WT - NYSE

Hello, and welcome to the WisdomTree Q4 2023 Earnings Conference Call and Webcast. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Jessica

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. I'll begin my remarks with the recap of 2023 and our fourth quarter results, followed by our 2024 expense guidance before turning it over to Jarrett and Jono for additional updates on our business. 2023 has been a year of transformation and table setting for the future. We generated $10.4 billion of inflows during the year, which translated into a 13% organic flow growth rate. And flow diversification is driving our average fee capture on our flows upward, which was about 2x greater than our fee capture in the prior year. And while we experienced modest outflows in the fourth quarter, revenue grew organically as we captured positive run rate revenues on our flows as we outflowed from lower fee products while inflowing into products with a higher fee capture. Continued organic growth and positive market conditions has resulted in the achievement of record revenue and AUM levels, while capital management actions undertaken by management has driven meaningful margin expansion and EPS accretion. The buyout of our gold royalty obligation in the spring was 15% accretive and drove operating margin expansion by over 500 basis points. This transaction also cleaned up our balance sheet, eliminating a perpetual obligation and reduced the volatility in our quarterly financial results. Consideration paid included $50 million in cash and the issuance of preferred stock convertible into 13 million shares of our common stock. In November, we repurchased these shares for $84.4 million, $40 million of which was paid upfront and the remainder payable in equal annual installments over the next three years with no requirement to pay interest. The implied price per share is $6.02 when considering the interest free financing element of the transaction and the stock repurchase was approximately 7% accretive. These actions taken together with record AUM of a $100 billion at year end serve as a strong foundation in jumping off point as we turn the page into 2024. Revenue growth going forward is naturally derived from our AUM ending the year at a level greater than our average AUM over this past year. That coupled with continuing organic growth and favorable market conditions as well as disciplined expense and capital management, is the formula for margin expansion and EPS accretion. Our AUM currently stands at a $100.6 billion, up slightly from the end of December, resulting from $300 million of inflows in positive market movement. Next slide. Revenues were $90.8 million, essentially flat as compared to the third quarter as the increase in our AUM was more heavily weighted toward the latter part of the year. As just mentioned, our ending AUM of a $100 billion, which is greater than our average AUM for the year, serves as a nice tailwind for future growth. For the year, we experienced revenue growth of 16% and adjusted operating income growth of 45%. This translated into 540 basis points of adjusted operating margin expansion or 140 basis points of organic adjusted operating margin expansion when excluding the impact of our gold royalty buyout that occurred earlier this year. Adjusted net income for the quarter was $18.6 million or $0.11 per share. Next slide. Our operating expenses were up 1.7% for the quarter, driven by higher marketing, fund costs and sales-related expenses. We ended the year toward the high end of our compensation and discretionary spending expense guidance. Next slide. Now a few comments on our 2024 expense guidance. We are forecasting our compensation expense to range from $108 million to $118 million. This guidance includes planned hires as well as year-end compensation adjustments and the annualization of hires made during 2023. The range considers variability in incentive compensation with drivers including the magnitude of our flows, revenue and operating income growth, margin expansion, and our share price performance in relation to our peers. Also, just a reminder that we experienced elevated seasonality in the amount of compensation we report in the first quarter as we recognized payroll taxes benefits and other items in connection with year-end bonuses. We estimate first quarter compensation expense to be approximately $30 million to $31 million. Discretionary spending is anticipated to range from $64 million to $68 million as compared to $59.3 million recognized in 2023. The modest uptick incorporates planned expenses for our national rollout of WisdomTree Prime, including our measured approach towards marketing and other related costs. Our gross margin is anticipated to be about 79% to 80% at current AUM levels and taking into consideration fund launches anticipated during the course of the year. If AUM scales higher from continued organic growth or favorable market conditions, we would anticipate further gross margin expansion. Our third-party distribution expense is anticipated to range from $10 million to $11 million as we expand our partnerships and grow AUM on the platforms. Our adjusted interest expenses forecasted to be about $14 million as compared to almost $15 million in 2023 as we paid down $45 million of debt this past June. Our adjusted interest expense is exclusive of any interest cost we are required to impute under GAAP related to our interest free financing of the shares we repurchased from the World Gold Council in November of this past year. Our interest income is estimated to be approximately $4 million in 2024 taking into consideration the magnitude of our investible assets and current interest rates. Our adjusted tax rate is expected to be about 24% to 25%, a slight uptick versus last year to account for the full-year impact of the UK rate change to 25% that went in effect on April 1st of last year. And our weighted average diluted shares are estimated to be between $166 million and $168 million as compared to $171 million this past quarter. The decline is primarily due to the recognition of the remaining half of the 13.1 million share equivalents recently repurchased is that repurchase occurred midway through the fourth quarter. That's all I have. I'll now turn the call over to Jarrett.

