Creating the Premier Global Independent ETP Provider

Transcription

1 Creating the Premier Global Independent ETP Provider November 13, 2017 WisdomTree to Acquire Exchange Traded Commodity, Currency and Short & Leveraged Business of ETF Securities Jonathan Steinberg, CEO Amit Muni, CFO

2 Forward Looking Statements This presentation contains forward-looking statements that are based on our management s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, will, should, expects, intends, plans, anticipates, believes, estimates, predicts, potential, continue or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, the risks described below. If one or more of these or other risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this presentation completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. In particular, forward-looking statements in this presentation may include statements about: anticipated trends, conditions and investor sentiment in the global markets and exchange-traded products ( ETPs ); anticipated levels of inflows into and outflows out of our ETPs; our ability to deliver favorable rates of return to investors; our ability to develop new products and services; our ability to maintain current vendors or find new vendors to provide services to us at favorable costs; our ability to successfully expand our business into non-u.s. markets; competition in our business; and the effect of laws and regulations that apply to our business. Our business is subject to many risks and uncertainties, including without limitation: Net outflows in our two largest ETFs the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund have had, and in the future could continue to have, a negative impact on our revenues. Declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing customers to sell their fund shares and trigger redemptions. Fluctuations in the amount and mix of our AUM may negatively impact revenues and operating margins. We derive a substantial portion of our revenues from a limited number of products, and as a result, our operating results are particularly exposed to the performance of these products and our ability to maintain the AUM of these products, as well as investor sentiment toward investing in the products strategies and market-specific and political and economic risk. Much of our AUM is held in our U.S. listed ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks. Many of our ETPs have a limited track record, and poor investment performance could cause our revenues to decline. We depend on third parties to provide many critical services to operate our business and our ETPs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm our customers. Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. For a more complete description of the risks noted above and other risks that could cause our actual results to differ from our current expectations, please see the section entitled Risk Factors in the Company s Annual Report on Form 10- K for the fiscal year ended December 31, The forward-looking statements in this presentation represent our views as of the date of this presentation. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this presentation. 2

3 Solidifies WisdomTree as the world s largest independent ETP sponsor Acquisition makes for an even stronger and more competitive global organization + Brings scale and accelerates WisdomTree s European growth strategy + Diversifies product suite and reduces AUM volatility + Financially compelling transaction with significant, day one earnings accretion 3

4 Why ETF Securities? Attractive fit to help achieve WisdomTree s existing strategic priorities + ETF Securities is Europe's leading commodity franchise + Track record of growth driven by innovation and distribution + Alignment of entrepreneurial culture and management vision 4

5 Transaction summary Transaction and scope Consideration Financial impact Anticipated closing + Acquisition of 100% of the European exchange traded commodity, currency and short and leveraged business of ETF Securities Ltd. ( ETFS ) $17.6 billion AUM (1) and 43 employees + 30 million WisdomTree shares million common shares 14,750 non-voting preferred shares convertible into million common shares Stock consideration carries voting restrictions and selling lock-ups (see Appendix) + $253 million cash $200 million newly issued debt $53 million cash on hand + Total consideration equal to $611 million, based on Friday s closing share price of $ $0.09/25% EPS accretive in first year on a fully synergized basis at current AUM levels (2) + ~$5 million of pre-tax cost synergies, expected to be fully realized within 9 months of closing + Pro-forma gross debt leverage of 1.7x EBITDA (3) + Late 1Q18, subject to regulatory approvals (1) As of 11/9/17 (2) Excludes the impact of one-time transaction and integration costs. Percentage accretion based on street consensus for 2Q18-1Q19 as of 11/10/17 (3) EBITDA excludes non-cash stock-based compensation expense 5

6 ETF Securities is the undisputed leader in European ETCs + Industry pioneer with 14-year track record and continued focus on product development and distribution Europe s first gold, oil and currency ETPs Market share leader in Gold ETCs in Europe + Offers a full suite of exchange traded products including exchange traded commodities (ETCs), FX ETPs, short & leveraged ETPs + Culturally aligned with a focused, high margin business model Robust AUM growth and attractive fee yield 49 bps 48 bps 46 bps $17.5B $15.7B $11.0B Oct '17 Strength in commodity focused products Gold Commodities Precious Metals Short & Leveraged FX 63% 23% 10% 1% 3% 55% 50% 45% 40% 35% Best-in-class profitability and margins EBITDA in millions and EBITDA margin $45 (1) $40 $35 $30 $25 $21 $20 $15 $10 $5 39% $0 $29 40% $39 47% Oct '17 (1) Historical EBITDA converted at constant FX rate of 1.31 USD/GBP 6

