS Issuers
   8,786    8,779
Receivable from BI and WTI
   1,004    951
Receivable from WTAMC
   189    167
Receivable from WTCS
   97    95




Total
   $ 25,112    $ 24,670


	March 31, 2020		December 31, 2019
Receivable from WTT	$	11,220	$	14,765
Receivable from ManJer Issuers		7,612		9,036
Receivable from WMAI and WTI		1,283		1,559
Receivable from WTAMC (Note 24)		—		227
Receivable from WTCS		54		80

Total	$	20,169	$	25,667

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The allowance for credit losses on accounts receivable from related parties is insignificant when applying historical loss rates, adjusted for current conditions and supportable forecasts, to the amounts outstanding in the table above. Amounts outstanding are all invoiced in arrears, are less than 30 days aged and are collected shortly after the applicable reporting period.

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

   Three Months Ended
   March 31,
2019    March 31,
2018
Advisory services provided to WTT
   $ 42,223    $ 55,202
Advisory services provided to ETFS Issuers
   19,273    —
Advisory services provided to BI and WTI
   2,504    2,626
Advisory services provided to WTAMC
   546    311
Advisory services provided to WTCS
   294    317




Total
   $ 64,840    $ 58,456


	Three Months Ended
	March 31, 2020		March 31, 2019
Advisory services provided to WTT	$	39,601	$	42,223
Advisory services provided to ManJer Issuers		20,258		19,273
Advisory services provided to WMAI and WTI		2,528		2,504
Advisory services provided to WTAMC		365		546
Advisory services provided to WTCS		198		294

Total	$	62,950	$	64,840

The Company also has investments in certain WisdomTree ETFs of approximately ~~$4,940~~$19,636 and ~~$7,117~~$16,886 at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. ~~Gains~~Losses and gains related to these ETFs for the three months ended March 31, 2020 and 2019 were ($290) and ~~2018 were~~ $353, ~~and $9,~~ respectively.

19. Stock-Based Awards

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

~~PRSUs:~~
PRSUs:		These awards cliff vest three years from the 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~~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~~^th ~~percentile, then 0% of the target number of PRSUs granted will vest;~~ ~~• If the relative TSR is at the 25~~^th ~~percentile, then 50% of the target number of PRSUs granted will vest; and~~ ~~• If the relative TSR is above the 25~~^th ~~percentile, then linear scaling is applied such that the percent of the target number of PRSUs vesting is 100% at the 50~~^th ~~percentile and capped at 200% of the target number of PRSUs granted for performance at the 100~~^th ~~percentile.~~

~~For~~

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 during the three months ended March 31, 2020 and 2019 was $3,239 and ~~2018, total stock-based compensation expense was~~ $3,072, ~~and $3,309,~~ respectively.

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

   March 31, 2019
   Unrecognized Stock-
Based
Compensation    Average
Remaining
Vesting Period
Employees and directors restricted stock awards
   $ 24,012    2.48


	March 31, 2020
	Unrecognized Stock- Based Compensation		Average Remaining Vesting Period (Years)
Employees and directors	$	17,760		1.91

Table of Contents

A summary of ~~stock options, restricted stock and restricted stock unit~~stock-based compensation award activity ~~for~~during the three months ended March 31, ~~2019~~2020 is as follows:

   Stock
Options    RSAs    RSUs    PRSUs
Balance at January 1, 2019
   570,537    1,957,102    9,494    —
Granted
   —      2,233,878    35,283    270,872 ⁽¹⁾
Exercised/vested
   (20,000 )    (827,721 )    (4,341 )    —
Forfeitures
   —      (93,194 )    —      —








Balance at March 31, 2019
   550,537    3,270,065    40,436    270,872 ⁽¹⁾


	Stock Options			RSAs			RSUs			PRSUs
Balance at January 1, 2020		485,536			3,244,558			39,278			232,610
Granted		—			1,436,089			32,901			117,013	(1)
Exercised/vested		(107,000	)		(936,186	)		(27,130	)		—
Forfeitures		(63,536	)		(23,483	)		(1,993	)		—

Balance at March 31, 2020		315,000			3,720,978			43,056			349,623

(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~~Monte-Carlo simulation was used to value these awards using the following assumptions for the Company and the peer group: (i) beginning90-day average stock prices; (ii) valuation date stock prices; (iii) historical stock price volatilities ranging from ~~22%~~21% to ~~42%~~36% (average ~~28%~~26%); (iv) correlation coefficients based upon the price data used to calculate the historical volatilities; (v) a risk free interest rate of ~~2.56%~~1.47%; and (vi) an expected dividend yield of 0%

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 March 31,
Basic Earnings per Share    2019    2018
Net income
   $ 8,824    $ 9,424
Less: Income distributed to participating securities
   (544 )    (71 )
Less: Undistributed income allocable to participating securities
   (391 )    (85 )




Net income available to common stockholders
   $ 7,889    $ 9,268
Weighted average common shares (in thousands)
   151,625    135,329




Basic earnings per share
   $ 0.05    $ 0.07




   Three Months Ended March 31,
Diluted Earnings per Share    2019    2018
Net income
   $ 8,824    $ 9,424




Weighted Average Diluted Shares (in thousands):

Weighted average common shares
   151,625    135,329
Dilutive effect of common stock equivalents
   15,186    1,139




Weighted average diluted shares
   166,811    136,468




Diluted earnings per share
   $ 0.05    $ 0.07


	Three Months Ended March 31,
		2020			2019
Basic Earnings per Share
Net (loss)/income	$	(8,638	)	$	8,824
Less: Income distributed to participating securities		(555	)		(544	)
Less: Undistributed income allocable to participating securities		—			(391	)

Net (loss)/income available to common stockholders – Basic EPS	$	(9,193	)	$	7,889
Weighted average common shares (in thousands)		152,519			151,625

Basic (loss)/earnings per share	$	(0.06	)	$	0.05


	Three Months Ended March 31,
		2020			2019
Diluted Earnings per Share
Net (loss)/income available to common stockholders	$	(9,193	)	$	7,889
Add back: Undistributed income allocable to participating securities		—			391
Less: Reallocation of undistributed income allocable to participating securities considered potentially dilutive		(—	)		(390	)

Net (loss)/income available to common stockholders – Diluted EPS	$	(9,193	)	$	7,890

Weighted Average Diluted Shares (in thousands) :
Weighted average common shares		152,519			151,625
Dilutive effect of common stock equivalents, excluding participating securities		—			196

Weighted average diluted shares, excluding participating securities (in thousands)		152,519			151,821

Diluted (loss)/earnings per share	$	(0.06	)	$	0.05

Diluted (loss)/earnings per share presented above is calculated ~~under both~~using the ~~treasury stock andif-converted~~

two-class

method ~~and thetwo-class~~as this 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~~lowest diluted earnings per share amount for common stock. During the three months ended March 31, 2020, the Company excluded 16,178 common stock isequivalents from its computation of diluted loss per share as the Company had reported ina net loss for the ~~Company’s consolidated financial statements.~~period. The Company excluded ~~3,495,080 and 1,101,513~~90,530 common stock equivalents from its computation of diluted earnings per share for the three months ended March 31, 2019 ~~and 2018, respectively,~~ as they were determined to be anti-dilutive.

The following table reconciles weighted average diluted shares as reported on the Company’s consolidated statements of operations for the three months ended March 31, 2020 and 2019 to the weighted average diluted shares used to calculate diluted (loss)/earnings per share as disclosed in the table above:

Table of Contents


	Three Months Ended March 31,
Reconciliation of Weighted Average Diluted Shares (in thousands)	2020			2019
Weighted average diluted shares as disclosed on the consolidated statements of operations		152,519	(1)		166,811
Less: Participating securities:
Weighted average shares of common stock issuable upon conversion of the Preferred Shares (Note 13)		—			(14,750	)
Potentially dilutive restricted stock awards		—			(240	)

Weighted average diluted shares used to calculate diluted (loss)/earnings per share as disclosed in the table above		152,519	(1)		151,821

(1)	Excludes participating securities as the Company reported a net loss for the period.

21. Income Taxes

Effective Income Tax Rate – Three Months Ended March 31, ~~2019~~2020 and March 31, ~~2018~~

2019

The Company’s effective income tax rate for the three months ended March 31, 2020 of 21.5% resulted in an income tax benefit of $2,371. The Company’s effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a $5,981 reduction in unrecognized tax benefits, a $2,877

non-taxable

gain recognized upon sale of the Company’s Canadian ETF business and a lower tax rate on foreign earnings, partly offset by

a valuation allowance on capital losses,

tax shortfalls associated with the vesting and exercise of stock-based compensation and a

non-deductible

loss on revaluation of deferred consideration.

The Company’s effective income tax rate for the three months ended March 31, 2019 of negative 13.5% resulted in an income tax benefit of $1,049. 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

non-taxable

gain on revaluation of deferred consideration and a lower tax rate on foreign earnings, partly offset by a valuation allowance on foreign net operating losses, tax shortfalls associated with the vesting and exercise of stock-based compensation awards and state and local income taxes.

The Company’s effective income tax rate for the three months ended March 31, 2018 of 32.3% resulted in income tax expense of $4,498. 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 and state and local income taxes, partly offset by tax windfalls associated with the vesting and exercise of stock-based compensation awards.

Deferred Tax Assets

A summary of the components of the Company’s deferred tax assets at March 31, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows:

   March 31,
2019    December 31,
2018
Deferred tax assets:


NOLs – Foreign
   $ 8,222    $ 6,605
Goodwill and intangible assets
   1,794    1,841
Accrued expenses
   1,358    2,699
Stock-based compensation
   1,189    2,673
Net lease liability
   1,172    1,184
Capital losses
   794    794
NOLs – U.S.
   635    762
Other
   37    40




Deferred tax assets
   15,201    16,598




Deferred tax liabilities:


Fixed assets and prepaid assets
   1,439    1,433
Unrealized gains
   748    724




Deferred tax liabilities
   2,187    2,157




Total deferred tax assets less deferred tax liabilities
   13,014    14,441
Less: valuation allowance
   (9,016 )    (7,399 )




Deferred tax assets, net
   $ 3,998    $ 7,042

March 31,
2020

December 31,
2019

Deferred tax assets:

Capital losses
$
17,002
$
8,226

Operating lease liabilities

5,295

5,529

NOLs – International

5,233

9,336

Goodwill and intangible assets

1,622

1,671

Stock-based compensation

1,115

1,754

NOLs – U.S.

514

642

Accrued expenses

373

4,054

Outside basis differences

123

123

Other

159

218

Deferred tax assets

31,436

31,553

Deferred tax liabilities:

Right of use assets – operating leases

4,189

4,400

Fixed assets and prepaid assets

1,309

1,326

Unrealized gains

717

744

Deferred tax liabilities

6,215

6,470

Total deferred tax assets less deferred tax liabilities

25,221

25,083

Less: valuation allowance

(22,358
)
(17,685
)

Deferred tax assets, net
$
2,863
$
7,398

27
Table of Contents

Net Operating and Capital Losses – U.S

The Company’s~~pre-tax~~ ~~federal~~ tax effected net operating losses ~~for tax purposes~~ (“NOLs”) at March 31, ~~2019~~2020 were ~~$2,622~~$514 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~~pre-tax~~ tax effected capital ~~loss~~losses at March 31, 2020 and December 31, 2019 ~~was $3,278. A full valuation allowance was established as it~~were $17,002 and $8,226, respectively. The change in capital losses is~~more-likely-than-not~~ ~~that some portion, or all,~~ due to the impairment recognized on the Company’s financial interests in AdvisorEngine (Note 7

) and a capital loss recognized upon sale of the ~~deferred tax assets will not be realized.~~

Canadian ETF business.

Net Operating Losses – ~~Foreign~~

International

Certain of the Company’s European subsidiaries ~~and its Canadian subsidiary~~ generated NOLs outside the U.S. These tax effected NOLs were ~~$8,222~~$5,233 and ~~$6,605~~$9,336 at

March 31, 2020 and December 31, 2019, respectively. All of these NOLs at March 31, ~~2019 and December 31, 2018, respectively.~~2020 are carried forward indefinitely. The ~~Company established a full~~reduction in NOLs was due to the sale of the Company’s Canadian ETF business, which occurred on February 19, 2020 (Note 24).