Thank you, Bryan, and good morning, everyone. We are incredibly proud of our accomplishments in 2023. We have industry-leading organic growth, expanding operating margins and a leadership position in tokenized assets and blockchain enabled finance. We have strong momentum build over several years, which we now carry into 2024 and beyond. As Bryan mentioned, our $10 plus billion of net inflows in 2023 generated best-in-class organic growth versus our peers extending our annual inflow streak to three consecutive years, where we have gathered over $27 billion in cumulative net inflows during that timeframe. Further, our ability to consistently drive strong organic growth is helping us reach new milestones. In December, WisdomTree reached $100 billion in assets under management for the first time, and we are now focused on delivering the next $100 billion. So how do we get there? It starts with our differentiated product lineup where we have products and solutions for every market environment in every part of the market cycle. In 2024, we will continue to augment our product lineup with the types of innovative and differentiated fund launches that are WisdomTree hallmarks. Separately, we will continue to drive flow growth by deepening relationships with existing clients while also adding new clients as we did in 2023. Last year, we deepened relationships and saw a 20% lift in the number of clients that hold multiple WisdomTree products, while at the same time we grew our overall client base by more than 20% Growing and deepening relationships with existing clients while at the same time adding new ones, our growth compounders and represent a pipeline of future inflows. A key additional growth driver is building upon momentum in our models business. Given this increased momentum, we are going to begin showcasing quarterly metrics that will better allow analysts and investors to benchmark our success and better understand and underwrite the steady cadence of our future growth. To begin our definition of model AUM is AUM in a model, where we control the allocation decision. We feel this distinction is important as some of our peers include single tickers in home office or advisor models in their figures, we do not. Second, we are now branding our models initiative as WisdomTree portfolio solutions, which encompasses all $3.2 billion of total assets sitting in model strategies where WisdomTree drives the portfolio allocation, whether it's at a wirehouse or in the RIA independent broker dealer channel. In the U.S., there are roughly 300,000 financial advisors in aggregate with over $27 trillion in assets under management. This is our addressable market. Today, our accessible market, which is the number of advisors and RIAs who have access to our models, is about 70,000. And our current penetration of this accessible market is under 3%, meaning that today we have 2,000 advisors that are using at least one of our models. Providing more color of the 2,000 current model clients, more than 1,000 were added in the past 12 months. Overall, in 2023, our organic model AUM. Growth was nearly 40% while our advisor client growth was over 100%. And this gives us visibility and confidence in our model flow growth over the next several quarters is our experience tells us that AUM growth follows client growth. Overall, growing our accessible market, penetrating this accessible market, and adding new advisors while deepening wallet share with current advisors as they gather additional assets for their end customers, translates into a strong pipeline of future AUM and earnings growth. And as Bryan detailed earlier, we are doing this on well-managed expense guidance that will help us continue to deliver high incremental margins and drive expanded operating margins and earnings growth in 2024. In sum, I'm extremely bullish about 2024 and beyond as we continue to drive organic growth, expand our margins, and continue to lead the industry's evolution in tokenized assets and blockchain enabled finance. And with that, let me now turn it over to Jono.

