WisdomTree, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below. For a more complete description of the risks noted above and other risks that could cause our actual results to materially differ from our current expectations, please see Item 1A. “Risk Factors” of this Report. We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. Introduction We are an asset management company in the business of offering transparent financial exposures to our clients and are a leading global ETP sponsor based on assets under management, or AUM, with AUM of $77.5 billion as of December 31, 2021. More recently, we have been positioning ourselves to expand beyond our existing ETP business by leveraging blockchain technology, digital assets and principles of DeFi to deliver transparency, choice and inclusivity to customers and consumers around the world. Our family of ETPs includes providing exposure to equities, commodities, fixed income, leveraged and inverse, currency, cryptocurrency and alternative strategies. We have launched many first-to-market products and pioneered alternative weighting we call “Modern Alpha,” which combines the outperformance potential of active management with the benefits of passive management to offer investors cost-effective funds that are built to perform. Most of our equity-based funds employ a fundamentally weighted investment methodology, which weights securities based on factors such as dividends, earnings or investment factors, whereas most other industry indexes use a capitalization weighted methodology. These products are distributed through all major channels in the asset management industry, including banks, brokerage firms, registered investment advisers, institutional investors, private wealth managers and online brokers primarily through our sales force. We are at the forefront of innovation and have differentiated ourselves through continued investments in technology-enabled and research-driven solutions such as our Advisor Solutions program, which includes portfolio construction, asset allocation, practice management services and digital tools for financial advisors. We seek to usher in the next chapter of financial services by introducing new revenue streams and expanding our offerings to include a new financial services mobile application, branded WisdomTree Prime ™ , a digital wallet that is native to the blockchain and being developed for saving, spending and investing in both native crypto assets and tokenized versions of mainstream financial assets (e.g., blockchain enabled investment funds). We also are planning to launch asset- and fund-tokenization products beginning with a dollar token, gold token and digital short term treasury fund which will be available on multiple public and permissioned blockchains, leveraging federal and state regulated entities. As we pursue our digital assets strategy, we are embracing a concept we refer to as “responsible DeFi,” which we believe upholds the foundational principles of regulation in this innovative and quickly evolving space. Executive Summary Our business has generated significant positive momentum while executing against our long-term strategic initiatives. We have benefited from the expansion and diversification of our product line-up, our Advisor Solutions program, investments in technology-enabled and research-driven solutions, the transformation of our distribution reach and investments in our managed models business. Our AUM as of December 31, 2021 was $77.5 billion, an all-time high. The breadth and depth of our flows and products is increasing and we generated $4.7 billion of net inflows in 2021, representing an annualized organic growth rate of 7%. Our U.S. products have generated positive net inflows for the last six consecutive quarters. In Europe, our UCITS business has grown at an annualized organic growth rate of 105%, has generated positive net inflows for the last seven consecutive quarters and had AUM of $3.7 billion as of December 31, 2021. Revenues and operating income have increased 22% and 62%, respectively, as compared to the prior year. We continue to pursue our digital assets initiative and believe we have made meaningful advancements. This includes: expanding our dedicated team focused on developing new investment products, indexes and strategies that provide exposure to digital assets, along with new blockchain-enabled products and services globally; the development of a new financial services mobile application, branded WisdomTree Prime ™ , a digital wallet that is native to the blockchain; launching a crypto index offering digital assets exposure to separately managed accounts in collaboration with Ritholtz Wealth Management, OnRamp Invest and Gemini; our collaboration with OnRamp Invest and Gemini to support a new digital asset variable annuity product by Federal Life through the development of our +Crypto model portfolio; the WisdomTree Enhanced Commodity Strategy Fund (GCC) becoming the first U.S. listed ETF to provide exposure to crypto assets through bitcoin futures; launching five crypto ETPs in Europe; our investments in Securrency and Onramp Invest; and various digital asset and blockchain-related regulatory filings and applications pending in the U.S. We believe our expansion into digital assets will complement our core competencies, diversify our revenue streams and contribute to our growth. 37 Table of Contents Additional business highlights include the following: • We were named a 2021 Best Places to Work in Money Management by Pension & Investments , for the second year in a row and 5 years total. We were one of the top five within the category for managers with 100-499 employees. We were also named Best WorkPlace for medium-sized companies in the U.K. for a second consecutive year. • We won Best Mixed-Allocation ETF Issuer ($100M+) at the ETF Express US Awards 2021 and we collected three wins at the Mutual Fund Industry and ETF Awards 2021, including Newcomer Smart-beta ETF of the Year - WisdomTree Cybersecurity Fund (WCBR), Newcomer Thematic ETF of the Year - WisdomTree Cybersecurity Fund (WCBR) and Asset Manager Website of the Year. • We cross-listed our European-domiciled WisdomTree Bitcoin ETP, or BTCW, in Germany, appointed Coinbase Custody as a custodian and received approval to passport BTCW in the European Union, allowing for a wider audience to access and invest in the product. • We launched 9 new U.S. listed ETPs and 14 new European listed ETPs. • We issued $150 million of convertible senior notes due 2026 and returned approximately $54.0 million to our stockholders through stock repurchases and our ongoing quarterly cash dividend. Reduction in Office Footprint On September 9, 2021, we terminated the lease for our principal executive office at 245 Park Avenue, New York, New York. In consideration for the landlord’s agreement to accelerate the expiration date of the term of the lease from August 31, 2029, we paid a termination fee of $12.7 million. As a result, we recognized a loss on the termination of a lease of $15.9 million which is included in impairments and was inclusive of the right-of-use asset, leasehold improvements and fixed assets broker fees and a reduction in operating lease liabilities. Cost savings for the year ending December 31, 2022 resulting from the reduction in the New York and London office footprints are estimated to be approximately $3.5 million when compared to actual occupancy and depreciation expense recognized during the year ended December 31, 2020. Anticipated rent for new office space in New York and London with a smaller footprint is included in these estimates. Market Environment The following chart reflects the annual returns of the broad-based equity indexes and gold prices over the last three years. Source: FactSet 38 Table of Contents U.S. listed ETF Industry Flows U.S. listed ETF net flows for the year ended December 31, 2021 were $908 billion. U.S. equity and fixed income and gathered the majority of those flows. Source: Morningstar International listed ETP Industry Flows International listed ETP net flows were $190 billion for the year ended December 31, 2021. Equities and fixed income gathered the majority of those flows. Source: Morningstar Industry Developments Asset Management – Consolidation In the recent past, a number of acquisitions in the asset management industry have either been announced or completed, such as OppenheimerFunds, Wells Fargo Asset Management and Voya Financial Advisors, among others. These trends have accelerated, as fee compression, cost pressures and increased regulations have weighed on the industry, highlighting the importance of scale and operating efficiency to compete in today’s market. Our growth strategies, including the expansion and diversification of our product line-up, our Advisor Solutions program, investments in technology-enabled and research-driven solutions, the transformation of our distribution reach and investments in our managed models business, have been effective in creating momentum in our core business. In addition, our advancements in digital assets and our efforts to expand beyond our existing ETP business by leveraging blockchain technology, digital assets and principles of DeFi to deliver transparency, choice and inclusivity to customers and consumers around the world positions us well for success to grow in this competitive landscape. 