WisdomTree, Inc. (NYSE:WT) Q2 2023 Earnings Call Transcript July 28, 2023

WisdomTree, Inc. beats earnings expectations. Reported EPS is $0.09, expectations were $0.08.

Operator: Greetings and welcome to WisdomTree’s Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Jessica Zaloom, Head of Corporate Communications. Thank you. You may begin.

Jessica Zaloom: 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.

Bryan Edmiston: Thank you, Jessica, and good morning, everyone. Let me begin by sharing our results for the second quarter, along with commentary on our expense guidance before turning the call over to Jarrett and Jono for additional updates on our business. We ended the quarter with $93.7 billion of AUM, a new record and up 3% from the prior quarter due to another strong quarter of positive inflows and market appreciation. Robust and sustainable inflows continue to grow our AUM having generated $2.3 billion in the quarter, which were gathered primarily in our fixed income and international equity products. It has been 11 consecutive quarters of generating positive flows and our year-to-date flows through the end of June of $8.7 billion translates into a 21% annualized organic flow growth rate.

Our AUM currently stands at $97 billion, almost 4% higher from the end of June, having benefited from further inflows and positive market movement. Next slide. Revenues were $85.7 million, an increase of 4.5% from the first quarter due to our higher average AUM, partly offset by lower other income, which is impacted by the velocity of flows from our European-listed products. As a reminder, our other income may change quarter-over-quarter depending upon European-listed AUM changes due to market movement or the velocity of flows arising from these products. As previously disclosed, during the quarter, we settled our contractual gold payment obligation with the World Gold Council and ETFS for about $137 million, comprised of $50 million in cash and nonvoting preferred stock convertible into about 13.1 million shares of our common stock.

The settlement reduces operating expenses by about $18 million per year and expands operating margins by 530 basis points. The contractual gold payment expense was $1.6 million during the second quarter, representing our final payment for the month of April, which had about a $0.01 impact to our earnings per share. Adjusted net income was $14.9 million or $0.09 a share. Our non-GAAP results exclude a non-cash after-tax gain of $41.4 million related to the termination of our contractual gold payment obligation as well as $3.3 million in other net non-operating losses. Next slide. Our adjusted operating expenses were down 2.3% for the quarter. This is primarily driven by lower contractual gold payments, partly offset by higher professional fees, inclusive of expenses incurred to settle the gold payment obligation.

Next slide. Now a few comments on our forecasted expense guidance. We are updating our forecasted compensation guidance to range from $104 million to $110 million to account for variability in incentive compensation. Our performance-based plan considers the magnitude of our flows, revenue, operating income and operating margin performance as well as our relative share price performance in relation to our publicly listed U.S. traditional asset manager peers whereby we currently ranked number one out of 13. Given the potential volatility in our performance-based metrics, we consider the midpoint of this range to be a reasonable estimate, which already seems to be reflected in consensus estimates. Our discretionary spending guidance of $56 million to $59 million remains unchanged, having recognized $28.3 million in discretionary spending year-to-date.

We reported a gross margin of about 79% year-to-date, and we’re updating our gross margin guidance to 79% from 78%, which we believe should be sustainable at current AUM levels. Our contractual gold payment expense of $6 million year-to-date will be 0 going forward as this obligation was terminated in early May. Our forecasted third-party distribution expense of $8 million to $9 million remains unchanged given current run rate levels. Our interest cost is anticipated to be $3.5 million per quarter going forward as we paid $60 million in cash and issued 1 million shares to settle convertible notes that had matured in June. Our run rate interest income is expected to be about $500,000 per quarter through 2023, taking into consideration the magnitude of our investments which has been reduced from the prior quarter after having paid $110 million to settle our convertible notes and having bought out our gold royalty obligation.

Our adjusted tax rate was 23.7% year-to-date through June, and we are updating our tax rate guidance to 24% given the current distribution of profits amongst our U.S. and European businesses. And our weighted average diluted shares outstanding were 170.7 million after having issued approximately 14 million shares in connection with our gold royalty buyout and the maturity of our convertible notes during the quarter. The impact of the share issuance on our second quarter diluted shares was affected by the timing of when the shares were issued. Going forward, we anticipate our diluted shares outstanding to be about 177 million per quarter. That’s all I have. I will now turn the call over to Jarrett.

