WisdomTree, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS WisdomTree Investments, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Per Share Amounts) September 30, 2021 December 31, 2020 (unaudited) Assets Current assets: Cash and cash equivalents $ 127,924 $ 73,425 Securities owned, at fair value (including $ 21,180 and $ 23,932 invested in WisdomTree ETFs at September 30, 2021 and December 31, 2020, respectively) 119,390 34,895 Accounts receivable (including $ 24,055 and $ 26,884 due from related parties at September 30, 2021 and December 31, 2020, respectively) 32,092 29,455 Income taxes receivable 146 — Prepaid expenses 5,676 3,827 Other current assets 407 259 Total current assets 285,635 141,861 Fixed assets, net 545 7,579 Indemnification receivable (Note 20) 21,872 27,016 Securities held-to-maturity 331 451 Deferred tax assets, net 7,636 8,063 Investments (Note 7) 14,238 8,112 Right of use assets – operating leases (Note 13) 631 16,327 Goodwill (Note 22) 85,856 85,856 Intangible assets (Note 22) 601,247 601,247 Other noncurrent assets 359 180 Total assets $ 1,018,350 $ 896,692 Liabilities and stockholders’ equity Liabilities Current liabilities: Fund management and administration payable $ 22,273 $ 19,564 Compensation and benefits payable 24,411 22,803 Deferred consideration – gold payments (Note 9) 15,961 17,374 Operating lease liabilities (Note 13) 361 3,135 Income taxes payable — 916 Accounts payable and other liabilities 12,737 10,207 Total current liabilities 75,743 73,999 Convertible notes (Note 11) 317,979 166,646 Deferred consideration – gold payments (Note 9) 208,992 212,763 Operating lease liabilities (Note 13) 327 17,434 Other noncurrent liabilities (Note 20) 21,872 27,016 Total liabilities 624,913 497,858 Preferred stock – Series A Non-Voting Convertible, par value $ 0.01 ; 14.750 shares authorized, issued and outstanding; redemption value of $ 88,456 and $ 72,667 at September 30, 2021 and December 31, 2020, respectively) (Note 12) 132,569 132,569 Contingencies (Note 14 ) Stockholders’ equity Preferred stock, par value $ 0.01 ; 2,000 shares authorized: — — Common stock, par value $ 0.01 ; 250,000 shares authorized; issued and outstanding: 145,150 and 148,716 at September 30, 2021 and December 31, 2020, respectively 1,451 1,487 Additional paid-in capital 287,399 317,075 Accumulated other comprehensive income 853 1,102 Accumulated deficit ( 28,835 ) ( 53,399 ) Total stockholders’ equity 260,868 266,265 Total liabilities and stockholders’ equity $ 1,018,350 $ 896,692 The accompanying notes are an integral part of these consolidated financial statements 4 Table of Contents WisdomTree Investments, Inc. and Subsidiaries Consolidated Statements of Operations (In Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Operating Revenues: Advisory fees $ 76,400 $ 63,028 $ 220,611 $ 181,697 Other income 1,712 721 4,532 2,563 Total revenues 78,112 63,749 225,143 184,260 Operating Expenses: Compensation and benefits 22,027 19,098 64,985 53,848 Fund management and administration 15,181 14,328 43,495 41,785 Marketing and advertising 2,925 2,996 9,525 7,413 Sales and business development 2,935 2,386 7,239 7,984 Contractual gold payments (Note 9) 4,250 4,539 12,834 12,362 Professional fees 1,583 950 5,517 3,580 Occupancy, communications and equipment 1,163 1,611 3,904 4,805 Depreciation and amortization 185 253 693 760 Third-party distribution fees 1,873 1,233 5,346 3,928 Acquisition and disposition-related costs — — — 416 Other 1,787 1,611 5,110 5,204 Total operating expenses 53,909 49,005 158,648 142,085 Operating income 24,203 14,744 66,495 42,175 Other Income/(Expenses): Interest expense ( 3,729 ) ( 2,511 ) ( 8,592 ) ( 6,974 ) Gain/(loss) on revaluation of deferred consideration – gold payments (Note 9) 1,737 ( 8,870 ) 5,066 ( 34,436 ) Interest income 689 111 1,145 393 Impairments (Note 13 and 24) ( 15,853 ) ( 3,080 ) ( 16,156 ) ( 22,752 ) Loss on extinguishment of debt (Note 10) — — — ( 2,387 ) Other losses and gains, net ( 714 ) 744 ( 6,558 ) 56 Income/(loss) before income taxes 6,333 1,138 41,400 ( 23,925 ) Income tax expense/(benefit) 500 1,408 2,790 ( 1,767 ) Net income/(loss) $ 5,833 $ ( 270 ) $ 38,610 $ ( 22,158 ) Earnings/(loss) per share—basic $ 0.04 $ ( 0.01 ) $ 0.24 $ ( 0.16 ) Earnings/(loss) per share—diluted $ 0.04 $ ( 0.01 ) $ 0.24 $ ( 0.16 ) Weighted-average common shares—basic 142,070 145,564 144,445 149,886 Weighted-average common shares—diluted 159,213 145,564 161,706 149,886 Cash dividends declared per common share $ 0.03 $ 0.03 $ 0.09 $ 0.09 The accompanying notes are an integral part of these consolidated financial statements (See Note 2 for revisions made to certain amounts previously reported) 5 Table of Contents WisdomTree Investments, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income/(Loss) (In Thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income/(loss) $ 5,833 $ ( 270 ) $ 38,610 $ ( 22,158 ) Other comprehensive (loss)/income Reclassification of foreign currency translation adjustment to other losses and gains, net, upon the sale of WisdomTree Asset Management Canada, Inc. (“WTAMC” or “Canadian ETF business”) (Note 23) — — — ( 167 ) Foreign currency translation adjustment, net of income taxes ( 302 ) 380 ( 249 ) ( 138 ) Other comprehensive (loss)/income ( 302 ) 380 ( 249 ) ( 305 ) Comprehensive income/(loss) $ 5,531 $ 110 $ 38,361 $ ( 22,463 ) The accompanying notes are an integral part of these consolidated financial statements 6 Table of Contents WisdomTree Investments, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (In Thousands) (Unaudited) For the Three Months Ended September 30, 2021 Common Stock Additional Paid-In Capital Accumulated Other Accumulated Deficit Total Shares Issued Par Value Comprehensive Income Balance—July 1, 2021 145,114 $ 1,451 $ 285,002 $ 1,155 $ ( 29,871 ) $ 257,737 Restricted stock issued and vesting of restricted stock units, net 36 — — — — — Stock-based compensation — — 2,397 — — 2,397 Other comprehensive loss — — — ( 302 ) — ( 302 ) Dividends — — — — ( 4,797 ) ( 4,797 ) Net income — — — — 5,833 5,833 Balance—September 30, 2021 145,150 $ 1,451 $ 287,399 $ 853 $ ( 28,835 ) $ 260,868 For the Three Months Ended September 30, 2020 Common Stock Additional Paid-In Capital Accumulated Other Accumulated Deficit Total Shares Issued Par Value Comprehensive Income Balance—July 1, 2020 149,796 $ 1,498 $ 325,406 $ 260 $ ( 39,632 ) $ 287,532 Restricted stock issued and vesting of restricted stock units, net 52 1 ( 1 ) — — — Shares repurchased ( 1,066 ) ( 11 ) ( 4,524 ) — — ( 4,535 ) Stock-based compensation — — 2,844 — — 2,844 Allocation of equity component related to convertible notes, net of issuance costs of $ 29 and deferred taxes of $ 222 — — 655 — — 655 Other comprehensive income — — — 380 — 380 Dividends — — ( 4,937 ) — — ( 4,937 ) Net loss — — — — ( 270 ) ( 270 ) Balance—September 30, 2020 148,782 $ 1,488 $ 319,443 $ 640 $ ( 39,902 ) $ 281,669 The accompanying notes are an integral part of these consolidated financial statements 7 Table of Contents WisdomTree Investments, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (Continued) (In Thousands) (Unaudited) For the Nine Months Ended September 30, 2021 Common Stock Additional Paid-In Capital Accumulated Other Accumulated Deficit Total Shares Issued Par Value Comprehensive Income Balance—January 1, 2021 148,716 $ 1,487 $ 317,075 $ 1,102 $ ( 53,399 ) $ 266,265 Reclassification of equity component related to convertible notes, net deferred taxes of $ 1,022 , upon the implementation of Accounting Standards Update 2020-06 (Note 11) — — ( 3,682 ) — 616 ( 3,066 ) Balance—January 1, 2021 (as adjusted) 148,716 $ 1,487 $ 313,393 $ 1,102 $ ( 52,783 ) $ 263,199 Restricted stock issued and vesting of restricted stock units, net 1,412 13 ( 13 ) — — — Shares repurchased ( 5,121 ) ( 51 ) ( 34,455 ) — — ( 34,506 ) Exercise of stock options, net 143 2 813 — — 815 Stock-based compensation — — 7,661 — — 7,661 Other comprehensive loss — — — ( 249 ) — ( 249 ) Dividends — — — — ( 14,662 ) ( 14,662 ) Net income — — — — 38,610 38,610 Balance—September 30, 2021 145,150 $ 1,451 $ 287,399 $ 853 $ ( 28,835 ) $ 260,868 For the Nine Months Ended September 30, 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 1,601 16 ( 16 ) — — — Shares repurchased ( 8,190 ) ( 81 ) ( 30,898 ) — — ( 30,979 ) Exercise of stock options, net 107 — 240 — — 240 Stock-based compensation — — 9,003 — — 9,003 Allocation of equity component related to convertible notes, net of issuance costs of $ 157 and deferred taxes of $ 1,239 — — 3,663 — — 3,663 Other comprehensive loss — — — ( 305 ) — ( 305 ) Dividends — — ( 15,207 ) — — ( 15,207 ) Net loss — — — — ( 22,158 ) ( 22,158 ) Balance—September 30, 2020 148,782 $ 1,488 $ 319,443 $ 640 $ ( 39,902 ) $ 281,669 The accompanying notes are an integral part of these consolidated financial statements 8 Table of Contents WisdomTree Investments, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands) (Unaudited) Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net income/(loss) $ 38,610 $ ( 22,158 ) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Advisory fees received in gold, other precious metals and cryptocurrencies ( 57,617 ) ( 46,077 ) Impairments 16,156 22,752 Contractual gold payments 12,834 12,362 Stock-based compensation 7,661 9,003 (Gain/)/loss on revaluation of deferred consideration – gold payments ( 5,066 ) 34,436 Unrealized losses 2,183 1,212 Amortization of right of use asset 1,860 2,384 