Thank you, Jarrett, and good morning, everyone. What a terrific year 2023 was. Over $100 billion of AUM, over $10 billion of inflows, over 500 basis points of margin expansion and a 42% increase in earnings per share. Building on recent years of strong momentum, I'm very bullish on WisdomTree's future. And while I'm proud that WisdomTree achieved a $100 billion of assets, I'm optimistic that the next $100 billion will take significantly less time. One of the reasons for that optimism is the expectation that Tokenization and WisdomTree Prime will contribute significantly to our overall organic growth in the years ahead. WisdomTree has put a lot of hard work to cement our leadership status in tokenization. However, the market is moving quickly and some of our traditional finance peers are starting to talk up the enormous opportunity in tokenization. This is not only a validation of our tokenization strategy, but also underscores the importance of WisdomTree's strong early mover position, the attractiveness of our strategy and the need to maintain our multi-year head start. Regarding digital assets, similar to last quarter, I want to frame my remarks around our key goals. First, increase the availability of WisdomTree Prime across the United States. Second, enhance the Prime experience through additional product and features. Third, deploy a targeted marketing effort to drive user growth. And fourth, explore opportunities for strategic partnerships. On the geographic front, we've made additional progress since last quarter's call with five additional states. WisdomTree Prime is now available to approximately 70% of the U.S. population across 38 states. There are a lot of variables in receiving state approvals, which differ by state with some states taking longer than anticipated. But we are in the home stretch and confident that most of the rest of the population will have access to WisdomTree Prime in the coming weeks. We are continually looking at different products or features that enhance the value proposition of the Prime experience. In December, we launched three WisdomTree Siegel branded digital funds where customers can deploy a model like experience with just one-click. Additionally, our digital money market fund is now live and available to customers inside WisdomTree Prime. And finally, I'm pleased to announce that the debit card is currently live in internal product testing and being successfully used at merchants, including through Apple Pay, and it's slated to be available to WisdomTree Prime customers by the end of February. As previously discussed, we believe it's wise to limit marketing spend until we are available across most of the U.S. and we have our initial full suite of product and service features. To us that is being prudent with our capital. Our nationwide rollout is now expected to start by late Q1, early Q2. That's the point where you should expect us to lean into the marketing efforts that will begin to generate both downloads and growth in funded accounts. However, I want to stress that the guidance that Bryan gave this morning fully contemplates all of the planned WisdomTree Prime marketing spend for 2024. Finally, we see a meaningful opportunity to leverage strategic relationships to drive both growth of the WisdomTree Prime platform as well as revenue opportunities outside of Prime. We have several active B2B and B2B2C conversations in the pipeline, and we think that many of those efforts will further diversify our revenue streams and offer new topline growth opportunities. For example, we see a significant opportunity to distribute our funds and gold token to and through established partners, platforms and ecosystems outside of WisdomTree Prime. These types of relationships will naturally be episodic in nature, so we may not have an update for you each quarter, but each would likely be meaningful in nature when they do cross the finish line. As I have mentioned in recent quarters, it's a very exciting time for WisdomTree. We have best-in-class organic growth, a meaningful margin expansion opportunity and leverage to the secular shift towards tokenization. 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, Jono. Good morning, everybody. Like prior quarters, we're going to take some questions here from the Say platform from our retail shareholders. A few this quarter were all kind of along the same lines. So I want to condense them actually into just one question. This is to our President and COO, Jarrett Lilien. Jarrett, the question is we are now about three weeks into the Bitcoin ETFs going live. What are some of the early takeaways and what's your plan to grow in a crowded field?