Jarrett Lilien: All right. Thanks, Bryan, and good morning, everyone. Our story continues to be simple. We have deep and wide flow momentum driven by a broad product suite and a differentiated models business. We have a scalable business with high incremental margins, and we have a leadership position in tokenized assets and blockchain-enabled finance, all of this was once again on display in the second quarter. We generated $2.3 billion of second quarter net inflows, our 11th consecutive quarter of net inflows. $8.7 billion of first half net inflows was the second best start to any year in WisdomTree’s history, while our 21% annualized pace of year-to-date organic growth is best-in-class among our peers. WisdomTree’s total AUM is at all-time highs, and our flow profile has never been healthier with inflows in all our eight major product categories so far this year.

Our managed model suite continues to gain momentum, now available to over 65,000 advisers, including ongoing traction at Merrill and Morgan and the recent win at LPL. High incremental margins on the back of higher AUM and revenues again drove organic margin expansion in the second quarter. Additionally, we added to our operating margins with the extinguishment of the gold royalty in May, expanding annualized operating margins by over 500 basis points while also eliminating balance sheet and income statement noise. And on top of all of this, we launched WisdomTree Prime at the end of June. Overall, these are very exciting times at WisdomTree, with nearly three years of positive results and momentum in our ETF and models business and with three years of work coming to fruition with the launch of WisdomTree Prime.

With that, I will now turn it over to Jono to add greater detail.

Jonathan Steinberg: Thank you, Jarrett, and hello, everyone. It really is an exciting time here at WisdomTree. I’ve never been more bullish on our outlook, both short-term and long-term than I am today. As Bryan and Jarrett have covered, we have truly strong momentum in our business today with record AUM, also with our most diverse mix of AUM, best-in-class organic growth and ample runway for margin expansion, which also builds on the successful retirement of our gold royalty liability. As stated, it is a great first half, and I expect the momentum will continue through the remainder of 2023 and beyond. Also exciting, the recent launch of our WisdomTree Prime Wallet and WisdomTree’s early mover status in tokenization. Starting with WisdomTree Prime, as you may have seen, it went live in both Android and Apple App Stores in late June.

This is just the beginning. We view this as the starting line. The Prime app is initially live in 21 states across the U.S., covering roughly half of the country’s population. As we’ve mentioned before, expanding the footprint of our offering is a key initiative, and we expect to have the platform available to substantially all of the U.S. population by the end of the year. Also, the platform will be iterative in nature as we launch new products and features throughout the remainder of 2023. The initial launch included nine blockchain-enabled funds, a dollar and gold token as well as Bitcoin and Ether. From here, you should expect us to add new products as well as expand the features and capabilities like adding peer-to-peer transfers and payments in coming quarters, and we are focused on the growth of Prime’s ecosystem.

On the retail side, the next several months are about testing and learning who is attracted to the platform and how they are using it. On the marketing front, we are laser-focused on targeting users with a high ROI and a tight payback period. We are not trying to solve solely for the number of users on the platform, but rather economically attractive users. Organic retail growth is one way for WisdomTree to win, but not the only way to win. Now that the Prime platform is live, we can showcase it to potential business development partners with either B2B or B2B2C applications. Financial services firms looking to leverage blockchain – blockchain tech, tech firms looking to deepen relationships with customers or institutional players looking for on chain use cases with a more regulated product set, we have lots of opportunity with many ways to grow the WisdomTree Prime platform.

Early engagement has been very promising, and we are going to leave no stone unturned. Also, you’re starting to see our peers wake up to the opportunity in asset tokenization. BlackRock’s CEO called tokenization “the next generation of markets.” Franklin tokenized the money market fund, KKR tokenized an LP and many others are starting to explore tokenization and blockchain technology. This is not only a validation of our tokenization strategy, but also underscores the strong position that WisdomTree is in, being an early mover and the first with any sort of robust product set. We will look to leverage our multiyear head start through additional products with the Prime ecosystem, but also explore potential third-party distribution opportunities as well.