Amortization of issuance costs – convertible notes 1,542 882 Deferred income taxes 1,515 ( 961 ) Gain on sale – Canadian ETF business, including remeasurement of contingent consideration ( 787 ) ( 2,877 ) Depreciation and amortization 693 760 Loss on extinguishment of debt — 2,387 Amortization of issuance costs – former credit facility — 1,328 Other ( 369 ) ( 1,173 ) Changes in operating assets and liabilities: Securities owned, at fair value ( 84 ) 94 Accounts receivable ( 1,273 ) 3,166 Prepaid expenses ( 1,888 ) ( 1,325 ) Gold, other precious metals and cryptocurrencies 44,006 32,969 Other assets ( 315 ) ( 341 ) Fund management and administration payable 2,868 735 Compensation and benefits payable 1,756 ( 12,349 ) Income taxes receivable/payable ( 1,050 ) ( 3,399 ) Securities sold, but not yet purchased, at fair value — ( 582 ) Operating lease liabilities (including lease termination payment of $ 12,725 ) ( 15,462 ) ( 2,778 ) Accounts payable and other liabilities 2,336 1,679 Net cash provided by operating activities 50,109 32,129 Cash flows from investing activities: Purchase of securities owned, a fair value ( 97,570 ) ( 34,683 ) Purchase of investments ( 5,750 ) — Purchase of fixed assets ( 237 ) ( 292 ) Proceeds from the sale of securities owned, at fair value 10,976 18,122 Proceeds from held-to-maturity securities maturing or called prior to maturity 114 16,441 Proceeds from the sale of the Company’s financial interests in AdvisorEngine Inc. — 9,592 Proceeds from the sale of Canadian ETF business, net, including receipt of contingent consideration — 2,774 Net cash (used in)/provided by investing activities ( 92,467 ) 11,954 Cash flows from financing activities: Shares repurchased ( 34,506 ) ( 30,979 ) Dividends paid ( 14,662 ) ( 15,207 ) Convertible notes issuance costs ( 4,297 ) ( 5,411 ) Repayment of debt — ( 179,000 ) Proceeds from the issuance of convertible notes 150,000 175,250 Proceeds from exercise of stock options 815 240 Net cash provided by/(used in) financing activities 97,350 ( 55,107 ) Decrease in cash flow due to changes in foreign exchange rate ( 493 ) ( 387 ) Increase/(decrease) in cash and cash equivalents 54,499 ( 11,411 ) Cash and cash equivalents—beginning of year 73,425 74,972 Cash and cash equivalents—end of period $ 127,924 $ 63,561 Supplemental disclosure of cash flow information: Cash paid for taxes $ 7,332 $ 7,650 Cash paid for interest $ 3,719 $ 3,390 NON-CASH ACTIVITIES On January 1 , 2021, the Company reclassified the equity component related to the convertible notes, net of deferred taxes, reducing accumulated deficit by $ 616 , increasing the carrying value of the convertible notes by $ 4,088 , reducing additional paid in capital by $ 3,682 and reducing deferred tax liabilities by $ 1,022 , upon the implementation of Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Note 11). The accompanying notes are an integral part of these consolidated financial statements (See Note 2 for reclassifications made to certain amounts previously reported) 9 Table of Contents 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, cryptocurrency 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 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. • WisdomTree Management Jersey Limited (“ManJer”) is a Jersey based management company providing management services to seven 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 ICAV (“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 United Kingdom based company registered with the Financial Conduct Authority currently providing distribution and support services to ManJer, WTMAML and WML. • WisdomTree Europe Limited is a United Kingdom 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 served as the managing owner and commodity pool operator of the WisdomTree Continuous Commodity Index Fund (“GCC”) until December 2020 when GCC was reorganized into the WisdomTree Enhanced Commodity Strategy Fund under WTT. 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. Immaterial Correction of an Error – Consolidated Statements of Operations The presentation of amounts collected on behalf of third parties of $ 891 and $ 2,380 for the three and nine months ended September 30, 2020, respectively, has been revised due to an immaterial error correction. These amounts were originally recorded as advisory fee revenue and fund management and administration expense while no such amounts should have been recorded in the Company’s Consolidated Statements of Operations. The following table summarizes these revisions, which had no effect on previously reported net income: 10 Table of Contents Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Operating Revenues: Advisory fees (previously reported) $ 63,919 $ 184,077 Amounts collected on behalf of third parties ( 891 ) ( 2,380 ) Advisory fees (as corrected) $ 63,028 $ 181,697 Total revenues (previously reported) $ 64,640 $ 186,640 Amounts collected on behalf of third parties ( 891 ) ( 2,380 ) Total revenues (as corrected) $ 63,749 $ 184,260 Operating Expenses: Fund management and administration (previously reported) $ 15,219 $ 44,165 Amounts collected on behalf of third parties ( 891 ) ( 2,380 ) Fund management and administration (as corrected) $ 14,328 $ 41,785 Total operating expenses (previously reported) $ 49,896 $ 144,465 Amounts collected on behalf of third parties ( 891 ) ( 2,380 ) Total operating expenses (as corrected) $ 49,005 $ 142,085 Reclassifications - Consolidated Statements of Cash Flows Cash flows from purchasing securities owned, at fair value of $ 34,683 and selling securities owned, at fair value of $ 18,122 during the nine months ended September 30, 2020 that were not acquired specifically for resale or associated with the Company’s business activities have been reclassified from operating activities to investing activities to conform to the current year’s presentation in the Company’s Consolidated Statements of Cash Flows. The following table summarizes these reclassifications for the nine months ended September 30, 2020: Nine Months Ended September 30, 2020 Consolidated Statements of Cash Flows: Cash Flows from Operating Activities Net cash provided by operating activities (previously reported) $ 15,568 Reclassification of net cash flows from securities purchases and sales 16,561 Net cash provided by operating activities (currently reported) $ 32,129 Cash Flows from Investing Activities Net cash provided by investing activities (previously reported) $ 28,515 Purchases of securities owned, at fair value ( 34,683 ) Proceeds from the sale of securities owned, at fair value 18,122 Net cash provided by investing activities (currently reported) $ 11,954 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. 11 Table of Contents The Company reassesses its evaluation of whether an entity is a VOE or VIE when certain reconsideration events occur. Segment and Geographic Information The Company, through its subsidiaries in the U.S. and Europe, conducts business as a single operating segment as an ETP sponsor and asset manager 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. Foreign Currency Translation Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar are translated based on the end of period exchange rates from local currency to U.S. dollars. Results of operations are translated at the average exchange rates in effect during the period. The impact of the foreign currency translation adjustment is included in the Consolidated Statements of Comprehensive Income/(Loss) as a component of other comprehensive income/(loss). 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. 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 (Note 9). Marketing and Advertising Marketing and 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 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 assets under management (“AUM”), subject to caps or minimums, to marketing agents to sell WisdomTree ETFs and for including WisdomTree ETFs on third-party customer platforms and recognizes these expenses as incurred. 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. 12 Table of Contents Accounts Receivable Accounts receivable are customer and other obligations due under normal trade terms. The Company measures credit losses, if any, by applying historical loss rates, adjusted for current conditions and reasonable and supportable forecasts to amounts outstanding using the 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. 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 (“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. Debt securities classified as 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 in earnings with a corresponding adjustment to the security’s amortized cost basis if the Company intends to sell the impaired AFS debt security or it is more likely than not the Company will be required to sell the security before recovering its amortized cost basis. Other credit-related impairments are recognized as an allowance with a corresponding adjustment to earnings. 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 securities as held-to-maturity on a trade date basis, which are recorded at amortized cost. For held-to-maturity securities, the Company has the intent and ability to hold these securities to maturity and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be maturity. 