39 Table of Contents Components of Operating Revenue Advisory fees Substantially all of our revenues are comprised of advisory fees we earn from our ETPs. These advisory fees are calculated based on a percentage of the ETPs’ average daily net assets. Our weighted average fee rates by product category are as follows: Commodity & Currency: 37bps Leveraged & Inverse: 87bps International Developed Market Equity: 51bps Fixed Income: 20bps U.S. Equity: 32bps Alternatives: 58bps Emerging Market Equity: 49bps Cryptocurrency: 96bps We determine the appropriate advisory fee to charge for our ETPs based on the cost of operating each ETP considering the types of securities the ETPs will hold, fees third-party service providers will charge us for operating the ETPs and our competitors’ fees for similar ETPs. From time to time, we implement voluntary waivers of a portion of our advisory fee. In addition, we earn a fee based on daily aggregate AUM of our ETPs in exchange for bearing certain fund expenses. Our advisory fee revenues may fluctuate based on general stock market trends, which include market value appreciation or depreciation, currency fluctuations against the U.S. dollar, increased competition and level of inflows or outflows from our ETPs. Other income Other income includes rebates from swap providers to our European ETPs, creation/redemption fees earned on our European non-UCITS products and fees from licensing our indexes to third parties. Components of Operating Expenses Our operating expenses consist primarily of costs related to selling, operating and marketing our ETPs as well as the infrastructure needed to run our business. Compensation and benefits Employee compensation and benefits expenses are expensed when incurred and include salaries, incentive compensation, and related benefit costs. Virtually all of our employees receive incentive compensation that is based on our operating results as well as their individual performance. Therefore, a portion of this expense will fluctuate with our business results. To attract and retain qualified personnel, we must maintain competitive employee compensation and benefit plans. We would expect changes in employee compensation and benefits expense to be correlated with changes in our revenues and net inflows. Our compensation costs are also affected by inflationary pressures. Also included in compensation and benefits are costs related to equity awards granted to our employees. Our executive management and board of directors strongly believe that equity awards are an important part of our employees’ overall compensation package and that incentivizing our employees with equity in the Company aligns the interests of our employees with that of our stockholders. We use the fair value method in recording compensation expense for equity-based awards. Under the fair value method, compensation expense is measured at the grant date based on the estimated fair value of the award and is recognized as an expense over the vesting period. Fund management and administration Fund management and administration expenses are expensed when incurred and are comprised of the following costs we pay third-party service providers to operate our ETPs: • portfolio management of our ETPs (sub-advisory); • fund accounting and administration; • custodial and storage services; • market making; • transfer agency; • accounting and tax services; • printing and mailing of stockholder materials; 40 Table of Contents • index calculation; • indicative values; • distribution fees; • legal and compliance services; • exchange listing fees; • trustee fees and expenses; • preparation of regulatory reports and filings; • insurance; • certain local income taxes; and • other administrative services. We are not responsible for extraordinary expenses, taxes and certain other expenses related to the funds. We depend on a number of parties to provide critical portfolio management services to our ETPs. The fees we pay our sub-advisers generally are the higher of the fixed minimums per fund, which range from $25,000 to $737,040 per year, or the percentage fee, which ranges between 0.015% and 0.200% per annum of average daily AUM at various breakpoint levels depending on the nature of the ETP. In addition, we pay certain costs based on transactions in our ETPs or based on inflow levels. The fees we pay for accounting, tax, transfer agency, index calculation, indicative values and exchange listing are based on the number of ETFs we have. The remaining fees are based on a combination of both AUM and number of funds, or as incurred. Marketing and advertising Marketing and advertising expenses are recorded when incurred and include the following: • advertising and product promotion campaigns that are initiated to promote our existing and new ETPs as well as brand awareness; • development and maintenance of our website; and • creation and preparation of marketing materials. Our discretionary advertising comprises the largest portion of this expense. In addition, we may incur expenditures in certain periods to attract inflows, the benefit of which may or may not be recognized from increases to our AUM in future periods. However, due to the discretionary nature of some of these costs, they can generally be reduced if there were a decline in the markets. Sales and business development Sales and business development expenses are recorded when incurred and include the following: • travel and entertainment or conference related expenses for our sales force; • market data services for our research team; • sales related software tools; • voluntary payment of certain costs associated with the creation or redemption of ETF shares, as we may elect from time to time; and • legal and other advisory fees associated with the development of new funds or business initiatives. Contractual gold payments Contractual gold payments expense represents an ongoing obligation requiring us to pay 9,500 ounces of gold annually from the advisory fee income we earn for managing physically backed gold ETPs. See Note 10 to our Consolidated Financial Statements for additional information. 41 Table of Contents Professional and consulting fees Professional fees are expensed when incurred and consist of fees we pay to corporate advisers including accountants, tax advisers, legal counsel, investment bankers, human resources or other consultants. These expenses fluctuate based on our needs or requirements at the time. Certain of these costs are at our discretion and can fluctuate year to year. Occupancy, communications and equipment Occupancy, communications and equipment expense includes costs for our corporate headquarters in New York City as well as office related costs in our other locations. Depreciation and amortization Depreciation and amortization expense results from amortization of leasehold improvements to our office space as well as depreciation on fixed assets we purchase, which is depreciated over five to fifteen years. Third-party distribution fees Third-party distribution fees, which are expensed as incurred, include payments made to enable our products and models to be included on certain third-party platforms in exchange for commission-free trading or other preferential access. These expenses also include payments to our third-party marketing agents in Latin America and Israel. Acquisition and disposition-related costs Acquisition and disposition-related costs are principally associated with the sale of our Canadian ETF business, which was completed in February 2020. Other Other expenses consist primarily of insurance premiums, general office related expenses, securities license fees for our sales force, public company related expenses, corporate related travel and entertainment and board of director fees, including stock-based compensation related to equity awards we granted to our directors. Components of Other Income/(Expenses) of a Recurring Nature Interest expense We recognize interest expense using the effective interest method which includes the amortization of discounts, premiums and issuance costs. Revaluation of deferred consideration – gold payments Deferred consideration arose in connection with the ETFS Acquisition and is remeasured each reporting period using forward-looking gold prices observed on the CMX exchange, a selected discount rate and perpetual growth rate. See Note 10 to our Consolidated Financial Statements for additional information. Interest income Interest income, which is recognized on an accrual basis, arises from investing our corporate cash and on notes receivable previously outstanding. Other losses and gains, net Included herein are gains and losses arising from our securities owned, the sale of gold earned from advisory fees paid by physically-backed gold ETPs, foreign exchange and other miscellaneous items. Also included are losses arising from the release of tax-related indemnification assets upon the expiration of the statute of limitations, for which an equal and offsetting benefit is recognized in income tax expense. Income Taxes Our income tax expense consists of taxes due to federal, various state and local and certain foreign authorities. 