Like I said earlier, it is a very exciting time here at WisdomTree. We have incredible momentum in our ETF flows. We have record high AUM. We have a significant margin expansion opportunity, and we have a massive opportunity to capitalize on the secular shift towards blockchain-enabled finance through our asset tokenization initiatives and our WisdomTree Prime platform. I thank you. Now let’s turn the call over to questions.

Q&A Session

Jeremy Campbell: All right. Good morning, everybody. It’s Jeremy Campbell, Head of Investor Relations, over here at WisdomTree. As in prior quarters, we’re going to start out with a couple of questions from our retail user base, our retail shareholders before opening it up to the sell-side analysts here. So the first question from our say platform goes to Will Peck, Head of Digital assets. And it’s a conglomeration of a two different questions that came through. Will, with the digital landscape evolving, what are you most excited about related to WisdomTree Prime? And what new products or features are you planning to roll out?

William Peck: Jeremy, thank you. Thanks for the question. Good morning, everyone. Obviously, some of this is just echoing exactly what Jono just said. I mean it’s been interesting to see that tokenization and very encouraging to see tokenization becoming a major theme in financial services broadly and WisdomTree is clearly an early leader here, especially on the liquid asset side. With WisdomTree Prime, we’ve got a great use case for it, whereas I think a lot of other people are figuring out their use cases, and we’re actually going into the market with live product. So with WisdomTree Prime just echoing what Jono said, this year is really about adding features and expanding to additional states to get more users onto the platform.

In terms of features that I’m most excited about, I mean, we’ve got an ambitious product road map, but connecting, spending and investing is something that is just absolutely critical to what we’re doing. It is going to be a great use case for the platform. By this time I mean things like U.S. floating rate notes for gold, feeling more like currency being more transactable on both debit cards and on the ACH or bill pay rails. So that’s the feature that I think is going to be most exciting with what we’re doing, a lot of additional features as well, and we’re looking forward to rolling that out over the rest of this year and then really ramping up market expense in there. So people should go to wisdomtreeprime.com, sign up for more details, and they can download the app from there if they’re in the right state.

Jeremy Campbell: Great. Thanks, Will. Our second question is going to go to Jeremy Schwartz, our Global Chief Investment Officer. Jeremy, the question is, are there unique trends to the European business and market that differ from the U.S. market? And how do you think about product development globally?

Jeremy Schwartz: Thanks, Jeremy, and great question. There’s, I guess, a number of key differences between Europe and U.S. that stem from how we each started the business and historical strength for both U.S. and Europe. But increasingly, we have a unified product road map that we’re executing globally, and I’ll go through a few examples here. What we’ve seen in Europe this year is our robust leadership position, commodities playing through. When you look through the flow data year-to-date, what you see is our legacy gold products and a bit of outflows, but is being offset by even more inflow to copper and oil or roughly more inflows to copper and oil. And I look at that [indiscernible] franchise with the key risk for equities and even traditional bond market is rising oil, rising food prices that feed higher inflation, it keeps a more hawkish Central Bank that tightens rates.

And so having this strong commodities franchise, to me, is a great diversifier for our overall business and the key risk to – risk assets. And I think we have a number of secular tailwinds to commodities, things like the move to electric vehicles that you hear a lot about dramatically. We see that with those copper inflows year-to-date, but also even $100 million of inflows to our energy transition metals basket this year. So we’ve got both nice cyclical and secular forces in the commodity franchise. But our net flows to Europe are now largely coming from UCITS and our UCITS suite has grown from less than $1 billion five years ago to almost $5 billion today. And in the U.S., we’ve had this value bias from our launch almost 20 years ago.