Valuation Allowance

The Company’s valuation allowance ~~related to these NOLs~~has been established on its net capital losses, international net operating losses and outside basis differences as it is

more-likely-than-not

that ~~some portion, or all, of the~~these deferred tax assets will not be realized. ~~Approximately $4,050~~

Coronavirus Aid, Relief, and Economic Security Act of ~~these~~2020 (the “CARES Act”)

On March 27, 2020, the CARES Act was enacted in response to the

COVID-19

pandemic which included temporary changes to income and

non-income

based tax laws including: (i) the elimination of the 80% of taxable income limitation by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 and 2020; (ii) allowing NOLs ~~at March 31,~~originating in 2018, 2019 ~~expire between~~and 2020 to be carried back five years; (iii) increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for tax years ~~2036~~beginning January 1, 2019 and ~~2039.~~2020; and (iv) other related provisions. The ~~remainder is carried forward indefinitely.~~

CARES Act did not have a material impact on the Company’s consolidated financial statements.

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 for uncertain tax positions and interest and penalties at the acquisition date. The table below sets forth the aggregate changes in the balance of these gross unrecognized tax benefits ~~for~~during the three months ended March 31, ~~2019:~~

   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

2020:


	Total			Unrecognized Tax Benefits			Interest and Penalties
Balance on January 1, 2020	$	32,101		$	25,998		$	6,103
Decrease - Lapse of statute of limitations (1)		(5,981	)		(4,620	)		(1,361	)
Increases		76			—			76
Foreign currency translation (2)		(1,767	)		(1,432	)		(335	)

Balance at March 31, 2020	$	24,429		$	19,946		$	4,483

(1)

Recorded as an income tax benefit of $5,981 during the three months ended March 31, 2020, along with an equal and offsetting amount recorded in other losses, net, to recognize a

reduction in the indemnification asset. During the three months ended March 31, 2019, an income tax benefit of $4,309 was recorded along with an equal and offsetting amount in other losses, net.

(2)	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.

The gross unrecognized tax benefits and interest and penalties totaling ~~$31,593~~$24,429 at March 31, ~~2019~~2020 are included in other

non-current

liabilities on the Consolidated Balance Sheet. It is ~~expected~~reasonably possible that the total amount of unrecognized tax benefits will ~~change~~decrease by $4,525 (including interest and penalties of $1,317) in the next 12 ~~months; however,~~months upon lapsing of the ~~Company does not expect the change to have a material impact on its consolidated financial statements.~~

statute of limitations.

Table of Contents

At March 31, ~~2019,~~2020, there were ~~$25,847~~$24,429 of unrecognized tax benefits (including interest and penalties) 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 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 and the Company’s New York state tax return for the years ended December 31, 2015 through 2018 are currently under review by the relevant tax authorities. The Company is indemnified by ETFS Capital for any potential exposure associated with ManJer’s tax return under audit.

The Company is not currently under audit in any other income tax jurisdictions. As of March 31, ~~2019,~~2020, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2015.

Undistributed Earnings of Foreign Subsidiaries

Due to the imposition of the

Global Intangible Low-Taxed Income (“

GILTI

”)

provisions, all unremitted earnings are no longer subject to U.S. federal income tax; however, there could be U.S. state and/or foreign withholding taxes upon distribution of such unremitted earnings. 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 March 31, ~~2019,~~2020, the Company considers all undistributed foreign earnings and profits to be permanent in duration.

22. Shares Repurchased

On April 24, 2019, the Company’s Board of Directors extended the term of the Company’s share repurchase program for three years through April 27, 2022. Included under this program are purchases to offset future equity grants made under the Company’s equity plans and 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 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,~~

In addition, the Company entered into a credit agreement (Note 12) 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) does not exceed 1.75 to 1.00 and no event of default (as defined in the 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.

During the three months ended March 31, ~~2019~~2020 and March 31, ~~2018,~~2019, the Company repurchased ~~311,213~~385,399 shares and ~~60,508~~311,213 shares of its common stock, respectively, under this program for an aggregate cost of $1,495 and $2,005, respectively. Shares repurchased under this program were returned to the status of authorized and ~~$734, respectively.~~

unissued on the Company’s books and records.

As of March 31, ~~2019, $83,724 remains~~2020, $81,894 remained under this program for future purchases.

23. Goodwill and Intangible Assets

Goodwill

The table below sets forth the Company’s 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~~which is tested annually for impairment on November 30^{th
:
   Reporting Unit
   European
Business⁽¹⁾    U.S. Business    Total
Balance at January 1, 2019    $ 84,057    $ 1,799    $ 85,856
Changes    —      —      —

Balance at March 31, 2019    $ 84,057    $ 1,799    $ 85,856

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


	Total
Balance at January 1, 2020	$	85,856
Changes		—

Balance at March 31, 2020	$	85,856

~~The goodwill allocated to~~

Goodwill arising from the ~~European Business reporting unit~~ETFS Acquisition of $84,057 is not deductible for tax purposes as the ~~transaction~~acquisition was structured as a stock acquisition occurring in the United Kingdom. The ~~goodwill allocated to~~remainder of the ~~U.S. Business reporting unit~~goodwill is deductible for U.S. tax purposes.

Table of Contents

Intangible Assets (Indefinite-Lived)

   Advisory
Agreements
(ETFS)    Advisory
Agreements
(Questrade AUM)    Total
Balance at January 1, 2019
   $ 601,247    $ 1,962    $ 603,209
Foreign currency translation
   —      42    42






Balance at March 31, 2019
   $ 601,247    $ 2,004    $ 603,251

The table below sets forth the Company’s intangible assets which are tested annually for impairment on November 30
th
:

Advisory
Agreements
(ETFS)

Advisory
Agreements
(Questrade AUM)

Total

Balance at January 1, 2020
$
601,247
$
2,047
$
603,294

Decreases
(1)

—

(1,992
)
(1,992
)
Foreign currency translation

—

(55
)
(55
)

Balance at March 31, 2020
$
601,247
$
—
$
601,247

(1) Derecognized upon the sale of the Company’s Canadian ETF business (Note 24).

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 eight Canadian-listed ETFs from Questrade, Inc. (the “Questrade ETFs”).}

24. Exit Activities

The ~~purchase price was CAD $2,675 (USD $2,132), all of which was allocated to~~following table summarizes operating losses recognized by the Company’s ~~right to manage AUM in the form of advisory contracts. These intangible 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 ETFs. The intangible assets (which are deductible for tax purposes) were determined to~~wholly-owned subsidiaries that have ~~an indefinite useful life. The Company has designated November 30~~^th aseither been sold or liquidated during reporting periods covered by its ~~annual impairment testing date for these intangible assets.~~

~~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 U.S. Business segment includes the results of the Company’s U.S. operations and wind down costs associated with the Japan sales office. The results of the Company’s European and Canadian operations are reported as the International Business segment.

~~Information concerning these reportable segments are as follows:~~

   Three Months Ended March 31,
   2019    2018
U.S. Business Segment

Operating revenues

Advisory fees
   $ 42,517    $ 55,518
Other income
   106    147




Total operating revenues
   $ 42,623    $ 55,665




Total operating expenses
   $ (37,176 )    $ (39,030 )




Other income/(expenses)

Interest expense
   $ (192 )    $ —
Interest income
   779    962
Impairment
   (572 )    —
Other gains/(losses), net
   145    (226 )




Total other income/(expenses)
   $ 160    $ 736




Total income before taxes (U.S. Business Segment)
   $ 5,607    $ 17,371




consolidated financial statements:


	Three Months Ended
	March 31, 2020		March 31, 2019
WTAMC	$	428	$	777
WisdomTree Japan Inc. (“WTJ”) (1)		—		430

Total	$	428	$	1,207

   Three Months Ended March 31,
   2019    2018
International Business Segment⁽¹⁾

Operating revenues

Advisory fees
   $ 22,323    $ 2,938
Other income
   539    301




Total operating revenues
   $ 22,862    $ 3,239




Total operating expenses
   $ (17,626 )    $ (6,653 )




Other income/(expenses)

Interest expense
   $ (2,700 )    $ —
Gain on revaluation of deferred consideration
   4,404    —
Other losses, net
   (4,772 )    (35 )




Total other income/(expenses)
   $ (3,068 )    $ (35 )




Total income/(loss) before taxes (International Business Segment)
   $ 2,168    $ (3,449 )




Income/(loss) before taxes

U.S. Business segment
   $ 5,607    $ 17,371
International Business segment
   2,168    (3,449 )




Total income before taxes
   $ 7,775    $ 13,922

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

(1)	~~The financial results~~WTJ also recognized an impairment expense of ~~ETFS are included~~$572 in connection with the ~~International Business reportable segment as~~termination of ~~April 11, 2018.~~ its office lease on March 31, 2019

~~25. Subsequent Events~~

~~Convertible Note - AdvisorEngine~~

Sale of Canadian ETF Business

On ~~April 11, 2019,~~February 19, 2020, the Company ~~participated~~completed the sale of all the outstanding shares of WTAMC to CI Financial Corp. The Company received CDN $3,720 (USD $2,774) in cash at closing

and will receive

additional cash consideration

CDN $2,000 to $8,000, depending on the achievement of certain AUM growth targets over the next three years.

During the three months ended March 31, 2020, the Company recognized a ~~private convertible note financing round of AdvisorEngine by advancing $1,540 in consideration for a convertible note,~~$2,877 gain on sale which was ~~issued as part~~recorded in other losses, net on the Consolidated Statements of ~~a series of convertible notes pursuant~~Operations and represents the difference between the minimum cash consideration payable to ~~a Convertible Note Purchase Agreement entered into between AdvisorEngine,~~ the Company and the ~~other purchasers thereto. The convertible note bears interest at a rate~~carrying value of ~~3% per annum,~~WTAMC’s net assets upon disposition. Contingent payments, if any, are recognized by the Company when the contingency is resolved and the gain is realized.

Restructuring of Distribution Strategy in Japan

In July 2018, the Company determined to restructure its distribution strategy in Japan and expanded its existing relationship with ~~all or any unpaid portion being treated as PIK by capitalizing such amount and adding it~~Premia Partners Company Limited 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 therein), but at a price per share equal to 80%manage distribution of the ~~price per share sold~~Company’s ETFs in ~~such transaction. In~~Japan. As a result, WTJ ceased operations and was liquidated in September 2019.

25. Subsequent Events

The Company evaluated subsequent events through the ~~event~~date of a corporate transaction (as defined therein) 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 unpaid interest. If neither a qualified financing nor a corporate transaction occur 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 prepaid by AdvisorEngine without the prior consentissuance of the ~~requisite holders (which includes the Company).~~

accompanying financial statements. There were no events requiring disclosure.

Table of Contents

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

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 this Report and in our Annual Report on Form
10-K
for the fiscal year ended December 31, ~~2018.~~2019. 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~~a leading global ETP ~~sponsors in the world~~sponsor based on assets under management, or AUM, with AUM of ~~$58.9~~$50.3 billion globally as of March 31, ~~2019.~~2020. 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.

~~We focus on creating~~

Our family of ETFs ~~for investors~~includes funds that ~~offer thoughtful innovation, smart engineering~~track our own indexes, funds that track third-party indexes and ~~redefined investing. We have launched manyfirst-to-market~~ ~~ETFs in the United States and pioneered alternative weighting and performance methods commonly referred to as “smart beta.” However,~~actively managed funds. Most of our ~~U.S. listed ETFs are not beta, but rather an~~equity-based funds employ a fundamentally weighted investment innovation we call “Modern Alpha.” Our Modern Alpha approach combines the outperformance potential of active management with the benefits of passive management to offer investors cost-effective ETFs that are 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 revenuesmethodology, which weights securities based on factors such as dividends, earnings or investment factors, whereas most other ETF industry indexes use a 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.capitalization weighted methodology. We distribute our ~~ETPs~~ETFs 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 directed towards financial or investment advisers that act as intermediaries between the

end-client

and us.

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

first-to-market

ETFs and pioneered alternative weighting methods commonly referred to as “smart beta.” However, our U.S. listed ETFs are not beta, but rather an investment approach we call “Modern Alpha,” which combines the outperformance potential of active management with the benefits of passive management to offer investors cost-effective funds that are built to perform.

We strive to deliver a better investing experience through innovative solutions. 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, have been made~~digital tools for financial advisors, are meant 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~~ and ultimately renamed WisdomTree Investments, Inc. on September 6, 2005.

COVID-19

Impact on our Business

During the first quarter of ~~ETFS~~

~~In April 2018,~~2020, market declines arising from the

COVID-19

pandemic adversely impacted the market performance of most financial assets and sectors of the economy, including the AUM that we ~~acquired~~manage. During the ~~European exchange-traded commodity, currency~~height of the market volatility in March 2020, we experienced a 16% decline in our AUM resulting from market depreciation and~~short-and-leveraged~~ ~~business, or ETFS, 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. ETFS had approximately $17.6~~ $1.6 billion of ~~AUM~~net outflows. These pressures contributed to a corresponding decline in our operating results which, if further eroded, could adversely impact our liquidity as our credit facility includes a financial covenant that requires we maintain compliance with a leverage test. At March 31, 2020, we were in compliance with this covenant and we continue to be in compliance as of the date of this Report.

