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WisdomTree, Inc. (WT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong bottom-line despite seasonal and non-recurring costs: operating revenues were $110.7M, diluted EPS $0.18 ($0.17 adjusted), and operating margin 31.7%; YoY revenue rose 21.9%, while margin compressed QoQ due to custody migration and discretionary spend .
  • AUM ended at $109.8B (-2.5% QoQ) with ($0.3)B net outflows; flows were pressured in EM equity, commodity and fixed income, partly offset by U.S. equity and crypto inflows .
  • Management guided FY2025 to 81–82% gross margin, comp-to-revenue of 28–30%, discretionary spend $68–72M, and adjusted interest expense ~$20M, highlighting continued margin discipline and capital efficiency (weighted average diluted shares 149–150M) .
  • Stock catalysts: accelerating models business (2,500 users; $3.83B AUM; targeted +25–30% users and +35–40% model AUM in 2025), expanding tokenization footprint (Prime/Connect KPIs disclosed), and ongoing revenue diversification via “other revenues” from European-listed products .

What Went Well and What Went Wrong

What Went Well

  • Revenue diversification and scale: adjusted revenues of $110.5M (+~1% QoQ; +22% YoY) with other revenues from European ETPs sustaining capture away from the expense ratio; gross margin at 79.3% despite migration costs .
  • Models momentum: 2,500 model users and $3.83B model AUM at year-end; management targeting +25–30% user growth and +35–40% model asset growth in 2025 .
  • Digital assets/tokenization: disclosed baselines for Prime/Connect (26k opened accounts; 2.3k funded; 143 daily transactions; $31M total digital AUM including $3M Prime AUM) and onboarding first WisdomTree Connect customers for tokenized money market funds on Ethereum .
  • Quote (CEO): “Earnings per share was up 73% year-over-year… we will remain disciplined in executing margin expansion, proactive in accretive capital deployment, and focused on driving strategic innovation” .

What Went Wrong

  • Net outflows and AUM drift: ($0.3)B net outflows in Q4 and end-period AUM down 2.5% QoQ due to market depreciation and outflows in EM, commodity and fixed income .
  • Margin compression QoQ: operating margin fell to 31.7% (from 36.0%) on BNY custody migration costs and seasonally higher discretionary spending; adjusted operating margin decreased to 31.7% from 37.3% .
  • Higher interest expense: +11.7% QoQ (and +49.4% YoY) from greater debt outstanding; while interest income improved, the net headwind remains .
  • Analyst concern: Prime conversion ratio (26k opened vs 2.3k funded accounts) raised questions; management expects conversion to improve with onboarding, stablecoin on/off ramps and enhanced funding methods .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Operating Revenues ($USD Millions)$90.8 $113.2 $110.7
Operating Revenues, as adjusted ($USD Millions)$90.8 $109.5 $110.5
Diluted EPS ($USD)$0.16 $(0.13) $0.18
Adjusted Diluted EPS ($USD)$0.11 $0.18 $0.17
Gross Margin % (adjusted)79.7% 80.8% 79.3%
Operating Income Margin %28.7% 36.0% 31.7%
Adjusted Operating Income Margin %28.7% 37.3% 31.7%
KPIsQ4 2023Q3 2024Q4 2024
AUM — End of Period ($USD Billions)$100.1 $112.6 $109.8
Net (Outflows)/Inflows ($USD Billions)$(0.3) $(2.4) $(0.3)
Average AUM ($USD Billions)$96.6 $110.4 $112.3
Average Advisory Fee (%)0.36% 0.37% 0.36%
Adjusted Revenue Yield (%)0.37% 0.39% 0.39%
Dividend per share ($USD)$0.03 (declared) $0.03 (declared) $0.03 (declared)
Category End-of-Period Assets ($USD Billions)Q3 2024Q4 2024
U.S. Equity$34.643 $35.414
Commodity & Currency$23.034 $21.906
Fixed Income$20.767 $20.043
International Developed Market Equity$18.075 $17.602
Emerging Market Equity$12.452 $10.468
Leveraged & Inverse$2.082 $1.924
Cryptocurrency$1.054 $1.912
Alternatives$0.470 $0.510
Number of ETPs — End of Period352 353

Notes:

