What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-04 compared with 2023-05-09 · 307 added, 169 removed, 280 unchanged (63% of the section changed)

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Factors that could cause or contribute to these differences include those discussed below.

For a more complete description of the risks noted above and other risks that could cause our actual results to materially differ from our current expectations, please see Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

for the fiscal year ended December 31, 2022.

We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Executive Summary

We are a global financial innovator, offering a well-diversified suite of ETPs, models and solutions.

We are a global financial innovator, offering a well-diversified suite of ETPs, models, solutions and products leveraging blockchain-enabled technology.

We empower investors to shape their future and support financial professionals to better serve their clients and grow their businesses.

We leverage the latest financial infrastructure to create products that provide access, transparency and an enhanced user experience.

Building on our heritage of innovation, we are also developing next-generation digital products and structures, including Digital Funds and tokenized assets, as well as our blockchain-native digital wallet, WisdomTree Prime ™ .

We have approximately $90.7 billion in AUM as of March 31, 2023.

Our family of ETPs includes products that provide 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.

Building on our heritage of innovation, we are also developing and recently launched next-generation digital products and structures, including WisdomTree Digital Funds, or “Digital Funds” and tokenized assets, as well as our blockchain-native digital wallet, WisdomTree Prime ™

We have approximately $93.7 billion in AUM as of June 30, 2023.

Our family of ETPs includes products that provide 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.

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We are building the foundation that will allow us to lead in this coming evolution.

WisdomTree Prime ™ , our blockchain-native digital wallet, is currently in beta testing and positions us to expand our blockchain-enabled financial services product offerings with a new direct-to-consumer channel where spending, saving and investing are united.

WisdomTree Prime ™

, our blockchain-native digital wallet, positions us to expand our blockchain-enabled financial services product offerings with a new direct-to-consumer

channel where spending, saving and investing are united.

As we continue to 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.

We believe that our expansion into digital assets will complement our existing core competencies in a holistic manner, diversify our revenue streams and contribute to our growth.

We believe that our expansion into digital assets and blockchain-enabled finance will complement our existing core competencies in a holistic manner, diversify our revenue streams and contribute to our growth.

We were incorporated under the laws of the state of Delaware on September 19, 1985 as Financial Data Systems, Inc., were renamed WisdomTree Investments, Inc.

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WisdomTree ETPs

We offer ETPs covering equity, commodity, fixed income, leveraged-and-inverse, currency, alternatives and cryptocurrency.

The chart below sets forth the asset mix of our ETPs at March 31, 2023, December 31, 2022 and March 31, 2022:

We offer ETPs covering equity, commodity, fixed income, leveraged-and-inverse,

currency, alternatives and cryptocurrency.

The chart below sets forth the asset mix of our ETPs at June 30, 2023, March 31, 2023 and June 30, 2022:

Market Environment

The outlook for the first quarter of 2023 improved as developed markets continued to stave off a recession despite rising interest rates.

The outlook for emerging markets has improved since the zero-Covid policy was abandoned in China.

In March, gold prices increased to over $2,000 per ounce for the first time in over a year amid market volatility sparked by the Silicon Valley Bank’s collapse and further turbulence in the banking sector.

The S&P 500, MSCI EAFE (local currency), MSCI Emerging Markets Index (U.S.

dollar) and gold prices increased by 7.5%, 7.7%, 4.0% and 9.2%, respectively, during the quarter.

During the second quarter of 2023, developed markets continued to stave off a recession, as interest rates were relatively stable as compared to the prior quarter.

The faster-than-expected re-opening

of the Chinese economy has also improved the outlook for global growth.

The S&P 500, MSCI EAFE (local currency) and MSCI Emerging Markets Index (U.S.

dollar) increased by 8.7%, 4.6% and 1.0%, respectively, during the quarter.

In addition, the European and Japanese equities markets both appreciated with the MSCI EMU Index and MSCI Japan Index increasing 3.3% and 15.6%, respectively, in local currency terms for the quarter.

Also, the U.S.

dollar weakened 1.8%, 2.6% and 1.3% versus the euro, British pound and the Japanese yen, respectively, the during the quarter.

Gold prices decreased by 3.4%.

dollar weakened 0.1% and 2.2% versus the euro and British pound, respectively, and strengthened 8.3% versus the Japanese yen, during the quarter.

Listed ETF Industry Flows

listed ETF net flows for the three months ended March 31, 2023 were $467 billion.

Fixed income and U.S.

equity gathered the majority of those flows.

listed ETF industry net flows were $135 billion for the three months ended June 30, 2023.

equity and fixed income gathered the majority of those flows.

European Listed ETP Industry Flows

European listed ETP net flows were $71.1 billion for the three months ended March 31, 2023.

Equities and fixed income gathered the majority of those flows.

European listed ETP industry net flows were $28.9 billion for the three months ended June 30, 2023.

Fixed income and equities gathered the majority of those flows.

Our Operating and Financial Results

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listed exchange traded funds, or U.S.

listed ETFs, increased from $56.0 billion at December 31, 2022 to $61.3 billion at March 31, 2023 due to net inflows and market appreciation.

listed ETFs, increased from $61.3 billion at March 31, 2023 to $65.9 billion at June 30, 2023 due to net inflows and market appreciation.

European Listed ETPs

The AUM of our European listed (including internationally cross-listed) ETPs, or European listed ETPs, increased from $26.0 billion at December 31, 2022 to $29.5 billion at March 31, 2023, due to net inflows and market appreciation.

The AUM of our European listed (including internationally cross-listed) ETPs, or European listed ETPs, decreased from $29.5 billion at March 31, 2023 to $27.8 billion at June 30, 2023, due to net outflows and market depreciation.