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 cash basis as interest income if and when received. The Company reviews its portfolio of held-to-maturity securities for impairment on a quarterly basis, recognizing an allowance, if any, 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. Investments 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 under the measurement alternative prescribed in Accounting Standards Update (“ASU”) 2016-01, Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities , to the extent such investments are not subject to consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment. Goodwill Goodwill is the excess of the purchase price over the fair values of the identifiable net assets at the acquisition date. The Company tests goodwill for impairment at least annually and at the time of a triggering event requiring re-evaluation, if one were to occur. 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. 13 Table of Contents Goodwill is allocated to the Company’s U.S. Business and European Business components. For impairment testing purposes, these components are aggregated as a single reporting unit as they fall under the same operating segment and have similar economic characteristics. Goodwill is assessed for impairment annually on November 30 th . When performing its goodwill impairment test, the Company considers a qualitative assessment, when appropriate, and a quantitative assessment using the market approach and its market capitalization when determining the fair value of the reporting unit. 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 The Company accounts for its lease obligations in accordance with Accounting Standards Codification (“ASC”) Topic 842, Leases (ASC 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. 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. 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 observed on the CMX exchange, a selected discount rate and perpetual growth rate (Note 9). Changes in the fair value of this obligation are reported as gain/(loss) on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations. Convertible Notes Convertible notes are carried at amortized cost, net of issuance costs. Effective January 1, 2021, the Company early adopted ASU 2020-06 Debt – Debt with Conversion and Other Options under the modified retrospective approach. ASU 2020-06 provides for convertible instruments being reported as a single liability (applicable to the convertible notes) or equity with no separate accounting for embedded conversion features unless the conversion feature meets the criteria for accounting under the substantial premium model or does not qualify for a derivative scope exception. Previously, the convertible notes were required to be separated into their liability and equity components by allocating the issuance proceeds to each of those components. The liability component was allocated proceeds equal to the estimated fair value of similar debt instruments without the conversion option. The difference between the gross proceeds received from the issuance of the convertible notes and the proceeds allocated to the liability component represented the residual amount that was recorded in additional paid-in capital. Interest expense is recognized using the effective interest method and includes amortization of issuance costs over the life of the debt. 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 evaluates the likelihood of an unfavorable outcome of all legal or regulatory proceedings to which it is a party and accrues a loss contingency when the loss is probable and reasonably estimable. 14 Table of Contents Contingent Payments The Company recognizes contingent payments when the contingency is resolved and the gain is realized. 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 (Note 12) 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). Diluted EPS is calculated under the treasury stock method and the two-class method. The calculation that results in the lowest diluted EPS amount for the common stock is reported in the Company’s consolidated financial statements. The treasury stock method includes the dilutive effect of potential common shares including unvested stock-based awards, the Series A non-voting convertible preferred stock and the convertible notes, if any. Potential common shares associated with the Series A non-voting convertible preferred stock and the convertible notes are computed under the if-converted method. Potential common shares associated with the conversion option embedded in the convertible notes are dilutive when the Company’s average stock price exceeds the conversion price. 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 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. The Global Intangible Low-Taxed Income (“GILTI”) provisions of the Tax Reform Act requires the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. An accounting policy election is available to either account for the tax effects of GILTI in the period that is subject to such taxes or to provide deferred taxes for book and tax basis differences that upon reversal may be subject to such taxes. The Company accounts for the tax effects of these provisions in the period that is subject to such tax. Non-income based taxes are recorded as part of other liabilities and other expenses. Recently Adopted Accounting Pronouncements On January 1, 2021, the Company early adopted ASU 2020-06, Debt – Debt with Conversion and Other Options (ASU 2020-06) under the modified retrospective approach. Under the ASU, the accounting for convertible instruments was simplified by removing major separation models required under current GAAP. Accordingly, more convertible instruments are reported as a single liability or equity with no separate accounting for embedded conversion features. Certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception are removed and, as a result, more equity contracts will qualify for the scope exception. The ASU also simplifies the diluted earnings-per-share calculation in certain areas. Upon the adoption of this ASU, the Company reclassified the equity component related to the convertible notes, net of deferred taxes, reducing accumulated deficit by $ 616 , increasing the carrying value of the convertible notes by $ 4,088 , reducing additional paid-in capital by $ 3,682 and reducing deferred tax liabilities by $ 1,022 . These updates also reduced interest expense recognized on the Company’s convertible notes by approximately $ 420 per quarter (Note 11). On January 1, 2021, the Company adopted 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 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 15 Table of Contents 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. The Company has determined that the adoption of this standard did not have a material impact on its financial statements. 3. Cash and Cash Equivalents Of the total cash and cash equivalents of $ 127,924 and $ 73,425 at September 30, 2021 and December 31, 2020, respectively, $ 105,885 and $ 70,911 were held at two financial institutions. At September 30, 2021 and December 3 1 , 2020, cash equivalents were approximately $ 20,143 and $ 660 , respectively. Certain of the Company’s international subsidiaries are required to maintain a minimum level of regulatory capital, which was $ 12,384 and $ 10,745 at September 30, 2021 and December 31, 2020, respectively. These requirements are generally satisfied by cash on hand. 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 Measurement , establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the transparency of inputs as follows: Level 1 – Quoted prices for identical instruments in active markets. Level 2 – 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 – Instruments whose significant drivers are unobservable. The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The tables below summarize the categorization of the Company’s assets and liabilities measured at fair value. During the three and nine months ended September 30, 2021 and 2020 there were no transfers between Levels 2 and 3. September 30, 2021 Total Level 1 Level 2 Level 3 Assets: Recurring fair value measurements: Cash equivalents $ 20,143 $ 20,143 $ — $ — Securities owned, at fair value ETFs 21,454 21,454 — — Pass-through GSEs 95,785 24,969 70,816 — Corporate bonds 2,151 — 2,151 — Total $ 139,533 $ 66,566 $ 72,967 $ — Non-recurring fair value measurements: Securrency, Inc. – Series A convertible preferred stock (1) $ 8,488 $ — $ — $ 8,488 Liabilities: Recurring fair value measurements: Deferred consideration (Note 9) $ 224,953 $ — $ — $ 224,953 (1) Fair value of $ 8,488 and $ 8,349 determined on June 9, 2021 and March 8, 2021, respectively (Note 7). 