42 Table of Contents Expense Guidance for the Year Ending December 31, 2022 Compensation Expense Our compensation expense for the year ending December 31, 2022 is currently estimated to range from $92.0 million to $102.0 million and takes into consideration the competitive landscape, inflationary pressures and hiring both in our core business and digital assets. Discretionary Spending Discretionary spending includes marketing, sales, professional fees, occupancy and equipment, depreciation and amortization and other expenses. We currently estimate our discretionary spending for the year ending December 31, 2022 to range from $49.0 million to $57.0 million, which presumes the pandemic dissipates and spending migrates toward pre-pandemic levels. This range also includes spending on our digital assets initiative and is dependent on the rollout of WisdomTree Prime ™ and the launch of additional products and services. Not included in the guidance above are any potential non-recurring expenses we may incur in response to the Schedule 13D filed with the SEC on January 24, 2022 by ETFS Capital Limited. Such expenses could be material to our results of operations for the year ending December 31, 2022. Gross Margin We define gross margin as total operating revenues less fund management and administration expenses. Gross margin percentage is calculated as gross margin divided by total operating revenues. For the year ending December 31, 2022, we currently estimate that our gross margin percentage will be 81% to 82% at current AUM and revenue levels. Contractual Gold Payments We currently estimate our contractual gold payments expense for the year ending December 31, 2022 to be approximately $17.0 million based upon current gold prices. This expense is measured based upon actual monthly average gold prices. Third-Party Distribution Expense We currently estimate third-party distribution expense to be approximately $9.5 million for the year ending December 31, 2022, which assumes continued growth in Latin America and the introduction of new platforms in Europe. Income Tax Expense We currently estimate that our consolidated normalized effective tax rate will be approximately 21% to 22% for the year ending December 31, 2022. This estimated rate may change and is dependent upon our actual taxable income earned in relation to our forecasts as well as any other items which may arise that are not currently forecasted. Such items may include, but are not limited to, any revaluation on deferred consideration – gold payments, reductions in unrecognized tax benefits and any stock-based compensation windfalls or shortfalls. Corporate tax legislation could also impact our normalized effective tax rate. 43 Table of Contents Factors that May Impact our Future Financial Results Our AUM is well diversified across the commodity, U.S. equity, international developed markets and emerging markets sectors. As a result, our operating results are particularly exposed to investor sentiment toward investing in these products’ strategies and our ability to maintain AUM of these products, as well as the performance of these products. Our revenues are also highly correlated to the level and relative mix of our AUM, as well as the fee rate associated with our ETPs. Changes in product mix have led to a decline in our average advisory fee, which, for the years ended December 31, 2019, 2020 and 2021 were 0.44%, 0.40% and 0.41%, respectively. The chart below sets forth the asset mix of our ETPs for the last three years: 44 Table of Contents Key Operating Statistics The following table presents key operating statistics that serve as indicators for the performance of our business: Years Ended December 31, 2021 2020 2019 GLOBAL ETPs (in millions) Beginning of period assets $ 67,383 $ 63,532 $ 53,940 Assets acquired/(sold) — (778 ) — Inflows/(outflows) 4,660 (22 ) 591 Market appreciation/(depreciation) 5,454 5,013 9,272 Fund closures (19 ) (362 ) (271 ) End of period assets $ 77,478 $ 67,383 $ 63,532 Average assets during the period $ 73,436 $ 60,266 $ 59,667 Average advisory fee during the period 0.41 % 0.40 % 0.44 % Number of ETPs – end of the period 329 309 349 U.S. LISTED ETFs (in millions) Beginning of period assets $ 38,517 $ 40,600 $ 35,486 Inflows/(outflows) 4,950 (1,253 ) (654 ) Market appreciation/(depreciation) 4,758 (706 ) 5,858 Fund closures (15 ) (124 ) (90 ) End of period assets $ 48,210 $ 38,517 $ 40,600 Average assets during the period $ 44,335 $ 34,133 $ 38,579 Number of ETPs—end of period 75 67 80 INTERNATIONAL LISTED ETPs (in millions) Beginning of period assets $ 28,866 $ 22,932 $ 18,454 Assets acquired/(sold) — (778 ) — Inflows/(outflows) (290 ) 1,231 1,245 Market appreciation/(depreciation) 696 5,719 3,414 Fund closures (4 ) (238 ) (181 ) End of period assets $ 29,268 $ 28,866 $ 22,932 Average assets during the period $ 29,100 $ 26,133 $ 21,088 Number of ETPs—end of period 254 242 269 PRODUCT CATEGORIES (in millions) Commodity & Currency Beginning of period assets $ 25,880 $ 20,073 $ 15,976 Inflows/(outflows) (1,478 ) 471 1,118 Market appreciation/(depreciation) 196 5,336 2,979 End of period assets $ 24,598 $ 25,880 $ 20,073 Average assets during the period $ 25,028 $ 23,737 $ 18,214 U.S. Equity Beginning of period assets $ 18,367 $ 17,732 $ 13,211 Inflows/(outflows) 1,542 765 1,446 Market appreciation/(depreciation) 3,951 (130 ) 3,075 End of period assets $ 23,860 $ 18,367 $ 17,732 Average assets during the period $ 21,265 $ 15,393 $ 15,847 International Developed Market Equity Beginning of period assets $ 9,406 $ 13,018 $ 14,231 Inflows/(outflows) 1,260 (2,843 ) (3,452 ) Market appreciation/(depreciation) 1,228 (769 ) 2,239 End of period assets $ 11,894 $ 9,406 $ 13,018 Average assets during the period $ 10,745 $ 9,500 $ 13,190 45 Table of Contents Years Ended December 31, 2021 2020 2019 Emerging Market Equity Beginning of period assets $ 8,539 $ 6,400 $ 5,202 Inflows/(outflows) 2,041 1,700 618 Market appreciation/(depreciation) (205 ) 439 580 End of period assets $ 10,375 $ 8,539 $ 6,400 Average assets during the period $ 10,619 $ 6,054 $ 5,704 Fixed Income Beginning of period assets $ 3,308 $ 3,565 $ 2,230 Inflows/(outflows) 1,131 (281 ) 1,276 Market appreciation/(depreciation) (83 ) 24 59 End of period assets $ 4,356 $ 3,308 $ 3,565 Average assets during the period $ 3,548 $ 3,540 $ 3,555 Leveraged & Inverse Beginning of period assets $ 1,477 $ 1,133 $ 1,054 Inflows/(outflows) 46 249 (3 ) Market appreciation/(depreciation) 254 95 82 End of period assets $ 1,777 $ 1,477 $ 1,133 Average assets during the period $ 1,676 $ 1,302 $ 1,167 Cryptocurrency Beginning of period assets $ 167 $ 1 $ — Inflows/(outflows) 84 76 1 Market appreciation/(depreciation) 106 90 — End of period assets $ 357 $ 167 $ 1 Average assets during the period $ 312 $ 30 $ 1 Alternatives Beginning of period assets $ 215 $ 358 $ 508 Inflows/(outflows) 39 (125 ) (162 ) Market appreciation/(depreciation) 7 (18 ) 12 End of period assets $ 261 $ 215 $ 358 Average assets during the period $ 224 $ 251 $ 440 Closed ETPs Beginning of period assets $ 24 $ 1,252 $ 1,528 Assets sold — (778 ) — Inflows/(outflows) (5 ) (34 ) (251 ) Market appreciation/(depreciation) — (54 ) 246 Fund closures (19 ) (362 ) (271 ) End of period assets $ — $ 24 $ 1,252 Average assets during the period $ 19 $ 459 $ 1,549 Headcount 241 217 208 Note: Previously issued statistics may be restated due to fund closures and trade adjustments Source: WisdomTree 46 Table of Contents Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Selected Operating and Financial Information Year Ended December 31, Change Percent Change 2021 2020 AUM (in millions) Average AUM $ 73,436 $ 60,266 $ 13,170 21.9 % Operating Revenues (in thousands) Advisory fees (1) $ 298,052 $ 246,395 $ 51,657 21.0 % Other income 6,266 3,517 2,749 78.2 % Total revenues $ 304,318 $ 249,912 $ 54,406 21.8 % (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 to our Consolidated Financial Statements for additional information. Average AUM Our average AUM increased 21.9 % from $60.3 billion at December 31, 2020 to $73.4 billion at December 31, 2021 arising from market appreciation and net inflows. Operating Revenues Advisory fees Advisory fee revenues increased 21.0% from $246.4 million during the year ended December 31, 2020 to $298.1 million in the comparable period in 2021 due to higher average AUM. Our average advisory fee increased from 0.40% during the year ended December 31, 2020 to 0.41% during the year ended December 31, 2021 due to AUM mix shift. Other income Other income increased 78.2% from $3.5 million during the year ended December 31, 2020 to $6.3 million in the comparable period in 2021 primarily due to higher fees associated with our European listed products. Operating Expenses ( in thousands ) Year Ended December 31, Change Percent Change 2021 2020 Compensation and benefits $ 88,163 $ 74,675 $ 13,488 18.1 % Fund management and administration (1) 58,912 56,728 2,184 3.8 % Marketing and advertising 14,090 11,128 2,962 26.6 % Sales and business development 9,907 10,579 (672 ) (6.4 %) Contractual gold payments 17,096 16,811 285 1.7 % Professional and consulting fees 7,616 4,902 2,714 55.4 % Occupancy, communications and equipment 4,629 6,427 (1,798 ) (28.0 %) Depreciation and amortization 738 1,021 (283 ) (27.7 %) Third-party distribution fees 7,176 5,219 1,957 37.5 % Acquisition and disposition-related costs — 416 (416 ) n/a Other 6,933 6,924 9 0.1 % Total operating expenses $ 215,260 $ 194,830 $ 20,430 10.5 % 47 Table of Contents As a Percent of Revenues: Year Ended December 31, 2021 2020 Compensation and benefits 28.9 % 29.8 % Fund management and administration (1) 19.4 % 22.7 % Marketing and advertising 4.6 % 4.5 % Sales and business development 3.3 % 4.2 % Contractual gold payments 5.6 % 6.7 % Professional and consulting fees 2.5 % 2.0 % Occupancy, communications and equipment 1.5 % 2.6 % Depreciation and amortization 0.2 % 0.4 % Third-party distribution fees 2.4 % 2.1 % Acquisition and disposition-related costs n/a 0.2 % Other 2.3 % 2.8 % Total operating expenses 70.7 % 78.0 % (1) Fund management and administration expenses previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information. Compensation and benefits Compensation and benefits expense increased 18.1% from $74.7 million during the year ended December 31, 2020 to $88.2 million in the comparable period in 2021 due to higher incentive compensation and headcount. Headcount was 217 and 241 at December 31, 2020 and 2021, respectively. Fund management and administration Fund management and administration expense increased 3.8% from $56.7 million during the year ended December 31, 2020 to $58.9 million in the comparable period in 2021 primarily due to higher average AUM. We had 67 U.S. listed ETFs and 242 International listed ETPs at December 31, 2020 compared to 75 U.S. listed ETFs and 254 International listed ETPs at December 31, 2021. Marketing and advertising Marketing and advertising expense increased 26.6% from $11.1 million during the year ended December 31, 2020 to $14.1 million in the comparable period in 2021 as our spending in the prior year was reduced at the onset of the COVID-19 pandemic. Sales and business development Sales and business development expense decreased 6.4% from $10.6 million during the year ended December 31, 2020 to $9.9 million in the comparable period in 2021 primarily due to lower travel and discretionary spending resulting from the persistence of the COVID-19 pandemic. Contractual gold payments Contractual gold payments expense increased 1.7% from $16.8 million during the year ended December 31, 2020 to $17.1 million in the comparable period in 2021. This expense was associated with the payment of 9,500 ounces of gold and was calculated using the average daily spot price of $1,770 and $1,800 per ounce during the years ended December 31, 2020 and 2021, respectively. Professional and consulting fees Professional and consulting fees increased 55.4% from $4.9 million during the year ended December 31, 2020 to $7.6 million in the comparable period in 2021 due to spending related to our digital assets initiative. Occupancy, communications and equipment Occupancy, communications and equipment expense decreased 28.0% from $6.4 million during the year ended December 31, 2020 to $4.6 million in the comparable period in 2021 as we exited our New York office and reduced our office footprint in Europe. Depreciation and amortization Depreciation and amortization expense decreased 27.7% from $1.0 million during the year ended December 31, 2020 to $0.7 million in the comparable period in 2021 due to the write-off of fixed assets related to the exit of our New York office. 