7 with an attractive client base and distribution capabilities + Offers differentiated investment solutions with strong penetration across key channels: Institutional investors (including multiasset fund managers) Intermediaries (wealth managers, private banks) Self-directed (retail) customers + Limited customer concentration top 20 customers account for ~20% of AUM + Pan-European distribution through presence on all major platforms and regions Institutional Intermediaries Self-directed (Retail) Highly diversified client base (1) 35% 56% 9% Presence on key European platforms Intermediaries Self-directed (Retail) + Institutionalized, integrated sales infrastructure with deep and longstanding customer relationships (1) Based on AUM as of 6/30/17 7

8 Immediate scale and profitability across Europe + Launches WisdomTree into the top-10 ETP providers in Europe with $19 billion of AUM + Become the clear European commodities leader with 28% market share across all exchange traded structures + Propels European operations to strong profitability European ETP market primed for faster growth (1) $ in billions 3,000 A top-10 European ETP player (2) Name AUM ($bn) Share 1 ishares % 2 Deutsche AM % 3 Lyxor % 4 UBS % 5 Amundi % 6 Vanguard % 7 Invesco % 8 State Street % 2,000 1, % 10 Deka 9 1.4% Other % 0 Yr 1 Yr 4 Yr 7 Yr 10 Yr 13 Yr 16 Yr 19 Yr 22 U.S. Europe Total Market 629 Source: ICI, Morningstar, Deutsche Bank (1) U.S. Yr 1 = 1993, Europe Yr 1 = Data through 9/30/17 (2) WisdomTree pro-forma. As of 9/30/17 8

9 Accelerates WisdomTree s European growth strategy Combination Broadens European product suite Delivers deeper penetration of key markets Expands distribution network Product Suite Market Presence Client and Distribution + 17 WisdomTree UCITS with AUM of $839 million + 68 Boost ETPs with AUM of $937 million ETF Securities ETPs with AUM of $17.6 billion + Increases scale and market presence across key European markets + Expands client base across institutional investors, intermediaries and retail customers + Enhances presence on important European distribution platforms + Highly complementary European team and sales resources Note: AUM as of 11/9/17 9

10 Acquisition diversifies WisdomTree s product suite + Pro-forma AUM is well diversified with immediate scale in commodities and the #1 position in European listed gold funds + Significantly reduces DXJ/HEDJ concentration risk + Balances largest investment themes: U.S. equities, European equities, Gold and Japanese Equities + Further diversifies the client base into European and commodity focused investors Current Pro-forma (1) (1) Other Short & Leveraged (1) Other (1) Short & Leveraged Int l Equity Int l Equity 13% 10% EM Equity 12% $48.4B 42% FX Hedged EM Equity 8% $66.0B 31% FX Hedged U.S. Equities 28% Commodities U.S. Equities 20% 25% Commodities Note: AUM as of 11/9/17 (1) Includes fixed income, alternatives, currencies 10

11 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Decrease Increase and reduces AUM volatility + Pro-forma business mix should dampen AUM and net flow volatility + ETFS gold/commodities focus nicely complement WisdomTree s strong U.S. dollar orientation + Negative correlation between respective AUM bases results in a 34% reduction in historical AUM volatility over last 5 years (1) Monthly AUM Volatility (last 5 years) (1) 4.7% -34% 3.1% Pro-forma Monthly change in AUM WETF Pro-forma Ownership of ETF Securities during would have meaningfully reduced the severity of monthly AUM declines while not significantly sacrificing growth in improved market conditions (1) Represents the average monthly absolute value percentage change in AUM. Data from October 2012 October