16 Table of Contents December 31, 2020 Total Level 1 Level 2 Level 3 Assets: Recurring fair value measurements: Cash equivalents $ 660 $ 660 $ — $ — Securities owned, at fair value ETFs 24,165 24,165 — — Pass-through GSEs 8,613 — 8,613 — Corporate bonds 2,117 — 2,117 — Total $ 35,555 $ 24,825 $ 10,730 $ — Non-recurring fair value measurements: AdvisorEngine Inc. (“AdvisorEngine”) – Financial interests (1) $ — $ — $ — $ — Thesys Group, Inc. (“Thesys”) – Series Y Preferred Stock (1) — — — — Total $ — $ — $ — $ — Liabilities: Recurring fair value measurements: Deferred consideration (Note 9) $ 230,137 $ — $ — $ 230,137 Non-recurring fair value measurements: Convertible notes (2) $ 170,191 $ — $ 170,191 $ — (1) The fair value of the AdvisorEngine financial interests of $ 9,592 was determined on May 4, 2020, the date on which these financial interests were sold (Note 23). Thesys was written down to zero on September 30, 2020. (2) Fair value of $ 145,847 and $ 24,344 determined for convertible notes raised on June 16, 2020 and August 13, 2020, respectively (Note 11). Recurring Fair Value Measurements - Methodology Cash Equivalents (Note 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 classified as Level 1 in the fair value hierarchy. Securities Owned (Note 5) – Securities owned are investments in ETFs, pass-through GSEs and corporate bonds. ETFs are generally traded in active, quoted and highly liquid markets and are therefore classified as Level 1 in the fair value hierarchy. Pricing of pass-through GSEs and corporate bonds include consideration given to collateral characteristics and market assumptions related to yields, credit risk and timing of prepayments and are therefore generally classified as Level 2. Pass-through GSE positions invested in through a fund structure with a quoted market price on an exchange are generally classified as Level 1. Deferred Consideration (Note 9) – Deferred consideration represents the present value of an obligation to pay gold into perpetuity. The following table presents a reconciliation of beginning and ending balances of recurring fair value measurements classified as Level 3: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Deferred consideration (Note 9) Beginning balance $ 226,706 $ 198,784 $ 230,137 $ 173,024 Net realized losses/(gains) (1) 4,250 4,539 12,834 12,362 Net unrealized (gains)/losses (2) ( 1,737 ) 8,870 ( 5,066 ) 34,436 Settlements ( 4,266 ) ( 4,445 ) ( 12,952 ) ( 12,074 ) Ending balance $ 224,953 $ 207,748 $ 224,953 $ 207,748 (1) Recorded as contractual gold payments expense on the Company’s Consolidated Statements of Operations. (2) Recorded as gain/(loss) on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations. 17 Table of Contents 5. Securities Owned These securities consist of the following: September 30, 2021 December 31, 2020 Securities Owned Trading securities $ 119,390 $ 34,895 The Company recognized net trading losses on securities owned that were still held at the reporting dates of $ 1,323 and $ 180 during the three months ended September 30, 2021 and 2020, respectively, and $ 2,156 and $ 25 during the nine months ended September 30, 2021 and 2020, respectively. The Company had no AFS debt securities at September 30, 2021 and December 31, 2020. 6. Securities Held-to-Maturity The following table is a summary of the Company’s securities held-to-maturity: September 30, 2021 December 31, 2020 Debt instruments: Pass-through GSEs (amortized cost) $ 331 $ 451 During the nine months ended September 30, 2021 and 2020, the Company received proceeds of $ 114 and $ 16,441 , respectively, from held-to-maturity securities 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: September 30, 2021 December 31, 2020 Cost/amortized cost $ 331 $ 451 Gross unrealized gains 25 30 Gross unrealized losses ( 9 ) ( 12 ) Fair value $ 347 $ 469 An allowance for credit losses was not provided on the Company’s held-to-maturity securities 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. The following table sets forth the maturity profile of the securities held-to-maturity; however, these securities may be called prior to maturity date: September 30, 2021 December 31, 2020 Due within one year $ — $ — Due one year through five years — — Due five years through ten years — — Due over ten years 331 451 Total $ 331 $ 451 18 Table of Contents 7. Investments The following table sets forth the Company’s investments: September 30, 2021 December 31, 2020 Carrying Value Cost Carrying Value Cost Securrency, Inc. – Series A convertible preferred stock $ 8,488 $ 8,112 $ 8,112 $ 8,112 Securrency, Inc. – Series B convertible preferred stock 5,500 5,500 — — Subtotal – Securrency, Inc. $ 13,988 $ 13,612 $ 8,112 $ 8,112 Onramp Invest, LLC – Simple Agreement for Future Equity 250 250 — — $ 14,238 $ 13,862 $ 8,112 $ 8,112 Securrency, Inc. – Preferred Stock The Company owns approximately 22 % (or 18 % on a fully-diluted basis) of the capital stock of Securrency, Inc. (“Securrency”), a leading developer of institutional-grade blockchain-based financial and regulatory technology, issued as a result of strategic investments totaling $ 13,612 . In consideration of such investments, the Company received 5,178,488 shares of Series A convertible preferred stock (“Series A Shares”) and 2,004,665 shares of Series B convertible preferred stock (“Series B Shares”). The Series B Shares contain a liquidation preference that is pari passu with shares of Series B-1 convertible preferred stock (which are substantially the same as the Series B Shares except that they have limited voting rights) and senior to that of the holders of the Series A Shares, which are senior to the holders of common stock. Otherwise, the Series A Shares and Series B Shares have substantially the same terms, are convertible into common stock at the option of the Company and contain various rights and protections including a non-cumulative 6.0 % dividend, payable if and when declared by the board of directors of Securrency. In addition, the Series A Shares and Series B Shares (together with the Series B-1 convertible preferred stock) are separately redeemable, with respect to all of the shares outstanding of the applicable series of preferred stock (subject to certain regulatory restrictions of certain investors), for the original issue price thereof, plus all declared and unpaid dividends, upon approval by holders of at least 60 % of the Series A Shares (at any time on or after December 31, 2029) and 90 % of the Series B Shares (at any time on or after March 31, 2031). The investment is accounted for under the measurement alternative prescribed in ASU 2016-01, as it does not have a readily determinable fair value and is not considered to be in-substance common stock. The investment is assessed for impairment and similar observable transactions on a quarterly basis. There was no impairment recognized during the three months ended September 30, 2021 based upon a qualitative assessment. During the nine months ended September 30, 2021, the Company recognized a gain of $ 376 on its Series A Shares, which was re-measured to fair value upon the issuance of Securrency’s Series B Shares. Fair value was determined using the backsolve method, a valuation approach that determines the value of shares for companies with complex capital structures based upon the price paid for shares recently issued. Fair value is allocated across the capital structure using the Black-Scholes option pricing model. The table below presents the inputs used in backsolve valuation approach (classified as Level 3 in the fair value hierarchy): Inputs June 9, 2021 March 8, 2021 Expected volatility 50 % 55 % Time to exit (in years) 4.75 5 .00 There was no impairment recognized during the three and nine months ended September 30, 2020 based upon a qualitative assessment. Onramp Invest, LLC In June 2021, the Company invested $ 250 in Onramp Invest, LLC (“Onramp”), a technology company that provides access to cryptoassets for registered investment advisers. In consideration for its investment, the Company holds a Simple Agreement for Future Equity (“SAFE”), which provides the Company with the right to be issued certain shares of Onramp’s preferred stock in connection with Onramp’s future equity financing for preferred stock, at a 20 % discount to the price per share issued in connection with such equity financing, subject to a pre-determined valuation cap. The preferred stock is issuable upon the occurrence of such preferred equity financing, which would occur after Onramp’s conversion to a corporation. The investment is accounted for under the measurement alternative prescribed in ASU 2016-01, as it does not have a readily determinable fair value and is not considered to be in-substance common stock. The investment is assessed for impairment and similar observable transactions on a quarterly basis. There was no impairment recognized during the three and nine months ended September 30, 2021 based upon a qualitative assessment. 19 Table of Contents 8. Fixed Assets, net The following table summarizes fixed assets: September 30, 2021 December 31, 2020 Equipment $ 997 $ 2,836 Furniture and fixtures — 2,225 Leasehold improvements — 11,012 Less: accumulated depreciation and amortization ( 452 ) ( 8,494 ) Total $ 545 $ 7,579 During the three months ended September 30, 2021, the Company recognized an impairment charge of $ 6,576 , representing the write-off of leasehold improvements and fixed assets in connection with the termination of the lease for its principal executive office at 245 Park Avenue, New York, New York. See Notes 13 and 24 for additional information. 9. 