Consolidated Operating Results

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

Revenues – Total revenues increased 4.7% from the three months ended March 31, 2022 to $82.0 million due to higher average AUM and higher other income from large flows into some of our European products.

These items were partly offset by a lower average advisory fee.

Expenses – Total operating expenses increased 7.9% from the three months ended March 31, 2022 to $65.5 million primarily due to higher compensation from increased headcount and stock-based compensation expense, fund management and administration costs and other expenses.

These increases were partly offset by lower professional fees.

Other Income/(Expenses) – Other income/(expenses) includes interest income and interest expense, gains/(losses) on revaluation of deferred consideration–gold payments, impairments, loss on extinguishment of convertible notes and other losses and gains.

– Total revenues increased 11.0% from the three months ended June 30, 2022 to $85.7 million in the comparable period in 2023 primarily due to higher average AUM.

– Total operating expenses increased 9.9% from the three months ended June 30, 2022 to $67.5 million in the comparable period in 2023 primarily due to higher professional fees incurred in connection with an activist campaign, incentive compensation and headcount, and fund management and administration costs.

These increases were partly offset by lower contractual gold payments.

Other Income/(Expenses)

– Other income/(expenses) includes interest income and interest expense, gains on revaluation/termination of deferred consideration–gold payments and other losses and gains.

Further information is provided herein.

Net income/(loss) – We reported net income of $16.2 million and a net loss of ($10.3) million during the three months ended March 31, 2023 and 2022, respectively.

Expense Guidance Update for the Year Ending December 31, 2023

Net income/(loss)

– We reported net income of $54.3 million and $8.0 million during the three months ended June 30, 2023 and 2022, respectively.

Guidance Update for the Year Ending December 31, 2023

Compensation Expense

Our compensation expense for the year ending December 31, 2023 is currently estimated to range from $100.0 million to $106.0 million.

Our compensation expense for the year ending December 31, 2023 is currently estimated to range from $104.0 million to $110.0 million (previously $100.0 million to $106.0 million).

This range considers variability in incentive compensation, with drivers including the magnitude of our flows, our share price performance in relation to our peers as well as revenue, operating income and operating margin performance.

Given the strong start to 2023, we anticipate trending toward the high end of this range.

Given the potential volatility in our performance-based metrics, we consider the midpoint of this range to be a reasonable estimate.

Discretionary Spending

Discretionary spending includes, marketing, sales, professional fees, occupancy and equipment, depreciation and amortization and other expenses.

During the three months ended March 31, 2023, our discretionary spending was $13.2 million.

We currently estimate our discretionary spending for the year ending December 31, 2023 to range from $56.0 million to $59.0 million (unchanged from our guidance provided last quarter), as we anticipate an uptick in marketing spend.

Not included in the guidance above are potential non-recurring expenses in response to an activist campaign, including $1.0 million incurred during the three months ended March 31, 2023.

During the six months ended June 30, 2023, our discretionary spending was $28.3 million.

We currently estimate our discretionary spending for the year ending December 31, 2023 to range from $56.0 million to $59.0 million (unchanged from our guidance provided last quarter).

Not included in the guidance above are potential non-recurring

expenses in response to an activist campaign, including $5.9 million incurred during the six months ended June 30, 2023.

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.

Our gross margin was 79.1% during the three months ended March 31, 2023.

Our gross margin guidance for the year ending December 31, 2023 is estimated to be 78% given anticipated product launches, changes in other income which may rise or fall depending upon the magnitude of flows of our European-listed products and uncertain market conditions.

Our gross margin was 79.2% during the six months ended June 30, 2023.

Our gross margin guidance for the year ending December 31, 2023 is estimated to be 79% (previously 78%) which we believe should be sustainable at current AUM levels.

Contractual Gold Payments

We currently estimate our contractual gold payments expense for the year ending December 31, 2023 to be approximately $18.0 million (unchanged from our guidance provided last quarter) taking into consideration current gold prices.

Our contractual gold payments expense of $6.1 million during the six months ended June 30, 2023 will be zero going forward as our obligation to make continuing gold payments was terminated in May 2023.

Third-Party Distribution Fees

We currently estimate third-party distribution fees to range from $8.0 million to $9.0 million (unchanged from our guidance provided last quarter) for the year ending December 31, 2023.

Given the AUM on our platforms we anticipate trending toward the high end of this guidance.

Interest Expense

Our interest expense for the year ending December 31, 2023 is currently estimated to be $15.0 million.

Our interest cost for the three months ended June 30, 2023 is estimated to be $4.1 million, which should then reduce to $3.5 million per quarter going forward upon the settlement of $60.0 million in aggregate principal amount of our 2020 Notes (defined below) maturing in June 2023.

Our interest expense for the year ending December 31, 2023 is currently estimated to be $15.0 million (unchanged from our guidance provided last quarter).

Interest Income

Our interest income for the year ending December 31, 2023 is currently estimated to be approximately $3.0 million taking into consideration the magnitude of our investments which has been reduced from the prior quarter after having paid approximately $110 million to settle our convertible notes maturing in June and to terminate our deferred consideration—gold payments obligation.

Income Tax Expense

We currently estimate that our consolidated normalized effective tax rate will be 23% (unchanged from our guidance provided last quarter).

This estimated rate may change and is dependent upon our actual taxable income earned in relation to our forecasts.

This normalized effective tax rate excludes items that are non-recurring and not core to our operating business including but not limited to the impact of any revaluation on deferred consideration – gold payments, the loss on extinguishment of convertible notes, remeasurement of contingent consideration from the sale of our former Canadian ETF business, gains and losses on financial instruments owned and investments, valuation allowances on capital losses, reductions in unrecognized tax benefits and any stock-based compensation windfalls or shortfalls.

