WisdomTree, Inc. Q4 FY2024 earnings call

• 2024 was marked by AUM growth of nearly 10%, adjusted operating margin expansion of 680 basis points, and adjusted EPS up over 70% with a 50% increase in stock price.
• Models business: Over 2,500 Model users and $3.83 billion in Model assets in 2024, with projected 25%-30% annual growth in Model users and 35%-40% in Model assets in 2025.
• Digital assets: Faced regulatory headwinds delaying implementation by about two years, but on and off ramps for blockchain assets and traditional payments near activation, with state approvals in reach and a pro-innovation administration offering opportunities.
• Growth and revenue diversification: Committed to diversifying revenue streams beyond the expense ratio, with firm-wide total revenue yield more resilient and expanding faster than expense ratio revenue.
• Disciplined execution: 2024 saw 21% revenue growth, 52% growth in adjusted operating income, and repurchased over 19 million shares in 2024. Plan to embed AI into workflows and explore M&A/partnerships if accretive and strategic.
• Strategic innovation: Focus on tokenization, with tokenized real world assets growing to over $200 billion in AUM, WisdomTree Connect onboarded first customers for tokenized money market funds on Ethereum, and pro-innovation administration paving way for faster approvals.

In Q4, adjusted revenues were $110.5 million, up 1% sequentially and approximately 22% higher than the same period last year, driven by higher average AUM. AUM closed the year at $109.8 billion, up almost 10% from the prior year. Year-over-year adjusted operating margin expanded by 680 basis points. The Models business ended the year with over 2,500 Model users and $3.83 billion in Model assets, reflecting 29% user growth and 28% Model assets growth year-over-year.

• Compensation to revenue ratio to range from 28% to 30% in 2025, including planned hires and compensation adjustments.
• Discretionary spending anticipated to range from $68 million to $72 million.
• Gross margin anticipated to be about 81% to 82%.
• Third party distribution expense anticipated to range from $11 million to $12 million.
• Annual adjusted interest expense guidance approximately $20 million, interest income approximately $7 million.
• Weighted average diluted shares anticipated to be $149 million to $150 million in 2025.
• Model users projected to grow 25%-30% annually and Model assets 35%-40% annually in 2025.

• Regulatory headwinds for digital assets, delaying implementation timeline by about two years.
• Lack of seamless access to the on-chain community, a primary target market.
• Need for additional state level approvals, including in Texas, to unlock growth opportunities.

Q: Jeremy Campbell asks Will Peck about WisdomTree's competitive landscape in a more open crypto environment.

A: Will Peck states there will be more competition, but WisdomTree has competitive moats including a technical platform, familiarity with the 40 Act structure, and broader regulatory innovation.

Q: Brennan Hawken asks about M&A/partnerships interest and crypto administration actions.

A: Jono Steinberg mentions interest in ETF sponsors, product lines, technology; Jono discusses SEC actions and regulatory clarity as catalysts for crypto growth.

Q: Mike Grondahl asks about European crypto funds and their expansion.

A: Jeremy Schwartz mentions a broad suite of crypto offerings in Europe including Bitcoin, Ethereum, Solana, etc., with plans to do more; Will Peck expects innovation in US crypto similar to Europe in 2025.

Q: Unidentified Analyst asks about use cases for WisdomTree Prime.

A: Will Peck mentions tokenized money market funds, WisdomTree Prime Visa debit card, and WisdomTree Connect for on-chain firms seeking yield and diversification.

Q: Chris Kotowski asks about 26,000 opened accounts vs. 2,300 funded.

A: Will Peck says funded account ratio is lower than expected in fintech, expects improvement with better onboarding and marketing, and stablecoin on/off ramps to support on-chain community funding.