WisdomTree, Inc. 10-Q

ITEM 2. 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” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. 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 diverse suite of ETPs, models, solutions, as well as digital asset-related products. Our offerings empower investors to shape their financial future and equip financial professionals to grow their businesses. Leveraging the latest financial infrastructure, we create products that emphasize access, transparency and provide an enhanced user experience. Building on our heritage of innovation, we offer next-generation digital products and services related to tokenized real world assets and stablecoins, including Digital Funds, as well as our blockchain-native digital wallet, WisdomTree Prime, and institutional platform, WisdomTree Connect. As of June 30, 2025, we managed approximately $126.1 billion in AUM. Our ETPs span a broad range of strategies including equities, fixed income, commodities, leveraged-and-inverse, currency, alternatives and cryptocurrency exposures. We have launched many first-to-market products and pioneered a unique alternative-weighting approach called “Modern Alpha” that combines the outperformance potential of active management with the cost effective benefits of passive management. Our products are distributed across all major asset management industry channels, including banks, brokerage firms, registered investment advisers, institutional investors, private wealth managers and online brokers, primarily through our dedicated sales team. We believe technology is transforming how financial advisors conduct business, and through our Advisor and Portfolio Solutions programs we offer technology-enabled and research-driven solutions. These include portfolio construction, asset allocation, practice management services and digital tools to help advisors address technology challenges and scale their businesses. As pioneers in tokenization and blockchain technology, we view this as the next phase in the evolution in financial services. Through our digital assets strategy, we are committed to “responsible DeFi,” aligning with regulatory standards to foster growth in this rapidly evolving space. We believe that expanding into digital assets and blockchain-enabled finance not only complements our core competencies, but will diversify our revenue streams and further contribute to our growth. We were incorporated under the laws of the state of Delaware on September 19, 1985 as Financial Data Systems, Inc. and were ultimately renamed WisdomTree, Inc. on November 7, 2022. 31 Table of Contents Pending Acquisition of Ceres Partners, LLC (“Ceres”) On July 31, 2025, we entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Ceres, pursuant to which we agreed to acquire all of the issued and outstanding equity interests of Ceres (the “Ceres Acquisition”), a leading U.S.-based alternative asset manager specializing in farmland investments. The Ceres Acquisition is expected to close in the fourth quarter of 2025, subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining regulatory approvals, required consents and financing. Pursuant to the Purchase Agreement, we will acquire Ceres for aggregate consideration consisting of (i) $275.0 million in cash payable at closing and subject to customary post-closing adjustments, including adjustments to cash, indebtedness and working capital, and (ii) earnout consideration of up to $225.0 million, payable in 2030, contingent upon Ceres achieving a compound annual growth rate in revenue of 12% to 22% during the earnout measurement period of January 1, 2025 through December 31, 2029. For additional information about the Ceres Acquisition, see Note 21 to our Consolidated Financial Statements. Assets Under Management WisdomTree ETPs We offer ETPs covering equity, fixed income, commodities and currency, leveraged-and-inverse, alternatives and cryptocurrency. The chart below sets forth the asset mix of our ETPs at June 30, 2025, March 31, 2025, and June 30, 2024: Market Environment The second quarter of 2025 was dominated by uncertainty over U.S. trade tariffs. However, equities made gains as the initially announced tariffs were later suspended and recession fears receded. In fixed income markets, the focus began to turn from interest rate cuts to worries over debt sustainability. In commodities, the S&P GSCI Index declined in the quarter and both the energy and agriculture components were weak. Digital asset markets were shaped by major regulatory and institutional developments amid macroeconomic uncertainty. Both Bitcoin and Ethereum returned more than 30% during the quarter. The U.S. Senate passed the GENIUS Act, providing long-awaited clarity for stablecoin regulation. Stablecoins are now being implemented by some of the largest financial institutions, fintech firms and crypto native issuers globally. During the quarter, the S&P 500, the MSCI EAFE Index (local currency), the MSCI EMU Index (local currency), the MSCI Japan Index (local currency), the MSCI Emerging Markets Index (U.S. dollar) and gold prices increased by 10.9%, 5.1%, 5.5% 7.6%, 12.2% and 5.5%, respectively. The U.S. dollar weakened 8.2%, 6.0% and 3.7%, respectively, versus the euro, British pound and Japanese yen during the quarter. 