48 Table of Contents Third-party distribution fees Third-party distribution fees increased 37.5% from $5.2 million during the year ended December 31, 2020 to $7.2 million in the comparable period in 2021 primarily due to higher AUM in Latin America resulting in higher fees paid to our third-party marketing agent, as well as additional platform relationships. Acquisition and disposition-related costs Acquisition and disposition-related costs of $0.4 million during the year ended December 31, 2020 arose in connection with the sale of our Canadian ETF business which was completed in February 2020. Other Other expenses were essentially unchanged from the year ended December 31, 2021. Other Income/(Expenses) Year Ended December 31, Change Percent Change ( in thousands ) 2021 2020 Interest expense $ (12,332 ) $ (9,668 ) $ (2,664 ) 27.6 % Gain/(loss) on revaluation of deferred consideration 2,018 (56,821 ) 58,839 n/a Interest income 2,009 744 1,265 170.0 % Impairments (16,156 ) (22,752 ) 6,596 (29.0 %) Loss on extinguishment of debt — (2,387 ) 2,387 n/a Other losses and gains, net (7,926 ) 580 (8,506 ) n/a Total other expenses, net $ (32,387 ) $ (90,304 ) $ 57,917 (64.1 %) Year Ended December 31, As a Percent of Revenues: 2021 2020 Interest expense (4.1 %) (3.9 %) Gain/(loss) on revaluation of deferred consideration 0.7 % (22.7 %) Interest income 0.7 % 0.3 % Impairments (5.3 %) (9.1 %) Loss on extinguishment of debt — (1.0 %) Other losses and gains, net (2.6 %) 0.2 % Total other expenses, net (10.6 %) (36.1 %) Interest expense Interest expense increased 27.6% from $9.7 million during the year ended December 31, 2020 to $12.3 million in the comparable period in 2021 due to a higher level of debt outstanding in the current period. Our effective interest rate during the years ended December 31, 2020 and 2021 was 5.5% and 4.9%, respectively. Gain/(loss) on revaluation of deferred consideration We recognized a gain on revaluation of deferred consideration of $2.0 million during the year ended December 31, 2021 as compared to a loss of $56.8 million during the year ended December 31, 2020. The gain in the current period was due to a decline in spot prices, partly offset by a steepening of the forward-looking gold curve. The magnitude of any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold. Interest income Interest income increased 170.0% from $0.7 million during the year ended December 31, 2020 to $2.0 million in the comparable period in 2021 due to an increase in securities owned. Impairments During the year ended December 31, 2021, we recognized impairment charges totaling $16.2 million, including a loss of $9.3 million upon the termination of the lease of our former principal executive office at 245 Park Avenue, New York, New York, $6.6 million related to the write-off of leasehold improvements and fixed assets associated with our former New York office and $0.3 million upon exiting our London office (See Notes 9, 14 and 26 to our Consolidated Financial Statements). 49 Table of Contents During the year ended December 31, 2020, we recognized non-cash impairment charges totaling $22.8 million, including $19.7 million related to our former investment in AdvisorEngine Inc., or AdvisorEngine, and $3.1 million related to our investment in Thesys Group, Inc., or Thesys. Loss on extinguishment of debt During the year ended December 31, 2020, we recognized a non-cash loss on extinguishment of debt of $2.4 million arising from the acceleration of debt issuance cost amortization in connection with the termination of our former credit facility. Other losses and gains, net Other losses and gains, net were $0.6 million and ($7.9) million during the year ended December 31, 2020 and 2021, respectively. This includes a charge of $6.0 million and $5.2 million during the years ended December 31, 2020 and 2021, respectively, arising from the release of a tax-related indemnification asset upon the expiration of the statute of limitations. An equal and offsetting benefit has been recognized in income tax expense. During the year ended December 31, 2021, we also recognized losses on our securities owned of $3.8 million, a gain of $0.8 million related to the remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business and an unrealized gain of $0.4 million on our investment in Securrency. In addition, during the year ended December 31, 2020, we recognized a gain of $2.9 million associated with the sale of our Canadian ETF business and a gain of $1.1 million arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine. Gains and losses also generally arise from the sale of gold earned from advisory fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items. Income Taxes Our effective income tax rate for the year ended December 31, 2021 of 12.1% resulted in income tax expense of $6.9 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due to a $5.2 million reduction in unrecognized tax benefits and a lower tax rate on foreign earnings. These items were partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation and non-deductible executive compensation. Our effective income tax rate for the year ended December 31, 2020 of negative 1.2% resulted in income tax expense of $0.4 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due to a non-deductible loss on revaluation of deferred consideration, a valuation allowance on capital losses and tax shortfalls associated with the vesting and exercise of stock-based compensation awards. These items were partly offset by a tax benefit of $6.0 million recognized in connection with the release of the tax-related indemnification asset described above, a $2.9 million non-taxable gain recognized upon sale of our Canadian ETF business in the first quarter, a tax benefit of $2.6 million recognized in connection with the release of a deferred tax asset valuation allowance on interest carryforwards arising from our debt previously held in the U.K. and a lower tax rate on foreign earnings. Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 Selected Operating and Financial Information Year Ended December 31, Change Percent Change 2020 2019 AUM (in millions) Average AUM $ 60,266 $ 59,667 $ 599 1.0 % Operating Revenues (in thousands) Advisory fees (1) $ 246,395 $ 263,777 $ (17,382 ) (6.6 %) Other income 3,517 2,751 766 27.8 % Total revenues $ 249,912 $ 266,528 $ (16,616 ) (6.2 %) (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 to our Consolidated Financial Statements for additional information. 50 Table of Contents Average AUM Our average AUM increased 1.0% from $59.7 billion at December 31, 2019 to $60.3 billion at December 31, 2020 arising from market appreciation. Operating Revenues Advisory fees Advisory fee revenues decreased 6.6% from $263.8 million during the year ended December 31, 2019 to $246.4 million in the comparable period in 2020 due to increase in our average AUM, notwithstanding a 4 basis point decline in our average advisory fee arising from AUM mix shift. Our average advisory fee declined from 0.44% during the year ended December 31, 2019 to 0.40% during the year ended December 31, 2020. Other income Other income increased 27.8% from $2.8 million during the year ended December 31, 2019 to $3.5 million in the comparable period in 2020 primarily due to higher creation/redemption fees associated with our international listed products. Operating Expenses (in thousands) Year Ended December 31, Change Percent Change 2020 2019 Compensation and benefits $ 74,675 $ 80,761 $ (6,086 ) (7.5 %) Fund management and administration (1) 56,728 59,627 (2,899 ) (4.9 %) Marketing and advertising 11,128 12,163 (1,035 ) (8.5 %) Sales and business development 10,579 18,276 (7,697 ) (42.1 %) Contractual gold payments 16,811 13,226 3,585 27.1 % Professional and consulting fees 4,902 5,641 (739 ) (13.1 %) Occupancy, communications and equipment 6,427 6,302 125 2.0 % Depreciation and amortization 1,021 1,045 (24 ) (2.3 %) Third-party distribution fees 5,219 6,968 (1,749 ) (25.1 %) Acquisition and disposition-related costs 416 902 (486 ) (53.9 %) Other 6,924 8,083 (1,159 ) (14.3 %) Total operating expenses $ 194,830 $ 212,994 $ (18,164 ) (8.5 %) As a Percent of Revenues: Year Ended December 31, 2020 2019 Compensation and benefits 29.8 % 30.2 % Fund management and administration (1) 22.7 % 22.4 % Marketing and advertising 4.5 % 4.6 % Sales and business development 4.2 % 6.9 % Contractual gold payments 6.7 % 5.0 % Professional and consulting fees 2.0 % 2.1 % Occupancy, communications and equipment 2.6 % 2.4 % Depreciation and amortization 0.4 % 0.4 % Third-party distribution fees 2.1 % 2.6 % Acquisition and disposition-related costs 0.2 % 0.3 % Other 2.8 % 3.0 % Total operating expenses 78.0 % 79.9 % (1) Fund management and administration expenses previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information. 