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 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 $ 224,953 and $ 230,137 at September 30, 2021 and December 31, 2020 using the following assumptions: September 30, 2021 December 31, 2020 Forward-looking gold price (low) – per ounce $ 1,756 $ 1,903 Forward-looking gold price (high) – per ounce $ 2,906 $ 2,662 Forward-looking gold price (weighted average) – per ounce $ 2,093 $ 2,117 Discount rate 9.0 % 9.0 % Perpetual growth rate 1.4 % 0.9 % The forward-looking gold prices at September 30, 2021 were extrapolated from the last observable CMX exchange price (beyond 2026) and the weighted-average price per ounce was derived from the relative present values of the annual payment obligations. The perpetual growth rate was determined based upon the increase in observable forward-looking gold prices through 2027. This obligation is classified as Level 3 as the discount rate and extrapolated forward-looking gold prices are significant unobservable inputs. An increase in spot gold prices, 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. Current amounts payable were $ 15,961 and $ 17,374 and long-term amounts payable were $ 208,992 and $ 212,763 , respectively, at September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following in respect of deferred consideration: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Contractual gold payments $ 4,250 $ 4,539 $ 12,834 $ 12,362 Contractual gold payments – gold ounces paid 2,375 2,375 7,125 7,125 Gain/(loss) on revaluation of deferred consideration – gold payments (1) $ 1,737 $ ( 8,870 ) $ 5,066 $ ( 34,436 ) (1) Gains on revaluation of deferred consideration – gold payments result from a decrease in spot gold prices, a decrease in the forward-looking price of gold, a decrease in the perpetual growth rate and an increase in the discount rate used to compute the present value of the annual payment obligations. Losses on revaluation of deferred consideration – gold payments result from an increase in spot gold prices, an increase in the forward-looking price of gold, an increase in the perpetual growth rate and a decrease in the discount rate used to compute the present value of the annual payment obligations. 20 Table of Contents 10. Former Credit Facility On June 16, 2020, the Company terminated its former credit facility by repaying $ 174,000 that was outstanding under its term loan and terminating the revolver. A loss on extinguishment of debt of $ 2,387 was recognized during the nine months ended September 30, 2020, which represented the write-off of the remaining unamortized issuance costs. Interest expense recognized on the former credit facility during the nine months ended September 30, 2020 was $ 4,086 . 11. Convertible Notes On June 14, 2021, the Company issued and sold $ 150,000 in aggregate principal amount of 3.25 % Convertible Senior Notes due 2026 (the “2021 Notes”) pursuant to an indenture dated June 14, 2021, between the Company and U.S. Bank National Association, as trustee (the “Trustee”), in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Rule 144A”). On June 16, 2020, the Company issued and sold $ 150,000 in aggregate principal amount of 4.25 % Convertible Senior Notes due 2023 (the “June 2020 Notes”) pursuant to an indenture dated June 16, 2020, between the Company and the Trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A. On August 13, 2020, the Company issued and sold $ 25,000 in aggregate principal amount of 4.25 % Convertible Senior Notes due 2023 at a price equal to 101% of the principal amount thereof, plus interest deemed to have accrued since June 16, 2020, and constitute a further issuance of, and form a single series with, the Company’s June 2020 Notes (the “August 2020 Notes” and together with the June 2020 Notes, the “2020 Notes”). After the issuance of the 2021 Notes (and together with the 2020 Notes, the “Convertible Notes”), the Company had $ 325,000 aggregate principal amount of Convertible Notes outstanding. Key terms of the Convertible Notes are as follows: 2021 Notes 2020 Notes Maturity date (unless earlier converted, repurchased or redeemed) June 15, 2026 June 15, 2023 Interest rate 3.25 % 4.25 % Conversion price $ 11.04 $ 5.92 Conversion rate 90.5797 168.9189 Redemption price $ 14.35 $ 7.70 • Interest rate : Payable semiannually in arrears on June 15 and December 15 of each year. • Conversion price : Convertible at an initial conversion rate of the Company’s common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price as disclosed in the table above). • Conversion : Holders may convert at their option at any time prior to the close of business on the business day immediately preceding March 15, 2026 and March 15, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, only under the following circumstances: (i) if the last reported sale price of the Company’s common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sales price of the Company’s common stock and the conversion rate on each such trading day; (iii) upon a notice of redemption delivered by the Company in accordance with the terms of the indentures but only with respect to the Convertible Notes called (or deemed called) for redemption; or (iv) upon the occurrence of specified corporate events. On or after March 15, 2026 and March 15, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances. • Cash settlement of principal amount : Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted. At its election, the Company will also settle its conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in either cash, shares of its common stock or a combination of cash and shares of its common stock. • Redemption price: The Company may redeem for cash all or any portion of the notes, at its option , on or after June 20, 2026 and June 20, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, and on or prior to the 55 th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has 21 Table of Contents been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the Convertible Notes. • Limited investor put rights : Holders of the Convertible Notes have the right to require the Company to repurchase for cash all or a portion of their notes at 100 % of their principal amount, plus any accrued and unpaid interest, upon the occurrence of certain change of control transactions or liquidation, dissolution or common stock delisting events. • Conversion rate increase in certain customary circumstances : In certain circumstances, conversions in connection with a “make-whole fundamental change” (as defined in the indentures) or conversions of Convertible Notes called (or deemed called) for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 144.9275 shares and 270.2702 shares of the Company’s common stock per $1,000 principal amount of the 2021 Notes and 2020 Notes, respectively (the equivalent of 69,036,410 shares of the Company’s common stock), subject to adjustment. • Seniority and Security : The 2021 Notes and 2020 Notes rank equal in right of payment, and are the Company’s senior unsecured obligations, but are subordinated in right of payment to the Company’s obligations to make certain redemption payments (if and when due) in respect of its Series A Non-Voting Convertible Preferred Stock (Note 12). The indentures contain customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25 % in aggregate principal amount of the Convertible Notes outstanding may declare the entire principal amount of all the Convertible Notes to be repurchased, plus any accrued special interest, if any, to be immediately due and payable. The following table provides a summary of the carrying value of the Convertible Notes at September 30, 2021 and December 31, 2020: September 30, 2021 December 31, 2021 Notes 2020 Notes Total 2020 Principal amount $ 150,000 $ 175,000 $ 325,000 $ 175,000 Plus: Premium — 250 250 250 Gross proceeds 150,000 175,250 325,250 175,250 Less: Unamortized discount (1) — — — ( 4,207 ) Less: Unamortized issuance costs (1) ( 4,045 ) ( 3,226 ) ( 7,271 ) ( 4,397 ) Carrying amount $ 145,955 $ 172,024 $ 317,979 $ 166,646 Effective interest rate (2) 3.83 % 5.26 % 4.60 % 6.29 % (1) Unamortized discount was reduced by $ 4,207 and unamortized issuance costs increased by $ 119 upon the early adoption of ASU 2020-06 on January 1, 2021. The discount previously arose from the bifurcation of the conversion option which occurred prior to the adoption of ASU 2020-06. The unamortized issuance costs are reported net of the unamortized premium. (2) Includes amortization of the issuance costs and premium. The effective interest rate prior to January 1, 2021 also included amortization of the discount arising from the bifurcation of the conversion option. On January 1, 2021, the Company early adopted ASU 2020-06, which simplified the accounting for convertible instruments by providing for such instruments being reported as a single liability (applicable to the convertible notes) or equity with no separate accounting for the embedded conversion features unless the conversion feature meets the criteria for accounting under the substantial premium model or does not qualify for a derivative scope exception. Previously, convertible instruments were required to be separated into their liability and equity components by allocating the issuance proceeds to each of those components. The discount arising from the recognition of the equity component was amortized as interest expense over the life of the 2020 Notes. Interest expense on the Convertible Notes during the three and nine months ended September 30, 2021 was $ 3,729 and $ 8,592 , respectively. Interest expense on the 2020 Notes during the three and nine months ended September 30, 2020 was $ 2,511 and $ 2,888 , respectively. Interest payable of $ 3,674 and $ 2,173 at September 30, 2021 and December 31, 2020 is included in accounts payable and other liabilities on the Company’s Consolidated Balance Sheets. The fair value of the Convertible Notes (classified as Level 2 in the fair value hierarchy) was $ 350,331 at September 30, 2021. The if-converted value of the 2020 Notes and the 2021 Notes did not exceed the principal amount at September 30, 2021. 