And what has been really strong in Europe has been our mega trend and thematic family that launched in Europe, which was really heavy into the growth side of the style map. And couldn’t be more relevant this year, all you hear about is artificial intelligence, dominating the technology trends in the Magnificent Seven stocks and this is a great example of approaching things globally as the firm. We started in Europe five years ago when we launched WTI. It was really our first thematic back in 2018. And then we gained conviction in the theme, and we launched in the U.S. a few years later. And this year, we’ve seen about $300 million of flow to AI. And we built expertise in Europe, reported that to a proprietary U.S. offering. And we couldn’t be more excited about the long-term potential of this AI theme now, $0.75 billion between the U.S. and Europe, and a good growth engine going forward for global synergies testing the concept in one market and bringing it globally.

I’d say another example of these global synergies in product dev have been our quality range. We’ve seen this quality family started in the U.S. 10 years ago, but in UCITS, it’s now surpassed $1.3 billion in total AUM this year has taken in $300 million in UCITS year-to-date flows to our quality family. And globally, in the U.S., it’s been also leading our inflows within equities as well. We’ve had about $2.5 billion of global inflows to this quality range this year. It started the year just under $11 billion of assets in all of our quality funds. Now it’s approaching $15 billion of assets with market move and flow. So would say this quality range is meaningful. But also, we started with quality dividends. This year, we launched a quality growth fund for the U.S. It’s one of our faster funds to reach $50 million of AUM within nine months of organic interest and we’re excited to build upon that success globally with further launches in the U.S. and Europe.

So in short, the European and U.S. businesses possess their unique strengths, but our product development strives to find diversifying assets and a global revenue mix with new launches.

Jeremy Campbell: Great. Thanks, Jeremy. And then our last question from individual shareholders, I’m going to ask Jarrett Lilien, our President and Chief Operating Officer, to answer this one. Jarrett, the question is, what types of customers are using WisdomTree models? And how big do you think WisdomTree models AUM can get in the next couple of years?

Jarrett Lilien: Thanks, Jeremy. And all great questions. It’s been interesting to hear them. I mean, covering the exciting parts of what we’re working on from WisdomTree Prime to our great product positioning. And just jumping on before I get to models on Jeremy Schwartz’ comments, the product suite that we have, the strength of it is what gives us confidence in our three-year streak of great performance and flows continuing. Models is another reason for that confidence. It’s a major contributor to our best-in-class growth and it leverages one of the largest macro trends in wealth management, which is this movement to using centralized models. Our models are now available to over 65,000 advisers, and we’ve got a different approach for the different segments of customers.

So right to your question, what kind of clients are interested in models. Well, first of all, we start with – I’ll tell you about four types of wins that we have on models. First is just getting a position in someone’s existing portfolio. That could be a retail investor, that could be an existing adviser in their portfolio or model or it could be in a home office model. So that’s blocking and tackling for us every day. And we also build WisdomTree models for third-party platforms like Merrill Lynch and Morgan Stanley. That’s another way and really another client segment that we’re working with. Then a third one is we work with advisers to build custom models for them and we add additional services there to help them build, implement and trade these models, really replicating the wire house easy button infrastructure that exists for the wire houses.

And then a fourth win and really a fourth customer group is through WisdomTree Prime with our vision to build models like experiences in a tokenized form, that we’re working on today. So bottom line, many types of clients, many approaches, many solutions for each and a very important opportunity. Today, it’s about 12% of our flows are coming from models. We see this as a number that can increase as the size of this market is growing. And so overall, it continues to be a very exciting opportunity for us and our future.

Jeremy Campbell: Great. Thanks, Jarrett. I know it’s a busy earnings day for everybody here, but let me kick it over to Daryl and feel free to open it up for any Q&A from the phone lines.

Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Brennan Hawken with UBS. Please proceed with your question.

Brennan Hawken: Good morning. Thanks for taking my question. I was curious, Jono, you spoke a little bit about Prime. And I know we’ve got the launch here recently. Curious about what the early reads are, right? Can you let us know how take-ups have been initially, I know we’re just getting started, but curious about that. And then if you could also please define – how do you define success for this platform? I know you’ve said that you’ve committed to not spend any more than you’re currently spending unless it’s successful. So could you just let us know how you define that success so we can understand how to calibrate for that?