32 Table of Contents U.S. Listed ETF Industry Flows U.S. listed ETF industry net flows were $241.5 billion for the three months ended June 30, 2025. U.S. equity and fixed income gathered the majority of those flows. Source: Morningstar 33 Table of Contents European Listed ETP Industry Flows European listed ETP industry net flows were $54.9 billion for the three months ended June 30, 2025. Equity and fixed income gathered the majority of those flows. Source: Morningstar 34 Table of Contents Our Operating and Financial Results We operate as an ETP sponsor and asset manager, providing investment advisory services globally through our subsidiaries in the U.S. and Europe. U.S. Listed ETFs The AUM of our U.S. listed exchange traded funds, or U.S. listed ETFs, increased from $80.5 billion at March 31, 2025 to $85.2 billion at June 30, 2025 due to market appreciation and net inflows. European Listed ETPs The AUM of our European listed (including internationally cross-listed) ETPs, or European listed ETPs, increased from $35.1 billion at March 31, 2025 to $40.5 billion at June 30, 2025 due to market appreciation and net inflows. 35 Table of Contents Consolidated Operating Results The following table sets forth our revenues and net income/(loss) for the most recent five quarters. ● Revenues – Total revenues increased 5.2% from the three months ended June 30, 2024 to $112.6 million in the comparable period in 2025 due to higher average AUM, partly offset by a lower average advisory fee. ● Expenses – Total operating expenses increased 6.1% from the three months ended June 30, 2024 to $78.0 million in the comparable period in 2025 primarily due to acquisition-related costs and higher compensation expense arising from increased headcount, as well as higher third-party distribution fees and fund management and administration expenses. These increases were partly offset by lower professional fees. ● Other Income/(Expenses) – Other income/(expenses) includes interest income and interest expense, impairments and other losses and gains. Further information is provided herein. ● Net income – We reported net income of $24.8 million and $21.8 million during the three months ended June 30, 2025 and 2024, respectively. Guidance Update for the Year Ending December 31, 2025 Compensation to Revenue Ratio Our compensation to revenue ratio for the year ending December 31, 2025 is currently estimated to range from 28% to 30% (unchanged from our guidance provided last quarter) and takes into consideration planned hires as well as year-end compensation adjustments and the annualization of hires made during 2024. The range also considers variability in incentive compensation with drivers including the magnitude of our flows, revenues and operating income growth, margin expansion and our stock price performance in relation to our peers. A range is provided in consideration of uncertain market conditions. Discretionary Spending Discretionary spending includes marketing, sales, professional fees, occupancy and equipment, depreciation and amortization and other expenses. During the six months ended June 30, 2025, our discretionary spending was $34.2 million, exclusive of acquisition-related costs incurred to date. We currently estimate our discretionary spending (exclusive of acquisition-related costs) for the year ending December 31, 2025 to range from $68.0 million to $72.0 million (unchanged from our guidance range provided last quarter). We estimate the impact of foreign exchange rates to adversely impact our forecasted expenses by approximately $3.0 million if British pound and euro foreign exchange rates at June 30, 2025 were to remain constant during the remainder of the year. This is offset by incremental revenues earned on foreign denominated revenues such that the overall impact of foreign exchange rates to our overall net operating results is immaterial. 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. Our gross margin was 81.0% during the six months ended June 30, 2025. For the year ending December 31, 2025, we currently estimate that our gross margin percentage will be 81.0% to 82.0% (unchanged from our guidance range provided last quarter). 36 Table of Contents Third-Party Distribution Fees We currently estimate third-party distribution expense to be approximately $14.0 million to $15.0 million (previously $11.0 million to $12.0 million) for the year ending December 31, 2025, due to strong organic growth and AUM expansion across our distribution platforms. Interest Expense We currently estimate our interest expense for the year ending December 31, 2025 to be $22.0 million (unchanged from our guidance range provided last quarter), which is inclusive of approximately $2.0 million of interest cost we are required to impute under U.S. GAAP related to our interest-free financing of the shares of Series C Non-Voting Convertible Preferred Stock (the “Series C Preferred Stock”) we repurchased from Gold Bullion Holdings (Jersey) Limited (“GBH”), a subsidiary of the World Gold Council, in November 2023. Interest Income We currently estimate our interest income for the year ending December 31, 2025 to be $8.0 million (unchanged from the guidance range provided last quarter), based upon the magnitude of our forecasted interest-earning assets. Income Tax Expense We currently estimate that our consolidated normalized effective tax rate will be approximately 24.0% to 25.0% for the year ending December 31, 2025 (unchanged from the guidance range provided last quarter), taking into consideration the current distribution of profits between the U.S. and Europe. 