22 Table of Contents 12. 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 (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: September 30, 2021 December 31, 2020 Issuance of Preferred Shares $ 132,750 $ 132,750 Less: Issuance costs ( 181 ) ( 181 ) Preferred Shares – carrying value $ 132,569 $ 132,569 Temporary equity classification is required for redeemable instruments for which redemption triggers are outside of the issuer’s control. ETFS Capital has the right to redeem all the Preferred Shares specified to be converted during the period of time specified in the Certificate of Designations in the event that: (a) the number of shares of the Company’s common stock authorized by its certificate of incorporation is insufficient to permit the Company to convert all of the Preferred Shares requested by ETFS Capital to be converted; or (b) ETFS Capital does not, upon completion of a change of control of the Company, receive the same amount per Preferred Share as it would have received had each outstanding Preferred Share been converted into common stock immediately prior to the change of control. However, the Company will not be obligated to make any such redemption payments to the extent such payments would be a breach of any covenant or obligation the Company owes to any of its secured creditors or is otherwise prohibited by applicable law. Any such redemption will be at a price per Preferred Share equal to the dollar volume-weighted average price for a share of common stock for the 30-trading day period ending on the date of such attempted conversion or change of control, as applicable, multiplied by 1,000. Such redemption payment will be made in one payment no later than 10 business days following the last day of the Company’s first fiscal quarter that begins on a date following the date ETFS Capital exercises such redemption right. The redemption value of the Preferred Shares was $ 88,456 and $ 72,667 at September 30, 2021 and December 31, 2020, respectively. The carrying amount of the Preferred Shares was not adjusted as it was not probable that the Preferred Shares would become redeemable. 13. Leases The Company has entered into operating leases for office facilities, financial data terminals and equipment. The Company has no finance leases. The following table provides additional information regarding the Company’s leases: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Lease cost: Operating lease cost $ 520 $ 796 $ 1,860 $ 2,384 Short-term lease cost 242 299 797 941 Total lease cost $ 762 $ 1,095 $ 2,657 $ 3,325 Other information: Cash paid for amounts included in the measurement of operating lease liabilities $ 13,804 $ 933 $ 15,462 $ 2,778 Right-of-use assets obtained in exchange for new operating lease liabilities n/a n/a n/a n/a Weighted-average remaining lease term (in years) – operating leases 1.8 8.9 1.8 8.9 Weighted-average discount rate – operating leases 4.4 % 6.3 % 4.4 % 6.3 % 23 Table of Contents 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. On September 9, 2021, the Company entered into a Surrender Agreement to terminate the lease for its principal executive office at 245 Park Avenue, New York, New York effective immediately. In consideration for the landlord’s agreement to enter into the Surrender Agreement and accelerate the expiration date of the term of the lease from August 31, 2029, the Company paid a termination fee of $ 12,725 . As a result, the Company recognized a loss on the termination of a lease of $ 9,277 during the three months ended September 30, 2021, which was inclusive of the write-off of the right-of-use asset, broker fees and a reduction in operating lease liabilities. This loss is included in impairments in the Company’s Consolidated Statements of Operations (Note 24). The following table provides additional information regarding lease impairment charges recognized by the Company: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Impairment charges – Leases: New York office $ 9,277 $ — $ 9,277 $ — London office — — 303 — Total impairment charges – Leases: $ 9,277 $ — $ 9,580 $ — The Company’s leases also included 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 September 30, 2021 with respect to the Company’s operating lease liabilities: Remainder of 2021 $ 98 2022 358 2023 195 2024 — 2025 — 2026 and thereafter — Total future minimum lease payments (undiscounted) $ 651 The following table reconciles the future minimum lease payments (disclosed above) at September 30, 2021 to the operating lease liabilities recognized in the Company’s Consolidated Balance Sheets: Amounts recognized in the Company’s Consolidated Balance Sheets Lease liability – short term $ 361 Lease liability – long term 327 Subtotal 688 Difference between undiscounted and discounted cash flows ( 37 ) Total future minimum lease payments (undiscounted) $ 651 14. 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. Closure of the WisdomTree WTI Crude Oil 3x Daily Leveraged ETP In December 2020, WMAI, WTMAML, WTUK and WisdomTree Ireland Limited were served with a writ of summons to appear before the Court of Milan, Italy, and in January 2021, WTUK was served with a writ of summons to appear before the Court of Udine, Italy. Investors had filed actions seeking approximately € 9,000 ($ 10,479 ), in the aggregate, resulting from the closure of the WisdomTree WTI Crude Oil 3x Daily Leveraged ETP (“3OIL”) in March 2020. The product was dependent on the receipt of payments from a swap provider to satisfy payment obligations to the investors. Due to an extreme adverse move in oil futures relative to the oil futures’ closing price, the swap contract underlying 3OIL was terminated by the swap provider, which resulted in the compulsory redemption of 3OIL, all in accordance with the prospectus. 24 Table of Contents The Company is currently assessing these claims and an accrual has not been made with respect to these matters at September 30, 2021 and December 31, 2020. 15. Variable Interest 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. 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 the entities in which it has a variable interest as it does not have the power to direct the activities that most significantly impact the entity’s economic performance. Such power is conveyed through the entities’ boards of directors and the Company does not have control over the boards. The following table presents information about the Company’s variable interests in non-consolidated VIEs: September 30, 2021 December 31, 2020 Carrying Amount – Assets (Securrency) Preferred stock – Series A Shares $ 8,488 $ 8,112 Preferred stock – Series B Shares 5,500 — Subtotal – Securrency $ 13,988 $ 8,112 Carrying Amount – Assets (Onramp) SAFE 250 — Total (Note 7) $ 14,238 $ 8,112 Maximum exposure to loss $ 14,238 $ 8,112 16. Revenues from Contracts with Customers The following table presents the Company’s total revenues from contracts with customers: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenues from contracts with customers: Advisory fees (1) $ 76,400 $ 63,028 $ 220,611 $ 181,697 Other 1,712 721 4,532 2,563 Total operating revenues $ 78,112 $ 63,749 $ 225,143 $ 184,260 (1) Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 for additional information. The Company recognizes revenues from contracts with customers when the performance obligation is satisfied, which is when the promised services are transferred to the customer. A service is considered to be transferred when the customer obtains control, which is represented by the transfer of rights with regard to the 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 services to the customer. Substantially all the Company’s revenues from contracts with customers are derived primarily from investment advisory agreements with related parties (Note 17). These advisory fees are recognized over time, are earned from the Company’s ETPs and are calculated based on a percentage of the ETPs’ average daily net assets. There is no significant judgment in calculating amounts due which are invoiced monthly in arrears and are not subject to any potential reversal. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice. There are no contract assets or liabilities that arise in connection with the recognition of advisory fee revenue. In addition, there are no costs incurred to obtain or fulfill the contracts with customers, all of which are investment advisory agreements with related parties. 25 Table of Contents Geographic Distribution of Revenue The following table presents the Company’s total revenues geographically as determined by where the respective management companies reside: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenues from contracts with customers: United States $ 46,523 $ 34,018 $ 131,744 $ 105,517 Jersey (1) 28,724 28,636 85,953 75,313 Ireland 2,865 1,095 7,446 3,065 Canada (Note 23) — — — 365 Total operating revenues $ 78,112 $ 63,749 $ 225,143 $ 184,260 (1) Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 for additional information. 17. 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. 