51 Table of Contents Compensation and benefits Compensation and benefits expense decreased 7.5% from $80.8 million during the year ended December 31, 2019 to $74.7 million in the comparable period in 2020 due to lower incentive compensation accruals as well as $3.5 million of severance expense included in the prior year period. Headcount was 208 and 217 at December 31, 2019 and 2020, respectively. Fund management and administration Fund management and administration expense decreased 4.9% from $59.6 million during the year ended December 31, 2019 to $56.7 million in the comparable period in 2020 due to the sale of our Canadian ETF business in February 2020, partly offset by higher average AUM. We had 80 U.S. listed ETFs and 269 International listed ETPs at December 31, 2019 compared to 67 U.S. listed ETFs and 242 International listed ETPs at December 31, 2020. Marketing and advertising Marketing and advertising expense decreased 8.5% from $12.2 million during the year ended December 31, 2019 to $11.1 million in the comparable period in 2020 primarily due to lower discretionary spending resulting from the COVID-19 pandemic. Sales and business development Sales and business development expense decreased 42.1% from $18.3 million during the year ended December 31, 2019 to $10.6 million in the comparable period in 2020 primarily due to lower discretionary spending resulting from the COVID-19 pandemic. Contractual gold payments Contractual gold payments expense increased 27.1% from $13.2 million during the year ended December 31, 2019 to $16.8 million in the comparable period in 2020. This expense was associated with the payment of 9,500 ounces of gold and was calculated using the average daily spot price of $1,393 and $1,770 per ounce during the years ended December 31, 2019 and 2020, respectively. Professional and consulting fees Professional and consulting fees decreased 13.1% from $5.6 million during the year ended December 31, 2019 to $4.9 million in the comparable period in 2020 due to lower corporate consulting-related expenses. Occupancy, communications and equipment Occupancy, communications and equipment expense was essentially unchanged from the year ended December 31, 2019. Depreciation and amortization Depreciation and amortization expense was essentially unchanged from the year ended December 31, 2019. Third-party distribution fees Third-party distribution fees decreased 25.1% from $7.0 million during the year ended December 31, 2019 to $5.2 million in the comparable period in 2020 primarily due to lower fees for platform relationships. Acquisition and disposition-related costs Acquisition and disposition-related costs were $0.9 million and $0.4 million during the year ended December 31, 2019 and 2020. These were incurred in connection with the integration of ETFS during the year ended December 31, 2019 and costs associated with the sale of our Canadian ETF business, which was completed in February 2020. Other Other expenses decreased 14.3% from $8.1 million during the year ended December 31, 2019 to $6.9 million in the comparable period in 2020 primarily due to lower office-related and travel expenses as a result of our employees working remotely. 52 Table of Contents Other Income/(Expenses) Year Ended December 31, Change Percent Change (in thousands) 2020 2019 Interest expense $ (9,668 ) $ (11,240 ) $ 1,572 (14.0 %) Loss on revaluation of deferred consideration (56,821 ) (11,293 ) (45,528 ) 403.2 % Interest income 744 3,332 (2,588 ) (77.7 %) Impairments (22,752 ) (30,710 ) 7,958 (25.9 %) Loss on extinguishment of debt (2,387 ) — (2,387 ) n/a Other gains and losses, net 580 (3,502 ) 4,082 n/a Total other expenses, net $ (90,304 ) $ (53,413 ) $ (36,891 ) 69.1 % Year Ended December 31, As a Percent of Revenues: 2020 2019 Interest expense (3.9 %) (4.2 %) Loss on revaluation of deferred consideration (22.6 %) (4.2 %) Interest income 0.3 % 1.3 % Impairments (9.1 %) (11.6 %) Loss on extinguishment of debt (1.0 %) — Other gains and losses, net 0.2 % (1.3 %) Total other expenses, net (36.1 %) (20.0 %) Interest expense Interest expense decreased 14.0% from $11.2 million during the year ended December 31, 2019 to $9.7 million in the comparable period in 2020 due to a lower level of debt outstanding. Our effective interest rate during the years ended December 31, 2019 and 2020 were 5.3% and 5.5%, respectively. Loss on revaluation of deferred consideration We recognized a loss on revaluation of deferred consideration of $11.3 million and $56.8 million during the years ended December 31, 2019 and 2020, respectively. The loss in each period was due to an increase in the forward-looking price of gold when compared to the forward-looking gold curve at the beginning of each respective year. The magnitude of any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold. In addition, the loss in the current year also resulted from a reduction in the discount rate used to compute the present value of the annual payment obligations. Interest income Interest income decreased 77.7% from $3.3 million during the year ended December 31, 2019 to $0.7 million in the comparable period in 2020 as paid-in-kind interest income was accrued in the prior period on our former AdvisorEngine notes receivable. Impairments During the year ended December 31, 2020, we recognized non-cash impairment charges totaling $22.8 million, including $19.7 million related to our former investment in AdvisorEngine, and $3.1 million related to our investment in Thesys (See Note 26 to our Consolidated Financial Statements). During the year ended December 31, 2019, we recognized non-cash impairment charges totaling $30.7 million, including $30.1 million to our former investment in AdvisorEngine and $0.6 million in connection with the termination of our Japan office lease. Loss on extinguishment of debt During the year ended December 31, 2020, we recognized a non-cash loss on extinguishment of debt of $2.4 million arising from the acceleration of debt issuance cost amortization in connection with the termination of our former credit facility. 53 Table of Contents Other gains and losses, net Other gains and losses, net were ($3.5) million and $0.6 million during the years ended December 31, 2019 and 2020, respectively. This includes a charge of $4.3 million and $6.0 million during the years ended December 31, 2019 and 2020, respectively, arising from the release of a tax-related indemnification asset upon the expiration of the statute of limitations. An equal and offsetting benefit has been recognized in income tax expense. In addition, during the year ended December 31, 2020, we recognized a gain of $2.9 million associated with the sale of our Canadian ETF business and a gain of $1.1 million arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine. The year ended December 31, 2019 also includes a gain of $0.4 million from the recognition of the foreign currency translation adjustment upon the liquidation of our Japan business. Gains and losses also generally arise from the sale of gold earned from advisory fees paid by our physically-backed gold ETPs, foreign exchange fluctuations, securities owned and other miscellaneous items. Income Taxes Our effective income tax rate for the year ended December 31, 2020 of negative 1.2% resulted in income tax expense of $0.4 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due to a non-deductible loss on revaluation of deferred consideration, a valuation allowance on capital losses and tax shortfalls associated with the vesting and exercise of stock-based compensation awards. These items were partly offset by a tax benefit of $6.0 million recognized in connection with the release of the tax-related indemnification asset described above, a $2.9 million non-taxable gain recognized upon sale of our Canadian ETF business in the first quarter, a tax benefit of $2.6 million recognized in connection with the release of a deferred tax asset valuation allowance on interest carryforwards arising from our debt previously held in the U.K. and a lower tax rate on foreign earnings. Our effective income tax rate during the year ended December 31, 2019 was not meaningful as our income before income taxes was $0.1 million. Our effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a valuation allowance on capital losses and foreign net operating losses, a non-deductible loss on revaluation of deferred consideration, non-deductible executive compensation, state and local income taxes and tax shortfalls associated with the vesting and exercise of stock-based compensation awards, partly offset by a $4.3 million reduction in unrecognized tax benefits and a lower tax rate on foreign earnings. 