The market rebound in April ~~10, 2018. Following~~2020 led to a partial recovery of our AUM. Our AUM increased 8% from $50.3 billion at March 31, 2020 to $54.5 billion at May 4, 2020. While this improvement is meaningful, we will continue to monitor our compliance with the ~~ETFS Acquisition we became~~financial covenants under our credit facility and are actively exploring refinancing and extension alternatives in advance of the ~~largest global independent ETP provider based on AUM, with significant scale and presence~~maturity date in April 2021. Our available liquidity as disclosed in the ~~U.S.~~section entitled “Liquidity and ~~Europe,~~Capital Resources” was $74.7 million, which is available to reduce our outstanding debt, if necessary.

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The CARES Act was enacted on March 27, 2020 in response to the ~~two largest ETP markets.~~

~~Industry Developments~~

~~In April 2019,~~

COVID-19

pandemic, which provided financial assistance under various programs to help companies cope with economic hardships. We did not draw upon any available financial assistance afforded by the ~~Securities and Exchange Commission approved a form ofnon-transparent~~ ~~active ETFs that will not be required to disclose their holdings daily, as most ETFs currently are required to do. While market commentators believe there may be increased competition in~~CARES Act. Throughout the ~~ETF industry as some~~course of the ~~largest asset managers who previously did not want~~pandemic, we have continued to ~~disclose fund holdings on a daily basis may now enter~~operate our business without disruption.

Cost Control Measures

Given the ~~ETF space, we believe transparency~~significant decline in ~~holdings is one of the hallmarks and benefits of the ETF structure. Further, thesenon-transparent~~ ETFs may face distribution challenges from gatekeepers and platforms that have been accustomed to greater transparency and it is also unclear how the decreased transparency will impact the liquidity of these~~non-transparent~~ ~~ETFs.~~

~~Assets Under Management~~

~~WisdomTree ETPs~~

~~A significant portion of our AUM historically has been held in ETFs that invest in foreign securities. Therefore,~~ our AUM and ~~revenues~~the current overall operating environment, we are ~~affected by movements~~managing a reduction in ~~global capital markets~~our expenses. Certain of our variable expenses that are tied to average AUM will decline, such as our fund related operating costs and ~~the strengthening or weakening of the U.S. dollar against other currencies. Over the last few years, concentrations~~fees we pay for third party distribution platforms. In addition, we expect a significant decline in ~~HEDJ,~~ our ~~European equity ETF which hedges exposure~~incentive compensation. We also expect to ~~the euro,~~spend less on discretionary expenses such as marketing, sales and ~~DXJ,~~overhead expenses for managing our ~~Japanese equity ETF which hedges exposure to the yen, have declined dramatically as negative investor sentiment toward these products~~business.

Recent Developments in our Commodity Product Suite

Recent market developments and price volatility around oil has led to ~~considerable~~the generation of over $3.0 billion of net ~~outflows. While reduced,~~inflows into our ~~exposure to these two ETFs remains significant and therefore~~European listed oil related products, with greater than 60% of those net inflows into one product, WisdomTree Crude Oil (CRUD), predominantly in the ~~strengthening~~month of April. Because of the ~~euro or yen against the U.S. dollar, the~~recent unprecedented decline in ~~European~~oil prices, three of our inverse and leveraged oil products were terminated as they hit underlying pricing thresholds. In order to manage counterparty risk, we temporarily halted creations into three products, including CRUD. Therefore, we will not experience further inflows into CRUD or ~~Japanese~~the other two products until the creation halt is lifted, which we anticipate will occur as soon as possible after the counterparty risk exposures are mitigated.

Assets Under Management

WisdomTree ETPs

We offer ETPs covering equity, ~~markets, or political or other market risks in either of these markets, may have an adverse effect on our results.~~

commodity, fixed income,

leveraged-and-inverse,

currency and alternative strategies. The chart below sets forth the asset mix of our ETPs at March 31, ~~2018,~~2019, December 31, ~~2018~~2019 and March 31, ~~2019:~~

~~The ETFS Acquisition diversified our investment theme concentrations by adding commodity exposures, predominantly gold, that historically have been negatively correlated with HEDJ~~2020:

During the three months ended March 31, 2020, market declines arising from the

COVID-19

pandemic adversely impacted the market performance of most financial assets and ~~DXJ. While we therefore may experience improved stability of AUM and lower overall AUM volatility, we can provide no assurance that this will be the case.~~

~~Market Environment~~

~~Performance~~sectors of the ~~U.S. and European markets recovered~~economy, including the AUM that we manage. Our AUM declined 20.9% from the prior quarter ~~volatility~~primarily due to market depreciation.

Market Environment

The

COVID-19

pandemic had a profound impact on the global markets during the quarter. Equity securities across all developed and emerging markets fell as ~~monetary policies in these markets became more accommodative~~the global economy was shut down to stem the spread of the virus. Government bond yields also fell and gold prices appreciated as ~~concerns over U.S. trade policies toward China dissipated. Emerging markets posted strong returns, led by China, while~~investors sought out assets perceived as lower risk.

During the ~~Japan markets also performed favorably although somewhat muted as compared to other markets. The price~~first quarter of ~~gold, which experienced bouts of volatility, ultimately remained largely unchanged.~~

~~The~~2020, the S&P 500 ~~rose 13.6%~~declined 19.6%, MSCI EAFE (local currency) ~~rose 10.7%~~declined 20.4%, MSCI Emerging Markets Index (U.S. dollar) ~~rose 12.0% and~~declined 25.2%, while gold prices rose ~~1.1% during the first quarter of 2019.~~5.6%. In addition, the European and ~~Japan equity~~Japanese equities markets both ~~appreciated~~depreciated with the MSCI EMU Index ~~rising 9.9%~~ and MSCI Japan Index ~~rising 7.7%~~declining 23.6% and 17.2%, respectively, in local currency terms for the quarter. Also, the U.S. dollar strengthened ~~0.5% versus the yen~~1.3% and ~~2.0%~~5.5% versus the euro and British pound, respectively, while weakening 1.1% versus the Japanese yen during the quarter.

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U.S. Listed ETF Industry Flows

~~As the charts below reflect,~~

U.S. listed ETF net flows for the three months ended March 31, ~~2019~~2020 were ~~$47.8~~$75.0 billion. ~~Fixed income, emerging market equity and~~ U.S. equity, commodities and fixed income gathered the majority of those flows.

Source: Bloomberg, Investment Company Institute, ~~WisdomTree.~~

~~International~~WisdomTree

European ETP Industry Flows

~~As the charts below reflect, international~~

European ETP net flows were ~~$32.8~~($4.1) billion for the three months ended March 31, ~~2019. Fixed~~2020 due to net outflows in fixed income and equities ~~gathered the majority of those flows.~~

partly offset by commodity inflows.

Source: Morningstar

~~Business Segments~~

Our Operating and Financial Results

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

~~U.S. Business Segment~~

~~Our U.S. Business segment included our Japan sales office, WTJ, which engaged in selling our U.S. listed ETFs to Japanese institutions. In July 2018,~~Europe.

On February 19, 2020, we ~~determined to restructure our distribution strategy in Japan and expanded our existing relationship with Premia Partners Company Limited to manage distribution~~completed the sale of all of the outstanding shares of our ~~ETFs~~wholly-owned Canadian subsidiary, WisdomTree Asset Management Canada, Inc., or Canadian ETF business, to CI Financial Corp. We received CDN $3.7 million (USD $2.8 million) in ~~Japan. As a result, WTJ has ceased operations~~cash at closing and ~~is in~~will receive additional cash consideration of CDN $2.0 million to $8.0 million, depending on the ~~process~~achievement of ~~being liquidated. During~~certain AUM growth targets over the next three years.

Our Canadian ETF business reported operating losses during the three months ended March 31, ~~2018~~2020 and 2019 ~~WTJ reported operating losses~~ of ~~$1.2~~$0.8 million and $0.4 million, respectively. ~~WTJ also recognized an impairment expense of $0.6 million in connection with the termination of its office lease on March 31, 2019.~~

~~International Business Segment~~

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

~~Our Operating and Financial Results~~

U.S. ~~Business Segment~~

Listed ETFs

Our U.S. listed ETFs’ AUM ~~increased~~decreased from ~~$35.5~~$40.6 billion at December 31, ~~2018~~2019 to ~~$39.4~~$28.9 billion at March 31, ~~2019 primarily~~2020 due to market ~~appreciation.~~

depreciation and net outflows.

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International ~~Business Segment~~

Listed ETPs

Our international ETPs’ AUM ~~increased~~decreased from ~~$18.6~~$23.0 billion at December 31, ~~2018~~2019 to ~~$19.6~~$21.4 billion at March 31, ~~2019~~2020 due to market ~~appreciation~~depreciation and a reduction of $0.8 billion of AUM resulting from the sale of our Canadian ETF business which was completed on February 19, 2020, partly offset by net inflows.

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Consolidated Operating Results

The following table sets forth our revenues and net income/(loss) for the most recent five ~~quarters. Results for~~quarters:

Revenues

– We recorded operating revenues of $63.9 million during the three months ended March 31, ~~2018 have been reclassified~~2020, down 2.5% from the three months ended March 31, 2019 due to ~~conform~~lower average AUM of our U.S. listed products arising from market depreciation and net outflows, as well as a 3 basis point decline in our average global advisory fee due to AUM mix shift. These declines were partly offset by higher average AUM of our International listed products.

Expenses

– Total operating expenses decreased 12.0% from the three months ended March 31, 2019 to $48.2 million largely due to lower compensation resulting from lower incentive compensation accruals as well as $2.0 million of severance included in the prior period, lower third-party distribution fees and lower sales and business development expenses.

Other Income/(Expenses)

– Other income/(expenses) includes interest income and interest expense, (losses)/gains on revaluation of deferred consideration – gold payments, impairments and other gains and losses. For the three months ended March 31, 2020 and 2019, the (losses)/gains on revaluation of deferred consideration – gold payments were ($2.2) million and $4.4 million, respectively. In addition, during the three months ended March 31, 2020, we recognized a

non-cash

impairment charge of $19.7 million on our investment in AdvisorEngine, Inc., or AdvisorEngine (See Note 7 to our Consolidated Financial Statements). We also recorded a gain of $2.9 million associated with the sale of our Canadian ETF business.

Net (loss)/income

– We reported a net loss of ($8.6) million during the three months ended March 31, 2020, compared to net income of $8.8 million during the three months ended March 31, 2019. The net loss reported in the current ~~presentation. These reclassifications had no effect~~period includes the loss on ~~previously reported net income. The results~~revaluation of ~~the second, third~~deferred consideration – gold payments of $2.2 million and ~~fourth quarters~~the

non-cash

impairment charge of ~~2018 have previously been restated.~~

•

~~Revenues~~– We recorded operating revenues of $65.5 million during the three months ended March 31, 2019, up 11.2% from the three months ended March 31, 2018 primarily due to the ETFS Acquisition, partly offset by lower average AUM of our U.S. Business segment.

•

~~Expenses~~ ~~– Total operating expenses increased 20.0% from the three months ended March 31, 2018 to $54.8 million primarily due to expenses associated with the ETFS acquired business.~~

•

~~Other Income/(Expenses)~~ ~~– Other income/(expenses) includes interest income and interest expense, gains/(losses) on revaluation of deferred consideration, impairments and other gains and losses.~~

•

~~Net income~~ ~~– Net income decreased 6.4% from the three months ended March 31, 2018 to $8.8 million.~~

$19.7 million on our investment in AdvisorEngine.

