Equity ETFs have helped WisdomTree's results. Source: WisdomTree.
The strong dollar has crushed many U.S. companies by creating unfavorable foreign exchange headwinds that have cut their earnings. Yet for exchange-traded fund provider WisdomTree Investments (WT 1.04%), the strong dollar has been a godsend, as some of its most successful ETFs have ridden the coattails of the greenback and attracted huge inflows of assets from investors. Coming into Friday morning's second-quarter financial report, WisdomTree investors were prepared for more monumental growth from the company, and despite their high expectations, WisdomTree's results met and even exceeded ambitious hopes for growth. Let's take a closer look at the latest results from WisdomTree to see how the ETF provider seems to be doing everything right.
WisdomTree rides the dollar to popularity, profit
WisdomTree continued to see the positive impacts of the stronger dollar on its second-quarter results that it has enjoyed for a while now. Total revenue jumped a whopping 85% to a record $81.6 million, just barely eking above the optimistic 84% growth rate that investors had hoped to see. Net income for the quarter also hit a new record, soaring 128% to $24.2 million and producing earnings of $0.18 per share, $0.02 above the consensus projections for the ETF provider.
From an operating standpoint, WisdomTree continues to fire on all cylinders. Assets under management for its key U.S. ETF listings were up 56% since the end of 2014 to a record $61.3 billion, with the company bringing in an unprecedented $20.1 billion in fund inflows in the first half of 2015. Its European operations also did well, with assets at the small division more than tripling to $612 million so far this year. Advisory fees also continued to move slowly higher in terms of percentage of assets under management, and while WisdomTree didn't dominate the ETF industry to quite the same extent as it did last quarter, it still accounted for nearly 16% of all industry inflows in the second quarter.
Helping to boost WisdomTree's profit is the fact that its expenses haven't risen as quickly as its revenue. Year-over-year costs soared 69%, with a nearly 150% jump in compensation and benefits costs being the most expensive contributor in that realm. Nevertheless, improving operating margins are a good sign for the growing ETF provider. Also, one nice thing for investors is that comparing WisdomTree's earnings across quarters has gotten easier, as income-tax impacts are now directly comparable without having to take any special considerations into account.
CEO Jonathan Steinberg was happy about another set of strong results, again focusing on the fact that its ETF platform has brought in so much money. He called WisdomTree "one of the fastest-growing companies within the ETF and broader asset management industry in 2015 to date," and he praised its success in having "delivered industry-leading operating margins and record financial results, demonstrating the increasing scale and strength of our business model."
What's next for WisdomTree?
WisdomTree has taken advantage of its popularity to introduce a number of new funds into the marketplace. During the quarter, the company launched three different dividend-oriented funds focusing on various international markets, and WisdomTree has also increased its exposure to the fixed-income side of the market by introducing several bond ETFs. In bolstering its international presence, WisdomTree has also cross-listed several funds on international exchanges, and it has successfully negotiated with Charles Schwab to include more of its ETFs on Schwab's OneSource platform. The European division also listed several exchange-traded products in London as well as exchanges in Germany and Italy.
Some still fear that WisdomTree is overexposed to funds that will respond favorably to a specific set of economic conditions, and if those conditions reverse course, then the funds could suffer. Yet some of WisdomTree's latest offerings try to play both sides of the dollar equation and highlight the company's alternative index-weighting strategies, such as fundamentally based dividend investing.
WisdomTree investors were quite pleased with the company's results, sending the stock up nearly 5% in the first hour of pre-market trading following the announcement. As long as the U.S. dollar helps some of its biggest ETFs continue to perform strongly, WisdomTree should be able to ride its continued popularity to better results.