54 Table of Contents Quarterly Results The following tables set forth our unaudited consolidated quarterly statement of operations data, both in dollar amounts and as a percentage of total revenues, and our unaudited consolidated quarterly operating data for the quarters in 2021 and 2020. In our opinion, this unaudited information has been prepared on substantially the same basis as the consolidated financial statements appearing elsewhere in this Report and includes all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the unaudited consolidated quarterly data. The unaudited consolidated quarterly data should be read together with the consolidated financial statements and related notes included elsewhere in this Report. The results for any quarter are not necessarily indicative of results for any future period, and you should not rely on them as such. (in thousands, except per share amounts) Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 Operating Revenues: Advisory fees (1) $ 77,441 $ 76,400 $ 74,169 $ 70,042 $ 64,697 $ 63,028 $ 56,394 $ 62,276 Other income 1,734 1,712 1,606 1,214 954 721 918 924 Total revenues 79,175 78,112 75,775 71,256 65,651 63,749 57,312 63,200 Operating Expenses: Compensation and benefits 23,178 22,027 20,331 22,627 20,827 19,098 17,455 17,295 Fund management and administration (1) 15,417 15,181 14,367 13,947 14,942 14,328 13,647 13,810 Marketing and advertising 4,565 2,925 3,594 3,006 3,715 2,996 1,949 2,468 Sales and business development 2,668 2,935 2,159 2,145 2,595 2,386 2,181 3,417 Contractual gold payments 4,262 4,250 4,314 4,270 4,449 4,539 4,063 3,760 Professional and consulting fees 2,099 1,583 1,921 2,013 1,322 950 1,357 1,273 Occupancy, communications and equipment 725 1,163 1,266 1,475 1,622 1,611 1,643 1,551 Depreciation and amortization 45 185 256 252 261 253 251 256 Third-party distribution fees 1,830 1,873 2,130 1,343 1,291 1,233 1,340 1,355 Acquisition and disposition-related costs — — — — — — 33 383 Other 1,823 1,787 1,752 1,571 1,720 1,611 1,596 1,997 Total operating expenses 56,612 53,909 52,090 52,649 52,744 49,005 45,515 47,565 Operating income 22,563 24,203 23,685 18,607 12,907 14,744 11,797 15,634 Other Income/(Expenses): Interest expense (3,740 ) (3,729 ) (2,567 ) (2,296 ) (2,694 ) (2,511 ) (2,044 ) (2,419 ) (Loss)/gain on revaluation of deferred consideration (3,048 ) 1,737 497 2,832 (22,385 ) (8,870 ) (23,358 ) (2,208 ) Interest income 864 689 225 231 351 111 119 163 Impairments — (15,853 ) — (303 ) — (3,080 ) — (19,672 ) Loss on extinguishment of debt — — — — — — (2,387 ) — Other losses and gains, net (1,368 ) (714 ) 49 (5,893 ) 524 744 1,819 (2,507 ) Income/(loss) before income taxes 15,271 6,333 21,889 13,178 (11,297 ) 1,138 (14,054 ) (11,009 ) Income tax expense/(benefit) 4,084 500 4,259 (1,969 ) 2,200 1,408 (804 ) (2,371 ) Net income/(loss) $ 11,187 $ 5,833 $ 17,630 $ 15,147 ($ 13,497 ) ($ 270 ) ($ 13,250 ) ($ 8,638 ) Earnings/(loss) per share - basic $ 0.07 $ 0.04 $ 0.11 $ 0.09 ($0.10 ) ($0.01 ) ($0.09 ) ($0.06 ) Earnings/(loss) per share - diluted $ 0.07 $ 0.04 $ 0.11 $ 0.09 ($0.10 ) ($0.01 ) ($0.09 ) ($0.06 ) Dividends per common share $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 (1) Advisory fees and fund management and administration expenses previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information. 55 Table of Contents Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 Percent of Revenues Operating Revenues Advisory fees 97.8 % 97.8 % 97.9 % 98.3 % 98.5 % 98.9 % 98.4 % 98.5 % Other income 2.2 % 2.2 % 2.1 % 1.7 % 1.5 % 1.1 % 1.6 % 1.5 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Operating Expenses Compensation and benefits 29.2 % 28.2 % 26.9 % 31.7 % 31.6 % 30.0 % 30.4 % 27.4 % Fund management and administration 19.4 % 19.5 % 19.0 % 19.6 % 22.7 % 22.6 % 23.8 % 21.9 % Marketing and advertising 5.8 % 3.7 % 4.7 % 4.2 % 5.7 % 4.7 % 3.4 % 3.9 % Sales and business development 3.4 % 3.8 % 2.8 % 3.0 % 4.0 % 3.7 % 3.8 % 5.4 % Contractual gold payments 5.4 % 5.4 % 5.7 % 6.0 % 6.8 % 7.1 % 7.1 % 5.9 % Professional and consulting fees 2.7 % 2.0 % 2.5 % 2.8 % 2.0 % 1.5 % 2.4 % 2.0 % Occupancy, communications and equipment 0.9 % 1.5 % 1.7 % 2.1 % 2.5 % 2.5 % 2.9 % 2.5 % Depreciation and amortization 0.1 % 0.2 % 0.3 % 0.4 % 0.4 % 0.4 % 0.4 % 0.4 % Third-party distribution fees 2.3 % 2.4 % 2.8 % 1.9 % 2.0 % 1.9 % 2.3 % 2.1 % Acquisition and disposition-related costs n/a n/a n/a n/a n/a n/a 0.1 % 0.6 % Other 2.3 % 2.3 % 2.3 % 2.2 % 2.6 % 2.5 % 2.8 % 3.2 % Total operating expenses 71.5 % 69.0 % 68.7 % 73.9 % 80.3 % 76.9 % 79.4 % 75.3 % Operating income 28.5 % 31.0 % 31.3 % 26.1 % 19.7 % 23.1 % 20.6 % 24.7 % Other Income/(Expenses) Interest expense (4.8 %) (4.8 %) (3.5 %) (3.2 %) (4.1 %) (3.9 %) (3.6 %) (3.8 %) (Loss)/gain on revaluation of deferred consideration (3.8 %) 2.2 % 0.7 % 4.0 % (34.1 %) (14.0 %) (40.7 %) (3.5 %) Interest income 1.1 % 0.9 % 0.3 % 0.3 % 0.5 % 0.2 % 0.2 % 0.3 % Impairments n/a (20.3 %) n/a (0.4 %) n/a (4.8 %) n/a (31.1 %) Loss on extinguishment of debt n/a n/a n/a n/a n/a n/a (4.2 %) n/a Other losses and gains, net (1.7 %) (0.9 %) 0.1 % (8.3 %) 0.8 % 1.2 % 3.2 % (4.0 %) Income/(loss) before income taxes 19.3 % 8.1 % 28.9 % 18.5 % (17.2 %) 1.8 % (24.5 %) (17.4 %) Income tax expense/(benefit) 5.2 % 0.6 % 5.6 % (2.8 %) 3.4 % 2.2 % (1.4 %) (3.7 %) Net income/(loss) 14.1 % 7.5 % 23.3 21.3 % (20.6 %) (0.4 %) (23.1 %) (13.7 %) 56 Table of Contents Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 Operating Statistics GLOBAL ETPs (in millions) Beginning of period assets $ 72,780 $ 73,941 $ 69,532 $ 67,383 $ 60,707 $ 57,616 $ 50,302 $ 63,532 Assets sold — — — — — — — (778 ) Inflows/(outflows) 1,902 548 931 1,279 881 (485 ) 129 (547 ) Market appreciation/(depreciation) 2,811 (1,709 ) 3,482 870 5,795 3,622 7,481 (11,885 ) Fund closures (15 ) — (4 ) — — (46 ) (296 ) (20 ) End of period assets $ 77,478 $ 72,780 $ 73,941 $ 69,532 $ 67,383 $ 60,707 $ 57,616 $ 50,302 Average assets during the period $ 75,990 $ 74,556 $ 73,621 $ 69,575 $ 64,053 $ 61,188 $ 55,705 $ 60,117 Average advisory fee during the period 0.40 % 0.41 % 0.40 % 0.41 % 0.40 % 0.41 % 0.41 % 0.42 % Number of ETPs – end of the period 329 322 318 313 309 305 311 331 U.S. LISTED ETFs (in millions) Beginning of period assets $ 44,742 $ 45,129 $ 42,163 $ 38,517 $ 33,310 $ 31,362 $ 28,920 $ 40,600 Inflows/(outflows) 1,865 612 1,130 1,343 919 575 (1,474 ) (1,273 ) Market appreciation/(depreciation) 1,618 (999 ) 1,836 2,303 4,288 1,373 4,030 (10,397 ) Fund closures (15 ) — — — — — (114 ) (10 ) End of period assets $ 48,210 $ 44,742 $ 45,129 $ 42,163 $ 38,517 $ 33,310 $ 31,362 $ 28,920 Average assets during the period $ 46,943 $ 45,509 $ 44,183 $ 40,706 $ 35,926 $ 33,003 $ 30,652 $ 36,950 Number of ETFs – end of the period 75 73 73 68 67 67 67 77 INTERNATIONAL LISTED ETPs (in millions) Beginning of period assets $ 28,038 $ 28,812 $ 27,369 $ 28,866 $ 27,397 $ 26,254 $ 21,382 $ 22,932 Assets sold — — — — — — — (778 ) Inflows/(outflows) 37 (64 ) (199 ) (64 ) (38 ) (1,060 ) 1,603 726 Market appreciation/(depreciation) 1,193 (710 ) 1,646 (1,433 ) 1,507 2,249 3,451 (1,488 ) Fund closures — — (4 ) — — (46 ) (182 ) (10 ) End of period assets $ 29,268 $ 28,038 $ 28,812 $ 27,369 $ 28,866 $ 27,397 $ 26,254 $ 21,382 Average assets during the period $ 29,047 $ 29,047 $ 29,438 $ 28,869 $ 28,127 $ 28,185 $ 25,053 $ 23,167 Number of ETPs – end of the period 254 249 245 245 242 238 244 254 PRODUCT CATEGORIES Commodity & Currency Beginning of period assets $ 23,826 $ 24,772 $ 23,657 $ 25,880 $ 25,177 $ 24,246 $ 19,819 $ 20,073 Inflows/(outflows) (251 ) (249 ) (318 ) (660 ) (296 ) (1,112 ) 1,302 577 Market appreciation/(depreciation) 1,023 (697 ) 1,433 (1,563 ) 999 2,043 3,125 (831 ) End of period assets $ 24,598 $ 23,826 $ 24,772 $ 23,657 $ 25,880 $ 25,177 $ 24,246 $ 19,819 Average assets during the period $ 24,422 $ 24,853 $ 25,549 $ 25,289 $ 25,596 $ 25,938 $ 23,016 $ 20,399 U.S. Equity Beginning of period assets $ 21,383 $ 21,285 $ 20,018 $ 18,367 $ 15,612 $ 13,997 $ 12,151 $ 17,732 Inflows/(outflows) 783 351 190 218 395 897 (242 ) (285 ) Market appreciation/(depreciation) 1,694 (253 ) 1,077 1,433 2,360 718 2,088 (5,296 ) End of period assets $ 23,860 $ 21,383 $ 21,285 $ 20,018 $ 18,367 $ 15,612 $ 13,997 $ 12,151 Average assets during the period $ 22,963 $ 21,794 $ 20,982 $ 19,320 $ 17,070 $ 15,160 $ 13,325 $ 16,018 International Developed Market Equity Beginning of period assets $ 11,178 $ 10,790 $ 9,988 $ 9,406 $ 8,618 $ 8,841 $ 8,663 $ 13,018 Inflows/(outflows) 440 404 399 17 (191 ) (586 ) (965 ) (1,101 ) Market appreciation/(depreciation) 276 (16 ) 403 565 979 363 1,143 (3,254 ) End of period assets $ 11,894 $ 11,178 $ 10,790 $ 9,988 $ 9,406 $ 8,618 $ 8,841 $ 8,663 Average assets during the period $ 11,523 $ 11,144 $ 10,524 $ 9,790 $ 8,927 $ 8,833 $ 8,784 $ 11,457 Emerging Market Equity Beginning of period assets $ 10,666 $ 11,519 $ 10,477 $ 8,539 $ 5,979 $ 5,413 $ 4,600 $ 6,400 Inflows/(outflows) (3 ) (149 ) 531 1,662 1,399 257 (25 ) 69 Market appreciation/(depreciation) (288 ) (704 ) 511 276 1,161 309 838 (1,869 ) End of period assets $ 10,375 $ 10,666 $ 11,519 $ 10,477 $ 8,539 $ 5,979 $ 5,413 $ 4,600 Average assets during the period $ 10,550 $ 11,038 $ 11,012 $ 9,875 $ 7,250 $ 5,917 $ 5,131 $ 5,919 57 Table of Contents Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 Fixed Income Beginning of period assets $ 3,529 $ 3,440 $ 3,245 $ 3,308 $ 3,605 $ 3,507 $ 3,505 $ 3,565 Inflows/(outflows) 838 115 168 10 (320 ) 76 (53 ) 16 Market appreciation/(depreciation) (11 ) (26 ) 27 (73 ) 23 22 55 (76 ) End of period assets $ 4,356 $ 3,529 $ 3,440 $ 3,245 $ 3,308 $ 3,605 $ 3,507 $ 3,505 Average assets during the period $ 4,118 $ 3,502 $ 3,337 $ 3,236 $ 3,449 $ 3,581 $ 3,500 $ 3,630 Leveraged & Inverse Beginning of period assets $ 1,666 $ 1,693 $ 1,521 $ 1,477 $ 1,423 $ 1,344 $ 890 $ 1,133 Inflows/(outflows) 11 42 (2 ) (5 ) (125 ) (10 ) 302 82 Market appreciation/(depreciation) 100 (69 ) 174 49 179 89 152 (325 ) End of period assets $ 1,777 $ 1,666 $ 1,693 $ 1,521 $ 1,477 $ 1,423 $ 1,344 $ 890 Average assets during the period $ 1,764 $ 1,717 $ 1,666 $ 1,556 $ 1,429 $ 1,476 $ 1,161 $ 1,140 Cryptocurrency Beginning of period assets $ 295 $ 229 $ 377 $ 167 $ 33 $ 15 $ 5 $ 1 Inflows/(outflows) 28 12 8 36 48 15 8 5 Market appreciation/(depreciation) 34 54 (156 ) 174 86 3 2 (1 ) End of period assets $ 357 $ 295 $ 229 $ 377 $ 167 $ 33 $ 15 $ 5 Average assets during the period $ 406 $ 277 $ 300 $ 264 $ 79 $ 27 $ 11 $ 2 Alternatives Beginning of period assets $ 222 $ 198 $ 227 $ 215 $ 229 $ 225 $ 244 $ 358 Inflows/(outflows) 56 22 (39 ) — (26 ) (4 ) (29 ) (66 ) Market appreciation/(depreciation) (17 ) 2 10 12 12 8 10 (48 ) End of period assets $ 261 $ 222 $ 198 $ 227 $ 215 $ 229 $ 225 $ 244 Average assets during the period $ 229 $ 214 $ 231 $ 223 $ 224 $ 226 $ 226 $ 328 Closed ETPs Beginning of period assets $ 15 $ 15 $ 22 $ 24 $ 31 $ 28 $ 425 $ 1,252 Assets sold — — — — — — — (778 ) Inflows/(outflows) — — (6 ) 1 (3 ) (18 ) (169 ) 156 Market appreciation/(depreciation) — — 3 (3 ) (4 ) 67 68 (185 ) Fund closures (15 ) — (4 ) — — (46 ) (296 ) (20 ) End of period assets $ — $ 15 $ 15 $ 22 $ 24 $ 31 $ 28 $ 425 Average assets