Greetings and welcome to WisdomTree Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn it over to Jessica Zaloom, Head of Corporate Communications, to begin. Thank you.

Good morning. Before we begin, I would like to reference our legal disclaimer available in today's presentation. This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from the results discussed in forward-looking statements, including, but not limited to, the risks set forth in this presentation and in the Risk Factors section of WisdomTree's annual report on Form 10-K for the year ended December 31, 2022. WisdomTree assumes no duty and does not undertake to update any forward-looking statements. Now, it is my pleasure to turn the call over to WisdomTree CFO, Bryan Edmiston.

Thank you, Jessica, and good morning, everyone. We ended the quarter with $93.7 billion of AUM, unchanged from the prior quarter as our inflows served to offset unfavorable market conditions. We generated $2 million of inflows in the quarter, which were broad and diverse across seven of our eight product categories. Diversification is driving year-to-date average fee capture on our flows upward, which was more than two times greater than our fee capture in the prior year. Our flows are strong and stable as it has now been 12 consecutive quarters of flowing positive. Our year-to-date flows through September of $10.7 billion translates into a 17% annualized organic flow growth rate. Our AUM currently stands at $94.1 billion, slightly higher from the end of September, having benefited from further inflows. Revenues were $90.4 million, an increase of 5.5% from the second quarter and up 24.9% versus the prior year quarter. Our revenues are growing and our margins are expanding. Our operating margin in the third quarter was 29.5% as compared to 20.5% in the third quarter of last year. Our margins have benefited from the settlement of our contractual gold payment obligation last quarter which has been a meaningful contributor to this expansion, but not the only contributor. When excluding the impact of the gold royalty buyout, our margins have expanded by 330 basis points versus the third quarter of last year, demonstrating the scalability of our business model. This margin expansion is translating into earnings per share growth. Our adjusted net income was $18 million or $0.10 a share. Our adjusted operating expenses were up 1.7% for the quarter. This was driven primarily by higher incentive compensation as well as higher third-party distribution fees payable to our marketing agent in Latin America, as we have experienced roughly 70% AUM growth in the region since the beginning of the year. These increases were partly offset by lower contractual gold payments and marketing expenses. Now a few comments on our forecasted expense guidance. Variability in our compensation expenses is driven by our performance-based compensation plans, which consider our organic growth, revenue growth, margin expansion, and our share price performance in relation to our peers, whereby we currently rank number one out of 13. Given our performance to date, we anticipate our compensation expense to be near the high end of our guidance range. We anticipate our discretionary spending to be near the high end of our guidance range as well, having recognized $43.4 million in discretionary spending year-to-date and forecasted Q4 seasonal spend. We reported a gross margin of 80.1% in the third quarter, and we are updating our gross margin guidance to be between 79% and 80% from 79%, which we believe should be sustainable at current AUM levels. Our forecasted third-party distribution expense is being updated to be between $9 million and $10 million driven largely by the growth we are experiencing in Latin America. And our interest income is trending higher given the magnitude of our invested assets and higher interest rates. We now anticipate our interest income to be between $3.5 million to $4 million for the year. That's all I have. I will now turn the call over to Jarrett.

Thank you, Bryan, and good morning, everyone. Our strategy continues to be clear and straightforward, which is to deliver industry-leading organic growth to expand our operating margins, and to lead the industry's evolution in tokenized assets and blockchain-enabled finance. In each quarter, we consistently deliver results against this strategy as we did again this quarter. In the third quarter, we generated nearly $2 billion of net inflows, our 12th consecutive quarter of net inflows. Year-to-date, we've now generated approximately $11 billion of net inflows, representing a 17% annualized organic growth rate, which continues to be best-in-class among all publicly traded U.S. asset managers. And we have confidence that our three years of momentum will continue. Our existing clients continue to grow in average size while also utilizing more of our products and services. In other words, our client relationships are becoming larger, broader, and deeper. In addition, we are adding new clients at a double-digit rate. Taken together, we have multiple growth cylinders working together. A great example is our experience with our U.S. Floating Rate Treasury Fund, USFR. While driving strong flows, it is also driving new customers. Roughly 40% of advisors buying USFR are first-time users of WisdomTree products and services, and we are already seeing a development path where these advisors are expanding their relationship with WisdomTree into additional products like our quality dividend growth fund and our managed model solutions. Speaking of models, while they are still in the early innings of growth, they continue to be one of the largest and longest growth runways we have. Here, our strategy is twofold. First, it is to continue to build a large group of recurring model users at large distribution partners. And second is to pursue the RIA and independent broker-dealer channel with a more customized model approach that will allow us to manage a majority of those firms' assets. Today, our models are available on some of the largest distribution platforms in U.S. wealth management including Merrill, Morgan Stanley, LPL, Kestra, Seterra, and Schwab. In total, over 65,000 advisors have access to our models at these firms, and there is a long growth runway ahead. At Merrill, for example, our model assets are now over $0.5 billion with approximately 850 advisors using at least one of our seven available models and nearly 60% of those advisors having more than one client in our models. Both the AUM and the number of advisors had doubled from this time last year. Likewise, we launched managed models at LPL earlier this summer. And as of the end of September, while from a lower base, we have already doubled our model assets from June levels. Once again, our client relationships are becoming larger, broader, and deeper. Outside the very large distribution networks, our strategy is to provide a bespoke models experience for the broad RIA and independent broker-dealer marketplace. About a year ago, we launched our portfolio and growth solutions effort that offers a custom model experience together with automated trading and rebalancing services, which is essentially an easy button for implementation of WisdomTree's managed models. To date, we have on-boarded eight clients ranging in size from $1 billion to $100 billion in assets. But more importantly, we have a pipeline of over 60 RIAs and IBDs, representing potential partners with over $60 billion in assets under management. Overall, WisdomTree is well positioned with a large distribution platform and has a differentiated approach to the RIA and IBD market. We continue to score wins in the model space and have a clear and strong line of sight for continued organic growth. And given our high incremental margins, all of this growth continues and will continue to grow our operating margins. The third quarter saw operating margins expand by 900 basis points versus the year-ago period. As Bryan has highlighted, roughly 570 basis points of this increase was driven by management proactively resolving our gold obligation, while another 330 basis points was driven by enhanced operational efficiencies and organic growth on top of our scalable operating model. Meanwhile, we continue to make significant and steady progress with WisdomTree Prime, with a growing product and feature set now available in 33 states. All in all, these are exciting times at WisdomTree as we continue to deliver industry-leading organic growth. We continue to expand our operating margins, and we continue to lead the industry's evolution in tokenized assets and blockchain-enabled finance. With that, let me now turn it over to Jona.

Thank you, Jarrett, and good morning, everyone. I'm very proud of WisdomTree's ability to execute on our goals to drive positive results. As Bryan and Jarrett discussed earlier, we have strong momentum in our business today and high confidence that the strength will persist for the coming quarters and years. Our foundation has never been stronger with approximately $95 billion in assets under management. We've achieved asset diversification and also geographic diversification. Our models and solutions business is world-class, as we've been added to almost every major platform in just the last few years. Our integration of technology into every aspect of our business is why WisdomTree can do more with less resources than any other asset manager. All of this against the backdrop of over $11 billion in year-to-date inflows on top of last year's over $12 billion in inflows. It has truly been a team effort and I'm very proud of WisdomTree's workforce and our unique culture. It is from this very strong foundation we have been able to leverage the skillset of our entire company from product, legal, research, ops, tech, etc., alongside a dedicated and focused digital asset team to cement our first mover status in tokenization and the launch of WisdomTree Prime. Starting with WisdomTree Prime, last quarter, we announced the launch of our mobile app and mentioned that the goals for the remainder of 2023 were; one, to increase the app's availability across the United States; two, enhance the product and features of the platform; three, continue to test and iterate our marketing messaging for low-cost ROI customer acquisition; and four, explore strategic partnerships and other business development efforts. I'm pleased to report that we've made progress on all four areas since our last call. On the geographic front, recall that the initial launch of our wallet was in 21 states. In the past month, we expanded the availability to 12 additional states. WisdomTree Prime is now available to 60% of the U.S. population and we are on track to have the platform available to substantially all of the U.S. population by year-end. We are also hard at work at continuing to enhance the products and features of the platform. I'm happy to announce that we are currently tracking to have new products available to customers later this quarter including a digital money market fund as well as the launch of three new WisdomTree Siegel branded digital funds where customers can deploy a model-like experience with just one click. From here, expect new features and capabilities like peer-to-peer transfers and payments in coming quarters. On the marketing side, we believe it's prudent to limit marketing spend until we are available across most of the U.S. and we have our initial full suite of product features. To us, this is a better use of capital. That said, we are seeing encouraging early signs on both our tactical spend and our messaging. The acquisition cost of each app download is in line with our modeled expectations. The key metrics for our user acquisitions are tracking in line with our beta tests. And we remain laser-focused on high ROI customer acquisition. As our marketing budget expands going into 2024, the spend will be measured, thoughtful, and under control. Every additional state added or feature enhancement or product launched has generated interest in what WisdomTree is doing from larger players in the financial and technology industries. So, in addition to our bullish outlook on the organic growth prospects of Prime, we are having many conversations around B2B and B2B2C applications for both our platform and product suite that could unlock additional tokenization revenue streams in the future. WisdomTree has put in a lot of hard work to cement our leadership status in tokenization as the only provider with a broad suite of products. But the market is starting to wake up to the opportunities in tokenization, with lots of exploration and early positioning in the space. This is not only a validation of our tokenization strategy, but also underscores WisdomTree's early mover position. As I've mentioned in recent quarters, it's very exciting times for WisdomTree. We have best-in-class organic growth, a meaningful margin expansion story, and meaningful leverage to the secular shift towards tokenization. Thank you. And now, Operator, will you please turn the call over to Jeremy Campbell, our Head of Investor Relations, to field some questions from our shareholders?

All right. Thanks, Jona, and good morning, everybody. Similar to prior quarters, we're going to take some questions from the Say platform from our retail shareholders. The first one I'm going to direct to Jeremy Schwartz, our Chief Investment Officer. Jeremy, the question is the Fed has tightened a lot in a short period of time. What's the house view on the rate cycle from here and what do you think it means for total net flows across our fund lineup?

Well, thanks, Jeremy. And that is a great question, very relevant to today's markets. The recent data have all come in very, very strong and our senior economist has raised an extended forecast for interest rates over, not just the coming quarters but years. And we can see long-term interest rates settling at much higher levels than we thought even just six months ago. So, we're upgrading our outlook for rates. We believe we are among the very best-positioned asset managers for this dynamic. USFR, our floating rate treasury ETF with $18 billion of assets, has proven its utility and remains one of the best and highest-yielding treasuries in the market because of the inverted yield curve. And you have seen a lot of money go from money market funds—other treasury short-duration products have all benefited—but there is still $1 trillion of cash and banks earning meager rates. And so we educate clients every day about the opportunity for this floating rate treasury ETF versus other cash management solutions, but we have a broad lineup of ETFs that have compelling value propositions for these rate dynamics. Just this year, we launched our enhanced yield universal fund with Voya that's attracted over $1 billion in assets in less than 12 months. And we have longer-term solutions—core bond solutions, high-yield ETFs, mortgage-related funds—that are becoming better opportunities as these yields rise. And our fixed income model portfolios have delivered very consistent alpha and relative performance versus their benchmarks. So we see really a broad, diversified mix of inflows coming from other yield opportunities ahead. And now, of course, we have things beyond fixed income. And you could see, even just this year, how well-diversified the flows have been. We've got over 24 products with $100 million of inflows this year, ranging from commodities in Europe, thematics like artificial intelligence that have been working both in Europe and in the U.S. And I would say the highlight of the year and what I see the biggest franchise ahead has been our quality dividend growth franchise, which has taken in $300 billion globally this year—a very exciting cross-section of funds covering many different regions but working here in the U.S. and in Europe. And the simplicity of that story, buying high-quality stocks and high-profitability stocks resonates in each of these markets, and we think it's well positioned for further flows ahead. To summarize, I just say, we already heard the breadth and depth of the inflows have very diversified opportunities ahead.

For the second question, I have our Head of Digital Assets, Will Peck, answer it. Will, the question is— and the workings are a little bit unclear—but the heart of the question is around the evolving regulatory regime for both crypto and blockchain tech. So, where does WisdomTree see the regulatory regime over time? And how does that fit within our crypto and tokenization plans?

Thanks, Jeremy, and good morning, everyone. So, I guess I will answer this by saying, I think there is a lot that can be done within existing rules and regulations here in the U.S. I mean, sure, there are some things you can point to that you wish you would have more clarity on. And I think some of the big issues at play in the U.S. aren't really a part of our business model. On crypto and blockchain impacts a lot of different regulators—state, federal, securities, commodities, banking, AML. And in the U.S., it's not just one body that makes decisions. So, I think things will move at different paces. But I think the ability to innovate within this environment has been a major advantage for WisdomTree as a company at this current moment in time. So, it is actually an advantage for us and we are looking forward to continuing to press it going forward.

Great. And we will stay on deck for me here because the last question we are going to take from our retail shareholder base is probably one you have heard quite a bit lately without the news flow. But is there any update on the Bitcoin ETF?

Well, it does seem like there has been some exciting momentum. It has certainly been in the news a lot. You have seen a lot of competitors and others do things here. We remain very focused on a spot Bitcoin ETF. We think it is the best execution for the asset class in the traditional channels in the U.S. And we are looking forward to continuing engaging with regulators on it. The big points I make though is that, unlike a lot of other financial services firms in the U.S., WisdomTree does actually have a Bitcoin product in the market today that's both in Europe where we have a leading set of ETPs that have had positive inflows this year, but also in the U.S. for retail customers with WisdomTree Prime. We're leveraging the same cold storage custody model that an ETF would use. We just think we're doing it with more utility in the wallet. So, Bitcoin in the U.S. for retail investors is something that we already offer today. We think it's actually a very good experience within WisdomTree Prime. And we're looking forward to continuing to hone in on that in our marketing messaging going forward.

Operator, that's all we have from the Say platform for this quarter. So please feel free to open up the line from the sell-side community.

Our first question comes from Chris Kotowski with Oppenheimer & Company. Please state your question.

I'm looking at Slide 10 and the $2.5 billion that you have in the managed models. I think last quarter you indicated that it was around 12% of flows. Now, I wonder if you can kind of update us on that metric. Is it increasing or decreasing as a percent of flows? And just any more color that you can have on the momentum there?

Jarrett, why don't you take that first?

Sure. 12% overall is still a pretty good number, but really at the heart of your question, the momentum is picking up. And it's picking up as I mentioned, we're adding more platform partners so that gives us bigger reach. We said 65,000 advisers have access today. When we add a new platform partner, that number goes up. We're getting more advisers using more of our models, and we're getting more of our advisers getting more of their clients in our models. And so, all those things are increasing the momentum. Another thing I can say that actually wasn't in the prepared remarks that will speak to the momentum is that this last quarter, Q3 was the best quarter on record for us so far in terms of model flows. So, overall, I think 12% is a number that's going to gradually go upwards, but it is going upwards as evidenced in the third quarter. But also all the elements for increasing momentum are there and are active. So we're very happy with the momentum we're seeing in models.

And then, on WisdomTree Prime Page 12 you show the map. I'm thinking about it like if you look at the first space that you were active in, is there anything that one can see in terms of the monthly trends of subscribers to Prime? Go ahead. Sorry.

Yes, sure. Just really echoing what Jona said earlier, we've been testing out various marketing messaging in these states. We're getting cost per install in line with our model and expectations. We're seeing which messaging is working, and we're leaning into that. So that's really the learnings that we've gotten so far, which is, I think, a prudent use of shareholder capital at this point in time.

Our next question comes from Adam Beatty with UBS. Please state your question.

Actually, a multipart question around the model portfolio is a bit of a follow-up to what Chris was asking about just now. Just wondering, obviously, gaining more platforms is kind of job one and the priority right now, but beyond that, just how you're thinking about kind of wallet share of model portfolios and within that of WisdomTree at the various clients that you've already on-boarded? And the second part is perhaps more importantly, what you're doing? You mentioned kind of one button trades and what have you, but what other operational kind of initiatives that you have to grow that wallet share once to get on those platforms?

Jarrett, I mean, you might want to take this, and I'm not sure. Maybe Jeremy Schwartz has something to add as well.

Okay. Well, first of all, there's the different approaches that I spoke about getting on large platforms like Merrill and Morgan Stanley, very important. There's then a development time. One year on a platform, as you mentioned, Adam, that's the first victory. But really, that’s just getting you in the door and the reward is that you're allowed in the door. Now the real work begins where you've got to go out and get the advisors excited about what you're doing. So, on the large platforms, a lot of what we're doing is educational material, a lot of support for our models. We have a lot of model tools that we provide to our customers. And sometimes before you see a real ramp-up on a large platform, it can be about a year before you get that real traction. You've seen it in Merrill and some of the things that I pointed out, how we've seen a doubling in assets and advisors in the last year. They were one of the first on the models of the big platform players. So we've got that kind of momentum building with our other platform partners. Then on the RIAs and IBDs, there you do have more of an operational component where we want to help those advisors who don't have the same resources that the buyers have, the big platforms. We help them build their models, implement their models, trade their models, and that's really the replication of the wirehouse easy button. The other thing I'd add is that I guess, if you think about it, every sale is a model sale. If in the old days when we were just going, before we had a models effort, you were still trying to win a position in an existing advisor or home office model. Now what we get to go out and do is provide a model solution, which when we have a win there, it's a multi-ticker win. It's a very long-term and sticky win. But that's sort of a second type of model win is the third-party model platforms. Then the third is that working with advisors to customize their models for them and solve operational or workflow issues. But the other thing that you've heard in one of the answers from Jona, and actually in Jona's remarks, is through WisdomTree Prime. That's another model opportunity, and soon we'll be launching those effectively WisdomTree Siegel funds that is really a models-like experience. So it's another model opportunity for us. So hopefully, I answered your question, but a ton of opportunity there and a ton of momentum.

That's great. Thank you. You mentioned Jeremy. I don't know if Jeremy wants to weigh in.

Jeremy, do you?

I think we are certainly doing a lot with Professor Siegel. As you heard about, the Merrill models we have—we are working on that, the Morgan Stanley models. We have those come in Prime. He has been a leading figure for us on this idea of interest rates, when I talked about the senior economist upgrading the outlook for rates. He has been a big proponent of where things are going. So, all those things are mutually beneficial and driving this diversified close set.

Excellent. That's great detail, exactly what I was looking for. For every sale as a model sale, I love it. All for me today, thanks a lot.

Our next question comes from Mike Brown with KBW. Please state your question.

Great. Thank you for taking my questions. I guess just starting with the USFR product, it is clearly been a major success here. But it is, I guess, leveraged to rising rates. I suppose it is hard to say, but how much of the assets do you think are more tactical in nature that could be a risk when the Fed starts to cut versus how much might just be more of a cash allocation that could be stickier? And maybe just a quick follow-up—how much of the flows, just maybe a percentage have come from the models and therefore could probably be more sticky? Thank you.

Jeremy, you want to start and then maybe, Jarrett?

Well, I think I gave this view that we think rates—the long-term rates, I alluded that we think rates could stay higher for longer. You would have thought, if rates could be really painful, you would have seen more of a slowdown even this year. And so, we think sort of the longer-term settling of rates is that they may not fall back to that zero rate environment that you had, that even sort of the 10-year may settle at 3% over the longer run versus where it got down to sub 1% on the 10-year. So, we don't think these rates are going back down quickly anytime soon. There is definitely a group who uses it for cash management. We talked about Prime as one of the nice features of how do we take it to the next level with adding spending features on top of these things. There is a huge opportunity across the interest rate curve in Prime for things like that. So, the cash management solutions are getting extended, but we are not just reliant on USFR. That has been the best place to be for the last 18 months, but we have a very robust fixed income lineup. We have a lot of new users to WisdomTree from USFR. There is something like 40% of USFR clients have been new users. And so, we can now help them to talk about where they are going next. And we have a very robust set of opportunities in our fixed income lineup to position them, and we are going to keep working on more. So, you will hear more from us on the product set, but we think we are well positioned today, but we will further develop some new things both in Prime and in ETF world to keep those assets in our lineup.

And let me double down on some of those messages as well. Big picture—and again, already mentioned, we are growing. We have got three years of—three consecutive years, 12 consecutive quarters of organic growth. We are doing that because we are adding more adviser clients, growing at a double-digit rate. But within that, we are also adding more products per adviser, more AUM per adviser. And that puts, hopefully in context, how great USFR has been for us. 40% of the advisors buying USFR are first-time users. And that sets them down that development path for us where what we're seeing is the next most purchased product of ours after USFR ends up being DTRW and/or models. And so, it's this great sort of entryway product for new customers and existing customers. When you look at the customers that own it, some view it as fixed income. But others view it as cash, and a typical advisor at any time is 10% to 20% in cash. I'd also add again how this all fits really well with WisdomTree Prime. We have digital USFR and a retail customer is typically 15% to 30% in cash. So, there's a long life for this product. It's a great product. It's a great relationship product. It's a core holding, and so we couldn't be happier with the product.

And then, if I change gear to the WisdomTree Prime, it's great to see the launch in 12 additional states, but I guess it sounds like you won't reach a full national rollout by year-end. So, what states are really the toughest ones to get done? Can you just give us a view into that process? What's needed to get them over the pump here? And when you get to 50, I guess, what's maybe the updated timeframe on when you might get to 50? And then just to give us a view as to maybe when that marketing will start to kind of pick up more in earnest, which I think was one of the guideposts that you mentioned?

Why don't you start?

Yes, happy to. Different states have different rules, I mean, some operate under exemption; some you need to get licenses for. And then certainly in New York, they've got a stricter regime around crypto assets and kind of a very forward and I think mature approach towards regulation for the asset. But some of these things just take time, right? So I think our guidance around being in substantially all states or substantially all population by the end of the year—we're on track for that and that will position us for a broader national rollout in Q1.

Yes, Mike, I just wanted to make sure that you heard me in the prepared remarks. We expect to be virtually 100% of the country or 100% of the population by the end of the year.

There are no further questions at this time. I'll hand the floor back to Jonathan Steinberg for closing remarks.

Thank you. As we are closing out 2023 and are preparing for 2024 and beyond, I am comforted and I am gratified by the fact that WisdomTree is in the most enviable position. We are levered to almost all of the most exciting growth drivers in asset management and, more broadly, financial services, whether it's global ETFs, models and solutions or tokenization, Bitcoin and blockchain-enabled finance. We are there, we are early, and we are a leader. Truly, 2024 and the next few years should be the most rewarding with the fastest growth that we've had at any time in WisdomTree's history. And so, first of all, we thank you for your time today on the call, and we'll update you on our progress next quarter. So thank you, everybody. Have a good day.

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.