Jonathan Steinberg: So Will, I’m going to turn it to you to start, but then I’m going to conclude, if you don’t mind.

William Peck: Yes, sure. So thanks for the question. Look, it’s very early, right? We’ve only gone live in 21 states about a month ago. We’re intentionally not spending very much money on marketing because we want to get – make sure that’s a high ROI spend on marketing, right? So that’s going to be waiting until we’re in the right states. And we’ve got the right product features that will generate kind of the greatest returns for us. So it’s very early kind of metrics on that front, aren’t necessarily meaningful right now. But the metrics that we are seeing are very encouraging and it works, right? And that’s not necessarily an easy thing to do for a lot of people and the platform works great, working as expected. We’re converting users from downloads in the way that we expected. So we’re very encouraged by the early results on that front. Jono, over to you.

Jonathan Steinberg: Yes. So a couple of points I would like to – so first on success. We thought that this would be sort of the next evolution in financial services. So partly the success will be macro. I believe that tokenization and blockchain-enabled finance that everyone is coming, not dissimilar from what you saw in ETF and in the early days of ETFs, there was tons of skepticism, not quite sure why it would be successful, but the reason it was successful was the better user experience for the consumer, and we believe that is going to drive success in this. And again, I think that everybody is coming. But I would say, the reason that we’re doing this is not just for the consumer having a better investing experience or consumer finance experience, but this is going to lead to faster organic growth and higher margins for WisdomTree.

We think that this is – as well as significantly diversifying our revenue streams. So I expect a highly profitable segment of our business, that’s how I define the success and that we would be the early winner of what will become the secular trend that will drive financial services. I think I answered the question or both of us did, Brennan?

Brennan Hawken: Yes. It’s a tricky question to answer in detail. I appreciate. So thanks for that color. Next question, maybe a bit more provocative. So look, Jono, I’m bull on your stock, but it does seem as though the engagement with the activist doesn’t really seem the most productive. You’re spending money on activism defense. So I’d be curious as to why you think that’s a good use of shareholder cash flow. I understand you back it out of your adjusted earnings, but it’s still a cash flow withdraw. And why do you think that it’s a better decision to be a little bit more combative or push back against the activism as opposed to just working with them?

Jonathan Steinberg: So first, we don’t determine if there would be a contest the activist does. We have a very distinct difference in vision, one, including what we’re doing in digital assets. So it would be a surrender of that. When we bought ETF securities from Graham Tuckwell, it was very intentional that this wasn’t a reverse takeover. This wasn’t an opportunity for him to join the Board or run the company. It’s why he agreed even though he had 18% of the economics that he would only vote 10%. And so we would not do it for that – for those reasons would change really WisdomTree’s culture, WisdomTree’s business model. To be honest, the seller didn’t have a vision for commoditization and fee pressure like WisdomTree does.

And I guess, what I would also say is that WisdomTree won five out of six seats. We got, I would say, strong affirmation of our tokenization strategy, especially where our newer directors Daniela Mielke and Shamla Naidoo Q Tech and payment experts got overwhelming support. And then if I’m being blunt for shareholders – being blunt, there was a resounding rejection of Graham Tuckwell himself is serving on the board, which is really what he would like to see. He votes 10% of the stock and only got 12% of the vote. And what was also interesting, shareholders voted to maintain the shareholder rights plan by overwhelming margin of over 70 million votes. And that rights plan was designed to keep Graham Tuckwell or ETF Securities from taking control of the company without paying a premium.

So shareholders have told us to do this, I would say. The vote is very supportive of WisdomTree. Now we hope we don’t have a fight, but I do believe that we have a mandate from shareholders to continue to do what we are doing to drive the strategy and success. And by that, I mean, we have three years of best-in-class organic growth and three years of either best or second-best relative stock performance. So – and then the early lead in terms of digital assets. And again, Larry Fink and BlackRock, certainly, there’s someone – all of us in asset management take seriously because of their scale, their support of what is coming, I think, truly validates what we are doing. And one of the goals of early success of our digital asset strategy was to be first in market as opposed to in ETFs. We were 13 years after the Spider.