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, increases or decreases in valuation allowances and any stock-based compensation windfalls or shortfalls. Additional corporate tax legislation could also impact our normalized effective tax rate. Weighted Average Diluted Shares We currently estimate our weighted average diluted shares to be between 147.0 million and 148.0 million (previously 147.0 million and 149.0 million) during the year ending December 31, 2025. This guidance does not take into consideration any variability in shares associated with our Convertible Notes. While our Convertible Notes require principal to be paid in cash, our diluted shares would need to be increased for any incremental shares associated with an exercise of the conversion option if our stock price exceeds the applicable conversion price of our Convertible Notes of $9.54 per share for the 5.75% Convertible Senior Notes due 2028, $11.04 per share for the 3.25% Convertible Senior Notes due 2026 and $11.82 per share for the 3.25% Convertible Senior Notes due 2029. 37 Table of Contents Key Operating Statistics The following table presents key operating statistics that serve as indicators for the performance of our business: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2025 2025 2024 2025 2024 GLOBAL ETPs (in millions ) Beginning of period assets $ 115,787 $ 109,779 $ 107,230 $ 109,779 $ 100,124 Add: Digital Assets—Jan. 1, 2025 — 32 — $ 32 — Inflows 3,527 3,052 340 6,579 2,328 Market appreciation 6,756 2,924 2,116 9,680 7,234 End of period assets $ 126,070 $ 115,787 $ 109,686 $ 126,070 $ 109,686 Average assets during the period $ 119,185 $ 114,622 $ 108,479 $ 116,904 $ 105,470 Average advisory fee during the period 0.35 % 0.35 % 0.37 % 0.35 % 0.37 % Number of products—end of the period 383 375 (1) 350 383 350 U.S. LISTED ETFs (in millions ) Beginning of period assets $ 80,531 $ 79,095 $ 78,087 $ 79,095 $ 72,486 Inflows 1,110 1,847 1,106 2,957 3,089 Market appreciation/(depreciation) 3,538 (411 ) 529 3,127 4,147 End of period assets $ 85,179 $ 80,531 $ 79,722 $ 85,179 $ 79,722 Average assets during the period $ 81,525 $ 81,127 $ 78,523 $ 81,326 $ 76,677 Number of ETFs – end of the period 81 78 78 81 78 EUROPEAN LISTED ETPs (in millions ) Beginning of period assets $ 35,124 $ 30,684 $ 29,143 $ 30,684 $ 27,638 Inflows/(outflows) 2,201 1,104 (766 ) 3,305 (761 ) Market appreciation 3,216 3,336 1,587 6,552 3,087 End of period assets $ 40,541 $ 35,124 $ 29,964 $ 40,541 $ 29,964 Average assets during the period $ 37,439 $ 33,415 $ 29,956 $ 35,427 $ 28,793 Number of ETPs—end of the period 285 280 272 285 272 DIGITAL ASSETS ($ in millions ) Beginning of period assets $ 132 $ — $ — $ — $ — Add: Digital Assets—Jan. 1, 2025 — 32 — 32 — Inflows 216 101 — 317 — Market appreciation/(depreciation) 2 (1 ) — 1 — End of period assets $ 350 $ 132 $ — $ 350 $ — Average assets during the period $ 221 $ 80 $ — $ 151 $ — Number of products—end of the period 17 17 (1) — 17 — PRODUCT CATEGORIES (in millions ) U.S. Equity Beginning of period assets $ 35,628 $ 35,414 $ 31,670 $ 35,414 $ 29,156 Add: Digital Assets—Jan. 1, 2025 — 9 — 9 — Inflows 1,288 962 221 2,250 757 Market appreciation/(depreciation) 1,701 (757 ) (57 ) 944 1,921 End of period assets $ 38,617 $ 35,628 $ 31,834 $ 38,617 $ 31,834 Average assets during the period $ 36,080 $ 36,278 $ 31,339 $ 36,178 $ 30,745 Commodity & Currency Beginning of period assets $ 25,487 $ 21,906 $ 21,944 $ 21,906 $ 21,336 Add: Digital Assets—Jan. 1, 2025 — 1 — 1 — Outflows (110 ) (159 ) (1,499 ) (269 ) (1,959 ) Market appreciation 1,319 3,739 1,542 5,058 2,610 End of period assets $ 26,696 $ 25,487 $ 21,987 $ 26,696 $ 21,987 Average assets during the period $ 25,888 $ 23,996 $ 22,437 $ 24,942 $ 21,637 38 Table of Contents Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2025 2025 2024 2025 2024 Fixed Income Beginning of period assets $ 22,230 $ 20,043 $ 21,218 $ 20,043 $ 21,197 Add: Digital Assets—Jan. 1, 2025 — 21 — 21 — Inflows 146 2,093 236 2,239 222 Market appreciation/(depreciation) 167 73 (24 ) 240 11 End of period assets $ 22,543 $ 22,230 $ 21,430 $ 22,543 $ 21,430 Average assets during the period $ 22,526 $ 21,464 $ 21,277 $ 21,995 $ 21,180 International Developed Market Equity Beginning of period assets $ 18,178 $ 17,602 $ 18,103 $ 17,602 $ 15,103 Inflows 1,645 474 1,253 2,119 2,850 Market appreciation 1,902 102 29 2,004 1,432 End of period assets $ 21,725 $ 18,178 $ 19,385 $ 21,725 $ 19,385 Average assets during the period $ 19,577 $ 18,275 $ 18,809 $ 18,926 $ 17,750 Emerging Market Equity Beginning of period assets $ 9,985 $ 10,468 $ 11,189 $ 10,468 $ 10,726 Inflows/(outflows) 28 (445 ) 57 (417 ) 274 Market appreciation/(depreciation) 944 (38 ) 629 906 875 End of period assets $ 10,957 $ 9,985 $ 11,875 $ 10,957 $ 11,875 Average assets during the period $ 10,295 $ 10,072 $ 11,448 $ 10,184 $ 11,174 Leveraged & Inverse Beginning of period assets $ 2,133 $ 1,924 $ 1,828 $ 1,924 $ 1,815 Inflows/(outflows) 141 116 (18 ) 257 (68 ) Market appreciation 357 93 112 450 175 End of period assets $ 2,631 $ 2,133 $ 1,922 $ 2,631 $ 1,922 Average assets during the period $ 2,354 $ 2,083 $ 1,905 $ 2,219 $ 1,849 Cryptocurrency Beginning of period assets $ 1,553 $ 1,912 $ 874 $ 1,912 $ 414 Add: Digital Assets—Jan. 1, 2025 — 1 — 1 — Inflows/(outflows) 198 (89 ) 75 109 233 Market appreciation/(depreciation) 336 (271 ) (111 ) 65 191 End of period assets $ 2,087 $ 1,553 $ 838 $ 2,087 $ 838 Average assets during the period $ 1,800 $ 1,900 $ 856 $ 1,850 $ 735 Alternatives Beginning of period assets $ 593 $ 510 $ 404 $ 510 $ 377 Inflows 191 100 15 291 19 Market appreciation/(depreciation) 30 (17 ) (4 ) 13 19 End of period assets $ 814 $ 593 $ 415 $ 814 $ 415 Average assets during the period $ 665 $ 554 $ 408 $ 610 $ 400 Headcount: 321 315 304 321 304 Note: Previously issued statistics may be restated due to fund closures and trade adjustments. Source: WisdomTree _____________________________ (1) Includes 17 digital assets products, which were launched prior to January 1, 2025. 39 Table of Contents Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 Selected Operating and Financial Information Three Months Ended June 30, Change Percent Change 2025 2024 AUM (in millions) Average AUM $ 119,185 $ 108,479 $ 10,706 9.9% Operating Revenues (in thousands) Advisory fees $ 103,241 $ 98,938 $ 4,303 4.3% Other revenues 9,380 8,096 1,284 15.9% Total operating revenues $ 112,621 $ 107,034 $ 5,587 5.2% Operating Revenues Advisory fees Advisory fee revenues increased 4.3% from $98.9 million during the three months ended June 30, 2024 to $103.2 million in the comparable period in 2025 due to higher average AUM, partly offset by a lower average advisory fee. Our average advisory fee was 0.37% during the three months ended June 30, 2024 and 0.35% during the three months ended June 30, 2025. Other revenues Other revenues increased 15.9% from $8.1 million during the three months ended June 30, 2024 to $9.4 million in the comparable period in 2025 due to higher other revenues attributable to our European listed ETPs. Operating Expenses Three Months Ended June 30, Change Percent Change (in thousands) 2025 2024 Compensation and benefits $ 32,827 $ 30,790 $ 2,037 6.6 % Fund management and administration 21,252 20,139 1,113 5.5 % Marketing and advertising 5,330 5,110 220 4.3 % Sales and business development 4,232 3,640 592 16.3 % Professional fees 3,177 6,594 (3,417 ) (51.8 %) Occupancy, communications and equipment 1,559 1,314 245 18.6 % Depreciation and amortization 580 418 162 38.8 % Third-party distribution fees 4,083 2,687 1,396 52.0 % Acquisition-related costs 1,967 — 1,967 n/a Other 2,982 2,831 151 5.3 % Total operating expenses $ 77,989 $ 73,523 $ 4,466 6.1 % Three Months Ended June 30, As a Percent of Revenues: 2025 2024 Compensation and benefits 29.2% 28.8% Fund management and administration 18.9% 18.8% Marketing and advertising 4.7% 4.8% Sales and business development 3.8% 3.4% Professional fees 2.8% 6.2% Occupancy, communications and equipment 1.4% 1.2% Depreciation and amortization 0.5% 0.4% Third-party distribution fees 3.6% 2.5% Acquisition-related costs 1.7% 0.0% Other 2.6% 2.6% Total operating expenses 69.2% 68.7% 40 Table of Contents Compensation and benefits Compensation and benefits expense increased 6.6% from $30.8 million during the three months ended June 30, 2024 to $32.8 million in the comparable period in 2025 due to increased headcount. Headcount was 304 and 321 at June 30, 2024 and 2025, respectively. Fund management and administration Fund management and administration expense increased 5.5% from $20.1 million during the three months ended June 30, 2024 to $21.3 million in the comparable period in 2025 primarily due to higher average AUM. We had 78 U.S. listed ETFs and 272 European listed ETPs at June 30, 2024 compared to 81 U.S. listed ETFs, 285 European listed ETPs and 17 digital assets products at June 30, 2025. Marketing and advertising Marketing and advertising expense increased 4.3% from $5.1 million during the three months ended June 30, 2024 to $5.3 million in the comparable period in 2025 primarily due to higher spend related to our U.S. listed ETFs. Sales and business development Sales and business development expense increased 16.3% from $3.6 million during the three months ended June 30, 2024 to $4.2 million in the comparable period in 2025 primarily due to increases in travel and events spending. Professional fees Professional fees expense decreased 51.8% from $6.6 million during the three months ended June 30, 2024 to $3.2 million in the comparable period in 2025 as the prior period included expenses incurred in response to an activist campaign and in connection with a settlement with the SEC regarding certain statements about the ESG screening process for three ETFs advised by WisdomTree Asset Management, Inc. (the “SEC ESG Settlement”). Occupancy, communications and equipment Occupancy, communications and equipment expense increased 18.6% from $1.3 million during the three months ended June 30, 2024 to $1.6 million in the comparable period in 2025 primarily due to higher internet and communications expenses. Depreciation and amortization Depreciation and amortization expense increased 38.8% from $0.4 million during the three months ended June 30, 2024 to $0.6 million in the comparable period in 2025 primarily due to higher amortization of capitalized software. Third-party distribution fees Third-party distribution fees increased 52.0% from $2.7 million during the three months ended June 30, 2024 to $4.1 million in the comparable period in 2025 due to our strong organic growth and AUM expansion across our distribution platforms. Acquisition-related Costs During the three months ended June 30, 2025, we recorded $2.0 million of acquisition-related costs, comprised of professional fees related to the Ceres Acquisition. Other Other expenses were essentially unchanged from the three months ended June 30, 2024. 