We currently estimate that our consolidated normalized effective tax rate will be 24% (previously 23%) taking into consideration the current distribution of profits amongst our U.S.

and European businesses.

This normalized effective tax rate excludes items that are non-recurring

and not core to our operating business including but not limited to the impact of any revaluation on deferred consideration—gold payments, the loss on extinguishment of convertible notes, remeasurement of contingent consideration from the sale of our former Canadian ETF business, gains and losses on financial instruments owned and investments, valuation allowances on capital losses, reductions in unrecognized tax benefits and any stock-based compensation windfalls or shortfalls.

Diluted Shares Outstanding

Our weighted average diluted shares outstanding were 170.7 million during the three months ended June 30, 2023 after having issued approximately 14 million shares of common stock or instruments convertible into common stock in connection with the termination of our deferred consideration—gold payments obligation and the maturity of our convertible notes during the second quarter.

The impact of the share issuance on our second quarter diluted shares was affected by the timing of when the shares were issued.

Going forward, we anticipate our diluted shares outstanding to be approximately 177 million per quarter.

Key Operating Statistics

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Three Months Ended

Six Months Ended

GLOBAL ETPs (in millions)

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Market appreciation/(depreciation)

Fund closures

End of period assets

Average assets during the period

Average advisory fee during the period

Number of ETPs—end of the period

US LISTED ETFs (in millions)

Average ETP advisory fee during the period

Number of ETPs—end of period

LISTED ETFs (in millions)

Beginning of period assets

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Average assets during the period

Number of ETPs—end of the period

Number of ETFs – end of the period

EUROPEAN LISTED ETPs (in millions)

Beginning of period assets

Inflows/(outflows)

Market appreciation/(depreciation)

(Outflows)/inflows

Market (depreciation)/appreciation

Fund closures

End of period assets

Average assets during the period

Number of ETPs—end of the period

Number of ETPs—end of period

PRODUCT CATEGORIES (in millions)

Commodity & Currency

Beginning of period assets

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Average assets during the period

Commodity & Currency

Beginning of period assets

(Outflows)/inflows

Market appreciation/(depreciation)

Market (depreciation)/appreciation

End of period assets

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Inflows/(outflows)

Market (depreciation)/appreciation

Market appreciation/(depreciation)

End of period assets

Average assets during the period

Three Months Ended

International Developed Market Equity

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Average assets during the period

Three Months Ended

Six Months Ended

Emerging Market Equity

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Inflows/(outflows)

Market (depreciation)/appreciation

Market appreciation/(depreciation)

End of period assets

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Beginning of period assets

(Outflows)/inflows

Inflows/(outflows)

Market appreciation/(depreciation)

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Beginning of period assets

Inflows/(outflows)

(Outflows)/inflows

Market appreciation/(depreciation)

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Inflows/(outflows)

Fund closures

End of period assets

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

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Selected Operating and Financial Information

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Total revenues

Our average AUM increased 12.5 % from $77.8 billion at March 31, 2022 to $87.5 billion at March 31, 2023 due to net inflows partly offset by market depreciation.

Operating Revenues

Advisory fees

Advisory fee revenues increased 1.5% from $76.5 million during the three months ended March 31, 2022 to $77.6 million in the comparable period in 2023 due to higher average AUM, partly offset by a decline in our average advisory fee.

Our average advisory fee decreased from 0.40% during the three months ended March 31, 2022 to 0.36% during the comparable period in 2023 due to AUM mix shift.

Other income increased 138.1% from $1.9 million during the three months ended March 31, 2022 to $4.4 million in the comparable period in 2023 primarily due to large flows into some of our European products.

Advisory fee revenues increased 8.5% from $75.6 million during the three months ended June 30, 2022 to $82.0 million in the comparable period in 2023 due to higher average AUM, partially offset by lower average advisory fee.

Our average advisory fee was 0.36% during the three months ended June 30, 2023 and 0.39% during the comparable period in 2022.

Other income increased 123.2% from $1.7 million during the three months ended June 30, 2022 to $3.7 million in the comparable period in 2023 primarily due to large flows into some of our European products.

Operating Expenses

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Total operating expenses

Three Months Ended

As a Percent of Revenues:

Three Months Ended

Compensation and benefits

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Compensation and benefits

Compensation and benefits expense increased 10.5% from $24.8 million during the three months ended March 31, 2022 to $27.4 million in the comparable period in 2023 due to increased headcount and higher stock-based compensation expense.

Headcount was 253 and 279 at March 31, 2022 and 2023, respectively.

Compensation and benefits expense increased 7.1% from $24.6 million during the three months ended June 30, 2022 to $26.3 million in the comparable period in 2023 due to increased headcount and higher stock-based compensation expense, partly offset by lower incentive compensation.

Headcount was 264 and 291 at June 30, 2022 and 2023, respectively.

Fund management and administration

Fund management and administration expense increased 10.7% from $15.5 million during the three months ended March 31, 2022 to $17.2 million in the comparable period in 2023 primarily due to higher average AUM, product launches and inflows.

Fund management and administration expense increased 10.3% from $16.1 million during the three months ended June 30, 2022 to $17.7 million in the comparable period in 2023 primarily due to higher average AUM, product launches and inflows.

We had 77 U.S.

listed ETFs and 264 European listed ETPs at March 31, 2022 compared to 80 U.S.

listed ETFs and 270 European listed ETPs at March 31, 2023.

listed ETFs and 267 European listed ETPs at June 30, 2022 compared to 80 U.S.

listed ETFs and 273 European listed ETPs at June 30, 2023.