  • The QoQ revenue decline reflects lapping $3.7M insurance-related “other revenues” recognized in Q3 tied to the SEC ESG settlement; adjusted revenues rose QoQ (110.5 vs 109.5) .
  • QoQ margin decline due to BNY custody migration non-recurring costs and seasonal discretionary spend .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Compensation-to-Revenue Ratio (%)FY 202528–29% (FY 2024) 28–30% Slightly widened/raised range
Q1 Compensation Expense ($USD Millions)Q1 2025—~$34–35 New disclosure
Discretionary Spending ($USD Millions)FY 2025$62–65 (FY 2024) $68–72 Raised
Gross Margin (%)FY 202580–81 (FY 2024) ~81–82 Raised
Third-Party Distribution ($USD Millions)FY 2025$10–11 (FY 2024) $11–12 Raised
Adjusted Interest Expense ($USD Millions)FY 2025~16 (FY 2024) ~20 Raised (due to incremental debt)
Interest Income ($USD Millions)FY 2025~6 (FY 2024) ~7 Raised
Weighted Avg Diluted Shares (Millions)FY 2025147–148 (Q4 2024) 149–150 Slightly higher
Dividend per share ($USD)Q4 2024$0.03 $0.03 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Models & Advisor SolutionsAccessible market expanded to 85k advisors and ~$18T assets; steady additions ~250 per quarter; model AUM contributes 10–12% of U.S. ETF flows 2,500 users; $3.83B AUM; targets +25–30% users and +35–40% AUM in 2025 Accelerating penetration
Digital Assets/TokenizationPrime live in ~44 states; Connect announced and going live; focus on tokenized money market funds; B2B2C partnerships contemplated Prime/Connect KPIs disclosed; first Connect customers onboarded; tokenized money market funds on Ethereum; regulatory backdrop seen as improving Execution traction; regulatory tailwinds
Revenue Diversification (“Other revenue”)Other revenue run-rate ~$8M per quarter; asset/transaction-based capture in Europe Continued contribution; adjusted revenues up QoQ despite lower GAAP other revenue vs Q3 Sustained, albeit variable
Capital ManagementConvertible notes refinanced (3.25% due 2029); preferred share repurchases; buybacks Emphasis on accretive capital deployment, potential M&A/partnerships Ongoing discipline
Regulatory/LegalSEC ESG settlement penalty and insurance-related revenue in Q3; effective tax rate elevated Q4 margins impacted by BNY custody migration costs; effective tax rate 20.1% (adjusted 23.5%) Transition-related costs, tax normalizing
AI/Technology Initiatives—Embedding AI into workflows to enhance scalability and decision speed Newly highlighted

Management Commentary

  • CFO: “Adjusted revenues were $110.5 million during the quarter, up 1% sequentially… our adjusted operating margin was 33.6%… adjusted net income… $25.3 million or $0.17 a share. The net impact of… nonrecurring items was about $0.01 a share.”
  • COO/President: “We ended the year with over 2,500 model users and $3.83 billion in model assets… projecting 25% to 30% annual growth in model users and 35% to 40% annual growth in model assets.”
  • CEO: “We will remain disciplined in executing margin expansion… more fully embedding AI into our daily workflows… explore inorganic growth opportunities like M&A and partnerships if they are accretive and strategic.”
  • Head of Digital Assets: “We’re in a great spot… technical platform + ’40 Act expertise + regulated entities (NY Trust Company)… build a real competitive moat” .

Q&A Highlights

  • Strategic M&A/partnerships: CEO open to ETF sponsors, product lines, and technology; “on our front foot” seeing opportunities .
  • Regulatory stance and crypto: Management sees “step function change” in pro-innovation environment; expects broader U.S. retail access and product innovation beyond Bitcoin .
  • European crypto ETP suite: Broad offerings (BTC, ETH, SOL, ADA, DOT, baskets); XRP one of fastest-growing; staking rewards shared between issuer and investors depending on product staking levels .
  • Prime conversion: Low funded/total accounts ratio typical for fintech; plans to improve onboarding, funding methods, remarketing; stablecoin on/off ramps expected to lift conversion .
  • Adviser portfolio consultations: Expanded service to deepen penetration, improve win rates, and drive sticky flows .

Estimates Context

  • S&P Global consensus EPS, revenue, and EBITDA estimates for Q4 2024 were unavailable at time of writing due to data access limits. As a result, estimate comparisons are not included in tables [SPGI access error].
  • Implication: Given adjusted revenues rose QoQ and margins dipped on non-recurring items, estimate revisions (where available) would likely focus on FY2025 margin trajectory, comp ratio, and interest expense run-rate rather than Q4 headline beats/misses .

Key Takeaways for Investors

  • Revenue durability: Adjusted revenues rose QoQ (110.5 vs 109.5) even as GAAP other revenue normalized; diversified capture from European ETPs supports topline resilience .
  • Margin path: Gross margin guide to 81–82% and comp-to-revenue 28–30% for FY2025 point to continued structural margin expansion despite Q4 migration/seasonality headwinds .
  • Growth engines: Models (+25–30% users; +35–40% AUM targeted in 2025) and tokenization (Prime/Connect KPIs disclosed; first Connect institutions live) can drive sustained organic growth and narrative re-rating .
  • Capital discipline: Higher adjusted interest expense (~$20M) reflects accretive capital actions (preferred/convertible refinancing); share count down materially with 2025 weighted average 149–150M .
  • Flows mix watch: EM, commodity, and fixed income outflows weighed in Q4; U.S. equity and crypto inflows (notably in Europe) partly offset—monitor category rotations and market beta .
  • Near-term trading: Expect focus on 2025 margin guidance clarity, Prime/Connect conversion momentum (stablecoin ramps), and continued European crypto ETP traction as catalysts .
  • Medium-term thesis: Scaling models and tokenization platforms alongside disciplined expenses and capital deployment support EPS compounding and potential multiple expansion advocated by management .