This gives us really a tremendous first-to-market advantage. So I guess that’s how I would answer.

Brennan Hawken: Yes. Thanks for all that detail, Jono. And certainly, especially on this topic, I would expect nothing else, but for you to be blunt. That is on brand. So thanks a lot.

Operator: Thank you. Our next questions come from the line of Michael Cyprys with Morgan Stanley. Please proceed with your question.

Stephanie Ma: Hi, good morning. This is Stephanie on for Mike. Our question is on Prime. So now that you’ve launched it, are you able to give us a sense of the different components of revenue streams that you’re able to earn? What are the different revenue opportunities between management fees, transaction fees and any help to size that contribution or mix? Thank you.

Jarrett Lilien: Will, how would you answer that?

William Peck: Yes, we’re not providing guidance across the different categories, but we have had slides in the past that talked about the different areas of revenue. So obviously, the funds have management fees on which we would earn management fees like we do today. We do also charge brokerage commissions like ETF Securities does, which is disclosed if you go to support.wisdomtreeprime.com in terms of what those numbers are. On the digital asset side, there is kind of a trading spread. You can think about it that way, that’s also a disclosed number. And then as we add debit cards, call it later this year or early next year, there’s obviously a healthy interchange paid there. So no guidance in terms of the mix of these, but when Jono says, earning higher revenue capture or higher margin, it’s really the combination of all of these revenue streams, which, as I think about it for the customer is a smaller pie, WisdomTree is just taking a greater percentage of the pie if that makes sense.

Stephanie Ma: Okay, great. That’s helpful. And maybe just a follow-up to that. I heard your ambitious roadmap for adding products and functionalities. So just wanted to get your thoughts around what impacts your decision between building organically versus hiring the appropriate talent or partnering and acquiring capabilities as you think about further rollout from here?

William Peck: Yes. I guess I’ll start. I mean in terms of everything that we’re doing at this point is kind of done from our organic product and tech development teams, right? We’ve got a few key partners like currency, fire blocks, Galileo in terms of some of the technology that we use to kind of put this platform together. So building that has been what we’ve been doing for the past couple of years. So it’s really our team that’s kind of deciding new products, new features, but really prioritizing in terms of what we think is going to be the highest payback, what’s going to drive returns for the firm, is how we make the decisions there. With kind of – I’d say that North Star for this year is by the end of this year, early next year, really having that great connectivity between investing and spending is what we’re driving towards.

Jonathan Steinberg: And I would just add that really, there’s nothing that you can buy. I mean, you could buy sort of maybe a tokenization platform, but that’s more of a service, not in the background sort of infrastructure, which would be a very, very different business model for WisdomTree. There’s really nothing at this stage or so early that there’s nothing to buy.

Stephanie Ma: Great. Thank you.

Operator: Thank you. [Operator Instructions] Our next questions come from the line of Keith Housum with Northcoast Research. Please proceed with your question.

Keith Housum: Good morning, gentlemen. Another question for you here on WisdomTree Prime. So it sounds like throughout the year, you guys were building additional features to make it available to a wider audience throughout the U.S. But by not spending on marketing dollars, it sounds like you don’t expect significant growth throughout this year. So what’s your expectations in terms of when you might see some revenue where you’re able to start offsetting some of your expenses? And then as you think out for longer-term, should we expect additional expenses next year as you start ramping this up? So I’ll stop there.

Jonathan Steinberg: Will, do you want to start?

William Peck: Yes, I’ll start and then maybe you can turn it over to Bryan or you, Jono, for kind of future guidance. But look, what I said is we haven’t really spent any money on marketing to date. I think we’re going to be spending an appropriate amount on marketing the rest of the year in terms of just adding users onto the platform, confirming our expectations around their usage and just getting more data to help inform our decision-making process going forward. So I wouldn’t say that I wouldn’t expect to have any users over the course of this year. We’re certainly going to be adding users both through paid marketing but also through media that we already do today as well as word of mouth, which is what we’ve seen so far. So that’s where we’re at on the marketing side. Bryan, do you want to give any color on guidance going forward?

Bryan Edmiston: I would just say, look, we’ll provide guidance next year, but I think what we’ve said and our message has been consistent, we would anticipate this to be one of our largest spend year. So if we have an incremental increase in expense, it would be offset with future revenue as well.

Keith Housum: Great. Thank you.

Operator: Thank you. Our next questions come from the line of Aidan Hall with KBW. Please proceed with your questions.

Aidan Hall: This is Aidan on for Mike Brown. Thanks for taking my question. Just a follow-up on WisdomTree Prime. Will, you mentioned earlier that the early metrics you’re seeing for the app are positive. Can you just put some more color around the metrics that you’re referencing here?

William Peck: I’m not going to get into too much detail like the specific metrics, but just like hypothetical, you want to see like conversion rates working correctly, right, where you’re getting downloads and that’s converting into a funded user at like the right rate so that’s what I’m seeing so far. That’s an encouraging sign. But again, it’s very early. There’s no marketing. There’s lots of people that are downloading the app that actually can’t use it yet because they’re not in one of the states that we have. So just early green shoots are positive, no red flags by any means. So that’s what I’m referring to.

Operator: Thank you. Our next questions come from the line of Stephanie Ma with Morgan Stanley. Please proceed with your questions.

Stephanie Ma: Great. Thanks for taking my follow-up. Maybe just turning to the fixed income opportunity, USFR has been very successful. But if people start to rotate out from using it as a cash proxy and maybe beginning to extend duration, what other products or tickers could be in demand at WisdomTree to capture that money in motion? Thank you.

William Peck: Jeremy?

Jeremy Schwartz: Well, a few things. I mean, we do think not to over-rely on this Prime story, but the ability to have payments tied to things like treasuries and other actions in Prime, we’ve heavily indexed to fixed income within Prime. So there’s a big component there, including tips, which we don’t have in ETFs, including long-duration treasuries, which we don’t have in ETF. But within ETFs, we’ve seen some good flows, and we’re talking a lot about opportunities. Our high-yield fund, WFHY, has – is one of our proprietary fixed income funds. We haven’t really had a credit cycle yet. This has a quality screen on top of high-yield bonds. You’re getting 8% yield, which is competitive to some of the long-term stock returns from where we see stocks priced right now.

So we love WFHY, we’re talking a lot about that. We also launched a fund with Voya UNIY, which is a universal fund, it’s got $1 billion right away. So we’re excited about the future opportunities from that. And we’ve had core fixed income with a yield-enhanced ag, A-G-G-Y AGGY. We also have model opportunities in fixed income that we’ve been competing for. So I think we have a very robust product. Obviously, we’ve done very well with you so far, but we think there’s a lot more that we can do.

Jarrett Lilien: Yes. And just – this is Jarrett, just jumping in as well. A lot of people use USFR for different things. Some view it as fixed income, but a lot of other people see it as a better cash holding because of the yields and the way the product works. Most advisers that we’re dealing with are keeping 10% to 20% of their portfolio in cash at any time. So this is a core holding is one note I’d make and especially for those that are looking for a smarter cash-like investment. This is an important core holding. And that’s why we continue to see great flows into it. The other point I’d make is that it’s not just pivoting into other fixed income products. For those, especially to view it as cash, yes, they might be moving into fixed income, but they’re also moving into equities.

And we saw a lot of that in the first quarter and in the second quarter. If you look to last year, flows in the USFR were a much bigger percentage of our overall positive flows. This year, we’ve seen still great flows in USFR, but we’ve also seen some of that pivot into other fixed income, but also into other equity products. And that gets back to the importance of the product suite that we have right now being so strong that whatever happens in the market, we feel good about being involved with where that cash goes.

Jonathan Steinberg: Thanks, Jarrett. Any more questions?

Operator: No, there is no questions at this time. I’ll hand the call back over to Jonathan Steinberg for any closing comments.

Jonathan Steinberg: I just want to thank all of you for your time this afternoon, and we look forward to speaking to you next quarter. Thank you, everybody. Have a good day.

Operator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.