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 are 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 ETPs’ average daily net assets. A majority of the independent members of the Board of Trustees are required to annually approve the advisory agreements of the U.S. WisdomTree ETFs and these agreements may be terminated by the Board of Trustees 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: September 30, 2021 December 31, 2020 Receivable from WTT $ 15,264 $ 13,030 Receivable from ManJer Issuers 6,053 11,693 Receivable from WMAI and WTI 2,738 2,125 Receivable from WTCS — 36 Total $ 24,055 $ 26,884 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 September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Advisory services provided to WTT $ 46,386 $ 33,767 $ 131,364 $ 104,757 Advisory services provided to ManJer Issuers (1) 24,759 26,506 75,296 68,945 Advisory services provided to WMAI and WTI 5,255 2,603 13,951 7,145 Advisory services provided to WTAMC — — — 365 Advisory services provided to WTCS — 152 — 485 Total $ 76,400 $ 63,028 $ 220,611 $ 181,697 (1) Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 for additional information. 26 Table of Contents The Company also has investments in certain WisdomTree ETFs of approximately $ 21,180 and $ 23,932 at September 30, 2021 and December 31, 2020, respectively. Net losses and gains related to trading WisdomTree ETFs during the three months ended September 30, 2021 and 2020 were ($ 92 ) and $ 86 , respectively, and during the nine months ended September 30, 2021 and 2020 were $ 75 and $ 94 , respectively, which are recorded in other losses and gains, net. 18. 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 grants equity awards to employees and directors which include restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and stock options. Certain awards described below are subject to acceleration under certain conditions. Stock options: Generally issued for terms of ten years and may vest after at least one year of service and have an exercise price equal to the Company’s stock price on the grant date. The Company estimates the fair value of stock options (when granted) using the Black-Scholes option pricing model. RSAs/RSUs: Awards are valued based on the Company’s stock price on grant date and generally vest ratably over three years. PRSUs: These awards cliff vest three years from 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 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 85 th percentile (or 100 th percentile for grants made during 2019 and 2020). •   If the Company’s TSR is negative, the target number of PRSUs vesting is capped at 100 % regardless of the relative TSR percentile. Stock-based compensation expense during the three months ended September 30, 2021 and 2020 was $ 2,397 and $ 2,844 , respectively, and during the nine months ended September 30, 2021 and 2020 was $ 7,661 and $ 9,003 , respectively. A summary of unrecognized stock-based compensation expense and average remaining vesting period is as follows: September 30, 2021 Unrecognized Stock- Based Compensation Average Remaining Vesting Period (Years) Employees and directors $ 11,362 1.48 A summary of stock-based compensation award activity during the three months ended September 30, 2021 is as follows: Stock Options RSAs RSUs PRSUs Balance at July 1, 2021 47,500 3,043,948 53,209 550,686 Granted — 47,393 — — Exercised/vested — — — — Forfeitures — ( 11,396 ) — — Balance at September 30, 2021 47,500 3,079,945 53,209 550,686 27 Table of Contents 19. Earnings Per Share The following tables set forth reconciliations of the basic and diluted earnings/(loss) per share computations for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Basic Earnings/(Loss) per Share Net income/(loss) $ 5,833 $ ( 270 ) $ 38,610 $ ( 22,158 ) Less: Income distributed to participating securities ( 538 ) ( 556 ) ( 1,634 ) ( 1,663 ) Less: Undistributed income allocable to participating securities ( 115 ) — ( 2,666 ) — Net income/(loss) available to common stockholders – Basic EPS $ 5,180 $ ( 826 ) $ 34,310 $ ( 23,821 ) Weighted average common shares (in thousands) 142,070 145,564 144,445 149,886 Basic earnings/(loss) per share $ 0.04 $ ( 0.01 ) $ 0.24 $ ( 0.16 ) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Diluted Earnings/(Loss) per Share Net income/(loss) available to common stockholders $ 5,180 $ ( 826 ) $ 34,310 $ ( 23,821 ) Add back: Undistributed income allocable to participating securities 115 — 2,666 — Less: Reallocation of undistributed income allocable to participating securities considered potentially dilutive ( 115 ) — ( 2,647 ) — Net income/(loss) available to common stockholders – Diluted EPS $ 5,180 $ ( 826 ) $ 34,329 $ ( 23,821 ) Weighted Average Diluted Shares (in thousands): Weighted average common shares 142,070 145,564 144,445 149,886 Dilutive effect of common stock equivalents, excluding participating securities 1,072 — 1,159 — Weighted average diluted shares, excluding participating securities (in thousands) 143,142 145,564 145,604 149,886 Diluted earnings/(loss) per share $ 0.04 $ ( 0.01 ) $ 0.24 $ ( 0.16 ) Diluted earnings/(loss) per share presented above is calculated using the two-class method as this method results in the lowest diluted earnings per share amount for common stock. During the three and nine months ended September 30, 2020, there were no dilutive common stock equivalents as the Company reported a net loss for the period. Total antidilutive non-participating common stock equivalents were 48 and 324 during the three months ended September 30, 2021 and 2020, respectively, and 130 and 441 during the nine months ended September 30, 2021 and 2020, respectively (shares herein are reported in thousands). Potential common shares associated with the conversion option embedded in the Convertible Notes for the three and nine months ended September 30, 2021 were 1,042 and 1,140 , respectively (shares herein are reported in thousands). There were no potential common shares included in weighted average diluted shares for the three and nine months ended September 30, 2020 as the Company’s average stock price during those respective periods was lower than the conversion price. The following table reconciles weighted average diluted shares as reported on the Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020, which are determined pursuant to the treasury stock method, to the weighted average diluted shares used to calculate diluted earnings/(loss) per share as disclosed in the table above: 28 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Reconciliation of Weighted Average Diluted Shares (in thousands) Weighted average diluted shares as disclosed on the Consolidated Statements of Operations 159,213 145,564 (1) 161,706 149,886 (1) Less: Participating securities Weighted average shares of common stock issuable upon conversion of the Preferred Shares (Note 12) ( 14,750 ) — ( 14,750 ) — Potentially dilutive restricted stock awards ( 1,321 ) — ( 1,352 ) — Weighted average diluted shares used to calculate diluted earnings/(loss) per share as disclosed in the table above 143,142 145,564 145,604 149,886 (1) Excludes 15,307 participating securities and 5 potentially dilutive common stock equivalents for the three months ended September 30, 2020 and 14,997 participating securities and 5 potentially dilutive common stock equivalents for the nine months ended September 30, 2020, as the Company reported a net loss for the period (shares herein are reported in thousands). 20. Income Taxes Effective Income Tax Rate – Three and Nine Months Ended September 30, 2021 The Company’s effective income tax rate during the three months ended September 30, 2021 of 7.9 % resulted in income tax expense of $ 500 . The effective income tax rate differs from the federal statutory tax rate of 21 % primarily due to a lower tax rate on foreign earnings and a non-taxable gain on revaluation of deferred consideration, partly offset by higher non-deductible compensation. The Company’s effective income tax rate for the nine months ended September 30, 2021 of 6.7 % resulted in income tax expense of $ 2,790 . The effective income tax rate differs from the federal statutory rate of 21 % primarily due to a $ 5,171 reduction in unrecognized tax benefits, a lower tax rate on foreign earnings and a non-taxable gain on revaluation of deferred consideration. These items were partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation and non-deductible executive compensation. Effective Income Tax Rate – Three and Nine Months Ended September 30, 2020 The Company’s effective income tax rate during the three months ended September 30, 2020 of 123.7 % resulted in an income tax expense of $ 1,408 . The effective income tax rate differs from the federal statutory tax rate of 21 % primarily due to a non-deductible loss on revaluation of deferred consideration. This loss was partly offset by a lower tax rate on foreign earnings. The Company’s effective income tax rate for the nine months ended September 30, 2020 of 7.4 % resulted in an income tax benefit of $ 1,767 . The effective income tax rate differs from the federal statutory rate of 21 % primarily due to a valuation allowance on capital losses, a non-deductible loss on revaluation of deferred consideration and tax shortfalls associated with the vesting and exercise of stock-based compensation awards. These items were partly offset by a $ 5,981 reduction in unrecognized tax benefits, a $ 2,877 non-taxable gain recognized upon sale of the Canadian ETF business in the first quarter of 2020, a tax benefit of $ 2,842 recognized in connection with the release of a deferred tax asset valuation allowance on interest carryforwards