during the period $ 15 $ 17 $ 20 $ 22 $ 29 $ 30 $ 551 $ 1,224 Headcount 241 235 227 227 217 211 214 210 Note: Previously issued statistics may be restated due to fund closures and trade adjustments Source: WisdomTree Non-GAAP Financial Measurements In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain non-GAAP information which we believe provides useful and meaningful information. Our management reviews these non-GAAP financial measurements when evaluating our financial performance and results of operations; therefore, we believe it is useful to provide information with respect to these non-GAAP measurements so as to share this perspective of management. Non-GAAP measurements do not have any standardized meaning, do not replace nor are superior to GAAP financial measurements and are unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measurements should be considered in the context with our GAAP results. The non-GAAP financial measurements contained in this Report include: • Adjusted net income and diluted earnings per share. We disclose adjusted net income and diluted earnings per share as non-GAAP financial measurements in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting these non-GAAP financial measures provides investors with a consistent way to analyze our performance. These non-GAAP financial measures exclude the following: • Unrealized gains or losses on the revaluation of deferred consideration : Deferred consideration is an obligation we assumed in connection with the ETFS Acquisition that is carried at fair value. This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices. Changes in the forward-looking price of gold and changes in the discount rate used to compute the present value of the annual payment obligations may have 58 Table of Contents a material impact on the carrying value of the deferred consideration and our reported financial results. We exclude this item when arriving at adjusted net income and diluted earnings per share as it is not core to our operating business. The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate. • Gains or losses on securities owned : We account for our securities owned as trading securities, which requires these instruments to be measured at fair value with gains and losses reported in net income. In the third quarter of 2021, we began excluding these items when calculating our non-GAAP financial measurements as these securities have become a more meaningful percentage of total assets and the gains and losses introduce volatility in earnings and are not core to our operating business. • Tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards : GAAP requires the recognition of tax windfalls and shortfalls within income tax expense. These items arise upon the vesting and exercise of stock-based compensation awards and the magnitude is directly correlated to the number of awards vesting/exercised as well as the difference between the price of our stock on the date the award was granted and the date the award vested or was exercised. We exclude these items when determining adjusted net income and diluted earnings per share as they introduce volatility in earnings and are not core to our operating business. • Other items : Unrealized gains recognized on our investment in Securrency, impairment charges, interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in the Convertible Notes (prior to January 1, 2021, the effective date of Accounting Standards Update 2020-06, Debt – Debt with Conversion and Other Options, Cash Conversion) , a loss on extinguishment of debt, the release of a deferred tax asset valuation allowance recognized on interest carryforwards arising from our debt previously outstanding in the U.K., a gain arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine, a gain recognized upon the sale of our Canadian ETF business (including the remeasurement of contingent consideration), acquisition and disposition-related costs and severance expenses are excluded when calculating our non-GAAP financial measurements. Years Ended Dec. 31, Dec. 31, Dec. 31, Adjusted Net Income and Diluted Earnings per Share : 2021 2020 2019 Net income/(loss), as reported $ 49,797 $ (35,655 ) $ (10,425 ) (Deduct)/add back: (Gain)/loss on revaluation of deferred consideration (2,018 ) 56,821 11,293 Add back: Impairments, net of income taxes 12,247 21,998 30,710 Deduct: Gain recognized from the sale of Canadian ETF business, including remeasurement of contingent consideration (787 ) (2,877 ) — Add back: Unrealized loss on securities owned, at fair value, net of income taxes 2,507 — — Deduct: Unrealized gain recognized on investment in Securrency, net of income taxes (284 ) — — Add back/(deduct): Tax (windfalls)/shortfalls upon vesting and exercise of stock-based compensation awards (110 ) 691 1,219 Deduct: Release of a deferred tax asset valuation allowance recognized on interest carryforwards arising from debt previously outstanding in the U.K. — (2,615 ) — Add back: Loss on extinguishment of debt, net of income taxes — 1,910 Deduct: Gain arising from an adjustment to the estimated fair value of consideration received from the exit of investment in AdvisorEngine — (1,093 ) — Add back: Interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in the Convertible Notes, net of income taxes — 642 — Add back: Acquisition and disposition-related costs, net of income taxes — 383 787 Add back: Severance expense, net of income taxes — — 2,715 Adjusted net income $ 61,352 $ 40,205 $ 36,299 Deduct: Income distributed to participating securities (2,168 ) (2,216 ) (2,163 ) Deduct: Undistributed income allocable to participating securities (4,630 ) (2,214 ) (1,679 ) Adjusted net income available to common stockholders $ 54,554 $ 35,775 $ 32,457 Weighted average diluted shares, excluding participating securities (See Note 21 to our Consolidated Financial Statements) 145,055 148,688 151,975 Adjusted earnings per share - diluted $ 0.38 $ 0.24 $ 0.21 59 Table of Contents Liquidity and Capital Resources The following table summarizes key data regarding our liquidity, capital resources and use of capital to fund our operations: December 31, 2021 December 31, 2020 Balance Sheet Data (in thousands) : Cash and cash equivalents $ 140,709 $ 73,425 Securities owned, at fair value 127,166 34,895 Accounts receivable 31,864 29,455 Securities held-to-maturity 308 451 Total: Liquid assets 300,047 138,226 Less: Total current liabilities (83,667 ) (73,999 ) Less: Regulatory capital requirement – certain international subsidiaries (12,320 ) (10,745 ) Total: Available liquidity $ 204,060 $ 53,482 Year Ended December 31, 2021 2020 2019 Cash Flow Data (in thousands) : Operating cash flows $ 75,318 $ 47,136 $ 57,488 Investing cash flows (99,632 ) 10,641 (17,661 ) Financing cash flows 92,553 (60,179 ) (43,566 ) Foreign exchange rate effect (955 ) 855 927 Increase/(decrease) in cash and cash equivalents $ 67,284 $ (1,547 ) $ (2,812 ) Liquidity We consider our available liquidity to be our liquid assets, less our current liabilities and regulatory capital requirements of certain international subsidiaries. Liquid assets consist of cash and cash equivalents, securities owned, at fair value, accounts receivable and securities held-to-maturity. Our securities owned, at fair value are highly liquid investments. Accounts receivable are current assets and primarily represent receivables from advisory fees we earn from our ETPs. Our current liabilities consist primarily of payments owed to vendors and third parties in the normal course of business, deferred consideration and accrued incentive compensation for employees. Cash and cash equivalents increased $67.3 million during the year ended December 31, 2021 due to $150.0 million of proceeds from the issuance of Convertible Notes, $75.3 million of net cash provided by operating activities, $19.4 million of proceeds from the sale of securities owned, at fair value and $2.4 million of proceeds from the receipt of contingent consideration from the sale of our Canadian ETF business. These increases were partly offset by $115.5 million used to purchase securities owned, at fair value, $34.5 million used to repurchase our common stock, $19.5 million used to pay dividends on our common stock, $5.8 million used to purchase investments, $4.3 million used to pay Convertible Notes issuance costs and $0.2 million from other activities. Cash and cash equivalents decreased $1.5 million during the year ended December 31, 2020 due to $179.0 million used to repay our debt, $36.4 million used to purchase securities owned, at fair value, $31.2 million used to repurchase our common stock, $20.1 million used to pay dividends on our common stock and $5.4 million used to pay Convertible Notes issuance costs. These decreases were partly offset by $175.3 million of proceeds from the issuance of Convertible Notes, $47.1 million of net cash provided by operating activities, $18.7 million of proceeds from the sale of securities owned, at fair value, $16.5 million of proceeds from held-to-maturity securities maturing or called prior to maturity, $9.6 million of proceeds from the sale of our financial interests in AdvisorEngine, $2.8 million of net proceeds from the sale of our Canadian ETF business and $0.6 million from other activities. Cash and cash equivalents decreased $2.8 million during the year ended December 31, 2019 due to $22.5 million used to purchase securities owned, at fair value, $21.0 million used to partially repay our debt, $20.4 million used to pay dividends on our common stock, $8.1 million used to purchase investments, $2.3 million used to repurchase our common stock and $2.1 million used to fund notes receivable. These decreases were partly offset by net cash provided by operating activities of $57.5 million, $11.9 million of proceeds from the sale of securities owned, at fair value, $3.2 million from held-to-maturity securities called or maturing during the period and $1.0 million from other activities. 