Marketing and advertising

Marketing and advertising expense was essentially unchanged from the three months ended March 31, 2022.

Marketing and advertising expense increased 14.7% from $3.9 million during the three months ended June 30, 2022 to $4.5 million in the comparable period in 2023 primarily due to higher spending related to our U.S.

listed products.

Sales and business development

Sales and business development expense increased 14.8% from $2.6 million during the three months ended March 31, 2022 to $3.0 million in the comparable period in 2023 primarily resulting from increases in conference and events spending as well as market data costs.

Sales and business development expense was essentially unchanged from the three months ended June 30, 2022.

Contractual gold payments

Contractual gold payments expense was essentially unchanged from the three months ended March 31, 2022.

This expense was associated with the annual payment of 9,500 ounces of gold and was calculated using the average daily spot price of $1,874 and $1,889 per ounce during the three months ended March 31, 2022 and 2023, respectively.

Contractual gold payments expense decreased 64.4% from $4.4 million during the three months ended June 30, 2022 to $1.6 million in the comparable period in 2023 due to the termination of our deferred consideration—gold payments obligation on May 10, 2023.

See Note 9 to our Consolidated Financial Statements for additional information.

Professional fees

Professional fees decreased 16.7% from $4.5 million during the three months ended March 31, 2022 to $3.7 million in the comparable period in 2023 primarily due to lower expenses incurred in response to an activist campaign.

Professional fees increased 93.5% from $4.3 million during the three months ended June 30, 2022 to $8.3 million in the comparable period in 2023 primarily due to higher expenses incurred in response to an activist campaign as well as expenses incurred to settle our deferred consideration—gold payments obligation and our acquisition of WisdomTree Transfers, Inc.

Occupancy, communications and equipment

Occupancy, communications and equipment expense increased 46.2% from $0.8 million during the three months ended March 31, 2022 to $1.1 million in the comparable period in 2023 as we signed new office leases in the U.S.

Occupancy, communications and equipment expense was essentially unchanged from the three months ended June 30, 2022.

Depreciation and amortization

Depreciation and amortization expense increased 131.9% from $0.05 million during the three months ended March 31, 2022 to $0.1 million in the comparable period in 2023 due to amortization of software development costs.

Depreciation and amortization expense increased 128.3% due to amortization of software development costs.

Third-party distribution fees

Third-party distribution fees were essentially unchanged from the three months ended March 31, 2022.

Other expenses increased 22.3% from $1.8 million during the three months ended March 31, 2022 to $2.3 million in the comparable period in 2023 primarily due to higher insurance, public relations, travel and directors expenses.

Third-party distribution fees were essentially unchanged from the three months ended June 30, 2022.

Other expenses increased 24.0% from $2.1 million during the three months ended June 30, 2022 to $2.6 million in the comparable period in 2023 primarily due to higher travel, public relations and directors expenses.

Other Income/(Expenses)

(in thousands)

Three Months Ended

Interest expense

Gain on revaluation/termination of deferred consideration—gold payments

Interest income

Other gains and losses, net

Total other income/(expenses), net

Three Months Ended June 30,

As a Percent of Revenues:

Interest expense

Gain on revaluation/termination of deferred consideration—gold payments

Interest income

Other gains and losses, net

Total other income/(expenses), net

Interest expense

Interest expense increased 7.7% from $3.7 million during the three months ended June 30, 2022 to $4.0 million in the comparable period in 2023 due to a higher level of debt outstanding and a higher effective interest rate.

Our effective interest rate during the three months ended June 30, 2022 and 2023 was 4.6% and 5.0%, respectively.

Gain on revaluation/termination of deferred consideration—gold payments

We recognized a gain on revaluation/termination of deferred consideration—gold payments of $41.4 million and $2.3 million during the three months ended June 30, 2023 and 2022, respectively.

This obligation was settled on May 10, 2023 for approximately $137.0 million.

See Note 9 to our Consolidated Financial Statements for additional information.

Interest income

Interest income increased 29.9% from $0.8 million during the three months ended June 30, 2022 to $1.0 million in the comparable period in 2023 due to, partially offset by a decrease in our financial instruments owned.

Other gains and losses, net

Other gains and losses, net was $1.3 million for the second quarter of 2023.

This quarter includes gains on our investments of $3.1 million, partly offset by losses on our financial instruments owned of $1.0 million.

Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.

Our effective income tax rate for the second quarter of 2023 was 6.1%, resulting in income tax expense of $3.6 million.

The effective tax rate differs from the federal statutory rate of 21% primarily due to a non-taxable

gain on revaluation/termination of deferred consideration—gold payments and a decrease in the deferred tax asset valuation allowance on losses recognized on our investments.

These items were partly offset by non-deductible

executive compensation.

Our effective income tax rate for the second quarter of 2022 of 25.0% resulted in an income tax expense of $2.7 million.

Our tax rate differs from the federal statutory rate of 21% primarily due to a valuation allowance on losses recognized on securities owned and non-deductible

compensation.

These items were partly offset by a non-taxable

gain on revaluation of deferred consideration—gold payments and a lower tax rate on foreign earnings.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Selected Operating and Financial Information

Six Months Ended

AUM (in millions)

Operating Revenues (in thousands)

Advisory fees

Total revenues

Operating Revenues

Advisory fees

Advisory fee revenues increased 5.0% from $152.1 million during the six months ended June 30, 2022 to $159.6 million in the comparable period in 2023 due to higher average AUM, partially offset by lower average advisory fee.