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Key Operating Statistics

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

   Three Months Ended
   March 31,
2019 December 31,
2018 March 31,
2018
U.S. LISTED ETFs (in millions)

Beginning of period assets
   $ 35,486 $ 41,556 $ 46,827
Inflows/(outflows)
   147 (893 ) (2,167 )
Market appreciation/(depreciation)
   3,820 (5,177 ) (1,729 )
Fund closures
   (87 ) —   (45 )


End of period assets
   $ 39,366 $ 35,486 $ 42,886


Average assets during the period
   $ 38,061 $ 38,246 $ 45,618
Average ETF advisory fee during the period
   0.45 % 0.47 % 0.49 %
Number of ETFs – end of the period
   77 85 81
INTERNATIONAL LISTED ETPs (in millions)

Beginning of period assets
   $ 18,608 $ 17,587 $ 2,110
Inflows/(outflows)
   414 1,138 (47 )
Market appreciation/(depreciation)
   545 (117 ) 12


End of period assets
   $ 19,567 $ 18,608 $ 2,075


Average assets during the period
   $ 19,616 $ 18,175 $ 2,106
Average ETP advisory fee during the period
   0.47 % 0.47 % 0.57 %
Number of ETPs—end of period
   457 452 99
PRODUCT CATEGORIES (in millions)

Commodity & Currency

Beginning of period assets
   $ 16,251 $ 15,039 $ 445
Inflows/(outflows)
   227 984 (28 )
Market appreciation/(depreciation)
   358 228 (1 )


End of period assets
   $ 16,836 $ 16,251 $ 416


Average assets during the period
   $ 17,027 $ 15,658 $ 426
U.S. Equity

Beginning of period assets
   $ 13,334 $ 15,187 $ 14,234
Inflows/(outflows)
   632 394 47
Market appreciation/(depreciation)
   1,914 (2,247 ) (922 )


End of period assets
   $ 15,880 $ 13,334 $ 13,359


Average assets during the period
   $ 14,947 $ 14,291 $ 14,122
International Developed Market Equity

Beginning of period assets
   $ 14,532 $ 19,590 $ 25,950
Inflows/(outflows)
   (1,553 ) (2,384 ) (2,704 )
Market appreciation/(depreciation)
   1,438 (2,674 ) (814 )


End of period assets
   $ 14,417 $ 14,532 $ 22,432


Average assets during the period
   $ 14,525 $ 16,962 $ 24,435
Emerging Market Equity

Beginning of period assets
   $ 5,278 $ 5,346 $ 5,887
Inflows/(outflows)
   (84 ) 233 425
Market appreciation/(depreciation)
   536 (301 ) (23 )


End of period assets
   $ 5,730 $ 5,278 $ 6,289


Average assets during the period
   $ 5,502 $ 5,148 $ 6,259


	Three Months Ended									Three Months Ended
	March 31, 2019			December 31, 2018			March 31, 2018			March 31, 2020			December 31, 2019			March 31, 2019
Fixed Income
GLOBAL ETPs ($ in millions)
Beginning of period assets	$	2,570		$	1,721		$	862		$	63,615		$	59,981		$	54,094
Assets sold											(778	)		—			—
Inflows/(outflows)		1,418			880			253			(536	)		390			561
Market appreciation/(depreciation)		35			(31	)		(14	)		(11,958	)		3,247			4,544
Fund closures											(20	)		(3	)		(87	)

End of period assets	$	4,023		$	2,570		$	1,101		$	50,323		$	63,615		$	59,112

Average assets during the period	$	3,511		$	2,140		$	1,014		$	59,819		$	61,858		$	57,683
Leveraged & Inverse
Beginning of period assets	$	1,282		$	1,445		$	930
Inflows/(outflows)		67			(1	)		(135	)
Market appreciation/(depreciation)		70			(162	)		77
Average ETP advisory fee during the period											0.43	%		0.44	%		0.46	%
Number of ETPs – end of the period											331			349			534

End of period assets	$	1,419		$	1,282		$	872

Average assets during the period	$	1,408		$	1,393		$	877
Alternatives
Beginning of period assets	$	755		$	674		$	582
Inflows/(outflows)		(141	)		178			(70	)
Market appreciation/(depreciation)		14			(97	)		(20	)

End of period assets	$	628		$	755		$	492

Average assets during the period	$	666		$	712		$	547
Closed ETPs
U.S. LISTED ETFs ($ in millions)
Beginning of period assets	$	92		$	141		$	47		$	40,600		$	37,592		$	35,486
Inflows/(outflows)		(5	)		(39	)		(2	)		(1,273	)		563			147
Market appreciation/(depreciation)		—			(10	)		—			(10,424	)		2,448			3,820
Fund closures		(87	)		—			(45	)		(10	)		(3	)		(87	)

End of period assets	$	—		$	92		$	—		$	28,893		$	40,600		$	39,366

Average assets during the period	$	91		$	117		$	44		$	36,936		$	39,094		$	38,061
Headcount – U.S. Business Segment		141			153			157
Headcount – International Segment		75			75			34
Average ETF advisory fee during the period											0.43	%		0.44	%		0.45	%
Number of ETFs – end of the period											77			80			77

INTERNATIONAL LISTED ETPs ($ in millions)
Beginning of period assets										$	23,015		$	22,389		$	18,608
Assets sold											(778	)		—			—
Inflows/(outflows)											737			(173	)		414
Market appreciation/(depreciation)											(1,534	)		799			724
Fund closures											(10	)		—			—

End of period assets										$	21,430		$	23,015		$	19,746

Average assets during the period										$	22,883		$	22,764		$	19,622
Average ETP advisory fee during the period											0.43	%		0.44	%		0.47	%
Number of ETPs – end of period											254			269			457

PRODUCT CATEGORIES ($ in millions)

Commodity & Currency
Beginning of period assets										$	20,326		$	19,954		$	16,212
Inflows/(outflows)											780			(266	)		228
Market appreciation/(depreciation)											(1,018	)		638			539

End of period assets										$	20,088		$	20,326		$	16,979

Average assets during the period										$	20,643		$	20,146		$	16,994

U.S. Equity
Beginning of period assets										$	17,746		$	16,296		$	13,222
Inflows/(outflows)											(285	)		458			639
Market appreciation/(depreciation)											(5,302	)		992			1,898

End of period assets										$	12,159		$	17,746		$	15,759

Average assets during the period										$	16,022		$	16,983		$	14,823

International Developed Market Equity
Beginning of period assets										$	13,089		$	12,243		$	14,309
Inflows/(outflows)											(1,107	)		(139	)		(1,575	)
Market appreciation/(depreciation)											(3,300	)		985			1,407

End of period assets										$	8,682		$	13,089		$	14,141

Average assets during the period										$	11,515		$	12,684		$	14,280

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	Three Months Ended
	March 31, 2020			December 31, 2019			March 31, 2019
Emerging Market Equity
Beginning of period assets	$	6,494		$	5,787		$	5,275
Inflows/(outflows)		59			193			(94	)
Market appreciation/(depreciation)		(1,887	)		514			533

End of period assets	$	4,666		$	6,494		$	5,714

Average assets during the period	$	6,002		$	6,082		$	5,492

Fixed Income
Beginning of period assets	$	3,633		$	3,390		$	2,345
Inflows/(outflows)		17			212			1,403
Market appreciation/(depreciation)		(86	)		31			24

End of period assets	$	3,564		$	3,633		$	3,772

Average assets during the period	$	3,697		$	3,589		$	3,268

Leveraged & Inverse
Beginning of period assets	$	1,058		$	1,046		$	981
Inflows/(outflows)		(81	)		14			147
Market appreciation/(depreciation)		(78	)		(2	)		(43	)

End of period assets	$	899		$	1,058		$	1,085

Average assets during the period	$	1,043		$	1,078		$	1,074

Alternatives
Beginning of period assets	$	394		$	461		$	739
Inflows/(outflows)		(77	)		(68	)		(138	)
Market appreciation/(depreciation)		(55	)		1			15

End of period assets	$	262		$	394		$	616

Average assets during the period	$	358		$	437		$	653

Closed ETPs
Beginning of period assets	$	875		$	804		$	1,011
Assets sold		(778	)		—			—
Inflows/(outflows)		158			(14	)		(49	)
Market appreciation/(depreciation)		(232	)		88			171
Fund closures		(20	)		(3	)		(87	)

End of period assets	$	3		$	875		$	1,046

Average assets during the period	$	539		$	859		$	1,099

Headcount		210			208			216

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

Source: ~~Investment Company Institute, Bloomberg,~~ WisdomTree

Table of Contents

Three Months Ended March 31, ~~2019~~2020 Compared to Three Months Ended March 31, ~~2018~~

2019

Selected Operating and Financial Information

   Three Months Ended
March 31,    Change    Percent
Change
   2019    2018
Global AUM (in millions)

Average global AUM
   $ 57,677    $ 47,724    $ 9,953    20.9 %





Operating Revenues (in thousands)

Advisory fees
   $ 64,840    $ 58,456    $ 6,384    10.9 %
Other income
   645    448    197    44.0 %







Total revenues
   $ 65,485    $ 58,904    $ 6,581    11.2 %

Three Months Ended
March 31,

Change

Percent
Change

2020

2019

Global AUM (in millions)

Average global AUM
$
59,819
$
57,683
$
2,136

3.7
%

Operating Revenues (in thousands)

Advisory fees
$
62,950
$
64,840
$
(1,890
)
(2.9
%)
Other income

924

645

279

43.3
%

Total revenues
$
63,874
$
65,485
$
(1,611
)
(2.5
%)

Average Global AUM

Our average global AUM increased ~~20.9%~~3.7% from ~~$47.7 billion at March 31, 2018 to~~ $57.7 billion at March 31, 2019 to $59.8 billion at March 31, 2020 primarily due to market appreciation over the ~~ETFS Acquisition and net inflows into certain of our ETFs. These increases were~~trailing twelve months, partly offset by net outflows. The market declines arising from the

COVID-19

pandemic had a minimal impact on the change in our average global AUM as the market depreciation occurred during the most recent month. Over the trailing twelve months net outflows were $0.5 billion, primarily due to $2.1 billion of outflows from our two largest currency hedged products, HEDJ and ~~DXJ~~DXJ. These outflows were offset by inflows of $1.6 billion principally into our commodity, emerging market and ~~market depreciation.~~

U.S. equity ETPs.

Operating Revenues

Advisory fees

Advisory fee revenues ~~increased 10.9%~~decreased 2.9% from ~~$58.4~~$64.8 million during the three months ended March 31, ~~2018~~2019 to ~~$64.8~~$63.0 million in the comparable period in ~~2019 primarily~~2020 due to ~~the ETFS Acquisition, partly offset by~~ lower average AUM of our U.S. ~~Business segment.~~listed products arising from market depreciation and net outflows, as well as a 3 basis point decline in our average global advisory fee. Our average global ETP advisory fee ~~has~~ declined ~~4 basis points,~~ from ~~0.50% to~~ 0.46% during the three months ended March 31, 2019 to 0.43% during the three months ended March 31, 2020 due to ~~the ETFS Acquisition and changes in product mix.~~

AUM mix shift.

Other income

Other income increased ~~44.0%~~43.3% from ~~$0.4~~$0.6 million during the three months ended March 31, ~~2018~~2019 to ~~$0.6~~$0.9 million in the comparable period in ~~2019~~2020 primarily due to higher creation/redemption fees ~~earned from the ETFS exchange-traded~~associated with our International listed products.

Operating Expenses

   Three Months Ended
March 31,    Change    Percent
Change
(in thousands)    2019    2018
Compensation and benefits
   $ 21,301    $ 18,832    $ 2,469    13.1 %
Fund management and administration
   15,166    10,912    4,254    39.0 %
Marketing and advertising
   2,680    3,195    (515 )    (16.1 %)
Sales and business development
   4,422    3,813    609    16.0 %
Contractual gold payments
   3,098    —      3,098    n/a
Professional and consulting fees
   1,482    1,636    (154 )    (9.4 %)
Occupancy, communications and equipment
   1,618    1,363    255    18.7 %
Depreciation and amortization
   269    355    (86 )    (24.2 %)
Third-party distribution fees
   2,400    1,725    675    39.1 %
Acquisition-related costs
   313    2,062    (1,749 )    (84.8 %)
Other
   2,053    1,790    263    14.7 %








Total expenses
   $ 54,802    $ 45,683    $ 9,119    20.0 %

   Three Months Ended
March 31,
As a Percent of Revenues:
   2019 2018
Compensation and benefits
   32.5 % 32.0 %
Fund management and administration
   23.2 % 18.5 %
Marketing and advertising
   4.1 % 5.4 %
Sales and business development
   6.8 % 6.5 %


	Three Months Ended March 31,				Change			Percent Change
(in thousands)	2020		2019		Change			Percent Change
Compensation and benefits	$	17,295	$	21,301	$	(4,006	)		(18.8	%)
Fund management and administration		14,485		15,166		(681	)		(4.5	%)
Marketing and advertising		2,468		2,680		(212	)		(7.9	%)
Sales and business development		3,417		4,422		(1,005	)		(22.7	%)
Contractual gold payments		3,760		3,098		662			21.4	%
Professional and consulting fees		1,273		1,482		(209	)		(14.1	%)
Occupancy, communications and equipment		1,551		1,618		(67	)		(4.1	%)
Depreciation and amortization		256		269		(13	)		(4.8	%)
Third-party distribution fees		1,355		2,400		(1,045	)		(43.5	%)
Acquisition and disposition-related costs		383		313		70			22.4	%
Other		1,997		2,053		(56	)		(2.7	%)

Total expenses	$	48,240	$	54,802	$	(6,562	)		(12.0	%)

   Three Months Ended
March 31,
As a Percent of Revenues:
   2019 2018
Contractual gold payments
   4.7 % n/a
Professional and consulting fees
   2.3 % 2.8 %
Occupancy, communications and equipment
   2.4 % 2.3 %
Depreciation and amortization
   0.4 % 0.6 %
Third-party distribution fees
   3.7 % 2.9 %
Acquisition-related costs
   0.5 % 3.5 %
Other
   3.1 % 3.1 %


Total expenses
   83.7 % 77.6 %

Three Months Ended
March 31,

As a Percent of Revenues:

2020

2019

Compensation and benefits

27.1
%
32.5
%
Fund management and administration

22.7
%
23.2
%
Marketing and advertising

3.9
%
4.1
%
38
Table of Contents

Three Months Ended
March 31,

As a Percent of Revenues:

2020

2019

Sales and business development

5.3
%
6.8
%
Contractual gold payments

5.9
%
4.7
%
Professional and consulting fees

2.0
%
2.3
%
Occupancy, communications and equipment

2.4
%
2.4
%
Depreciation and amortization

0.4
%
0.4
%
Third-party distribution fees

2.1
%
3.7
%
Acquisition and disposition-related costs

0.6
%
0.5
%
Other

3.1
%
3.1
%

Total expenses

75.5
%
83.7
%

Compensation and benefits

Compensation and benefits expense ~~increased 13.1%~~decreased 18.8% from ~~$18.8~~$21.3 million during the three months ended March 31, ~~2018~~2019 to ~~$21.3~~$17.3 million in the comparable period in ~~2019 primarily~~2020 due to ~~higher~~lower incentive compensation ~~expense~~accruals as well as $2.0 million of ~~our International Business segment associated with the ETFS Acquisition and~~ severance expense ~~of $2.0 million, partly offset by lower headcount costs.~~included in the prior period. Headcount ~~of our U.S. Business segment~~ was ~~157~~216 and ~~our International Business segment was 34~~210 at March 31, ~~2018 compared to 141~~2019 and ~~75, respectively, at~~ March 31, ~~2019.~~

2020, respectively.