12 Financially compelling with immediate 25%+ EPS accretion + EPS accretion of $0.09 on fully synergized basis at current AUM levels 25% accretive to EPS in first twelve months from closing excluding anticipated revenue synergies (1) + Estimated cost synergies of ~$5 million (pre-tax), expected to be fully realized within 9 months + Pre-tax restructuring costs of ~$5 million and transaction costs of ~$17 million + Effective tax rate on ETF Securities earnings of 24% + Opportunity to optimize WisdomTree s capital structure Prudent leverage of $200 million (gross debt / EBITDA ratio of 1.7x) (2) Adjusting quarterly dividend to $0.03 to balance the new capital structure, maintain capital for future growth opportunities and continue to return capital to shareholders (1) Excludes the impact of one-time transaction costs, integration costs and amortization on intangible assets. Percentage accretion based on street consensus for 2Q18-1Q19 as of 11/10/17 (2) EBITDA excludes non-cash stock-based compensation expense 12

13 Creates the largest independent global ETP provider + Exciting and important transaction that accomplishes key strategic objectives + Acquisition makes for a stronger, more competitive global firm that is better diversified World s largest independent provider of ETPs (1) Name AUM ($bn) 1 BlackRock 1,614 2 Vanguard State Street Invesco Nomura AM Well positioned to profitably grow in the world s two largest and most important ETP markets 6 Deutsche AM 89 7 Charles Schwab 88 8 Lyxor Nikko AM 53 (1) Deutsche Bank. As of 9/30/17. WisdomTree data pro-forma as of 11/9/17 13

14 Appendix 14

15 ETF Securities: 20 Largest Funds by AUM ($ in millions) Expense AUM Net Flows Fund Name Ticker Ratio 11/9/17 YTD (1) ETFS Physical Gold PHAU 0.39% 6, ,767 (795) 758 Gold Bullion Securities GBS 0.40% 3, ,066 (539) (504) ETFS Physical Silver PHAG 0.49% 893 (1) ETFS W TI Crude Oil CRUD 0.54% 755 (76) ETFS Physical Swiss Gold SGBS 0.25% (8) ETFS Brent 1mth OILB 0.49% 333 (70) (47) ETFS All Commodities AIGC 0.54% (25) 36 ETFS Physical Platinum PHPT 0.49% (41) 18 ETFS EUR Daily Hedged Physical Gold GBSE 0.39% 248 (1) (13) ETFS Agriculture AIGA 0.54% (23) (77) (15) ETFS Physical Palladium PHPD 0.49% 136 (130) (25) (97) 24 ETFS Copper COPA 0.54% 216 (12) 82 (100) 11 ETFS Industrial Metals AIGI 0.54% (41) 13 ETFS Physical PM Basket PHPM 0.45% 111 (18) 9 (6) 24 ETFS Gold BULL 0.54% 100 (8) 18 0 (8) ETFS 2x Daily Long W TI Crude Oil LOIL 1.03% 95 (15) (38) ETFS Nickel NICK 0.54% 117 (10) 9 (25) 127 ETFS Aluminium ALUM 0.54% ETFS Brent Crude BRNT 0.54% 111 (7) (7) ETFS GBP Daily Hedged Physical Gold GBSP 0.39% Total Top 20 Funds 15, ,781 (340) 974 Total ETF Securities ETC Business 17, ,885 (63) 911 (1) As of 11/9/17 15

16 Modeling Guidance Revenue + AUM: $17.6B + Effective fee rate: 46 bps Expenses + Gross margin: 66% + EBITDA margin: 47% + Annual interest expense: $8M pre-tax L+175 bps), $6.5M after-tax + Synergies: ~$5M with linear phase-in 2Q18-4Q18 + Effective tax rate on ETF Securities earnings: 24%; interest expense tax deductible at 19% rate + Pro-forma diluted share count: 165.9M + Excludes additional amortization expenses which is expected to be minimal Quarterly dividend $

17 Lock-Up Details + Breakdown of 30 million share stock equivalent consideration: million common shares 14,750 non-voting preferred shares; convertible into million common shares + Lockups in place with restrictions in the manner in which stock can be sold 91 days post closing 10 million shares 271 days (~9 months) post closing 10 million shares 451 days (~15 months) post closing 10 million shares + Voting rights / standstill agreements in place + Voting rights capped at 9.99% 17