arising from the Company’s debt previously held in the United Kingdom and a lower tax rate on foreign earnings. Deferred Tax Assets A summary of the components of the Company’s deferred tax assets at September 30, 2021 and December 31, 2020 are as follows: September 30, 2021 December 31, 2020 Deferred tax assets: Capital losses $ 16,368 $ 16,596 Accrued expenses 3,560 3,507 NOLs – Foreign 2,016 2,167 Goodwill and intangible assets 1,323 1,466 Interest carryforwards 1,223 2,235 Stock-based compensation 1,045 1,922 Unrealized losses 467 15 NOLs – U.S. 382 510 Outside basis differences 122 122 Operating lease liabilitie s — 4,953 Othe r 315 96 Deferred tax assets 26,821 33,589 29 Table of Contents Deferred tax liabilities: Fixed assets and prepaid assets 267 1,261 Foreign currency translation adjustment 226 293 Unremitted earnings – International subsidiaries 185 138 Right of use assets – operating leases — 3,927 Allocated equity component of convertible notes — 1,022 Deferred tax liabilitie s 678 6,641 Total deferred tax assets less deferred tax liabilities 26,143 26,948 Less: valuation allowance ( 18,507 ) ( 18,885 ) Deferred tax assets, net $ 7,636 $ 8,063 Net Operating and Capital Losses – U.S . The Company’s tax effected net operating losses (“NOLs”) at September 30, 2021 were $ 382 which expire in 2024 . The net operating loss carryforwards have been reduced by the impact of annual limitations described in the Internal Revenue Code Section 382 that arose as a result of an ownership change. The Company’s tax effected capital losses were $ 16,368 at September 30, 2021. These capital losses expire between the years 2023 and 2025. Net Operating Losses – International One of the Company’s European subsidiar ie s generated NOLs outside the U.S. These tax effected NOLs, all of which are carried forward indefinitely, were $ 2,016 at September 30, 2021. Valuation Allowance The Company’s valuation allowance has been established on its net capital losses, international net operating losses and outside basis differences, as it is more-likely-than-not that these deferred tax assets will not be realized. 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 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. 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 during the three and nine months ended September 30, 2021: Total Unrecognized Tax Benefits Interest and Penalties Balance on January 1, 2021 $ 27,016 $ 21,850 $ 5,166 Decrease - Lapse of statute of limitations (1) ( 5,171 ) ( 3,559 ) ( 1,612 ) Increases 39 — 39 Foreign currency translation (2) 338 273 65 Balance at March 31, 2021 $ 22,222 $ 18,564 $ 3,658 Increases 40 — 40 Foreign currency translation (2) 165 138 27 Balance at June 30, 2021 $ 22,427 $ 18,702 $ 3,725 Increases 39 — 39 Foreign currency translation (2) ( 594 ) ( 496 ) ( 98 ) Balance at September 30, 2021 $ 21,872 $ 18,206 $ 3,666 (1) Recorded as an income tax benefit of $ 5,171 during the nine months ended September 30, 2021, along with an equal and offsetting amount recorded in other gains and losses, net, to recognize a reduction in the indemnification asset. During the nine months ended September 30, 2020, an income tax benefit of $ 5,981 was recorded along with an equal and offsetting amount in other gains and losses, net. (2) The gross unrecognized tax benefits were accrued in British pounds. 30 Table of Contents 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 gross unrecognized tax benefits and interest and penalties totaling $ 21,872 at September 30, 2021 are included in other non-current liabilities on the Company’s Consolidated Balance Sheets. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by $ 6,995 (including interest and penalties of $ 2,041 ) in the next 12 months upon lapsing of the statute of limitations. At September 30, 2021, there were $ 21,872 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. ManJer’s tax returns (a Jersey-based subsidiary) for the years ended December 31, 2014 through 2016 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 September 30, 2021, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2016. Undistributed Earnings of Foreign Subsidiaries ASC 740-30 Income Taxes , provides guidance that US companies do not need to recognize tax effects on foreign earnings that are indefinitely reinvested. The Company repatriates earnings of its foreign subsidiaries and therefore has recognized a deferred tax liability of $ 185 and $ 138 at September 30, 2021 and December 31, 2020, respectively. 21. 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, subject to 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. There were no shares repurchased during the three months ended September 30, 2021. During the nine months ended September 30, 2021, the Company repurchased 5,120,496 shares of its common stock under this program for an aggregate cost of $ 34,506 . During the three and nine months ended September 30, 2020, the Company repurchased 1,066,261 and 8,189,973 shares of its common stock, respectively, under this program for an aggregate cost of $ 4,535 and $ 30,979 , respectively. Shares repurchased under this program were returned to the status of authorized and unissued on the Company’s books and records. As of September 30, 2021, $ 17,685 remained under this program for future repurchases . 22. Goodwill and Intangible Assets Goodwill The table below sets forth goodwill which is tested annually for impairment on November 30 th : Total Balance at January 1, 2021 $ 85,856 Changes — Balance at September 30, 2021 $ 85,856 Goodwill arising from the ETFS Acquisition of $ 84,057 is not deductible for tax purposes as the acquisition was structured as a stock acquisition occurring in the United Kingdom. The remainder of the goodwill is deductible for U.S. tax purposes. 31 Table of Contents Intangible Assets (Indefinite-Lived) The table below sets forth the Company’s intangible assets which are tested annually for impairment on November 30 th : Total Balance at January 1, 2021 $ 601,247 Changes — Balance at September 30, 2021 $ 601,247 ETFS In connection with the ETFS Acquisition, which was completed on April 11, 2018 , the Company identified intangible assets valued at $ 601,247 related to the right to manage AUM through customary advisory agreements. The intangible assets were determined to have indefinite useful lives and are not deductible for tax purposes. 23. Contingent Payments The Company recognizes contingent payments when the contingency is resolved and the gain is realized. AdvisorEngine – Sale of Financial Interests On May 4, 2020, the Company closed a transaction to exit its investment in AdvisorEngine. The fair value of upfront consideration paid to the Company was $ 9,592 . Consideration also included contingent payments totaling up to $ 10,408 which will be payable only upon AdvisorEngine achieving certain revenue milestones during the first through fourth anniversaries of such exit. No value has been ascribed to these contingent payments at September 30, 2021 and December 31, 2020. During the nine months ended September 30, 2020, the Company recognized an impairment of $ 19,672 to adjust the carrying value of its previously held financial interests in AdvisorEngine to fair value. During the three and nine months ended September 30, 2020, the Company subsequently recognized a gain of $ 225 and $ 1,093 , respectively, arising from an adjustment to the estimate fair value of consideration received. These fair value adjustments were based upon the final sale terms as disclosed above. Sale of Canadian ETF Business On February 19, 2020, the Company 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 is entitled to additional cash consideration depending on the achievement of certain AUM growth targets as determined on the 18- and 36-month anniversaries of the closing date. In connection with this sale, the Company recognized a gain of $ 2,877 during the nine months ended September 30, 2020 which was recorded in other losses and gains, net. This gain represented the difference between the minimum cash consideration payable to the Company and the carrying value of WTAMC’s net assets upon disposition. During the three months ended September 30, 2021, it was determined that the Company is entitled to CDN $ 3,000 (USD $ 2,360 ) of additional cash consideration as determined on the 18-month anniversary of the closing date, which was paid to the Company on October 4, 2021. A gain of $ 787 from remeasuring the contingent payment to its realizable value was recorded in other losses and gains, net. The Company may receive additional cash consideration of CDN $ 0 to $ 4,000 depending on the achievement of certain AUM growth targets as determined on the 36-month anniversary of the closing date. 24. Impairments The following table summarizes impairments recognized by the Company: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Lease termination – New York office (Note 13) $ 9,277 $ — $ 9,277 $ — Fixed assets – New York office (Note 8) 6,576 — 6,576 — Lease termination – London office (Note 13) — — 303 — AdvisorEngine – Financial Interests (Note 23) — — — 19,672 Thesys – Series Y Preferred (Note 4) — 3,080 — 3,080 Total $ 15,853 $ 3,080 $ 16,156 $ 22,752 32 Table of Contents 25. Subsequent Events The Company evaluated subsequent events through the date of issuance of the accompanying consolidated financial statements. There were no events requiring disclosure. 33 Table of Contents