41 Table of Contents Other Income/(Expenses) Three Months Ended June 30, Change Percent Change (in thousands) 2025 2024 Interest expense $ (5,490 ) $ (4,140 ) $ (1,350 ) 32.6% Interest income 2,090 1,438 652 45.3% Other gains and losses, net 638 (1,283 ) 1,921 n/a Total other expenses, net $ (2,762 ) $ (3,985 ) $ 1,223 (30.7% ) Three Months Ended June 30, As a Percent of Revenues: 2025 2024 Interest expense (5.0% ) (3.8% ) Interest income 1.9% 1.3% Other gains and losses, net 0.6% (1.2% ) Total other expenses, net (2.5% ) (3.7% ) Interest expense Interest expense increased 32.6% from $4.1 million during the three months ended June 30, 2024 to $5.5 million in the comparable period in 2025 due to a higher level of debt outstanding, partly offset by a lower average interest rate. Our effective interest rate during the three months ended June 30, 2024 and 2025 was 5.0% and 3.9%, respectively. Interest income Interest income increased 45.3% from $1.4 million during the three months ended June 30, 2024 to $2.1 million in the comparable period in 2025 due to a higher level of interest-earning assets. Other gains and losses, net Other gains and losses, net were ($1.3) million and $0.6 million during the three months ended June 30, 2024 and 2025, respectively. The three months ended June 30, 2025 includes net gains of $1.3 million on our financial instruments owned and net gains of $0.6 million on our investments. These items were partly offset by $1.4 million of foreign currency remeasurement losses on U.S. dollars held by foreign subsidiaries. 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. Income Taxes Our effective income tax rate during the three months ended June 30, 2025 was 22.3%, resulting in income tax expense of $7.1 million. The effective tax rate differs from the federal statutory rate of 21.0% primarily due to state and local income taxes, partly offset by a lower tax rate on foreign earnings. Our effective income tax rate during the three months ended June 30, 2024 was 26.3%, resulting in income tax expense of $7.8 million. The effective tax rate differs from the federal statutory rate of 21.0% primarily due to non-deductible executive compensation, an increase in the deferred tax asset valuation allowance on losses recognized on our investments and state and local income taxes. These items were partly offset by a lower tax rate on foreign earnings. Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Selected Operating and Financial Information Six Months Ended June 30, Change Percent Change 2025 2024 AUM (in millions) Average AUM $ 116,904 $ 105,470 $ 11,434 10.8% Operating Revenues (in thousands) Advisory fees $ 202,790 $ 191,439 $ 11,351 5.9% Other revenues 17,913 12,433 5,480 44.1% Total revenues $ 220,703 $ 203,872 $ 16,831 8.3% 42 Table of Contents Operating Revenues Advisory fees Advisory fee revenues increased 5.9% from $191.4 million during the six months ended June 30, 2024 to $202.8 million in the comparable period in 2025 primarily due to higher average AUM, partly offset by a lower average advisory fee. Our average advisory fee was 0.37% during the six months ended June 30, 2024 and 0.35% during the comparable period in 2025. Other revenues Other revenues increased 44.1% from $12.4 million during the six months ended June 30, 2024 to $17.9 million in the comparable period in 2025 due to higher other revenues attributable to our European listed products. Operating Expenses Six Months Ended June 30, Change Percent Change (in thousands) 2025 2024 Compensation and benefits $ 66,615 $ 61,844 $ 4,771 7.7% Fund management and administration 41,966 40,101 1,865 4.7% Marketing and advertising 10,143 9,518 625 6.6% Sales and business development 8,369 7,251 1,118 15.4% Professional fees 5,959 10,224 (4,265 ) (41.7% ) Occupancy, communications and equipment 3,041 2,524 517 20.5% Depreciation and amortization 1,120 801 319 39.8% Third-party distribution fees 7,195 4,994 2,201 44.1% Acquisition-related costs 1,967 — 1,967 100.0% Other 5,534 5,154 380 7.4% Total operating expenses $ 151,909 $ 142,411 $ 9,498 6.7% Six Months Ended June 30, As a Percent of Revenues: 2025 2024 Compensation and benefits 30.1% 30.4% Fund management and administration 19.0% 19.7% Marketing and advertising 4.6% 4.7% Sales and business development 3.8% 3.6% Professional fees 2.7% 5.0% Occupancy, communications and equipment 1.4% 1.2% Depreciation and amortization 0.5% 0.4% Third-party distribution fees 3.3% 2.4% Acquisition-related costs 0.9% 0.0% Other 2.5% 2.5% Total operating expenses 68.8% 69.9% Compensation and benefits Compensation and benefits expense increased 7.7% from $61.8 million during the six months ended June 30, 2024 to $66.6 million in the comparable period in 2025 due to higher stock-based compensation expense and increased headcount. Fund management and administration Fund management and administration expense increased 4.7% from $40.1 million during the six months ended June 30, 2024 to $42.0 million in the comparable period in 2025 primarily due to higher average AUM. Marketing and advertising Marketing and advertising expense increased 6.6% from $9.5 million during the six months ended June 30, 2024 to $10.1 million in the comparable period in 2025 primarily due to higher spending related to our U.S. listed products. Sales and business development Sales and business development expense increased 15.4% from $7.3 million during the six months ended June 30, 2024 to $8.4 million in the comparable period in 2025 primarily due to increases in travel and events spending. 