Our average advisory fee was 0.39% during the six months ended June 30, 2022 and 0.36% during the comparable period in 2023.

Other income increased 131.0% from $3.5 million during the six months ended June 30, 2022 to $8.1 million in the comparable period in 2023 primarily due to large flows into some of our European products.

Operating Expenses

(in thousands)

Six Months Ended

Compensation and benefits

Fund management and administration

Marketing and advertising

Sales and business development

Contractual gold payments

Professional fees

Occupancy, communications and equipment

Depreciation and amortization

Third-party distribution fees

Total operating expenses

As a Percent of Revenues:

Six Months Ended

Compensation and benefits

Fund management and administration

Marketing and advertising

Sales and business development

Contractual gold payments

Professional fees

Occupancy, communications and equipment

Depreciation and amortization

Third-party distribution fees

Total operating expenses

Compensation and benefits

Compensation and benefits expense increased 8.8% from $49.4 million during the six months ended June 30, 2022 to $53.7 million in the comparable period in 2023 due to increased headcount, stock-based compensation expense, payroll taxes and benefits, partly offset by lower incentive compensation.

Fund management and administration

Fund management and administration expense increased 10.5% from $31.6 million during the six months ended June 30, 2022 to $34.9 million in the comparable period in 2023 primarily due to higher average AUM, product launches and inflows.

Marketing and advertising

Marketing and advertising expense increased 7.0% from $7.9 million during the three months ended June 30, 2022 to $8.5 million in the comparable period in 2023 primarily due to higher spending related to our U.S.

listed products.

Sales and business development

Sales and business development expense increased 10.1% from $5.7 million during the six months ended June 30, 2022 to $6.3 million in the comparable period in 2023 primarily resulting from increases in travel, conference and events spending.

Contractual gold payments

Contractual gold payments expense decreased 31.8% from $8.9 million during the six months ended June 30, 2022 to $6.1 million in the comparable period in 2023 due to the termination of our deferred consideration—gold payments obligation on May 10, 2023.

See Note 9 to our Consolidated Financial statements for additional information.

Professional fees

Professional fees increased 37.4% from $8.8 million during the six months ended June 30, 2022 to $12.0 million in the comparable period in 2023 primarily due to higher expenses incurred in response to an activist campaign, as well as expenses incurred to settle our deferred consideration—gold payments obligation and our acquisition of WisdomTree Transfers, Inc.

Occupancy, communications and equipment

Occupancy, communications and equipment expense increased 26.1% from $1.8 million during the six months ended June 30, 2022 to $2.3 million in the comparable period in 2023 as our New York office lease became effective in May 2022.

Depreciation and amortization

Depreciation and amortization expense increased 130.0% from $0.1 million during the six months ended June 30, 2022 to $0.2 million in the comparable period in 2023 due to amortization of software development costs.

Third-party distribution fees

Third-party distribution fees were essentially unchanged from the six months ended June 30, 2022.

Other expenses increased 23.2% from $4.0 million during the six months ended June 30, 2022 to $4.9 million in the comparable period in 2023 primarily due to higher travel, public relations and directors expenses.

Other Income/(Expenses)

(in thousands)

Six Months Ended

Interest expense

Gain/(loss) on revaluation of deferred consideration

Gain/(loss) on revaluation/termination of deferred consideration—gold payments

Interest income

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Total other income/(expenses), net

Three Months Ended March 31,

Six Months Ended June 30,

As a Percent of Revenues:

Interest expense

Gain/(loss) on revaluation of deferred consideration

Gain/(loss) on revaluation/termination of deferred consideration—gold payments

Interest income

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Interest expense

Interest expense increased 7.2% from $3.7 million during the three months ended March 31, 2022 to $4.0 million in the comparable period in 2023 due to a higher level of debt outstanding and a higher effective interest rate.

Our effective interest rate during the three months ended March 31, 2022 and 2023 was 4.6% and 5.0%, respectively.

Gain/(loss) on revaluation of deferred consideration

We recognized a loss on revaluation of deferred consideration of ($17.0) million and a gain on revaluation of deferred consideration of $20.6 million during the three months ended March 31, 2022 and 2023, respectively.

The gain recognized during the three months ended March 31, 2023, was primarily due to an increase in the discount rate used to compute the present value of the annual payment obligations, partly offset by higher gold prices.

The magnitude of any gain or loss is highly correlated to changes in the discount rate and the magnitude of the change in the forward-looking price of gold.

Interest expense increased 7.5% from $7.5 million during the six months ended June 30, 2022 to $8.0 million in the comparable period in 2023 due to a higher level of debt outstanding and a higher effective interest rate.

Our effective interest rate during the six months ended June 30, 2022 and 2023 was 4.6% and 4.9%, respectively.

Gain/(loss) on revaluation/termination of deferred consideration—gold payments

We recognized a loss on revaluation of deferred consideration—gold payments of ($14.7) million and a gain on revaluation/termination of deferred consideration—gold payments of $62.0 million during the six months ended June 30, 2022 and 2023, respectively.

This obligation was settled on May 10, 2023 for approximately $137.0 million.

See Note 9 to our Consolidated Financial Statements for additional information.

Interest income

Interest income increased 36.4% from $0.8 million during the three months ended March 31, 2022 to $1.1 million in the comparable period in 2023 due to rising interest rates.

During the three months ended March 31, 2023, we recognized a non-cash impairment charge of $4.9 million on the Securrency Series A Shares.

Interest income increased 33.2% from $1.6 million during the six months ended June 30, 2022 to $2.1 million in the comparable period in 2023 due to rising interest rates, partially offset by a decrease in our financial instruments owned.