60 Table of Contents Issuance of Convertible Notes On June 14, 2021, we issued and sold $150.0 million in aggregate principal amount of 3.25% Convertible Senior Notes due 2026 (the “2021 Notes”) pursuant to an indenture dated June 14, 2021, between us and U.S. Bank National Association, as 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, we issued and sold $150.0 million 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 us and the trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A. On August 13, 2020, we issued and sold $25.0 million 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, which constitute a further issuance of, and form a single series with, our 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”), we had $325.0 million 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 our common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price set forth 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 our 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 our common stock and the conversion rate on each such trading day; (iii) upon a notice of redemption delivered by us 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, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted. At our election, we will also settle our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in either cash, shares of our common stock or a combination of cash and shares of its common stock. • Redemption price : We may redeem for cash all or any portion of the notes, at our 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 our common stock has 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 we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide 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 us 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. 61 Table of Contents • 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 our common stock per $1,000 principal amount of the 2021 Notes and 2020 Notes, respectively (the equivalent of 69,036,410 shares of our common stock), subject to adjustment. • Seniority and Security : The 2021 Notes and 2020 Notes rank equal in right of payment, and are our senior unsecured obligations, but are subordinated in right of payment to our obligations to make certain redemption payments (if and when due) in respect of its Series A Non-Voting Convertible Preferred Stock (See Note 12 to our Consolidated Financial Statements). 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. Capital Resources Our principal source of financing is our operating cash flow. We believe that current cash flows generated by our operating activities and existing cash balances should be sufficient for us to fund our operations for the foreseeable future. Our ability to satisfy our contractual obligations as they arise are discussed in the section titled “Contractual Obligations” below. Use of Capital Our business does not require us to maintain a significant cash position. However, certain of our international subsidiaries are required to maintain a minimum level of regulatory capital, which at December 31, 2021 was approximately $12.3 million in the aggregate. Notwithstanding these regulatory capital requirements, we expect that our main uses of cash will be to fund the ongoing operations of our business. We also maintain a capital return program which includes a $0.03 per share quarterly cash dividend and authority to purchase our common stock through April 27, 2025, including purchases to offset future equity grants made under our equity plans. During the year ended December 31, 2021, we repurchased 5,120,496 shares of our common stock under the repurchase program for an aggregate cost of 34.5 million. Currently, $17.7 million remains under this program for future purchases. Contractual Obligations Convertible Notes At December 31, 2021, we had $325.0 million aggregate principal amount of Convertible Notes outstanding, of which $175.0 million are scheduled to mature on June 15, 2023 and $150.0 million are scheduled to mature on June 15, 2026, unless earlier converted, repurchased or redeemed. Conditional conversions or a requirement to repurchase the Convertible Notes upon the occurrence of a fundamental change may accelerate payment. The Convertible Notes require cash settlement of the principal amount, while settlement of the conversion obligation in excess of the aggregate principal amount may be satisfied in either cash, shares of our common stock or a combination of cash and shares of its common stock. We currently anticipate refinancing these obligations when due. See the section titled “Issuance of Convertible Notes” above for additional information. Deferred Consideration – Gold Payments Deferred consideration represents an obligation we assumed in April 2018 in connection with our acquisition of the European exchange-traded commodity, currency and leveraged and inverse business of ETFS Capital. 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 present value of the deferred consideration was $228.0 million at December 31, 2021. The Contractual Gold Payments are paid from advisory fee income generated by any of our sponsored financial products backed by physical gold with no recourse back to us for any unpaid amounts that exceed advisory fees earned. See Note 10 to our Consolidated Financial Statements for additional information. Operating Leases Total future minimum lease payments with respect to our operating lease liabilities were $0.6 million at December 31, 2021. Cash flows generated by our operating activities and existing cash balances should be sufficient to satisfy the future minimum lease payments. See Note 14 to our Consolidated Financial Statements for additional information. 62 Table of Contents Off-Balance Sheet Arrangements We do not have any off-balance sheet financing or other arrangements and have neither created nor are party to any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. Critical Accounting Policies and Estimates Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the fair values of the identifiable net assets at the acquisition date. We test 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. Goodwill is allocated to our 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 our goodwill impairment test, we consider a qualitative assessment, when appropriate, and the market approach and its market capitalization when determining the fair value of the reporting unit. The results of our analysis indicated no impairment based upon a quantitative assessment. Indefinite-lived intangible assets are tested for impairment at least annually and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair value is less than their carrying value. We may rely on a qualitative assessment when performing our intangible asset impairment test. Otherwise, the impairment evaluation is performed at the lowest level of reasonably identifiable cash flows independent of other assets. The annual impairment testing date for our intangible assets is November 30 th . The results of our analysis identified no indicators of impairment to be recognized based upon a quantitative assessment (discounted cash flow analysis) which relied upon significant unobservable inputs including projected revenue growth rates ranging from 3% to 4% (3% weighted average) and a weighted average cost of capital of 9.0%. Investments We account for equity investments that do not have a readily determinable fair value under the measurement alternative prescribed within ASU 2016-01, Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities , to the extent such investments are not subject to consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment. See Note 8 to our Consolidated Financial Statements for information regarding a gain of $0.4 million recognized on our investment in Securrency during the year ended December 31, 2021. 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. The weighted average forward-looking gold price per ounce, discount rate and perpetual growth rate were $2,106, 9.0% and 1.0%, respectively, at December 31, 2021. Changes in the fair value of this obligation are reported as gain/(loss) on revaluation of deferred consideration – gold payments on our Consolidated Statements of Operations. During the year ended December 31, 2021, we reported a gain on deferred consideration – gold payments of $2.0 million. A 1.0% increase in the weighted average forward-looking gold price per ounce would have reduced this reported gain by $1.8 million, a 1 percentage point increase in the discount rate would have increased this reported gain by $23.1 million and a 1 percentage point increase in the perpetual growth rate would have reduced this reported gain by $20.1 million. See Note 10 to our Consolidated Financial Statements for additional information. 63 Table of Contents Revenue Recognition We earn substantially all of our revenue in the form of advisory fees from our ETPs and recognize this revenue over time, as the performance obligation is satisfied. Advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which we have a right to invoice. Recently Adopted Accounting Pronouncements On January 1, 2021, we 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, we reclassified the equity component related to the Convertible Notes, net of deferred taxes, reducing accumulated deficit by $0.6 million, increasing the carrying value of the Convertible Notes by $4.1 million, reducing additional paid-in capital by $3.7 million and reducing deferred tax liabilities by $1.0 million. These updates also reduced interest expense recognized on our Convertible Notes by approximately $0.4 million per quarter. See Note 12 to our Consolidated Financial Statements for additional information. On January 1, 2021, we 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 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. We have determined that the adoption of this standard did not have a material impact on our financial statements.