Fund management and administration

Fund management and administration expense ~~increased 39.0%~~decreased 4.5% from ~~$10.9~~$15.2 million during the three months ended March 31, ~~2018~~2019 to ~~$15.2~~$14.5 million in the comparable period in ~~2019~~2020 primarily due to lower variable fees associated with lower average AUM of our U.S. listed products, partly offset by higher average AUM of our International ~~Business segment primarily associated with~~listed products. These expenses were also lower as a result of the ~~ETFS Acquisition.~~sale of our Canadian ETF business which was completed on February 19, 2020. We had ~~81 U.S. listed ETFs and 99 International listed ETPs at March 31, 2018 compared to~~ 77 U.S. listed ETFs and 457 International listed ETPs at March 31, ~~2019.~~

2019 compared to 77 U.S. listed ETFs and 254 International listed ETPs at March 31, 2020.

Marketing and advertising

Marketing and advertising expense decreased ~~16.1%~~7.9% from ~~$3.2~~$2.7 million during the three months ended March 31, ~~2018~~2019 to ~~$2.7~~$2.5 million in the comparable period in ~~2019~~2020 primarily due to lower discretionary spending ~~of our U.S. Business segment.~~

resulting from the

COVID-19

pandemic.

Sales and business development

Sales and business development expense ~~increased 16.0%~~decreased 22.7% from ~~$3.8~~$4.4 million during the three months ended March 31, ~~2018~~2019 to ~~$4.4~~$3.4 million in the comparable period in ~~2019~~2020 primarily due to ~~sales related activities of~~lower discretionary spending resulting from the ~~ETFS acquired business.~~

COVID-19

pandemic.

Contractual gold payments

Contractual gold payments expense ~~was~~increased 21.4% from $3.1 million during the three months ended March 31, 2019 ~~which~~to $3.8 million in the comparable period in 2020. This expense was associated with the payment of 2,375 ounces of gold ~~at an~~and was calculated using the average daily spot price of $1,304 and $1,583 per ~~ounce.~~

ounce during the three months ended March 31, 2019 and 2020, respectively.

Professional and consulting fees

Professional and consulting fees decreased ~~9.4%~~14.1% from ~~$1.6~~$1.5 million during the three months ended March 31, ~~2018~~2019 to ~~$1.5~~$1.3 million in the comparable period in ~~2019~~2020 due to lower spending on corporate consulting-related expenses.

Occupancy, communications and equipment

Occupancy, communications and equipment expense ~~increased 18.7%~~was essentially unchanged from ~~$1.4~~the three months ended March 31, 2019.

Depreciation and amortization

Depreciation and amortization expense was essentially unchanged from the three months ended March 31, 2019.

Third-party distribution fees

Third-party distribution fees decreased 43.5% from $2.4 million during the three months ended March 31, ~~2018~~2019 to ~~$1.6~~$1.4 million in the comparable period in ~~2019~~2020 primarily due to ~~additional office space associated with the ETFS Acquisition.~~

~~Depreciation~~lower fees for platform relationships.

Table of Contents

Acquisition and ~~amortization~~

~~Depreciation~~disposition-related costs

Acquisition and ~~amortization expense decreased 24.2%~~disposition-related costs increased 22.4% from ~~$0.4~~$0.3 million during the three months ended March 31, ~~2018~~2019 to ~~$0.3~~$0.4 million ~~primarily~~in the comparable period in 2020 due to the ~~closure~~completion of the sale of our ~~office in Japan.~~

~~Third-party distribution fees~~

~~Third-party distribution fees increased 39.1%~~Canadian ETF business.

Other

Other expenses were essentially unchanged from ~~$1.7~~the three months ended March 31, 2019.

Other Income/(Expenses)


	Three Months Ended March 31,						Change			Percent Change
(in thousands)	2020			2019			Change			Percent Change
Interest expense	$	(2,419	)	$	(2,892	)	$	473			(16.4	%)
(Loss)/gain on revaluation of deferred consideration		(2,208	)		4,404			(6,612	)		n/a
Interest income		163			779			(616	)		(79.1	%)
Impairments		(19,672	)		(572	)		(19,100	)		3,339.2	%
Other losses, net		(2,507	)		(4,627	)		2,120			(45.8	%)

Total other income/(expenses)	$	(26,643	)	$	(2,908	)	$	(23,735	)		816.2	%


	Three Months Ended March 31,
As a Percent of Revenues:	2020			2019
Interest expense		(3.8	%)		(4.4	%)
(Loss)/gain on revaluation of deferred consideration		(3.5	%)		6.7	%
Interest income		0.2	%		1.2	%
Impairment		(30.7	%)		(0.9	%)
Other losses, net		(3.9	%)		(7.0	%)

Total other income/(expenses)		(41.7	%)		(4.4	%)

Interest expense

Interest expense decreased 16.4% from $2.9 million during the three months ended March 31, ~~2018~~2019 to $2.4 million in the comparable period in ~~2019 primarily~~2020 due to~~one-time~~ ~~fees for~~ a ~~platform relationship.~~

~~Acquisition-related costs~~

~~Acquisition-related costs decreased 84.8% from $2.1 million~~lower level of debt outstanding as well as lower interest rates. Our effective interest rate during the three months ended March 31, ~~2018 to $0.3 million in the comparable period in~~ 2019 ~~as the integration of ETFS is essentially complete.~~

~~Other~~

Other expenses increased 14.7% from $1.8 million during the three months ended March 31, 2018 to $2.1 million in the comparable period in 2019 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
March 31,    Change    Percent
Change
(in thousands)    2019    2018
Interest expense
   $ (2,892 )    $ —      $ (2,892 )    n/a
Gain on revaluation of deferred consideration
   4,404    —      4,404    n/a
Interest income
   779    962    (183 )    (19.0 %)
Impairment
   (572 )    —      (572 )    n/a
Other losses, net
   (4,627 )    (261 )    (4,366 )    n/a








Total other income/(expenses)
   $ (2,908 )    $ 701    $ (3,609 )    n/a

   Three Months Ended March 31,
As a Percent of Revenues:
   2019 2018
Interest expense
   (4.4 %) n/a
Gain on revaluation of deferred consideration
   6.7 % n/a
Interest income
   1.2 % 1.6 %
Impairment
   (0.9 %) n/a
Other losses, net
   (7.0 %) (0.4 %)


Total other income/(expenses)
   (4.4 %) 1.2 %

~~Interest expense~~

Interest expense for the three months ended March 31, 2019 of $2.9 million was incurred principally in connection with our $200.0 million term loan, or the Term Loan, to facilitate the ETFS Acquisition. Our effective interest rate during the periodand 2020 was 5.5% and 5.0%, respectively, and includes our cost of borrowing and amortization of issuance costs.

~~Gain~~

(Loss)/gain on revaluation of deferred consideration

We recognized a gain on revaluation of deferred consideration of $4.4 million during the three months ended March 31, 2019 as compared to a loss of ($2.2) million during the three months ended March 31, 2020. The loss in the current quarter was due to an increase in the forward-looking price of gold ~~curve flattened~~ when compared to the forward-looking gold curve on December 31, ~~2018,~~2019, the date on which the deferred consideration was last measured. The magnitude of ~~the~~any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold. ~~See Note 11 to our Consolidated Financial Statements for further information.~~

Interest income

Interest income decreased ~~19.0%~~79.1% from ~~the three months ended March 31, 2018 to~~ $0.8 ~~million in the comparable period in 2019 due to the maturity of our short-term investment grade portfolio in the first quarter of 2018, partly offset bypaid-in-kind,~~ ~~or PIK, interest on a note receivable from AdvisorEngine Inc.~~

~~Impairment~~

~~We recognized an impairment of $0.6~~ million during the three months ended March 31, 2019 to $0.2 million in the comparable period in 2020 due to our AdvisorEngine unsecured convertible note receivable being placed on

non-accrual

status.

Impairment

During the three months ended March 31, 2020, we recognized a

non-cash

impairment charge of $19.7 million on our investment in AdvisorEngine (See Note 7 to our Consolidated Financial Statements). During the three months ended March 31, 2019, we recognized an impairment of $0.6 million in connection with the termination of our Japan office lease.

Table of Contents

Other losses, net

Other losses, net were ~~$0.3~~$4.6 million and ~~$4.6~~$2.5 million during the three months ended March 31, ~~2018~~2019 and ~~2019,~~2020, respectively. Included in the loss recognized during the three months ended March 31, 2019 and 2020 is a charge of $4.3 million and $6.0 million, respectively, arising from the release of a

tax-related

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 tax expense. In addition, ~~gains~~during the first quarter of 2020, we recognized a gain of $2.9 million associated with the sale of our Canadian ETF business (See Note 24 to our Consolidated Financial Statements). Gains and losses also generally arise from 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 three months ended March 31, 2020 of 21.5% resulted in an income tax benefit of $2.4 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due a $6.0 million reduction in unrecognized tax benefits, a $2.9 million

non-taxable

gain upon sale of our Canadian ETF business and a lower tax rate on foreign earnings, partly offset by a valuation allowance on capital losses, tax shortfalls associated with the vesting and exercise of stock-based compensation awards and a

non-deductible

loss on revaluation of deferred consideration.

Our effective income tax rate for the three months ended March 31, 2019 of negative 13.5% resulted in an income tax benefit of $1.0 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due a $4.3 million reduction in unrecognized tax benefits, the

non-taxable

gain on revaluation of deferred consideration and a lower tax rate on foreign earnings, partly offset by a valuation allowance applied to foreign net operating losses, tax shortfalls associated with the vesting and exercise of stock-based compensation awards and state and local income taxes.

Non-GAAP

Financial Measures

In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain

non-GAAP

information which we believe provides useful and meaningful information. Our ~~effective~~management reviews these

non-GAAP

financial measurements when evaluating our financial performance and results of operations; therefore, we believe it is useful to provide information with respect to these

non-GAAP

measurements so as to share this perspective of management.

Non-GAAP

measurements do not have any standardized meaning, do not replace nor are superior to GAAP financial measurements and are unlikely to be comparable to similar measures presented by other companies. These

non-GAAP

financial measurements should be considered in the context with our GAAP results. The

non-GAAP

financial measurements contained in this Report include:

Adjusted net income and adjusted diluted earnings per share.

We disclose adjusted net income and adjusted diluted earnings per share as

non-GAAP

financial measurements in order to report our results exclusive of items that are

non-recurring

or not core to our operating business. We believe presenting these

non-GAAP

financial measures provides investors with a consistent way to analyze our performance. These

non-GAAP

financial measures exclude the following:

Unrealized gains or losses on the revaluation of deferred consideration

: Deferred consideration is an obligation we assumed in connection with the ETFS acquisition that is carried at fair value. This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices. Changes in the forward-looking price of gold may have a material impact on the carrying value of the deferred consideration and our reported financial results. We exclude this item when arriving at adjusted net income and adjusted diluted earnings per share as it is not core to our operating business. The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.

Tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards

: GAAP requires the recognition of tax windfalls and shortfalls within income tax rate for the three months ended March 31, 2018 of 32.3% resulted in income tax expense of $4.5 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 and state and local income taxes, partly offset by tax windfalls associated withexpense. These items arise upon the vesting and exercise of stock-based compensation ~~awards.~~

~~Segment Results~~

~~The table below presents~~awards and the ~~net revenues, operating expenses and income before taxes~~magnitude is directly correlated to the number of awards vesting/exercised as well as the difference between the price of our ~~U.S. Business~~stock on the date the award was granted and ~~International Business reportable segments (in thousands, except for average assets during~~ the ~~period, which~~date the award vested or was exercised. We exclude these items when determining adjusted net income and adjusted diluted earnings per share as they introduce volatility in earnings and are ~~in millions).~~

   Three Months Ended March 31,
   2019 2018
U.S. Business Segment

Operating revenues

Advisory fees
   $ 42,517 $ 55,518
Other income
   106 147


Total operating revenues
   $ 42,623 $ 55,665


Total operating expenses
   $ (37,176 ) $ (39,030 )


Other income/(expenses)

Interest expense
   $ (192 ) $ —
Interest income
   779 962
Impairment
   (572 ) —
Other gains/(losses), net
   145 (226 )


Total other income
   $ 160 $ 736


Total income before taxes (U.S. Business Segment)
   $ 5,607 $ 17,371


Average assets during the period (in millions)
   $ 38,061 $ 45,618
Average ETF advisory fee during the period
   0.45 % 0.49 %
International Business Segment

Operating revenues

Advisory fees
   $ 22,323 $ 2,938
Other income
   539 301


Total operating revenues
   $ 22,862 $ 3,239


Total operating expenses
   $ (17,626 ) $ (6,653 )


Other income/(expenses)

Interest expense
   $ (2,700 ) $ —
Gain on revaluation of deferred consideration
   4,404 —
Other losses, net
   (4,772 ) (35 )


Total other expenses
   $ (3,068 ) $ (35 )


Total income/(loss) before taxes (International Business Segment)
   $ 2,168 $ (3,449 )


Average assets during the period (in millions)
   $ 19,616 $ 2,106
Average ETP advisory fee during the period
   0.47 % 0.57 %
Income/(loss) before taxes

U.S. Business segment
   $ 5,607 $ 17,371
International Business segment
   2,168 (3,449 )


Total income before taxes
   $ 7,775 $ 13,922

~~Three Months Ended March 31, 2019 Compared~~not core to ~~Three Months Ended March 31, 2018~~

~~U.S. Business segment~~

Operating revenues of the U.S. Business segment decreased 23.4% from $55.7 million during the three months ended March 31, 2018 to $42.6 million in the comparable period in 2019. The decrease was attributable 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 certainour operating business.

Other items

: Impairment charges, gain recognized upon sale of our ~~U.S. listed ETFs. Our average U.S. advisory fee was 0.49% and 0.45% during the three months ended March 31, 2018 and 2019, respectively.~~

Operating expenses of the U.S. Business segment decreased 4.8% from $39.0 million during the three months ended March 31, 2018 to $37.2 million in the comparable period in 2019 due primarily to lower acquisition-related costs, lower marketing and advertising expense, lower fund management and administration expense, lower professional fees and lower incentive compensation. These decreases were partly offset by higher third-party distribution fees andCanadian ETF business, severance expense and acquisition and disposition-related costs are excluded when determining adjusted net income and adjusted earnings per share.

Table of ~~$2.0 million. Headcount of our U.S. Business segment was 157 and 141 at March 31, 2018 and 2019, respectively.~~

Other income/(expenses) of the U.S. Business segment were $0.2 million during the three months ended March 31, 2019, which was comprised of interest income of $0.8 million and other net gains of $0.2 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 ($0.2) million. Other income/(expenses) for the three months ended March 31, 2018 were $0.7 million and were comprised of interest income of $0.9 million, partly offset by other net losses of ($0.2) million.

~~International Business segment~~

Operating revenues of the International Business segment increased 605.8% from $3.2 million during the three months ended March 31, 2018 to $22.9 million in the comparable period in 2019. This increase was attributable to higher average AUM associated with the ETFS Acquisition.

Operating expenses of the International Business segment increased 164.9% from $6.7 million during the three months ended March 31, 2018 to $17.6 million in the comparable period in 2019 primarily due to the ETFS Acquisition. Fund management and administration expense and compensation expense increased due to higher average AUM and higher headcount, respectively. Sales and business development expense increased due to sales related activities of the ETFS acquired business. In addition, during the three months ended March 31, 2019 we recognized contractual gold payment expense of $3.1 million.

Other income/(expenses) of our International Business segment were ($3.1) million during the three months ended March 31, 2019, which was comprised of a loss of ($4.3) million arising from the reduction of a~~tax-related~~ indemnification asset upon the expiration of the statute of limitations, interest expense of ($2.7) million and other net losses of ($0.4) million. These losses were partly offset by a gain on revaluation of deferred consideration of $4.4 million.

Contents


	Three Months Ended
	Mar. 31,			Mar. 31,
Adjusted Net Income and Diluted Earnings per Share:	2020			2019
Net (loss)/income, as reported	$	(8,638	)	$	8,824
Add back/(deduct): Loss/(gain) on revaluation of deferred consideration		2,208			(4,404	)
Add back: Impairment, net of income taxes		19,672			572
Deduct: Gain recognized upon sale of our Canadian ETF business		(2,877	)		—
Add back: Tax shortfalls upon vesting and exercise of stock-based compensation awards		501			971
Add back: Acquisition and disposition-related costs, net of income taxes		358			253
Add back: Severance expense, net of income taxes		—			1,521

Adjusted net income	$	11,224		$	7,737
Deduct: Income distributed to participating securities		(555	)		(544	)
Deduct: Undistributed income allocable to participating securities		(654	)		(276	)

Adjusted net income available to common stockholders	$	10,015		$	6,917
Weighted average diluted shares, excluding participating securities (See Note 20 to our Consolidated Financial Statements)		152,535			151,821

Adjusted earnings per share – diluted	$	0.07		$	0.05

Liquidity and Capital Resources

The following table summarizes key data regarding our liquidity, capital resources and ~~use~~uses of capital to fund our operations:

   March 31,
2019    December 31,
2018
Balance Sheet Data (in thousands):

Cash and cash equivalents
   $ 78,942    $ 77,784
Accounts receivable
   28,136    25,834
Securitiesheld-to-maturity
   20,159    20,180
Securities owned, at fair value
   6,419    8,873




Total: Liquid assets
   133,656    132,671
Less: Total current liabilities
   (62,753 )    (62,801 )




Subtotal
   70,903    69,870
Plus: Revolving credit facility—undrawn
   50,000    50,000




Total: Available liquidity
   $ 120,903    $ 119,870


	March 31, 2020			December 31, 2019
Balance Sheet Data (in thousands) :
Cash and cash equivalents	$	68,429		$	74,972
Accounts receivable		22,728			26,838
Securities owned, at fair value		20,261			17,319
Securities held-to-maturity		10,864			16,863

Total: Liquid assets		122,282			135,992
Less: Total current liabilities		(54,329	)		(79,041	)
Less: Regulatory capital requirement – certain international subsidiaries		(10,398	)		(12,312	)

Subtotal		57,555			44,639
Plus: Revolving credit facility – available capacity		17,128			27,908

Total: Available liquidity	$	74,683		$	72,547

   Three Months Ended March 31,
   2019    2018
Cash Flow Data (in thousands):

Operating cash flows
   $ 7,852    $ (4,836 )
Investing cash flows
   11    60,513
Financing cash flows
   (7,088 )    (4,812 )
Foreign exchange rate effect
   383    593




Increase in cash and cash equivalents
   $ 1,158    $ 51,458

Three Months Ended March 31,

2020

2019

Cash Flow Data (in thousands)
:

Operating cash flows
$
(2,634
) $
7,852

Investing cash flows

8,754

11

Financing cash flows

(11,391
)
(7,088
)
Foreign exchange rate effect

(1,272
)
383

(Decrease)/increase in cash and cash equivalents
$
(6,543
) $
1,158

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 regulatory capital requirements of certain international subsidiaries. Liquid assets consist of cash and cash equivalents, accounts receivable, securities

held-to-maturity

and securities owned, at fair value. Our securities owned, at fair value are highly liquid 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, deferred consideration and accrued incentive compensation for employees.

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See the section below titled “Credit Facility” for a discussion of our revolving credit facility.

Cash and cash equivalents decreased $6.5 million during the three months ended March 31, 2020 due to $5.1 million used to pay dividends on our common stock, $5.0 million used to repay our debt, $2.6 million used in operating activities, $1.5 million used to repurchase our common stock and $1.1 million used in other activities. These decreases were partly offset by $6.0 million of proceeds from

held-to-maturity

securities maturing or called prior to maturity and $2.8 million of net proceeds from the sale of our Canadian ETF business.

Cash and cash equivalents increased $1.1 million during the three months ended March 31, 2019 due to net cash provided by operating activities of $7.9 million and $0.3 million from changes in foreign exchange rates. These increases were partly offset by $5.1 million used to pay dividends on our common stock and $2.0 million used to repurchase our common stock.

Cash and cash equivalents increased $51.5 million during the three months ended March 31, 2018 due to $60.5 million from sales and maturities of debt securities available for sale and $0.6 million from changes in foreign exchange rates. These increases were partly offset by $4.8 million of net cash used in operating activities, $4.1 million used to pay dividends on our common stock and $0.7 million used to repurchase our common stock.

Credit Facility

On April 11, 2018, ~~and in connection with the ETFS Acquisition,~~ we entered into a credit agreement with Credit Suisse AG and certain other lenders. Under the credit agreement, the lenders extended to us a ~~$200.0 million~~term loan, or the Term Loan, ~~the net cash proceeds~~ of which ~~were used, together with other cash on hand, to complete the acquisition and pay certain related fees, costs and expenses,~~$174.0 million is currently outstanding, and made a $50.0 million revolving credit facility, or the Revolver, available to 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 ~~herein~~ 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 ~~an annual~~a rate per annum equal to LIBOR, plus up to 2.00% (commencing at LIBOR, plus 1.75%), and interest on the Revolver accrues at ~~an annual~~a 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 ~~an annual~~a 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 Term Loan does not amortize and the entire principal balance is due in a single payment on the maturity date.

The 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, equal to or less than the ratio set forth opposite such fiscal quarter:


~~Fiscal Quarter Ending~~	~~Total Leverage Ratio~~
~~March 31, 2019~~		~~2.75:1.00~~
~~June 30, 2019~~ Fiscal Quarter Ending	Total Leverage Ratio
March 31, 2020		~~2.50:~~ 2.25:1.00
~~September~~ June 30, ~~2019~~ 2020		~~2.50:~~ 2.25:1.00
~~December 31, 2019~~		~~2.50:1.00~~
~~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		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) as of such date to Consolidated EBITDA of ours and our restricted subsidiaries (as defined in the credit agreement) for the four consecutive fiscal quarters ended on such date.

The 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 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 ours, entering into affiliate transactions and asset sales. The 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.

We are in compliance with our covenants under the credit ~~agreement.~~

agreement and are actively exploring refinancing and extension alternatives as the facility matures within approximately the next 12 months.

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.

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Use of Capital

Our business does not require us to maintain a significant cash position. However, certain of our international subsidiaries ~~of our International Business segment~~ are required to maintain a minimum level of ~~net liquid assets,~~regulatory capital, which at March 31, ~~2019~~2020 was approximately ~~$12.2~~$10.4 million in the aggregate. Notwithstanding these ~~net liquid asset~~regulatory capital requirements, we expect that our main uses of cash will be to fund the ongoing operations of our business. ~~Also, as~~As part of our capital management, we use available capital to pay down our debt. We also 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, 2022, including purchases to offset future equity grants made under our equity plans. As previously mentioned, under the terms of the 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) has occurred and is continuing at the time the cash dividend payment or stock repurchase is made.

During the three months ended March 31, ~~2019,~~2020, we repurchased ~~311,213~~385,399 shares of our common stock under the repurchase program for an aggregate cost of ~~$2.0~~$1.5 million. At March 31, ~~2019, $83.7~~2020, $81.9 million remained under this program for future purchases.

Contractual Obligations

The following table summarizes our future ~~cash~~ payments associated with contractual obligations as of March 31, ~~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
   32,933    2,723    9,611    5,995    14,604










Total
   $ 232,933    $ 2,723    $ 209,611    $ 5,995    $ 14,604

2020:

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
$
174,000
$
—
$
174,000
$
—
$
—

Deferred consideration – gold payments
(1)

175,300

14,500

25,876

21,839

113,085

Operating leases

29,255

3,479

5,916

6,042

13,818

Total
$
378,555
$
17,979
$
205,792
$
27,881
$
126,903

(1) Paid from advisory fee income generated by any Company-sponsored financial product backed by physical gold with no recourse back to the Company for any unpaid amounts that exceed advisory fees earned (See Note 11 to our Consolidated Financial Statements).

Off-Balance
Sheet Arrangements

We do not have any

off-balance

sheet financing or other 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. 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~~occur. Goodwill~~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.

~~For impairment testing purposes, goodwill has been~~

Goodwill is allocated to our U.S. Business and European Business components. Effective January 1, 2020, for impairment testing purposes, these components are aggregated as a single reporting unit ~~which~~as they fall under the same operating segment and have similar economic characteristics. Previously, these components were tested separately for impairment when we were operating as more than one operating segment.

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Goodwill is assessed ~~annually~~ for impairment ~~on April 30~~^th. 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 ourits market capitalization when determining the fair value of ourthe reporting units.
units, in the aggregate.}

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 of 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

, 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.

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~~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 ~~June 2016,~~December 2019, the FASB issued ASU

2019-12,

Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes

(ASU

2019-12).

The main objective of the standard is to reduce complexity in the accounting for income taxes by removing the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income); (2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) exception to the general methodology for calculating income taxes in an interim period when a

year-to-date

non-income-based

tax; (b) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered as a separate transaction; (c) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; and (d) requiring that an entity reflect the enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. ASU

2019-12

is effective for years beginning after December 15, 2020, including the interim periods within those reporting periods. Early adoption is permitted. We have determined that this standard will not have a material impact on our financial statements.

Recently Adopted Accounting Pronouncements

On January 1, 2020, we adopted 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~~the standard, the FASB is responding to criticism that ~~today’s~~prior guidance ~~delays~~delayed recognition of credit losses. The standard ~~will replace today’s~~replaced the prior guidance’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, ~~will apply~~applies 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,~~

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prior guidance, except that the credit losses ~~will be~~are recognized as allowances rather than reductions in the amortized cost of the securities. Accordingly, the new methodology ~~will be~~is 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.~~time. The ASU also ~~simplifies~~simplified the accounting model for purchased credit-impaired debt securities and loans. ASU

2016-13

also ~~expands~~expanded the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. ~~ASU2016-13~~ ~~is effective for years beginning after December 15, 2019, including interim periods within those fiscal years under a modified retrospective approach. Early~~The adoption ~~is permitted for the periods beginning after December 15, 2018. We are currently evaluating the impact that~~of this standard, ~~will~~which is applicable to our trade receivables, notes receivable and

held-to-maturity

securities did not have a material impact on our consolidated financial ~~statements and plan to adopt this standard on~~statements.

On January 1, ~~2020.~~

~~In August 2018, the FASB issued~~2020, we adopted ASU

2018-13,

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

(ASU

2018-13),

which ~~modifies~~modified the disclosure requirements on fair value measurements, including removing the requirement to disclose (1) the 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 measurements. ASU

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. ~~ASU2018-13~~ ~~is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019 and early adoption is permitted.~~ This standard ~~will~~ only ~~impact~~impacted the disclosures pertaining to fair value ~~measurements. We plan~~measurements and were incorporated into the notes to ~~adopt this standard on January 1, 2020.~~

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

our consolidated financial statements.

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 our ETPs that results from fluctuations in securities or commodity prices, foreign currency exchange rates against the U.S. dollar, and interest rates. Nearly all our revenues are derived from advisory agreements for the WisdomTree ETPs. Under these agreements, the advisory fee we receive is based on the average market value of the assets in the WisdomTree ETP portfolios we manage.

Fluctuations in the value of 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

We invest our corporate cash in short-term interest earning assets, primarily money market instruments at a commercial bank, federal agency debt instruments and other securities which totaled ~~$27.4~~$33.9 million and ~~$25.8~~$34.5 million as of December 31, ~~2018~~2019 and March 31, ~~2019,~~2020, 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~~interest rate risk on borrowings under our 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~~(Note 12 to our Consolidated Financial Statements).

Exchange Rate Risk

~~Over the last few years, we have expanded our business globally and~~

We are subject to currency translation exposure on the results of our

non-U.S.

operations, primarily in ~~Europe~~the United Kingdom and ~~Canada.~~Europe. 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 theThe advisory fees earned ~~by ETFS~~on our International listed ETPs are predominantly in U.S. dollars (and also paid in gold ounces, as described below), however, 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 ~~and Canadian 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~~our ETPs could have a material adverse effect on ~~ETFS’s~~our AUM and revenues. In addition, a portion of the advisory fee revenues we receive on our ETPs backed by gold are paid in gold

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ounces. In addition, we pay gold ounces to satisfy our deferred consideration obligation ~~that we assumed in connection with the ETFS Acquisition (See Note~~(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.

~~ITEM 4. CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, ~~2019,~~2020, 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 March 31, ~~2019,~~2020, 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 the date of this Report, we are in the process of completing the integration of the acquired operations of ETFS into our overall internal control over financial reporting, or ICFR, and have deferred our assessment of the ICFR related to ETFS, which constituted 2% and 7% of total and net assets, respectively, at March 31, 2019, and 30% of revenues for the three months then ended.

~~Notwithstanding the ETFS Acquisition, during~~

During the quarter ended March 31, ~~2019,~~2020, there were no 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~~

ITEM 1. LEGAL PROCEEDINGS

None.

~~ITEM 1A. RISK FACTORS~~

~~You~~
ITEM 1A. RISK FACTORS

In addition to the risk factors and other information set forth below and elsewhere in this Report, 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 Report on Form

10-K

for the fiscal year ended December 31, ~~2018.~~

2019.

As a result of the recent global market reactions to the

COVID-19

pandemic, our assets under management, or AUM, have declined and adversely impacted our revenues and we face various potential liquidity and operational challenges due to the pandemic.

As a result of the recent global market reactions to the

COVID-19

pandemic, our AUM declined significantly during the first quarter of 2020, which adversely impacted our revenues. Future negative market reactions to the

COVID-19

pandemic would likely adversely impact our future financial results.

In addition, our credit facility includes a financial covenant that requires we maintain compliance with a leverage test. At March 31, 2020, we were in compliance this covenant and we continue to be in compliance as of the date of this Report. However, further pressures on our operating results may require that we use available liquidity to reduce our outstanding borrowing under the credit facility to maintain compliance with this requirement. The inability to maintain compliance with our covenants under our credit facility could accelerate the timeframe our outstanding debt comes due.

Further, in response to mandated precautions where applicable and to ensure the safety of our employees, all our employees are working remotely at this time to seek to mitigate the risks associated with the

COVID-19

virus. While our teams have been successful in working remotely, operational challenges may arise in the future. Many of the key service providers we rely on also have transitioned to working remotely. If we or they were to experience material disruptions in the ability for our or their employees to work remotely, such as disruptions in internet-based communications systems and networks or the availability of essential goods and services such as food or power, our ability to operate our business normally could be materially adversely disrupted. Similarly, to date our own employees and, we believe, the employees of our key service providers, have not experienced a material degree of illness due to the

COVID-19

virus. If our or their workforces, or key components thereof, were to experience significant illness, our ability to operate our business normally could be materially adversely disrupted. Any such material adverse disruptions to our business operations could have a material adverse impact on our results of operations or financial condition.

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Certain of our European listed products are subject to counterparty risks. Failure of the counterparties to fulfill their obligations could negatively impact our products and AUM, which could adversely affect our business.

Certain of our European listed products depend on the services of counterparties. The terms of contracts with counterparties are generally complex, frequently customized and often not subject to regulatory oversight, and are thus subject to a variety of risks, including the following:

Counterparty risk

– certain products are backed by swap, derivative or similar arrangements and are subject to risks associated with the creditworthiness of their counterparties;

Default

– a counterparty may not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the relevant arrangement (whether or not bona fide), a default (whether or not bona fide), or because of a credit, liquidity, regulatory, tax or operational problem; and

Uncollateralized obligation

– certain of our products are not collateralized. Products issued by WisdomTree Oil Securities Limited, or OSL, are backed by futures swaps purchased from an affiliate of the Royal Dutch Shell Company, or Shell. In the event of default under these purchased swaps, OSL would have only unsecured claims against Shell with no recourse to collateral.

These products are dependent on receipt of payments from such counterparties in order to satisfy payment obligations to investors. Any shortfall in the amounts received from counterparties, a voluntary or involuntary default by a counterparty, failure of the counterparty to perform its contractual obligations due to market stress or otherwise, or deterioration of the credit rating of a counterparty could result in:

losses for investors and the potentially limited ability to recover losses;

a compulsory redemption or other termination of the relevant products which may be earlier and at a different price to that which investors may receive had their investment not been redeemed or otherwise terminated;

the associated products trading at a discount to the value of the underlying assets;

the imposition of temporary restrictions on creation and redemption activity in the primary market in accordance with applicable product documentation. Such actions may impact the operation and liquidity of these products in the secondary market on exchange and the products may trade at a discount or premium; and/or

increased operational risks or transaction costs, which may negatively affect the investment performance of the relevant products and have a material adverse effect on our business and operations.

We currently depend on HSBC and JP Morgan to provide us with critical physical custody services for precious metals that back our ETCs. The failure of HSBC and JP Morgan to adequately safeguard the physical assets could materially adversely affect our business and harm WisdomTree ETC shareholders.

Certain products are backed by physical metal and are subject to risks associated with the custody of physical assets, including the risk that access to the metal held in the secure facilities managed by HSBC and JP Morgan could be restricted by natural events (such as an earthquake) or human actions (such as a terrorist attack or pandemic). In addition, there is a risk that the physical metal could be lost, stolen, damaged or restricted. The failure of HSBC and JP Morgan to successfully provide us with these services could result in financial loss to us and WisdomTree ETC shareholders and our recovery of any losses from a custodian,

sub-custodian

or insurer may be inadequate.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent sales of Unregistered Securities

None.

Use of Proceeds

Not applicable.

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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 us or any “affiliated purchaser” of shares of our common stock.

Period
   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
            (in thousands)
January 1, 2019 to January 31, 2019
   304,809    $ 6.43    304,809
February 1, 2019 to February 28, 2019
   —      $ —      —
March 1, 2019 to March 31, 2019
   6,404    $ 7.06    6,404





Total
   311,213    $ 6.44    311,213    $ 83,724


	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)
January 1, 2020 to January 31, 2020		378,408	$	3.86		378,408
February 1, 2020 to February 29, 2020		6,991	$	4.75		6,991
March 1, 2020 to March 31, 2020		—	$	—		—

Total		385,399	$	3.88		385,399	$	81,894

(1)

On April 24, 2019, our Board of Directors extended the term of our share repurchase program for three years through April 27, 2022. During the three months ended March 31, ~~2019,~~2020, we repurchased ~~311,213~~385,399 shares of our common stock under this program for an aggregate cost of approximately ~~$2.0~~$1.5 million. As of March 31, ~~2019, $83.7~~2020, $81.9 million remained under this program for future purchases. Under the terms of the 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) has occurred and is continuing at the time the stock repurchase is 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 is not restricted.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM 4. MINE SAFETY DISCLOSURES~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 5. OTHER INFORMATION~~

~~None.~~

~~ITEM 6. EXHIBITS~~

ITEM 5.

OTHER INFORMATION

None.

Table of Contents

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		Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form8-K, filed with the SEC on February 26, 2019)

~~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 (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form8-K filed with the SEC on April 13, 2018)

~~10.1~~		~~Share Sale Agreement among the Registrant, WisdomTree International and ETF Securities Limited dated November~~ ~~13, 2017 (incorporated by reference to Exhibit 4.6 of the Registrant’s Annual Report on Form10-K~~ ~~filed with the SEC on March~~ ~~1, 2018)~~

~~10.2~~		~~Waiver and Variation Agreement, dated April~~ ~~11, 2018, by and among the Registrant, WisdomTree International and ETF Securities Limited (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form8-K~~ ~~filed with the SEC on April~~ ~~13, 2018)~~

~~10.3~~ 31.1 (1)		~~Credit Agreement, dated April~~ 11, 2018, by and among the Registrant, 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 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form~~8-K~~ ~~filed with the SEC on April~~ ~~13, 2018)~~

~~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~~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


~~Exhibit No.~~		~~Description~~

~~101 (1)~~
	101 (1)		Financial Statements from the Quarterly Report on Form 10-Q of the Company for the three months ended March 31, ~~2019,~~2020, formatted in XBRL: (i) Consolidated Balance Sheets at March 31, ~~2019~~2020 (Unaudited) and December 31, ~~2018;~~2019; (ii) Consolidated Statements of Operations and Comprehensive (Loss)/Income for the three months ended March 31, ~~2019~~2020 and March 31, ~~2018~~2019 (Unaudited); (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, ~~2019~~2020 and March 31, ~~2018~~2019 (Unaudited); (iv) Consolidated Statements of Cash Flows for the three months ended March 31, ~~2019~~2020 and March 31, ~~2018~~2019 (Unaudited); and (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

Table of Contents


Exhibit No.		Description

	104 (1)	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

(1)	Filed herewith.

Table of Contents

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^{8th
day of May 2019.
2020.}


WISDOMTREE INVESTMENTS, INC.

~~By:~~
By:		/s/ Jonathan Steinberg
		Jonathan Steinberg
		~~President and~~ Chief Executive Officer (Principal Executive Officer)

WISDOMTREE INVESTMENTS, INC.

~~By:~~
By:		/s/ Amit Muni
		Amit Muni
		Chief Financial Officer (Principal Financial Officer)

WISDOMTREE INVESTMENTS, INC.

~~By:~~
By:		/s/ Bryan Edmiston
		Bryan Edmiston
		Chief Accounting Officer (Principal Accounting Officer)


	March 31, 2019			December 31, 2018
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	78,942		$	77,784
Securities owned, at fair value		6,419			8,873
Accounts receivable		28,136			25,834
Income taxes receivable		1,770			1,181
Prepaid expenses		4,037			4,441
Other current assets		164			163

Total current assets		119,468			118,276
Fixed assets, net		8,863			9,122
Note receivable, net (Note 8)		29,317			28,722
Indemnification receivable (Note 21)		31,593			34,876
Securitiesheld-to-maturity		20,159			20,180
Deferred tax assets, net		3,998			7,042
Investments, carried at cost (Note 9)		28,080			28,080
Right of use assets – operating leases (Note 14)		19,446			—
Goodwill (Note 23)		85,856			85,856
Intangible assets (Note 23)		603,251			603,209
Other noncurrent assets		1,486			2,155

Total assets	$	951,517		$	937,518

Liabilities and stockholders’ equity
Liabilities
Current liabilities:
Fund management and administration payable	$	26,921		$	22,508
Compensation and benefits payable		9,214			18,453
Deferred consideration – gold payments (Note 11)		11,857			11,765
Securities sold, but not yet purchased, at fair value		1,338			1,698
Operating lease liabilities (Note 14)		3,651			—
Accounts payable and other liabilities		9,772			8,377

Total current liabilities		62,753			62,801
Long-term debt (Note 12)		195,174			194,592
Deferred consideration – gold payments (Note 11)		145,290			149,775
Operating lease liabilities (Note 14)		20,704			—
Deferred rent payable		—			4,570
Other noncurrent liabilities (Note 21)		31,593			34,876

Total liabilities		455,514			446,614

Preferred stock – Series ANon-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: 155,056 and 153,202 at March 31, 2019 and December 31, 2018, respectively		1,551			1,532
Additionalpaid-in capital		364,717			363,655
Accumulated other comprehensive income		758			467
Accumulated deficit		(3,592	)		(7,319	)

Total stockholders’ equity		363,434			358,335

Total liabilities and stockholders’ equity	$	951,517		$	937,518


	Three Months Ended March 31,
	2019			2018
Operating Revenues:
Advisory fees	$	64,840		$	58,456
Other income		645			448

Total revenues		65,485			58,904
Operating Expenses:
Compensation and benefits		21,301			18,832
Fund management and administration		15,166			10,912
Marketing and advertising		2,680			3,195
Sales and business development		4,422			3,813
Contractual gold payments (Note 11)		3,098			—
Professional and consulting fees		1,482			1,636
Occupancy, communications and equipment		1,618			1,363
Depreciation and amortization		269			355
Third-party distribution fees		2,400			1,725
Acquisition-related costs (Note 3)		313			2,062
Other		2,053			1,790

Total expenses		54,802			45,683

Operating income		10,683			13,221
Other Income/(Expenses):
Interest expense		(2,892	)		—
Gain on revaluation of deferred consideration – gold payments (Note 11)		4,404			—
Interest income		779			962
Impairment (Note 14)		(572	)		—
Other losses, net		(4,627	)		(261	)

Income before taxes		7,775			13,922
Income tax (benefit)/expense		(1,049	)		4,498

Net income	$	8,824		$	9,424

Earnings per share—basic	$	0.05		$	0.07

Earnings per share—diluted	$	0.05		$	0.07

Weighted-average common shares—basic		151,625			135,329

Weighted-average common shares—diluted		166,811			136,468

Cash dividends declared per common share	$	0.03		$	0.03


	For the Three Months Ended March 31, 2019
	Common Stock						Additional Paid-In Capital			Accumulated Other		Accumulated Deficit			Total
	Shares Issued			Par Value			Additional 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		2,145			21			(21	)		—		—			—
Shares repurchased		(311	)		(2	)		(2,003	)		—		—			(2,005	)
Exercise of stock options, net		20			—			14			—		—			14
Stock-based compensation		—			—			3,072			—		—			3,072
Other comprehensive income		—			—			—			291		—			291
Dividends		—			—			—			—		(5,097	)		(5,097	)
Net income		—			—			—			—		8,824			8,824

Balance—March 31, 2019		155,056		$	1,551		$	364,717		$	758	$	(3,592	)	$	363,434


	For the Three Months Ended March 31, 2020
	Common Stock						Additional Paid-In Capital			Accumulated Other			Accumulated Deficit			Total
	Shares Issued			Par Value			Additional Paid-In Capital			Comprehensive Income			Accumulated Deficit			Total
Balance – January 1, 2020		155,264		$	1,553		$	352,658		$	945		$	(17,744	)	$	337,412
Restricted stock issued and vesting of restricted stock units, net		1,438			14			(14	)		—			—			—
Shares repurchased		(385	)		(3	)		(1,492	)		—			—			(1,495	)
Exercise of stock options, net		107			—			240			—			—			240
Stock-based compensation		—			—			3,239			—			—			3,239
Other comprehensive loss		—			—			—			(853	)		—			(853	)
Dividends		—			—			(5,136	)		—			—			(5,136	)
Net loss		—			—			—			—			(8,638	)		(8,638	)

Balance – March 31, 2020		156,424		$	1,564		$	349,495		$	92		$	(26,382	)	$	324,769


Operating Revenues:	Three Months Ended March 31, 2018
Advisory fees (previously reported)	$	58,756
Other ETP fees reclassified to Other income		(300	)

Advisory fees (currently reported)	$	58,456

Other income (previously reported)	$	849
Other ETP fees reclassified from Advisory fees		300
Interest income reclassified to Other Income/(Expenses)		(962	)
Realized and unrealized losses reclassified to Other losses, net		261

Other income (currently reported)	$	448

Total revenues (currently reported)	$	58,904


Other Income/(Expenses):
Interest income reclassified from operating revenues	$	962

Other losses, net (previously reported)	$	—
Realized and unrealized losses reclassified from operating revenues		(261	)

Other losses, net (currently reported)	$	(261	)


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


	March 31, 2019
	Total		Level 1		Level 2		Level 3
Assets:
Recurring fair value measurements:
Cash equivalents	$	566	$	566	$	—	$	—
Securities owned, at fair value		6,419		6,419		—		—

Total	$	6,985	$	6,985	$	—	$	—


Liabilities:
Recurring fair value measurements:
Deferred consideration (Note 11)	$	157,147	$	—	$	—	$	157,147
Securities sold, but not yet purchased		1,338		1,338		—		—

Total	$	158,485	$	1,338	$	—	$	157,147


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

Total	$	8,897	$	8,897	$	—	$	—


Non-recurring fair value measurements:
Thesys – 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


	Three Months Ended March 31,
	2019			2018
Deferred consideration (See Note 11)
Beginning balance	$	161,540		$	—
Net realized losses/(gains)⁽¹⁾		3,098			—
Net unrealized losses/(gains)⁽²⁾		(4,404	)		—
Settlements		(3,087	)		—

Ending balance	$	157,147		$	—


	March 31, 2019		December 31, 2018
Securities Owned
Trading securities	$	6,419	$	8,873

Securities Sold, but not yet Purchased
Trading securities	$	1,338	$	1,698


	March 31, 2019		December 31, 2018
Federal agency debt instruments (amortized cost)	$	20,159	$	20,180


	March 31, 2019			December 31, 2018
Note receivable (face value)	$	30,000		$	30,000
Less: Original issue discount (“OID”), unamortized		(2,378	)		(2,582	)
Plus: PIK interest		1,695			1,304

Total note receivable, net	$	29,317		$	28,722


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

Total	$	28,080	$	28,080


Remainder of 2019	$	2,723
2020		3,695
2021		2,958
2022		2,958
2023		2,958
2024 and thereafter		17,641

Total future minimum lease payments (undiscounted)	$	32,933


Remainder of 2018	$	3,072
2019		3,764
2020		3,516
2021		3,146
2022		2,958
2023 and thereafter		20,599

Total future minimum lease payments (undiscounted)	$	37,055


	March 31, 2019		December 31, 2018
Carrying Amount - Assets
Preferred stock	$	25,000	$	25,000
Note receivable - unsecured		29,317		28,722

Total carrying amount - Assets	$	54,317	$	53,722

Maximum exposure to loss	$	54,317	$	53,722


	March 31, 2019
	Unrecognized Stock- Based Compensation		Average Remaining Vesting Period
Employees and directors restricted stock awards	$	24,012		2.48


	Stock Options			RSAs			RSUs			PRSUs
Balance at January 1, 2019		570,537			1,957,102			9,494			—
Granted		—			2,233,878			35,283			270,872	⁽¹⁾
Exercised/vested		(20,000	)		(827,721	)		(4,341	)		—
Forfeitures		—			(93,194	)		—			—

Balance at March 31, 2019		550,537			3,270,065			40,436			270,872	⁽¹⁾


	March 31, 2019			December 31, 2018
Deferred tax assets:
NOLs – Foreign	$	8,222		$	6,605
Goodwill and intangible assets		1,794			1,841
Accrued expenses		1,358			2,699
Stock-based compensation		1,189			2,673
Net lease liability		1,172			1,184
Capital losses		794			794
NOLs – U.S.		635			762
Other		37			40

Deferred tax assets		15,201			16,598

Deferred tax liabilities:
Fixed assets and prepaid assets		1,439			1,433
Unrealized gains		748			724

Deferred tax liabilities		2,187			2,157

Total deferred tax assets less deferred tax liabilities		13,014			14,441
Less: valuation allowance		(9,016	)		(7,399	)

Deferred tax assets, net	$	3,998		$	7,042


	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


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

Balance at March 31, 2019	$	84,057	$	1,799	$	85,856


	Advisory Agreements (ETFS)		Advisory Agreements (Questrade AUM)		Total
Balance at January 1, 2019	$	601,247	$	1,962	$	603,209
Foreign currency translation		—		42		42

Balance at March 31, 2019	$	601,247	$	2,004	$	603,251


	Advisory Agreements (ETFS)		Advisory Agreements (Questrade AUM)			Total
Balance at January 1, 2020	$	601,247	$	2,047		$	603,294
Decreases (1)		—		(1,992	)		(1,992	)
Foreign currency translation		—		(55	)		(55	)

Balance at March 31, 2020	$	601,247	$	—		$	601,247


	Three Months Ended March 31,				Change		Percent Change
	2019		2018		Change		Percent Change
Global AUM (in millions)
Average global AUM	$	57,677	$	47,724	$	9,953		20.9	%

Operating Revenues (in thousands)
Advisory fees	$	64,840	$	58,456	$	6,384		10.9	%
Other income		645		448		197		44.0	%

Total revenues	$	65,485	$	58,904	$	6,581		11.2	%


	March 31, 2019			December 31, 2018
Balance Sheet Data (in thousands):
Cash and cash equivalents	$	78,942		$	77,784
Accounts receivable		28,136			25,834
Securitiesheld-to-maturity		20,159			20,180
Securities owned, at fair value		6,419			8,873

Total: Liquid assets		133,656			132,671
Less: Total current liabilities		(62,753	)		(62,801	)

Subtotal		70,903			69,870
Plus: Revolving credit facility—undrawn		50,000			50,000

Total: Available liquidity	$	120,903		$	119,870


	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		32,933		2,723		9,611		5,995		14,604

Total	$	232,933	$	2,723	$	209,611	$	5,995	$	14,604


Period	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
							(in thousands)
January 1, 2019 to January 31, 2019		304,809	$	6.43		304,809
February 1, 2019 to February 28, 2019		—	$	—		—
March 1, 2019 to March 31, 2019		6,404	$	7.06		6,404

Total		311,213	$	6.44		311,213	$	83,724

Three Months
Ended
March 31, 2018

Net income

(including a loss on revaluation of deferred consideration of $2,555)