During the six months ended June 30, 2023, we recognized a non-cash

impairment charge of $4.9 million on the Securrency Series A Shares.

Loss on Extinguishment of Convertible Notes

During the three months ended March 31, 2023, we recognized a loss on extinguishment of convertible notes of $9.7 million arising from the repurchase of $115.0 million in aggregate principal amount of our 2020 Notes.

During the six months ended June 30, 2023, we recognized a loss on extinguishment of convertible notes of $9.7 million arising from the repurchase of $115.0 million in aggregate principal amount of our 2020 Notes.

Other losses, net

Other net losses were $2.0 million for the first quarter of 2023.

This quarter includes a non-cash charge of $1.4 million 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).

This quarter also includes losses on our investments of $3.9 million.

These items were partly offset by gains on our financial instruments owned of $2.0 million and a gain of $1.5 million related to the remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business.

Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold exchange-traded products (“ETPs”), foreign exchange fluctuations and other miscellaneous items.

Our effective income tax rate for the first quarter of 2023 was 7.9%, resulting in income tax expense of $1.4 million.

The effective tax rate differs from the federal statutory rate of 21% primarily due to a non-taxable gain on revaluation of deferred consideration and a reduction in unrecognized tax benefits upon the expiration of the statute of limitations.

These items were partly offset by a non-deductible loss on extinguishment of our convertible notes and an increase in the deferred tax asset valuation allowance on losses recognized on our investments.

Our effective income tax rate for the three months ended March 31, 2022 of 62.0% resulted in an income tax benefit of $16.7 million.

Our tax rate differs from the federal statutory rate of 21% primarily due to a $19.9 million reduction in unrecognized tax benefits (including interest and penalties), a lower tax rate on foreign earnings and tax windfalls associated with the vesting of stock-based compensation awards.

These items were partly offset by a non-taxable loss on revaluation of deferred consideration and an increase in the deferred tax asset valuation allowance on losses recognized on securities owned.

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:

Other net losses were $0.7 million during the six months ended June 30, 2023.

This period includes a non-cash

charge of $1.4 million arising from the release of tax-related

indemnification assets upon the expiration of the statute of limitations (an equal and offsetting benefit was recognized in income tax expense);

gains on our financial instruments owned of $0.9 million and losses on our investments of $0.8 million.

Gains and losses also generally arise from the sale of gold earned on management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.

Our effective income tax rate for the six months ended June 30, 2023 was 6.5%, resulting in an income tax expense of $4.9 million.

Our tax rate differs from the federal statutory rate of 21% primarily due to a non-taxable

gain on revaluation/termination of deferred consideration—gold payments, a reduction in unrecognized tax benefits associated with the release of the tax-related

indemnification asset described above and a lower tax rate on foreign earnings.

These items were partly offset by a non-deductible

loss on extinguishment of our convertible notes during the first quarter of 2023, non-deductible

executive compensation and an increase in the deferred tax asset valuation allowance on losses recognized on our investments.

Our effective income tax rate benefit for the six months ended June 30, 2022 was 86.2% resulting in an income tax benefit of $14.0 million.

Our tax rate differs from the federal statutory rate of 21% primarily due to a reduction in unrecognized tax benefits associated with the release of the tax-related

indemnification asset described above and a lower tax rate on foreign earnings.

These items were partly offset by a non-taxable

loss on revaluation of deferred consideration—gold payments and an increase in the deferred tax asset valuation allowance on losses recognized on our financial instruments owned.

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.

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.

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 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.

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 measurements provides investors with a consistent way to analyze our performance.

These non-GAAP

financial measurements exclude the following:

Unrealized gains or losses on revaluation/termination of deferred consideration—gold payments:

Deferred consideration—gold payments was an obligation we assumed in connection with the ETFS Acquisition that was carried at fair value.

This item represented 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 have had 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 was 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.

During the second quarter of 2023, we terminated this obligation for aggregate consideration totaling approximately $137.0 million.

Gains or losses on financial instruments owned:

We account for our financial instruments owned as trading securities, which requires these instruments to be measured at fair value with gains and losses reported in net income.

We exclude these items when calculating our non-GAAP financial measurements as 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:

We exclude these items when calculating our non-GAAP

financial measurements as the gains and losses introduce volatility in earnings and are not core to our operating business.

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

GAAP requires the recognition of tax windfalls and shortfalls within income tax expense.

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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.

Loss on extinguishment of convertible notes, impairments, remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business, unrealized gains and losses recognized on our investments, changes in deferred tax asset valuation allowance and expenses incurred in response to an activist campaign are excluded when calculating our non-GAAP financial measurements.

Loss on extinguishment of our convertible notes, impairments, remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business, unrealized gains and losses recognized on our investments, changes in deferred tax asset valuation allowance, expenses incurred in response to an activist campaign and litigation expenses associated with certain provisions of our Stockholder Rights Agreement are excluded when calculating our non-GAAP

financial measurements.