43 Table of Contents Professional fees Professional fees decreased 41.7% from $10.2 million during the six months ended June 30, 2024 to $6.0 million in the comparable period in 2025 primarily as the prior period included expenses incurred in response to an activist campaign and in connection with the SEC ESG Settlement. Occupancy, communications and equipment Occupancy, communications and equipment expense increased 20.5% from $2.5 million during the three months ended June 30, 2024 to $3.0 million in the comparable period in 2025 primarily due to higher internet and communications expenses. Depreciation and amortization Depreciation and amortization expense increased 39.8% from $0.8 million during the six months ended June 30, 2024 to $1.1 million in the comparable period in 2025 due to amortization of software development costs. Third-party distribution fees Third-party distribution fees increased 44.1% from $5.0 million during the six months ended June 30, 2024 to $7.2 million in the comparable period in 2025 due to our strong organic growth and AUM expansion across our distribution platforms. Acquisition-related Costs During the six months ended June 30, 2025, we recorded $2.0 million of acquisition-related costs, comprised of professional fees related to the Ceres Acquisition. Other Other expenses were essentially unchanged from the six months ended June 30, 2024. Other Income/(Expenses) Six Months Ended June 30, Change Percent Change (in thousands) 2025 2024 Interest expense $ (10,931 ) $ (8,268 ) $ (2,663 ) 32.2% Interest income 3,987 2,836 1,151 40.6% Other gains, net 388 1,309 (921 ) (70.4% ) Total other expenses, net $ (6,556 ) $ (4,123 ) $ (2,443 ) 59.0% Six Months Ended June 30, As a Percent of Revenues: 2025 2024 Interest expense (5.0% ) (4.0% ) Interest income 1.8% 1.4% Other gains, net 0.2% 0.6% Total other expenses, net (3.0% ) (2.0% ) Interest expense Interest expense increased 32.2% from $8.3 million during the six months ended June 30, 2024 to $10.9 million in the comparable period in 2025 due to a higher level of debt outstanding, partly offset by a lower average interest rate. Our effective interest rate during the six months ended June 30, 2024 and 2025 was 5.0% and 3.9%, respectively. Interest income Interest income increased 40.6% from $2.8 million during the six months ended June 30, 2024 to $4.0 million in the comparable period in 2025 due to a higher level of interest-earning assets. Other gains, net Other gains, net were $1.3 million and $0.4 million during the six months ended June 30, 2024 and 2025, respectively. This period includes net gains on our investments of $0.9 million, net gains on our financial instruments owned of $0.8 million and $2.4 million of foreign currency remeasurement losses on U.S. dollars held by foreign subsidiaries. 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. 44 Table of Contents Income Taxes Our effective income tax rate for the six months ended June 30, 2025 was 20.6%, resulting in an income tax expense of $12.8 million. Our tax rate differs from the federal statutory rate of 21.0% primarily due tax windfalls associated with the vesting of stock-based compensation awards and a lower tax rate on foreign earnings. These items were partly offset by state and local income taxes. Our effective income tax rate for the six months ended June 30, 2024 was 23.5%, resulting in an income tax expense of $13.5 million. Our tax rate differs from the federal statutory rate of 21% primarily due to non-deductible executive compensation and state and local income taxes. These items were partly offset by a lower tax rate on foreign earnings and tax windfalls associated with the vesting of stock-based compensation awards. 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 they 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 measurements provides investors with a consistent way to analyze our performance. These non-GAAP financial measurements exclude the following: ● 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 earnings volatility and are not core to our operating business. ● Foreign currency remeasurement gains and losses on U.S. dollars held by foreign subsidiaries: U.S. GAAP requires account balances to be remeasured into an entity’s functional currency, with resulting gains and losses reported in net income. Foreign subsidiaries holding U.S. dollars remeasure these balances into their functional currencies and recognize the gains and losses. Beginning in the second quarter of 2025, we began excluding these remeasurement effects from our non-GAAP financial measures, as they introduce earnings volatility, are not core to our operations and arise from balances denominated in our reporting currency. ● Tax windfalls and shortfalls upon vesting of stock-based compensation awards: GAAP requires the recognition of tax windfalls and shortfalls within income tax expense. These items arise upon the vesting 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 calculating our non-GAAP financial measurements as they introduce earnings volatility and are not core to our operating business. ● Imputed interest on our payable to GBH: During the fourth quarter of 2023, we repurchased our Series C Preferred Stock, which was convertible into approximately 13.1 million shares of our common stock, from GBH for aggregate cash consideration of approximately $84.4 million. Under the terms of the transaction, we paid GBH $40.0 million on the closing date, with the remainder of the purchase price payable in equal annual installments on the first, second and third anniversaries of the closing date, with no requirement to pay interest. Under U.S. GAAP, the obligation is recorded at its present value utilizing a market rate of interest on the closing date of 7.0% and the corresponding discount is amortized as interest expense pursuant to the effective interest method of accounting over the life of the obligation. We exclude this item when calculating our non-GAAP financial measurements as recognition of interest expense is non-cash and contrary to the stated terms of our obligation. ● Other items: Acquisition-related costs, losses on extinguishment of convertible notes, a civil money penalty in connection with the SEC ESG Settlement, 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. We also offset revenues and related expenses pertaining to legal and other related expenses covered by insurance as the gross presentation required under U.S. GAAP serves to overstate our revenues and expenses in the ordinary course of business. 