All right. Thanks, Jeremy. Yes, let's start with a few takeaways. First of all, this was really a unique situation where you had 11 beta funds that all came to the market at the same time and all with cutthroat fees and fee waivers. A second takeaway is that while demand was solid, not all of it was new money. There's a lot of swapping out of gray scale and pro shares into other products. And also many competitors were able to use their own balance sheet to put into funds or use discretionary allocations from other funds or we're able to lean on captive distribution to drive early flows. So you pull that all together, a very unique launch. Yes, some solid demand, but also some noise in the early numbers. In terms of WisdomTree, just to remember for us, this is another ETF launch. We launched over 20 funds each year and you look at our track record, we've generated three consecutive years of organic growth and industry-leading organic growth last year. Also remember that we are managing today eight crypto ETPs in Europe with over $0.5 billion of AUM, where last year, we generated 37% organic growth, in this year so far, we are leading European crypto inflow growth. So overall, we're confident in our ability and our track record in growing AUM. That said, it does take time, especially in our model because these products are not yet available on many adviser platforms, which is where we would expect to see most of our flows. But I'd make one final point, really a larger point is that we believe the best use case for Bitcoin is not in an ETF, but is actually inside of WisdomTree Prime where not only can you hold Bitcoin together with other digital assets, you also get added utility in the form of payments and peer-to-peer functionality that doesn't come with an ETF. So that's the early look and obviously, more to come.

Great. Thanks, Jarrett. All right, operator, we can open up the lines here to take some questions from the analyst community at this point.

Certainly. [Operator Instructions] Our first question is coming from Adam Beatty from UBS. Your line is now live.

Thank you, and good morning. I wanted to ask about Portfolio Solutions. I appreciate the new metrics. I think the way you're measuring it and tracking it makes a lot of sense. It looks like as we look at the addressable market versus the accessible market that WisdomTree has already managed to capture over half the addressable AUM with less than 25% of the advisers. So that, to me, suggests that there might be a bit of a shift in your approach toward maximizing that accessible market that you've kind of already got on the table. So check me on that, whether or not that's correct. And then maybe if you could talk about your goals for the year in that context? Thank you.

Thanks, Adam. Jarrett, why don't you start?

Sure. Yes, I think you have it right. Of course, we would like to keep increasing that accessible market. But again, you read it right. Our real key is penetrating what we have today. And we're already seeing that. I mean the confidence that we have is, again, now 2,000 advisers using our models with 1,000 coming in the last year. We're also able to see sort of vintages of seasoning. What it means when somebody starts and where they get to after three months, six months, a year or what have you? So you're absolutely right. It's all about the penetrating that accessible market. That's really the main goal for 2024.

Excellent. Thank you. I appreciate that. And then just one more maybe for Bryan around operating margin and potential upside there. It looks like pretty good cost control, the guidance for 2024 looks to be – to have some opportunity. And yet the gross margin is kind of more or less where it was before and you didn't guide adjusted operating margin. So if that's a better way to talk about it, feel free to do that. But just wondering what kind of operating leverage you might see to the extent that you hit the high end of your other targets? Thank you.

Yes. So look, there is certainly operating leverage in our business model. We showed expansion of 540 basis points this past year. And if you strip out the impact of the gold buyout was 140 basis points of organic expansion. As we go forward from here, it's really – it's a story about scale. It's a story about continued organic growth. It's a story about cooperating market conditions and capitalizing on our strategic initiatives. But when you think about expansion going forward, I'd suggest that you view our ability to expand margins through the lens of achieving incremental margins greater than 50% in up revenue environments. And that would imply a very long runway with respect to margin expansion as we scale.

Excellent. Got it. Thank you very much.

Thank you. Next question today is coming from Mike Brown from KBW. Your line is now live.

Okay. Great. Thanks for taking my questions. I was looking at Slide 14. And on that slide, you lay out some use cases for tokenization across the industry. Can you just expand on how you think this trend can progress for the industry? How has investor uptake been? What's the education required? And I guess maybe expand on why this could be a better wrapper or better mousetrap than the ETF and how will that dynamic play out over the next five or 10 years?

Hey, Will. Will Peck, Head of WisdomTree Digital Assets. Why don't you take the first crack at this?

Yes, happy to. So just on Slide 14, we're showing where a lot of our traditional and alternative asset management competitors are doing in the [indiscernible] banks. Clearly, it's been a large uptick in activity. There's been some live product, but a lot of this has been POCs so far, proof of concepts, things like that. So in terms of actual investor demand at this point, you're seeing some stuff in the defi space in terms of token addition of real world assets, but it's still very early. In terms of the advantages, I like to focus on three things. Liquidity, transparency and standardization. Those are three things that you can see in terms of the benefits that tokenization provide versus traditional rails for financial assets. So we're very encouraged by what we're seeing in the industry so far, but we're also encouraged by our ability and nimbleness to actually bring live product to market, which we think is going to give us an advantage versus a lot of other people today. So does that answer your question?