Three Months Ended

Six Months Ended

Adjusted Net Income and Diluted Earnings per Share:

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Deduct/add back:

(Gain)/loss on revaluation of deferred consideration

(Gain)/loss on revaluation/termination of deferred consideration—gold payments

Expenses incurred in response to an activist campaign, net of income taxes

Deduct/add back:

Unrealized (gain)/loss recognized on our investments, net of income taxes

Add back/(deduct):

Losses/(gains) on financial instruments owned, net of income taxes

(Deduct)/add back:

(Decrease)/increase in deferred tax asset valuation allowance on financial instruments owned and investments

Litigation expenses associated with certain provisions of the Stockholder Rights Agreement, net of income taxes

Add back/(deduct):

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

Loss on extinguishment of convertible notes, net of income taxes

Impairments, net of income taxes (where applicable)

Remeasurement of contingent consideration—sale of former Canadian ETF business

(Deduct)/add back:

(Gains)/losses on financial instruments owned, net of income taxes

Increase in deferred tax asset valuation allowance on financial instruments owned and investments

Unrealized loss recognized on our investments, net of income taxes

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

Expenses incurred in response to an activist campaign, net of income taxes

Adjusted net income

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Adjusted net income available to common stockholders

Weighted average diluted shares, excluding participating securities (See Note 11 to our Consolidated Financial Statements)

Weighted average diluted shares, excluding participating securities (in thousands) (See Note 11 to our Consolidated Financial Statements)

Adjusted earnings per share – diluted

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Total current liabilities

Other assets—seed capital (WisdomTree blockchain-enabled funds)

Other assets—seed capital (WisdomTree Digital Funds)

Regulatory capital requirements

Available liquidity

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flow Data (in thousands):

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Decrease in cash and cash equivalents

We consider our available liquidity to be our liquid assets, less our current liabilities and regulatory capital requirements of certain European subsidiaries.

We consider our available liquidity to be our liquid assets, less our current liabilities, seed capital in WisdomTree Digital Funds and regulatory capital requirements.

Liquid assets consist of cash and cash equivalents, financial instruments owned, at fair value, accounts receivable and securities held-to-maturity.

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Accounts receivable are current assets and primarily represent receivables from advisory fees we earn from our ETPs.

Our current liabilities consist primarily of convertible notes maturing in the next 12 months, 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 decreased by $13.0 million during the three months ended March 31, 2023 due to $130.0 million of proceeds from the issuance of convertible notes, $18.3 million of proceeds from the sale of financial instruments owned, at fair value and $0.4 million from other activities.

These increases were offset by $124.3 million used to repurchase convertible notes, $20.3 million used to purchase financial instruments owned, at fair value, $5.4 million used in operating activities, $4.8 million used to pay dividends, $3.5 million used to cover convertible notes issuance costs and $3.4 million used to repurchase our common stock.

Cash and cash equivalents decreased by $30.3 million during the three months ended March 31, 2022 due to $25.5 million used to purchase securities owned, $6.9 million used to purchase investments, $4.8 million used to pay dividends on our common stock, $3.4 million used to repurchase our common stock, $2.7 million of net cash used in operating activities and $0.6 million used in other activities.

These decreases were partly offset by $13.6 million of proceeds from the sale of securities owned.

Our current liabilities consist primarily of payments owed to vendors and third parties in the normal course of business and accrued incentive compensation for employees.

Cash and cash equivalents decreased by $48.3 million during the six months ended June 30, 2023 due to $184.3 million used to repurchase and settle at maturity our convertible notes, $50.0 million used to settle our deferred consideration—gold payments obligation, $40.5 million used to purchase financial instruments owned, at fair value, $10.0 million used to purchase investments, $9.7 million used to pay dividends, $3.5 million used to repurchase our common stock, $3.5 million used for convertible notes issuance costs and $1.0 million used to acquire Securrency Transfers, Inc (renamed WisdomTree Transfers, Inc.).

These decreases were partly offset by $130.0 million of proceeds from the issuance of convertible notes, $102.0 million of proceeds from the sale of financial instruments owned, at fair value, $20.0 million provided by operating activities, $1.5 million from receipt of contingent consideration and $0.7 million from other activities.

Cash and cash equivalents decreased $31.0 million during the six months ended June 30, 2022 due to $32.5 million used to purchase securities owned, $11.9 million used to purchase investments, $9.7 million used to pay dividends on our common stock, $3.4 million used to repurchase our common stock, $3.4 million of foreign exchange rate losses and $0.1 million used in other activities.

These decreases were partly offset by $21.5 million of proceeds from the sale of securities owned and $8.5 million of net cash provided by operating activities.

Issuance of Convertible Notes

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In connection with the issuance of the 2023 Notes, we repurchased $115.0 million in aggregate principal amount of the 2020 Notes.

As a result of this repurchase, we recognized a loss on extinguishment of approximately $9.7 million during the three months ended March 31, 2023.

After the issuance of the 2023 Notes (and together with the remaining 2020 Notes and the 2021 Notes, the “Convertible Notes”), we had $340.0 million in aggregate principal amount of Convertible Notes outstanding.

As a result of this repurchase, we recognized a loss on extinguishment of approximately $9.7 million during the six months ended June 30, 2023.

The remainder of the 2020 Notes matured on June 15, 2023 and were settled for approximately $59.9 million of cash and approximately 1.0 million shares of common stock of the Company.

After the repurchase and maturity of the 2020 Notes and the issuance of the 2023 Notes (and together with the 2021 Notes, the “Convertible Notes”), we had $280.0 million in aggregate principal amount of Convertible Notes outstanding.

Key terms of the Convertible Notes are as follows:

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June 15, 2026

June 15, 2023

Interest rate

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Interest rate:

Payable semiannually in arrears on February 15 and August 15 of each year for the 2023 Notes (beginning on August 15, 2023) and June 15 and December 15 of each year for the 2020 Notes and the 2021 Notes.

Payable semiannually in arrears on February 15 and August 15 of each year for the 2023 Notes (beginning on August 15, 2023) and on June 15 and December 15 of each year for the 2021 Notes.

Conversion price:

Convertible at an initial conversion rate into shares of our common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price set forth in the table above), subject to adjustment.