45 Table of Contents Three Months Ended Six Months Ended Adjusted Net Income and Diluted Earnings per Share: June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Net income, as reported $ 24,777 $ 21,759 $ 49,406 $ 43,870 Add back: Acquisition-related costs, net of income taxes 1,489 — 1,489 — Add back: Foreign currency remeasurement losses on U.S. dollar balances, net of income taxes 1,136 — 1,136 — (Deduct)/add back: (Gains)/losses on financial instruments owned, net of income taxes (972 ) 220 (639 ) (1,342 ) (Deduct)/add back: (Decrease)/increase in deferred tax asset valuation allowance on financial instruments owned and investments (459 ) 391 (429 ) (140 ) (Deduct)/add back: (Gains)/losses recognized on investments, net of income taxes (458 ) 998 (697 ) 905 Add back: Imputed interest on payable to GBH, net of income taxes 354 513 698 1,017 Deduct: Tax windfalls upon vesting of stock-based compensation awards (4 ) (40 ) (2,087 ) (739 ) Add back: Expenses incurred in response to an activist campaign, net of income taxes — 3,234 — 3,760 Adjusted net income $ 25,863 $ 27,075 $ 48,877 $ 47,331 Deduct: Income distributed to participating securities — (462 ) — (924 ) Deduct: Undistributed income allocable to participating securities — (2,053 ) (23 ) (3,506 ) Adjusted net income available to common stockholders $ 25,863 $ 24,560 $ 48,854 $ 42,901 Weighted average diluted shares, excluding participating securities (in thousands) (See Note 16 to our Consolidated Financial Statements) 146,640 151,208 146,431 150,642 Adjusted earnings per share – diluted $ 0.18 $ 0.16 $ 0.33 $ 0.28 Liquidity and Capital Resources The following table summarizes key data regarding our liquidity, capital resources and use of capital to fund our operations: Balance Sheet Data (in thousands): June 30, 2025 December 31, 2024 Cash, cash equivalents and restricted cash $ 193,673 $ 181,191 Financial instruments owned, at fair value 97,749 85,439 Accounts receivable 43,070 44,866 Total: Liquid assets 334,492 311,496 Less: Total current liabilities (243,853 ) (109,197 ) Less: Other assets — seed capital (WisdomTree Digital Funds) (21,859 ) (20,866 ) Less: Regulatory capital requirements (37,407 ) (39,423 ) Total: Available liquidity $ 31,373 $ 142,216 Six Months Ended June 30, 2025 2024 Cash Flow Data (in thousands): Operating cash flows $ 45,176 $ 31,172 Investing cash flows (16,712 ) (9,699 ) Financing cash flows (23,505 ) (17,693 ) Foreign exchange rate effect 7,523 (626 ) Increase in cash, cash equivalents and restricted cash $ 12,482 $ 3,154 Liquidity We consider our available liquidity to be our liquid assets, less our current liabilities, seed capital in WisdomTree Digital Funds and regulatory capital requirements of certain of our subsidiaries. Liquid assets consist of cash, cash equivalents and restricted cash, financial instruments owned, at fair value, accounts receivable and securities held-to-maturity. Our financial instruments 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 and accrued incentive compensation for employees. 46 Table of Contents Cash, cash equivalents and restricted cash increased by $12.5 million during the six months ended June 30, 2025 due to $45.2 million provided from operating activities, $7.5 million increase in cash flow due to changes in foreign exchange rates and $4.5 million of proceeds from the sale of financial instruments owned, at fair value. These increases were partly offset by $15.8 million used to purchase financial instruments owned, at fair value, $12.7 million used to repurchase our common stock, $8.9 million used to pay dividends, $4.0 million used to purchase investments, $1.9 million of excise tax paid on common stock repurchased, $1.3 million used to pay for software development and $0.1 million from other activities. Cash, cash equivalents and restricted cash increased by $3.2 million during the six months ended June 30, 2024 due to $14.2 million used to purchase financial instruments owned, at fair value, $9.9 million used to pay dividends, $7.8 million used to repurchase our common stock, $1.2 million used to pay for software development and $0.7 million used for other activities. These decreases were partly offset by $31.2 million provided by operating activities, $5.3 million of proceeds from the sale of financial instruments owned, at fair value, and $0.5 million of proceeds from the exit from our investment in Securrency, Inc. Convertible Notes We have the following convertible notes outstanding as of June 30, 2025: ● $150.0 million in aggregate principal amount of 3.25% Convertible Senior Notes due 2026 (the “2026 Notes”); ● $25.8 million in aggregate principal amount of 5.75% Convertible Senior Notes due 2028 (the “2028 Notes”); and ● $345.0 million in aggregate principal amount of 3.25% Convertible Senior Notes due 2029 (the “2029 Notes”). Each class of notes were issued pursuant to indentures dated as of the issuance dates between us and U.S. Bank Trust Company, National Association, as trustee (either initially or as successor to U.S. Bank National Association, the “Trustee”), in private offerings to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. As of June 30, 2025, we had an aggregate principal amount of $520.8 million outstanding of the 2026 Notes, the 2028 Notes and the 2029 Notes (collectively, the “Convertible Notes”). Key terms of the Convertible Notes are as follows: 2026 Notes 2028 Notes 2029 Notes Principal outstanding $150.0 $25.8 $345.0 Issuance date June 14, 2021 February 14, 2023 August 13, 2024 Maturity date (unless earlier converted, repurchased or redeemed) June 15, 2026 August 15, 2028 August 15, 2029 Interest rate 3.25% 5.75% 3.25% Initial conversion price $11.04 $9.54 $11.82 Initial conversion rate 90.5797 104.8658 84.5934 Redemption price $14.35 $12.40 $15.37 ● Interest rate: Payable semiannually in arrears on February 15 and August 15 of each year for the 2029 Notes and the 2028 Notes and on June 15 and December 15 of each year for the 2026 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. ● Conversion: Holders may convert at their option at any time prior to the close of business on the business day immediately preceding May 15, 2029 and May 15, 2028 for the 2029 Notes and the 2028 Notes, respectively, and March 15, 2026 for the 2026 Notes, 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; (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 May 15, 2029 and May 15, 2028 in respect of the 2029 Notes and the 2028 Notes, respectively, and March 15, 2026 in respect of the 2026 Notes, 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 the 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 common stock. 47 Table of Contents ● Redemption price: We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after August 20, 2026 and August 20, 2025 in respect of the 2029 Notes and the 2028 Notes, respectively, and June 20, 2023 in respect of the 2026 Notes 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. ● 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. ● 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 103.6269 shares, 167.7853 shares and 144.9275 shares of our common stock per $1,000 principal amount of the 2029 Notes, the 2028 Notes and the 2026 Notes, respectively (the equivalent of 61,826,817 shares of our common stock based on the aggregate principal amount of Convertible Notes outstanding), subject to adjustment. ● Seniority and Security: The Convertible Notes rank equal in right of payment and are our senior unsecured obligations. 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 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 subsidiaries are required to maintain a minimum level of regulatory capital, which at June 30, 2025 was approximately $37.4 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, 2028, including purchases to offset future equity grants made under our equity plans and purchases made in open market or privately negotiated transactions. During the six months ended June 30, 2025, we repurchased 1,282,498 shares of our common stock under the repurchase program for an aggregate cost of $12.7 million. Currently, approximately $150.0 million remains under this program for future purchases. Contractual Obligations Convertible Notes We currently have $520.8 million in aggregate principal amount of Convertible Notes outstanding, of which $150.0 million, $25.8 million and $345.0 million are scheduled to mature on June 15, 2026, August 15, 2028 and August 15, 2029, in respect of the 2026 Notes, the 2028 Notes and the 2029 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 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 “Convertible Notes” above for additional information. 48 Table of Contents Payable to GBH On November 20, 2023, we repurchased our Series C Preferred Stock from GBH for aggregate cash consideration of approximately $84.4 million. Under the terms of the transaction, we have paid GBH $54.8 million to date, with the remainder of the purchase price payable in equal, interest-free installments on the second and third anniversaries of the closing date. The implied price per share was $6.02 when considering the interest-free financing element of the transaction. Operating Leases Total future minimum lease payments with respect to our operating lease liabilities were $2.1 million at June 30, 2025. Cash flows generated by our operating activities and existing cash balances should be sufficient to satisfy the future minimum lease payments. See Note 10 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. 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. and European 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 most recent 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 most recent 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 of 3.0% and a weighted average cost of capital of 10.5%. Investments We account for equity investments that do not have a readily determinable fair value under the measurement alternative prescribed within Accounting Standards Codification Topic 321, Investments – Equity Securities , 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 6 to our Consolidated Financial Statements for information. Investments in debt instruments are accounted for at fair value, with changes in fair value reported in other income/(expenses). Revenue Recognition We earn a significant portion of our revenues 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. 49 Table of Contents Other revenues are earned from swap providers associated with certain of our European listed ETPs, the nature of which are based on a percentage of the ETPs’ average daily net assets. We also earn transaction-based income on flows associated with certain European listed ETPs. There is no significant judgment in calculating amounts due, which are invoiced monthly or quarterly in arrears and are not subject to any potential reversal. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which we have a right to invoice.