I guess maybe if you could just expand a little bit on the key advantages versus ETFs and perhaps what that growth potential could be longer term and maybe what's the key impediments to delivering on that growth potential?

Yes. So again, I see the key advantages versus ETFs or kind of traditional ways to hold assets being liquidity, transparency and standardization, right? So liquidity, the ability to trade something 24/7, 365 if you're getting the right market participants in there, transparency kind of providing much greater visibility to market participants in terms of who is holding what assets, where it's sitting at in different parts of the life cycle. And then finally, around standardization, I think blockchain, you look at like something an ERC-20 token in a wallet. The ability to hold any asset like that, and all you need is a compatible wallet, we think has a lot of potential and power versus kind of traditional assets or traditional ways of holding assets over time. So those are the three advantages that I like to focus on. In terms of the market opportunity, we've said cited cities said something like $5 trillion in tokenized assets, tokenized securities over the next five, 10 years, you'll see people ranging from up to $10 trillion and some of their projections or things like that. I mean I think the big catalyst, a lot of people point to regulation I think the regulation is starting to get there. To me, it's actually doing live product, right, going out there trying to acquire customers, putting stuff in the market, which you really haven't seen so much yet in terms of the tokenization of world asset space. So that's what we're doing now with WisdomTree Prime. That's what we're doing with our institutional user portal. And I think you'll see some kind of continued growth and adoption from there.

Mike, let me add. This is Jono. That, one of the real advantages, I would say, will be around the user experience. And by that, I mean you're going to get much greater control of your assets as opposed to the infrastructure that exists today. Where your savings, your vesting and your payments are all connected much more closely. That kind of flexibility will prove to be I think, of tremendous excitement to investors over time. I think when you asked about like where will this go over time? I think that for those that can remember the early days of ETFs, they thought it might be a niche structure, but the user experience was so much better that it's actually conquered every single liquid asset that exists. And I believe that the trend line long-term for tokenization will be the same, but more so, so that everything, I believe, over periods of time will be tokenized and you'll get not just things like crypto sitting seamlessly with traditional assets, you're also going to see illiquid assets or private assets sitting seamlessly with liquid assets. And again, all of it much closer to greater functionality like payments. So again, we feel tremendously fortunate at WisdomTree to be launching within the end of this quarter, early next quarter really marketing nationally, but also to be ahead of everyone else in the market.

Great. Thank you for all that color. That's really, really fascinating. Maybe if I just change gears to USFR, I guess, with the Fed soon shifting to easing and timing is still unclear there. But how do you believe investor sentiment for the USFR product could progress in a declining rate environment? Could there be some growth headwinds, but ultimately, outlook is still good assuming rates still stay relatively high versus historical levels? And then conversely, 21% or so of your AUM is tied to fixed income. So how well do you believe the rest of the fixed income franchise will perform in what looks to be a great opportunity for fixed income flows as investors kind of reallocate.

Good question. Thank you. Jeremy Schwartz, our global CIO, why don't you take the first shot at this?

Yes. No, this is a conversation we love having today. Because actually the environment for USFR, we think is actually still quite attractive today, and there's an opportunity when we look at the performance through this cycle, USFR got close to 5.5% yield today and you look at where the 10-year is, it's still 150 basis points above the 10-year. So the inverted yield curve, you have had no volatility because of the very stable rate resetting, the 1-week duration, there's still an opportunity to grow USFR given the Fed would have to cut 6x to get you down to where USFR is today, and you look about the rising correlation between stocks and bonds, bonds aren't diversifying stocks the way they used to because of the concerns about inflation. And we think that's a longer-term when you're buying a 30-year bond, it's not about the inflation dynamic this year, it's what's the inflation for the next 30 years. And so there is an opportunity that there's still a very positive case. There's still a lot of money in cash earning zero which is an opportunity for Prime, for people, both how [indiscernible] you could spend off of floating rate type treasuries earning 5.5% and not earn zero in your bank. But there is still an opportunity that people have 10% in cash and USFR can still take some more market share from that and also from bonds, which have a lot of volatility. But we do have beyond that, we have a very robust fixed income suite. We have a few multibillion-dollar core fund or two, particularly core funds that each have $1 billion that can help for people wanting to add duration with enhanced yield approach, including when we launched last year that generated $1 billion in its first year, and we're continuing to launch existing and new funds. We launched one in December as a core plus fund. We've got some more treasury funds to sort of help clients that became first-time users of WisdomTree with USFR. We're looking to help them extend duration with some new launches as well. So there's existing new products as we always do, but there's still a great story on just the current market environment is still actually attractive for USFR.

Thank you, Jeremy.

Okay, great. Thank you very much.

Thank you. Next question is coming from Keith Housum from Northcoast Research. Your line is now live.

Good morning guys. Please appreciate the color on the portfolio solutions as well. Just if you can dig a little bit deeper there. You guys mentioned trying to deepen the relationship with your customers there. How in fact, do you guys plan on deepening those relationships? And then what is your competition level at those people that you want to deepen your relationship with?

Jarrett, do you want to start?

Sure. You look at the various platforms and we're competing with the biggest names out there and doing extremely well. And I think we're doing extremely well because of our sort of holistic focus. We have content. We have a lot of tools that people can use to do analysis we're able to generate customized reports for advisers to use with their end clients. So there's – that's really one of the big reasons for that branding change. It's more than just models, it's this holistic approach. But one of the things that we also do is we work very closely with advisers to get them up on models and get them using models. I talk about on many of these calls, if you go back over the last few years, that one of the bigger macro trends in wealth management is actually financial advisers using centralized models or home office models and we're right at the front of the line there helping them do that. In terms of growth and how we go about it, it's sort of along the lines of what I was just speaking about is helping people transition to using models which still there is room to go of people in that macro trend getting there. But once they're using them, getting them more comfortable and using maybe more than one model and then helping them bring more and more of their clients onto the program. And that's what I talked about earlier with seasoning, and that's why I'm also so bullish about the growth. I feel it's in the pipeline where, again, we know that the assets follow the client growth. And again, we had about 40% AUM growth in models last year, but over 100% client growth. So the growth strategy is really about, again, penetration and seasoning those clients as they come on board while we continue to add new clients to the program.

Great. Thank you.

Thank you. Next question today is coming from Michael Cyprys from Morgan Stanley. Your line is now live.

Great. Thanks. I just wanted to follow-up a little bit on the commentary around tokenization, the benefits that you've outlined sound very compelling. But I understand it's still very early days. I was hoping you can elaborate a bit on some of the hurdles that's holding back further adoption including more broadly across the industry? And what catalyst do you think could accelerate that adoption? How long do you think this can take? Is it five years? Is it a 10-year journey in terms of more widespread adoption? And what sort of progress might we see in 2024 that can really help move the dial on adoption across the industry?

Thank you, Michael. Well, let me first start. I would say the biggest hurdle to adoption has been regulation, the regulatory environment to bring this about has been extraordinary, though we've had tremendous progress, whether it's a Bitcoin ETP launch in the U.S. the digital funds approved by the SEC, all the 38 states of money transfer licenses achieved, but regulation doesn't just happen overnight. Those approvals are really take a long time, but we really are at the end of this journey. And the greatest thing that I can say is that we started this journey in reality, three and four years ago so that we are – while people are now talking about tokenization and they're doing proof of concepts, we're actually launching a business on it. And so I think that is the thing that will – that's taken the longest amount of time. Why you're going to see adoption is the same reason that you saw adoption in ETFs. It will be a better experience, faster, cheaper, more functionality. Those kinds of elements matter to people and a better experience around your assets and money is allowing WisdomTree to go from just impeding for your investments, where listen, I'm very proud again about that $100 billion that we've accomplished over the last 16, 17 years. But to be able to go after savings for those that have been following WisdomTree for years, the savings account is a black and white TV and it matters to people that they get more income out of their savings account and more utility and more efficiency out of all of these assets. So I think that's what's going to drive it will be this better user experience. And you're going to start seeing it at WisdomTree, this upcoming year really starting in Q2 with more actual downloads and funded accounts. But Will, why don't you add to this?

No, I think you covered a lot of it, Jono. I mean the one thing I'd point out on Page 14, a lot of people have just because like a token has the potential to be more liquid than another asset, doesn't mean that unless there's actually liquidity provision and demand that it will trade more right? So I think you've seen over the past few years, some people are like, "Oh, I'm going to tokenize this private fund and it will magically start trading." We all know that's not how it works. It's actually about the underlying and demand for it. So what I think is exciting about what we've done, both on the retail side of WisdomTree Prime and also in terms of institutional and B2B use cases is building the portal to kind of meet clients where they are and actually demonstrating and creating the better utility around these assets as opposed to just putting them out there and hoping they start trading. So I think what WisdomTree is doing is going to be a big catalyst for the space. I think the continued growth of distribution and evolving regulation is going to be a catalyst for the space. So I think 2024 is going to be a very big year.

Great. And just a follow-up question on capital management. I was hoping you could update us on your priorities around the use of cash generation, how you're thinking about that from here? And more broadly on strategic M&A, where that could be most additive to WisdomTree at this point? I think you may have sold down your stake in currency. Maybe you could just update us on that relationship there? Thank you.

Bryan, why don't you start with capital management, please?

Yes. So Mike, we've been very active over the past few years. You're well aware we retired a gold royalty obligation. That was a $90 million cash outlay. We have another $44 million payable over the next three years. We paid down our debt, $45 million this past June. Over the last four years, putting aside the repurchase of the Gold Council stock, we've bought back 15 million shares, spent $70 million just on stock repurchase generally. I think going forward, our dividend is our primary commitment buybacks or something that's always on the table. The buyback is something that we weigh against our desire to ultimately reduce our debt further, keeping in mind that we have another $150 million that's maturing in 2026. If there's a question as to whether or not we would early retire debt, it's something we'd be weighing the return that we could instead earn by simply investing our cash. USFR is at 5.5% today. We're paying three in the quarter and the debt that's maturing in two years. So going forward, it's really about debt and leverage optimization and potentially some further stock buybacks.

And let me add about strategic M&A. It's been a secondary strategy for WisdomTree, though, it's been a strategy that we have implemented a number of times. So when we do it, we have very high hurdles in the past, everything has been accretive in our M&A. So I think we would have very high hurdles if it's within the ETF business. And with respect to some investments that we've made or how we might use capital in light of – you mentioned Securrency. Securrency was a strong investment, and we spoke about tokenization and how people have tokenized things like office buildings and paintings and a lot of it hasn't really generated any traction. Not all tokens are created equal. And before Securrency, we couldn't really envision how the tokens became better than ETFs. And with that, an interoptibility, we really have had a vision that has served us incredibly well over the last four years in how we think blockchain-enabled financial services will roll out and because of our investment in Securrency, we've got to speak to many, many participants about how they view tokenization. What I think is interesting and may be undercovered, it was DTCC, which acquired to Securrency. So the leading infrastructure company in the United States acquired our lead investment in blockchain infrastructure. I believe that the future of blockchain infrastructure is going to be coming out of DTCC, and they'll be following on the path that WisdomTree has begun. So we don't have to make a left turn or a pivot. The market is moving in our direction. I think that's very, very bullish. If we see opportunities to enhance our digital efforts. We might look to make other strategic investments. But again, these are secondary opportunities to advance the strategic priorities of the firm to have very high hurdles if we do anything.

Great. Thanks so much.

Thank you. We reach end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

I just wanted to thank everybody for their attention today, and we'll speak to you shortly. Have a great day.