Holders may convert at their option at any time prior to the close of business on the business day immediately preceding May 15, 2028, March 15, 2026 and March 15, 2023 for the 2023 Notes, 2021 Notes and 2020 Notes, respectively, only under the following circumstances:

Holders may convert at their option at any time prior to the close of business on the business day immediately preceding May 15, 2028 and March 15, 2026 for the 2023 Notes and the 2021 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 for the respective Convertible Notes on each applicable trading day;

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or (iv) upon the occurrence of specified corporate events.

On or after May 15, 2028, March 15, 2026 and March 15, 2023 in

respect of the 2023 Notes, 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.

On or after May 15, 2028 and March 15, 2026 in respect of the 2023 Notes, and the 2021 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:

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Redemption price:

We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after August 20, 2025, June 20, 2023 and June 20, 2021 in respect of the 2023 Notes, 2021 Notes and 2020 Notes, respectively, and on or prior to the 55th 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 for the respective Convertible Notes 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.

We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after August 20, 2025 and June 20, 2023 in respect of the 2023 Notes and the 2021 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 for the respective Convertible Notes 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.

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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 167.7853 shares, 144.9275 shares and 270.2702 shares of our common stock per $1,000 principal amount of the 2023 Notes, 2021 Notes and 2020 Notes, respectively (the equivalent of 59,767,426 shares of our common stock), subject to adjustment.

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 167.7853 shares and 144.9275 shares of our common stock per $1,000 principal amount of the 2023 Notes and the 2021 Notes, respectively (the equivalent of 43,551,214 shares of our common stock), subject to adjustment.

Seniority and Security:

The Convertible 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 11 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.

Convertible Preferred Stock (See Note 11 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 respective holders of not less than 25% in aggregate principal amount of the respective series of Convertible Notes outstanding may declare the entire principal amount of all such respective Convertible Notes to be repurchased, plus any accrued special interest, if any, to be immediately due and payable.

Capital Resources

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Our business does not require us to maintain a significant cash position.

However, certain of our subsidiaries are required to maintain a minimum level of regulatory capital, which at March 31, 2023 was approximately $28.7 million in the aggregate.

However, certain of our subsidiaries are required to maintain a minimum level of regulatory capital, which at June 30, 2023 was approximately $24.9 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 three months ended March 31, 2023, we repurchased 604,505 shares of our common stock under the repurchase program for an aggregate cost of $3.4 million.

During the six months ended June 30, 2023, we repurchased 631,087 shares of our common stock under the repurchase program for an aggregate cost of $3.5 million.

Currently, approximately $96.4 million remains under this program for future purchases.

In addition, during the three months ended June 30, 2023, we paid approximately $50.0 million in cash to settle our deferred consideration—gold payments obligation (see Note 10 to our Consolidated Financial Statements for additional information) and also paid approximately $59.9 million in cash upon the maturity of our 2020 Notes.

Contractual Obligations

Convertible Notes

We currently have $340.0 million in aggregate principal amount of Convertible Notes outstanding, of which $60.0 million, $150.0 million and $130.0 million are scheduled to mature on June 15, 2023, June 15, 2026 and August 15, 2028, respectively, unless earlier converted, repurchased or redeemed.

We currently have $280.0 million in aggregate principal amount of Convertible Notes outstanding, of which $150.0 million and $130.0 million are scheduled to mature on June 15, 2026 and August 15, 2028 in respect of the 2021 Notes and the 2023 Notes, respectively, 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 our common stock.

We anticipate settling the $60.0 million in aggregate principal amount of 2020 Notes scheduled to mature in June 2023 and may settle and/or refinance the remaining obligations when due.

The Convertible Notes require cash settlement of up to 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 our common stock.

We may settle and/or refinance 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 per year continuing into perpetuity (“Contractual Gold Payments”).

The present value of the deferred consideration was $179.8 million at March 31, 2023.

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.

On May 10, 2023, the Company entered into and closed on a Sale, Purchase and Assignment Deed to terminate the Company’s obligations relating to the contractual gold payments.

Pursuant to that agreement, the Company paid consideration totaling $136.9 million, including an aggregate of $50.0 million in cash and the issuance of 13,087 shares of Series C Non-Voting Convertible Preferred Stock (valued at $86.9 million), which are convertible into 13,087,000 shares of the Company’s common stock.

See Note 9 to our Consolidated Financial Statements for additional information.

Operating Leases

Total future minimum lease payments with respect to our operating lease liabilities were $1.2 million at March 31, 2023.

Total future minimum lease payments with respect to our operating lease liabilities were $0.9 million at June 30, 2023.

Cash flows generated by our operating activities and existing cash balances should be sufficient to satisfy the future minimum lease payments.

See Note 12 to our Consolidated Financial Statements for additional information.

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.

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

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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.

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.

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The results of our most recent analysis indicated no impairment based upon a quantitative assessment (discounted cash flow analysis) which relied upon significant unobservable inputs including projected revenue growth rates ranging from 3% to 8% (5% weighted average) and a weighted average cost of capital of 11.0%.

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 ,

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.

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See Note 7 to our Consolidated Financial Statements for information.

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 $2,401, 13.3% and 1.5%, respectively, at March 31, 2023.

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 three months ended March 31, 2023, we reported a gain on deferred consideration—gold payments of $20.6 million.

A 1.0% increase in the weighted average forward-looking gold price per ounce would have decreased this reported gain by $1.3 million, a 1 percentage point increase in the discount rate would have increased this reported gain by $12.9 million and a 1 percentage point increase in the perpetual growth rate would have decreased this reported gain by $9.3 million.

See Note 9 to our Consolidated Financial Statements for additional information.

Revenue Recognition

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis