WISDOMTREE INVESTMENTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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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 Amendment No. 1 on Form
10-K/A
to our Annual Report on Form
10-K
for the fiscal year ended December 31, 2021. 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

Introduction


We are an asset management company in the business of offering transparent
financial exposures to our clients and are a leading global ETP sponsor based on
assets under management, or AUM, with AUM of $79.4 billion as of March 31, 2022.
More recently, we have been positioning ourselves to expand beyond our existing
ETP business by leveraging blockchain technology, digital assets and principles
of decentralized finance, or DeFi, to deliver transparency, choice and
inclusivity to customers and consumers around the world.

Our family of ETPs includes providing exposure to equities, commodities, fixed
income, leveraged and inverse, currency, cryptocurrency and alternative
strategies. We have launched many
first-to-market
products and pioneered alternative weighting we call "Modern Alpha," which
combines the outperformance potential of active management with the benefits of
passive management to offer investors cost-effective funds that are built to
perform. Most of our equity-based funds employ a fundamentally weighted
investment methodology, which weights securities based on factors such as
dividends, earnings or investment factors, whereas most other industry indexes
use a capitalization weighted methodology. These products are distributed
through all major channels in the asset management industry, including banks,
brokerage firms, registered investment advisers, institutional investors,
private wealth managers and online brokers primarily through our sales force.

We are at the forefront of innovation and have differentiated ourselves through
continued investments in technology-enabled and research-driven solutions such
as our Advisor Solutions program, which includes portfolio construction, asset
allocation, practice management services and digital tools for financial
advisors. We seek to usher in the next chapter of financial services by
introducing new revenue streams and expanding our offerings to include a new
financial services mobile application, branded WisdomTree Prime
™
, a digital wallet that is native to the blockchain and being developed for
saving, spending and investing in both native crypto assets and tokenized
versions of mainstream financial assets (e.g., blockchain enabled investment
funds). We also are planning to launch asset- and fund-tokenization products
beginning with a dollar token, gold token and digital short term treasury fund
which will be available on multiple public and permissioned blockchains,
leveraging federal and state regulated entities. As we pursue our digital assets
strategy, we are embracing a concept we refer to as "responsible DeFi," which we
believe upholds the foundational principles of regulation in this innovative and
quickly evolving space.

We were incorporated under the laws of the state of Delaware on September 19,
1985
as Financial Data Systems, Inc. and ultimately renamed WisdomTree
Investments, Inc.
on September 6, 2005.

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Assets Under Management

WisdomTree ETPs

We offer ETPs covering equity, commodity, fixed income, leveraged and inverse,
currency, cryptocurrency and alternative strategies. The chart below sets forth
the asset mix of our ETPs at March 31, 2021, December 31, 2021 and March 31,
2022:


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Market Environment

During the first quarter of 2022, the U.S. and Eurozone markets declined and
inflationary pressures rose. Commodity prices surged following the Russian
invasion of the sovereign territory of Ukraine and this contributed to a further
increase in inflation as well as supply chain disruption. Emerging markets were
negatively affected by renewed
COVID-19
outbreaks. Gold prices increased during the quarter.

The S&P 500, MSCI EAFE (local currency) and MSCI Emerging Markets Index (U.S.
dollar) decreased by 4.6%, 3.6% and 6.9%, respectively, while gold prices
increased 6.7% during the quarter. In addition, the European and Japanese
equities markets both depreciated with the MSCI EMU Index and MSCI Japan Index
decreasing 9.1% and 1.4%, respectively, in local currency terms for the quarter.
Also, the U.S. dollar rose 1.7% and 2.7% versus the euro and British pound,
respectively, and weakened 5.9% versus the Japanese yen during the quarter.

U.S. listed ETF Industry Flows

U.S. listed ETF industry net flows for the three months ended March 31, 2022
were $199.0 billion. U.S. equity gathered the majority of those flows.


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Source: Morningstar

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International ETP Industry Flows

International ETP industry net flows were $47.8 billion for the three months
ended March 31, 2022. Equities gathered the majority of those flows.


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Source: Morningstar

Our Operating and Financial Results

We operate as an ETP sponsor and asset manager providing investment advisory
services globally through our subsidiaries in the United States and Europe.

U.S. Listed ETFs

Our U.S. listed ETFs’ AUM increased from $48.2 billion at December 31, 2021 to
$48.6 billion at March 31, 2022 due to net inflows, partly offset by market
depreciation.


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European Listed ETPs


Our European listed ETPs' AUM increased from $29.3 billion at December 31, 2021
to $30.8 billion at March 31, 2022 primarily due to market appreciation, partly
offset by net outflows.


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Consolidated Operating Results


The following table sets forth our revenues and net income/(loss) for the most
recent five quarters. Prior period amounts previously disclosed have been
revised to conform with our current presentation. These revisions had no effect
on previously reported net income. See Note 2 to our Consolidated Financial
Statements for additional information.


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• Revenues

– We recorded operating revenues of $78.4 million during the three months

ended March 31, 2022, up 10% from the three months ended March 31, 2021

due to higher average AUM, partly offset by a lower average advisory fee.

• Operating Expenses

– Total operating expenses increased 15.3% from the three months ended

March 31, 2021 to $60.7 million primarily due to expenses incurred in

responding to the activist campaign by ETFS Capital Limited and Lion

Point Capital, LP (collectively, the “Investor Group“), as evidenced by

their Schedule 13D initially filed on January 24, 2022, and thereafter

amended (the “activist campaign”), higher compensation arising from

increased headcount, higher fund management and administration costs, as

well as higher marketing expenses, third-party distribution fees and

sales and business development expenses. These increases were partly

          offset by lower occupancy expenses.



     •    Other Income/(Expenses)

– Other income/(expenses) includes interest income and interest expense,

gains/(losses) on revaluation of deferred consideration – gold payments,

impairments and other net losses. For the three months ended March 31,

2022 and 2021, the (losses)/gains on revaluation of deferred

consideration – gold payments were ($17.0) million and $2.8 million,

respectively. We recognized charges arising from the release of a

tax-related

indemnification asset of $19.9 million and $5.2 million during the three

months ended March 31, 2022 and 2021, respectively. An equal and

offsetting benefit has been recognized in income taxes. In addition,

          during the three months ended March 31, 2022 we recognized losses on our
          securities owned of $5.1 million.



     •    Net (loss)/income

– We reported net loss of ($10.3) million during the three months ended

March 31, 2022, compared to net income of $15.1 million during the three

months ended March 31, 2021. The change was impacted by an unfavorable

          change related to the revaluation of deferred consideration - gold
          payments of $19.8 million, losses on our securities owned and the change
          in revenues and expenses described above.



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Key Operating Statistics

The following table presents key operating statistics that serve as indicators
for the performance of our business:

                                                                Three Months Ended
                                                                                         March 31,
                                                March 31,          December 31,
                                                  2022                 2021                2021
GLOBAL ETPs (in millions)
Beginning of period assets                     $    77,471$       72,774$    67,383
Inflows/(outflows)                                   1,314                 1,908              1,268
Market appreciation/(depreciation)                     618                 2,804                876
Fund closures                                           -                    (15 )               -

End of period assets                           $    79,403$       77,471$    69,527

Average assets during the period               $    77,813$       75,986$    69,570
Average ETP advisory fee during the period            0.40 %                0.40 %             0.41 %
Revenue days                                            90                    92                 90
Number of ETPs-end of period                           341                   329                313

U.S. LISTED ETFs (in millions)
Beginning of period assets                     $    48,210$       44,742$    38,517
Inflows/(outflows)                                   2,250                 1,865              1,343
Market appreciation/(depreciation)                  (1,838 )               1,618              2,303
Fund closures                                           -                    (15 )               -

End of period assets                           $    48,622$       48,210$    42,163

Average assets during the period               $    47,506$       46,944$    40,706
Number of ETFs - end of the period                      77                    75                 68

EUROPEAN LISTED ETPs (in millions)
Beginning of period assets                     $    29,261$       28,032$    28,866
Inflows/(outflows)                                    (936 )                  43                (75 )
Market appreciation/(depreciation)                   2,456                 1,186             (1,427 )
Fund closures                                           -                     -                  -

End of period assets                           $    30,781$       29,261$    27,364

Average assets during the period               $    30,307$       29,042$    28,864
Number of ETPs-end of period                           264                   254                245

PRODUCT CATEGORIES (in millions)

Commodity & Currency
Beginning of period assets                     $    24,598$       23,825$    25,880
Inflows/(outflows)                                  (1,058 )                (246 )             (672 )
Market appreciation/(depreciation)                   2,761                 1,019             (1,552 )

End of period assets                           $    26,301$       24,598$    23,656

Average assets during the period               $    25,893$       24,423$    25,290

U.S. Equity
Beginning of period assets                     $    23,860$       21,383$    18,367
Inflows/(outflows)                                     779                   784                218
Market appreciation/(depreciation)                    (901 )               1,693              1,434

End of period assets                           $    23,738$       23,860$    20,019

Average assets during the period               $    23,141        $       

22,964 $ 19,320


International Developed Market Equity
Beginning of period assets                     $    11,888$       11,174$     9,406
Inflows/(outflows)                                      97                   440                 17
Market appreciation/(depreciation)                    (566 )                 274                561

End of period assets                           $    11,419$       11,888$     9,984

Average assets during the period               $    11,539$       11,518$     9,786

Emerging Market Equity
Beginning of period assets                     $    10,375$       10,666$     8,539
Inflows/(outflows)                                     189                    (3 )            1,663
Market appreciation/(depreciation)                    (573 )                (288 )              275

End of period assets                           $     9,991$       10,375$    10,477

Average assets during the period               $    10,116$       10,550$     9,875



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                                                   Three Months Ended
                                                                          March 31,
                                      March 31,       December 31,
                                        2022              2021              2021
Fixed Income
Beginning of period assets           $     4,354$       3,528$     3,308
Inflows/(outflows)                         1,242                837               10
Market appreciation/(depreciation)          (178 )              (11 )            (74 )

End of period assets                 $     5,418$       4,354$     3,244

Average assets during the period $ 4,690$ 4,117 $

   3,234

Leveraged & Inverse
Beginning of period assets           $     1,775$       1,663$     1,477
Inflows/(outflows)                            (2 )               11               (4 )
Market appreciation/(depreciation)            83                101               46

End of period assets                 $     1,856$       1,775$     1,519

Average assets during the period $ 1,830$ 1,761 $

   1,554

Cryptocurrency
Beginning of period assets           $       357      $         295      $       167
Inflows/(outflows)                            37                 28               36
Market appreciation/(depreciation)           (11 )               34              174

End of period assets                 $       383      $         357      $       377

Average assets during the period $ 324 $ 406 $

     264

Alternatives
Beginning of period assets           $       261      $         222      $       215
Inflows/(outflows)                            29                 56               -
Market appreciation/(depreciation)             3                (17 )             12

End of period assets                 $       293      $         261      $       227

Average assets during the period $ 275 $ 229 $

     223

Closed ETPs
Beginning of period assets           $         3      $          18      $        24
Inflows/(outflows)                             1                  1               -
Market appreciation/(depreciation)            -                  (1 )             -
Fund closures                                 -                 (15 )             -

End of period assets                 $         4      $           3      $        24

Average assets during the period $ 5 $ 18 $

      24

Headcount:                                   253                241              227

Note: Previously issued statistics may be restated due to fund closures and
trade adjustments
Source: WisdomTree

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Selected Operating and Financial Information

                                      Three Months Ended
                                           March 31,                         Percent
AUM (in millions)                      2022          2021       Change       Change
Average AUM                         $   77,813$ 69,570$ 8,243          11.8 %

Operating Revenues (in thousands)
Advisory fees
(1)                                 $   76,517$ 70,042$ 6,475           9.2 %
Other income                             1,851        1,214         637          52.5 %

Total revenues                      $   78,368$ 71,256$ 7,112          10.0 %




(1) Advisory fees previously reported have been revised due to an immaterial

error correction. These revisions had no effect on previously reported net

income. See Note 2 to our Consolidated Financial Statements for additional

    information.


Average AUM

Our average AUM increased 11.8% from $69.6 billion at March 31, 2021 to
$77.8 billion at March 31, 2022 due to market appreciation and net inflows.

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Operating Revenues

Advisory fees

Advisory fee revenues increased 9.2% from $70.0 million during the three months
ended March 31, 2021 to $76.5 million in the comparable period in 2022 due to
higher average AUM, partly offset by a lower average advisory fee. Our average
advisory fee was 0.40% during the three months ended March 31, 2022 and 0.41%
during the same period in 2021.

Other income


Other income increased 52.5% from $1.2 million during the three months ended
March 31, 2021 to $1.9 million in the comparable period in 2022 primarily due to
higher fees associated with our European listed products.

Operating Expenses

                                            Three Months Ended
                                                 March 31,                         Percent
(in thousands)                               2022          2021       Change        Change
Compensation and benefits                 $   24,787$ 22,627$ 2,160           9.5 %
Fund management and administration
(1)                                           15,494       13,947       1,547          11.1 %
Marketing and advertising                      4,023        3,006       1,017          33.8 %
Sales and business development                 2,609        2,145         464          21.6 %
Contractual gold payments                      4,450        4,270         180           4.2 %
Professional fees                              4,459        2,013       2,446         121.5 %
Occupancy, communications and equipment          753        1,475        (722 )       (48.9 %)
Depreciation and amortization                     47          252        (205 )       (81.3 %)
Third-party distribution fees                  2,212        1,343         869          64.7 %
Other                                          1,845        1,571         274          17.4 %

Total operating expenses                  $   60,679$ 52,649$ 8,030          15.3 %




                                            Three Months Ended
                                                 March 31,
As a Percent of Revenues:                   2022            2021
Compensation and benefits                      31.5 %        31.7 %
Fund management and administration
(1)                                            19.8 %        19.6 %
Marketing and advertising                       5.1 %         4.2 %
Sales and business development                  3.3 %         3.0 %
Contractual gold payments                       5.7 %         6.0 %
Professional fees                               5.7 %         2.8 %

Occupancy, communications and equipment 1.0 % 2.1 %
Depreciation and amortization

                   0.1 %         0.4 %
Third-party distribution fees                   2.8 %         1.9 %
Other                                           2.4 %         2.2 %

Total operating expenses                       77.4 %        73.9 %






(1) Fund management and administration expenses previously reported have been

revised due to an immaterial error correction. These revisions had no effect

on previously reported net income. See Note 2 to our Consolidated Financial

Statements for additional information.

Compensation and benefits


Compensation and benefits expense increased 9.5% from $22.6 million during the
three months ended March 31, 2021 to $24.8 million in the comparable period in
2022 due to increased headcount. Headcount was 227 and 253 at March 31, 2021 and
2022, respectively.

Fund management and administration


Fund management and administration expense increased 11.1% from $13.9 million
during the three months ended March 31, 2021 to $15.5 million in the comparable
period in 2022 due to higher average AUM.

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Marketing and advertising


Marketing and advertising expense increased 33.8% from $3.0 million during the
three months ended March 31, 2021 to $4.0 million in the comparable period in
2022 primarily due to higher spending on online marketing campaigns.

Sales and business development


Sales and business development expense increased 21.6% from $2.1 million during
the three months ended March 31, 2021 to $2.6 million in the comparable period
in 2022 primarily due to higher spending on conferences and market data.

Contractual gold payments


Contractual gold payments expense increased 4.2% from $4.3 million during the
three months ended March 31, 2021 to $4.5 million in the comparable period in
2022. This expense was associated with the payment of 2,375 ounces of gold and
was calculated using the average daily spot price of $1,798 and $1,874 per ounce
during the three months ended March 31, 2021 and 2022, respectively.

Professional fees


Professional fees increased 121.5% from $2.0 million during the three months
ended March 31, 2021 to $4.5 million in the comparable period in 2022 due to
expenses incurred in response to the activist campaign by the Investor Group.

Occupancy, communications and equipment


Occupancy, communications and equipment expense decreased 48.9% from
$1.5 million during the three months ended March 31, 2021 to $0.8 million in the
comparable period in 2022 due to the termination of our New York office lease in
September 2021.

Depreciation and amortization


Depreciation and amortization expense decreased 81.3% from $0.3 million during
the three months ended March 31, 2021 to $0.05 million in the comparable period
in 2022 due to
write-off
of fixed assets related to the exit of our New York office.

Third-party distribution fees


Third-party distribution fees increased 64.7% from $1.3 million during the three
months ended March 31, 2021 to $2.2 million in the comparable period in 2022
primarily due to higher AUM in Latin America resulting in higher fees paid to
our third-party marketing agent, as well as new platform relationships in
Europe.

Other


Other expenses were essentially unchanged from the three months ended March 31,
2021.

Other Income/(Expenses)

                                                    Three Months Ended
                                                         March 31,                            Percent
(in thousands)                                      2022           2021         Change         Change
Interest expense                                  $  (3,732 )$ (2,296 )$  (1,436 )        62.5 %
(Loss)/gain on revaluation of deferred
consideration - gold payments                       (17,018 )       2,832        (19,850 )         n/a
Interest income                                         794           231            563         243.7 %
Impairments                                              -           (303 )          303           n/a
Other losses, net                                   (24,707 )      (5,893 )      (18,814 )       319.3 %

Total other expenses, net                         $ (44,663 )$ (5,429 )$ (39,234 )       722.7 %




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                                                                Three Months Ended
                                                                     March 31,
As a Percent of Revenues:                                      2022              2021
Interest expense                                                  (4.8 %)         (3.2 %)
(Loss)/gain on revaluation of deferred consideration -
gold payments                                                    (21.7 %)          4.0 %
Interest income                                                    1.0 %           0.3 %
Impairments                                                        0.0 %          (0.4 %)
Other losses, net                                                (31.5 %)         (8.3 %)

Total other expenses, net                                        (57.0 %)         (7.6 %)



Interest expense

Interest expense increased 62.5% from $2.3 million during the three months ended
March 31, 2021 to $3.7 million in the comparable period in 2022 due to a higher
level of debt outstanding, partly offset by a lower effective interest rate. Our
effective interest rate during the three months ended March 31, 2021 and 2022
was 5.3% and 4.6%, respectively.

(Loss)/gain on revaluation of deferred consideration


We recognized a gain on revaluation of deferred consideration of $2.8 million
during the three months ended March 31, 2021 as compared to a loss of ($17.0)
million during the three months ended March 31, 2022. The loss in the current
quarter was due to higher forward-looking gold prices. The magnitude of any gain
or loss is highly correlated to the magnitude of the change in the
forward-looking price of gold.

Interest income

Interest income increased 243.7% from $0.2 million during the three months ended
March 31, 2021 to $0.8 million in the comparable period in 2022 due to an
increase in securities owned.

Impairment


During the three months ended March 31, 2021, we recognized an impairment charge
of $0.3 million upon exiting our London office. There were no impairment charges
recognized in the comparable period in 2022.

Other losses, net


Other losses, net were $5.9 million and $24.7 million during the three months
ended March 31, 2021 and 2022, respectively. The three months ended March 31,
2022 includes a
non-cash
charge of $19.9 million arising from the release of a
tax-related
indemnification asset due to a favorable resolution to certain tax audits as
well as the expiration of the statute of limitations (an equal and offsetting
benefit was recognized in income tax expense) and losses on securities owned of
$5.1 million.

Included in the loss recognized during the three months ended March 31, 2021 is
a charge of $5.2 million, arising from the release of a
tax-related
indemnification asset upon the expiration of the statute of limitations (an
equal and offsetting benefit was recognized in income tax expense). During the
three months ended March 31, 2021, we also recognized an unrealized gain of
$0.2 million on our investment in Securrency.

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 for the three months ended March 31, 2022 of 62.0%
resulted in an income tax benefit of $16.7 million. Our tax rate differs from
the federal statutory rate of 21% primarily due to a $19.9 million reduction in
unrecognized tax benefits (including interest and penalties), a lower tax rate
on foreign earnings and tax windfalls associated with the vesting of stock-based
compensation awards. These items were partly offset by a
non-taxable
loss on revaluation of deferred consideration and an increase in the deferred
tax asset valuation allowance on losses recognized on securities owned.

Our effective income tax rate for the three months ended March 31, 2021 of
negative 14.9% resulted in an income tax benefit of $2.0 million. Our effective
income tax rate differs from the federal statutory tax rate of 21% primarily due
to a $5.2 million reduction in unrecognized tax benefits (including interest and
penalties), a
non-taxable
gain on revaluation of deferred consideration and a lower tax rate on foreign
earnings, partly offset tax shortfalls associated with the vesting and exercise
of stock-based compensation awards.

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Non-GAAP
Financial Measurements

In an effort to provide additional information regarding our results as
determined by GAAP, we also disclose certain
non-GAAP
information which we believe provides useful and meaningful information. Our
management reviews these
non-GAAP
financial measurements when evaluating our financial performance and results of
operations; therefore, we believe it is useful to provide information with
respect to these
non-GAAP
measurements so as to share this perspective of management.
Non-GAAP
measurements do not have any standardized meaning, do not replace nor are
superior to GAAP financial measurements and are unlikely to be comparable to
similar measures presented by other companies. These
non-GAAP
financial measurements should be considered in the context with our GAAP
results. The
non-GAAP
financial measurements contained in this Report include:

Adjusted Operating Income, Operating Expenses, Income Before Income Taxes,
Income Tax Expense, Net Income and Diluted Earnings per Share


We disclose adjusted operating income, operating expenses, income before income
taxes, income tax expense, net income and diluted earnings per share as
non-GAAP
financial measurements in order to report our results exclusive of items that
are
non-recurring
or not core to our operating business. We believe presenting these
non-GAAP
financial measurements provides investors with a consistent way to analyze our
performance. These
non-GAAP
financial measurements exclude the following:

Unrealized gains or losses on the revaluation of deferred consideration:
Deferred consideration is an obligation we assumed in connection with the ETFS
Acquisition that is carried at fair value. This item represents the present
value of an obligation to pay fixed ounces of gold into perpetuity and is
measured using forward-looking gold prices. Changes in the forward-looking price
of gold and changes in the discount rate used to compute the present value of
the annual payment obligations may have a material impact on the carrying value
of the deferred consideration and our reported financial results. We exclude
this item when calculating our
non-GAAP
financial measurements as it is not core to our operating business. The item is
not adjusted for income taxes as the obligation was assumed by a wholly-owned
subsidiary of ours that is based in Jersey, a jurisdiction where we are subject
to a zero percent tax rate.

Gains or losses on securities owned:
We account for securities owned as trading securities which requires these
instruments to be measured at fair value with gains and losses reported in net
income. In the third quarter of 2021, we began excluding these items when
calculating our
non-GAAP
financial measurements as these securities have become a more meaningful
percentage of total assets and the gains and losses introduce volatility in
earnings and are not core to our operating business.

Tax shortfalls and windfalls upon vesting and exercise of stock-based
compensation awards:
GAAP requires the recognition of tax windfalls and shortfalls within income tax
expense. These items arise upon the vesting and exercise 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 volatility in earnings and are not core
to our operating business.

Other items:
Unrealized gains and losses recognized on our investments, changes in the
deferred tax asset valuation allowance on securities owned, expenses incurred in
response to the activist campaign by the Investor Group, impairment charges and
the remeasurement of contingent consideration payable to us from the sale of our
Canadian ETF business.

                                                                  Three Months Ended
                                                              March 31,       March 31,

Adjusted Net Income and Diluted Earnings per Share:              2022       

2021

Net (loss)/income, as reported                                $  (10,261 )

$ 15,147
Add back/Deduct: Loss/(gain) on revaluation of deferred
consideration

                                                     17,018    

(2,832 )
Add back: Increase in deferred tax asset valuation
allowance on securities owned

                                      2,010    

Add back: Losses on securities owned, net of income taxes 3,893

Add back: Expenses incurred in response to the activist
campaign by the Investor Group, net of income taxes

                1,844    

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

                     (565 )  

123

Add back/Deduct: Unrealized loss/(gain) recognized on our
investments, net of income taxes

                                     124            (179 )
Add back: Impairments, net of income taxes                            -     

245


Adjusted net income                                           $   14,063$   12,504
Weighted average common shares - diluted                         158,335    

161,831


Adjusted earnings per share - diluted                         $     0.09$     0.08




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Liquidity and Capital Resources

The following table summarizes key data regarding our liquidity, capital
resources and use of capital to fund our operations:


                                                           March 31,        

December 31,

                                                              2022          

2021

Balance Sheet Data (in thousands):
Cash and cash equivalents                                  $  110,395$      140,709
Securities owned, at fair value                               133,846              127,166
Accounts receivable                                            35,191               31,864
Securities
held-to-maturity                                                  290                  308

Total: Liquid assets                                          279,722              300,047
Less: Total current liabilities                               (66,886 )            (83,667 )
Less: Regulatory capital requirement - certain
international subsidiaries                                    (12,602 )            (12,320 )

Total: Available liquidity                                 $  200,234$      204,060




                                           Three Months Ended
                                               March 31,
                                          2022           2021
Cash Flow Data (in thousands):
Operating cash flows
(1)                                     $  (2,692 )$   2,290
Investing cash flows
(1)                                       (18,721 )       (5,990 )
Financing cash flows                       (8,236 )       (7,188 )
Foreign exchange rate effect                 (665 )         (235 )

Decrease in cash and cash equivalents $ (30,314 )$ (11,123 )

(1) Cash flows from purchasing securities owned, at fair value of ($1,657)

          and selling securities owned, at fair value of $1,232 during the three
          months ended March 31, 2021 that were not acquired specifically for
          resale or associated with the Company's business activities have been
          reclassified from operating activities to investing activities to
          conform to the current year's presentation in the Consolidated
          Statements of Cash Flows. See Note 2 for additional information.

Liquidity


We consider our available liquidity to be our liquid assets, less our current
liabilities and regulatory capital requirements of certain international
subsidiaries. Liquid assets consist of cash and cash equivalents, securities
owned, at fair value, accounts receivable and securities
held-to-maturity.
Our securities 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,
deferred consideration and accrued incentive compensation for employees.

Cash and cash equivalents decreased $30.3 million during the three months ended
March 31, 2022 due to $25.5 million used to purchase securities owned,
$6.9 million used to purchase investments, $4.8 million used to pay dividends on
our common stock, $3.4 million used to repurchase our common stock, $2.7 million
of net cash used in operating activities and $0.6 million used in other
activities. These decreases were partly offset by $13.6 million of proceeds from
the sale of securities owned.

Cash and cash equivalents decreased $11.1 million during the three months ended
March 31, 2021 due to $5.5 million used to purchase investments, $4.9 million
used to pay dividends on our common stock, $2.6 million used to repurchase our
common stock and $1.7 million used to purchase investments. These decreases were
partly offset by $2.3 million provided by operating activities, $1.2 million of
proceeds from the sale of securities owned and $0.1 provided by other
activities.

Issuance of Convertible Notes


On June 14, 2021, we issued and sold $150.0 million in aggregate principal
amount of 3.25% Convertible Senior Notes due 2026 (the "2021 Notes") pursuant to
an indenture dated June 14, 2021, between us and U.S. Bank National Association,
as trustee, in a private offering to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended ("Rule 144A").

On June 16, 2020, we issued and sold $150.0 million in aggregate principal
amount of 4.25% Convertible Senior Notes due 2023 (the "June 2020 Notes")
pursuant to an indenture dated June 16, 2020, between us and the trustee, in a
private offering to qualified institutional buyers pursuant to Rule 144A. On
August 13, 2020, we issued and sold $25.0 million in aggregate principal amount
of 4.25% Convertible Senior Notes due 2023 at a price equal to 101% of the
principal amount thereof, plus interest deemed to have accrued since June 16,
2020, which constitute a further issuance of, and form a single series with, our
June 2020 Notes (the "August 2020 Notes" and together with the June 2020 Notes,
the "2020 Notes").

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After the issuance of the 2021 Notes (and together with the 2020 Notes, the
“Convertible Notes”), we had $325.0 million aggregate principal amount of
Convertible Notes outstanding.

Key terms of the Convertible Notes are as follows:


                                                      2021 Notes               2020 Notes
Maturity date (unless earlier converted,
repurchased or redeemed)                              June 15, 2026            June 15, 2023
Interest rate                                                  3.25 %                   4.25 %
Conversion price                                    $         11.04          $          5.92
Conversion rate                                             90.5797                 168.9189
Redemption price                                    $         14.35          $          7.70



  •   Interest rate
      : Payable semiannually in arrears on June 15 and December 15 of each year.



     •    Conversion price
          : Convertible at an initial conversion rate (as disclosed in the table
          above) of shares of our common stock per $1,000 principal amount of notes
          (equivalent to an initial conversion price as disclosed in the table
          above).



     •    Conversion
          :
          Holders may convert at their option at any time prior to the close of
          business on the business day immediately preceding March 15, 2026 and

March 15, 2023 in respect of the 2021 Notes and 2020 Notes, respectively,

only under the following circumstances: (i) if the last reported sale

price of our common stock for at least 20 trading days during a period of

30 consecutive trading days ending on the last trading day of the

immediately preceding calendar quarter is greater than or equal to 130%

of the conversion price 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 March 15, 2026

and March 15, 2023 in respect of the 2021 Notes and 2020 Notes,

respectively, until the close of business on the second scheduled trading

day immediately preceding the maturity date, holders may convert their

Convertible Notes at any time, regardless of the foregoing circumstances.

• 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 our 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 our common stock.



     •    Redemption price
          : We may redeem for cash all or any portion of the notes, at our option,

on or after June 20, 2026 and June 20, 2023 in respect of the 2021 Notes

          and 2020 Notes, respectively, and on or prior to the 55
          th
          scheduled trading day immediately preceding the maturity date, if the
          last reported sale price of our common stock has been at least 130% of
          the conversion price 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 144.9275 shares and 270.2702 shares of our common stock

per $1,000 principal amount of the 2021 Notes and 2020 Notes,

respectively (the equivalent of 69,036,410 shares of our common stock),

          subject to adjustment.



     •    Seniority and Security

: The 2021 Notes and 2020 Notes rank equal in right of payment, and are

our senior unsecured obligations, but are subordinated in right of

payment to our obligations to make certain redemption payments (if and

when due) in respect of our Series A

Non-Voting

Convertible Preferred Stock (See Note 12 to our Consolidated Financial

Statements).



The indentures contain customary terms and covenants, including that upon
certain events of default occurring and continuing, either the trustee or the
holders of not less than 25% in aggregate principal amount of the Convertible
Notes outstanding may declare the entire principal amount of all the Convertible
Notes to be repurchased, plus any accrued special interest, if any, to be
immediately due and payable.

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Capital Resources

Our principal source of financing is our operating cash flow. We believe that
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 international subsidiaries are required to maintain a
minimum level of regulatory capital, which at March 31, 2022 was approximately
$12.6 million in the aggregate. Notwithstanding these regulatory capital
requirements, we expect that our main uses of cash will be to fund the ongoing
operations of our business. We also maintain a capital return program which
includes a $0.03 per share quarterly cash dividend and authority to purchase our
common stock through April 27, 2025, including purchases to offset future equity
grants made under our equity plans.

During the three months ended March 31, 2022, we repurchased 588,694 shares of
our common stock under the repurchase program for an aggregate cost of
$3.4 million. Currently, $100.0 million remains under this program for future
purchases.

Contractual Obligations

Convertible Notes

At March 31, 2022, we had $325.0 million aggregate principal amount of
Convertible Notes outstanding, of which $175.0 million are scheduled to mature
on June 15, 2023 and $150.0 million are scheduled to mature on June 15, 2026,
unless earlier converted, repurchased or redeemed. Conditional conversions or a
requirement to repurchase the Convertible Notes upon the occurrence of a
fundamental change may accelerate payment.

The Convertible Notes require cash settlement of the principal amount, while
settlement of the conversion obligation in excess of the aggregate principal
amount may be satisfied in either cash, shares of our common stock or a
combination of cash and shares of our common stock. We currently anticipate
refinancing these obligations when due.

See the section titled “Issuance of Convertible Notes” above for additional
information.

Deferred Consideration – Gold Payments


Deferred consideration represents an obligation we assumed in April 2018 in
connection with our acquisition of the European exchange-traded commodity,
currency and leveraged and inverse business of ETFS Capital Limited. The
obligation is for fixed payments to ETFS Capital Limited of physical gold
bullion equating to 9,500 ounces of gold per year through March 31, 2058 and
then subsequently reduced to 6,333 ounces of gold continuing into perpetuity
("Contractual Gold Payments"). The present value of the deferred consideration
was $245.2 million at March 31, 2022.

The Contractual Gold Payments are paid from advisory fee income generated by any
of our sponsored financial products backed by physical gold with no recourse
back to us for any unpaid amounts that exceed advisory fees earned.

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

Operating Leases


Total future minimum lease payments with respect to our office space was
$0.5 million at March 31, 2022. Cash flows generated by our operating activities
and existing cash balances should be sufficient to satisfy the future minimum
lease payments. See Note 12 to our Consolidated Financial Statements for
additional information.

Off-Balance
Sheet Arrangements

We do not have any
off-balance
sheet financing or other arrangements and have neither created nor are party to
any special-purpose or
off-balance
sheet entities for the purpose of raising capital, incurring debt or operating
our business.

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Critical Accounting Policies

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. business and European business 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, the market approach and its market capitalization
when determining the fair value of the reporting unit. The results of our
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
.

Investments

We account for equity investments that do not have a readily determinable fair
value under the measurement alternative prescribed in ASU
2016-01,
Financial Instruments - Recognition and Measurement of Financial Assets and
Financial Liabilities
, to the extent such investments are not subject to consolidation or the equity
method. 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.

Deferred Consideration – Gold Payments


Deferred consideration represents the present value of an obligation to pay gold
to a third party into perpetuity and is measured using forward-looking gold
prices observed on the CMX exchange, a selected discount rate and perpetual
growth rate. The weighted average forward-looking gold price per ounce, discount
rate and perpetual growth rate were $2,263, 9.0% and 0.9%, respectively, at
March 31, 2022. Changes in the fair value of this obligation are reported as
(loss)/gain on revaluation of deferred consideration - gold payments in our
Consolidated Statements of Operations.

During the three months ended March 31, 2022, we reported a loss on deferred
consideration - gold payments of $17.0 million. A 1.0% increase in the weighted
average forward-looking gold price per ounce would have increased this reported
loss by $1.9 million, a 1 percentage point increase in the discount rate would
have reduced this reported loss by $24.7 million and a 1 percentage point
increase in the perpetual growth rate would have increased this reported loss by
$21.7 million. See Note 9 to our Consolidated Financial Statements for
additional information.

Revenue Recognition


We earn substantially all of our revenue 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.

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