SOURCE: Stifel Financial Corp.

Stifel Financial Corp.

August 02, 2016 16:00 ET

Stifel Reports Second Quarter 2016 Financial Results

ST. LOUIS, MO--(Marketwired - August 02, 2016) -

Highlights for the three months ended June 30, 2016:

  • Net revenues of $652.1 million, increased 9.1% compared with the year-ago quarter.
  • Net income of $9.8 million, or $0.13 per diluted common share.
  • Non-GAAP net income of $52.3 million, or $0.69 per diluted common share.

Highlights for the six months ended June 30, 2016:

  • Net revenues of $1.3 billion, increased 9.8% compared with the year-ago quarter.
  • Net income of $36.8 million, or $0.48 per diluted common share.
  • Non-GAAP net income of $95.6 million, or $1.26 per diluted common share.

Stifel Financial Corp. (NYSE: SF) today reported net income of $9.8 million, or $0.13 per diluted common share on record net revenues of $652.1 million for the three months ended June 30, 2016, compared with net income of $20.9 million, or $0.27 per diluted common share, on net revenues of $597.8 million for the second quarter of 2015.

For the three months ended June 30, 2016, the Company reported non-GAAP net income of $52.3 million, or $0.69 per diluted common share. These non-GAAP results primarily exclude merger-related expenses associated with the Company's acquisitions.

For the six months ended June 30, 2016, the Company reported net income of $36.8 million, or $0.48 per diluted common share on record net revenues of $1.3 billion, compared with net income of $64.0 million, or $0.82 per diluted share, on net revenues of $1.2 billion for the comparable period in 2015.

For the six months ended June 30, 2016, the Company reported non-GAAP net income of $95.6 million, or $1.26 per diluted share. A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed below under "Non-GAAP Financial Measures."

Summary Results of Operations (Unaudited)
  
   Three Months Ended   Six Months Ended  
(in 000s)  6/30/16  6/30/15  % Change   3/31/16  % Change   6/30/16  6/30/15  % Change  
 Net revenues  $652,145  $597,751   9.1   $619,974  5.2   $1,272,119  $1,158,733  9.8  
 Net income  $9,771  $20,888   (53.2 ) $27,055  (63.9 ) $36,826  $63,985  (42.4 )
 Non-GAAP net income1  $52,292  $55,091   (5.1 ) $43,354  20.6   $95,645  $105,031  (8.9 )
                                   
Earnings per common share:                                  
 Basic  $0.15  $0.31  $(51.6 ) $0.40  (62.5 ) $0.55  $0.94  (41.5 )
 Diluted  $0.13  $0.27  $(51.9 ) $0.36  (63.9 ) $0.48  $0.82  (41.5 )
 Non-GAAP net income1  $0.69  $0.71  $(2.8 ) $0.57  21.1   $1.26  $1.35  (6.7 )
Weighted average number of common shares outstanding:                                  
 Basic   66,792   68,370   (2.3 )  67,579  (1.2 )  67,186   68,189  (1.5 )
 Diluted   75,982   77,856   (2.4 )  76,086  (0.1 )  76,084   77,624  (2.0 )
                           
1A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed under "Non-GAAP Financial Measures."
  

Chairman's Comments

"We are pleased with the results from the second quarter as we posted a second consecutive quarter of record revenue and increased adjusted EPS by 21% sequentially, despite a less than ideal market environment. The diversity of our business model was again illustrated by a rebound in investment banking activity and growth in our bank, which more than offset the sequential decline in brokerage revenue from the first quarter's record levels. Although the market environment remains challenged, as macro level events in the first half of 2016 led to spikes in volatility that weighed on investor and corporate activity, we believe that Stifel remains well positioned to capitalize as the markets improve," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.

"In the past month, we have sold off the lower margin legacy businesses from the Sterne Agee acquisition, raised preferred equity, and refinanced higher cost debt. These actions have further strengthened our already strong balance sheet and will facilitate our continued efforts to optimize our capital base and increase shareholder returns."

Brokerage Revenues

Brokerage revenues, defined as commissions plus principal transactions, were $308.5 million, a 14.6% increase compared with the second quarter of 2015 and an 3.2% decrease compared with the first quarter of 2016.

  • Global wealth management brokerage revenues were $172.2 million, an 8.4% increase compared with the second quarter of 2015 and a 0.5% decrease compared with the first quarter of 2016.
  • Institutional equity brokerage revenues were $55.0 million, a 6.1% decrease compared with the second quarter of 2015 and an 11.7% decrease compared with the first quarter of 2016.
  • Institutional fixed income brokerage revenues were $81.3 million, a 56.6% increase compared with the second quarter of 2015 and a 2.7% decrease compared with the first quarter of 2016.

Investment Banking Revenues

Investment banking revenues were $133.1 million, a 17.3% decrease compared with the second quarter of 2015 and a 32.3% increase compared with the first quarter of 2016.

  • Equity capital raising revenues were $37.6 million, a 32.1% decrease compared with the second quarter of 2015 and a 47.3% increase compared with the first quarter of 2016.
  • Fixed income capital raising revenues were $28.8 million, a 27.8% decrease compared with the second quarter of 2015 and a 3.7% increase compared with the first quarter of 2016.
  • Advisory fee revenues were $66.7 million, a 4.8% increase compared with the second quarter of 2015 and a 40.9% increase compared with the first quarter of 2016.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $144.6 million, a 20.5% increase compared with the second quarter of 2015 and consistent with the first quarter of 2016.

Compensation and Benefits Expenses

For the quarter ended June 30, 2016, compensation and benefits expenses were $460.0 million, which included $50.1 million of merger-related expenses. This compares with $410.0 million in the second quarter of 2015 and $411.1 million in the first quarter of 2016.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 62.8% in the second quarter of 2015, compared with 62.0% in the second quarter of 2015 and 63.6% in the first quarter of 2016.

Non-Compensation Operating Expenses

For the quarter ended June 30, 2016, non-compensation operating expenses were $176.3 million, which included merger-related expenses of $18.4 million. This compares with $149.7 million in the second quarter of 2015 and $164.9 million in the first quarter of 2016.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2016 was 24.2%, compared with 22.5% in the second quarter of 2015 and 25.0% in the first quarter of 2016.

Provision for Income Taxes

The effective income tax rate for the quarter ended June 30, 2016 was 38.1% compared with 45.1% in the second quarter of 2015.

Assets and Capital

Assets

  • Assets increased 50.5% to $15.2 billion as of June 30, 2016 from $10.1 billion as of June 30, 2015.
  • At June 30, 2016, the Company's Level 3 assets measured at fair value on a recurring basis of $60.0 million, or 0.4% of total assets, consisted of $52.1 million of auction rate securities and $7.9 million of partnership interests, private company investments, private equity, and fixed income securities. The Company's Level 3 assets as a percentage of total assets measured at fair value was 1.6% at June 30, 2016. At June 30, 2016, the Company had $562.8 million of held-to-maturity securities classified as Level 3 assets not measured at fair value on a recurring basis.
  • Non-performing assets as a percentage of total assets as of June 30, 2016 was 0.37%.

Capital

  • Shareholders' equity as of June 30, 2016 decreased 1.0% to $2.49 billion from $2.52 billion as of June 30, 2015.
  • During the six months ended June 30, 2016, the Company repurchased 2.8 million shares of the Company's common stock for approximately $95.1 million.
  • At June 30, 2016, book value per common share was $37.41 based on 66.6 million common shares outstanding. This represents a 2.9% increase from June 30, 2015.
  • At June 30, 2016, the Company's Tier 1 leverage capital and Tier 1 risk-based capital ratios were 11.5% and 20.9%, respectively, compared to 18.3% and 29.4%, respectively, at June 30, 2015.

Conference Call Information

Stifel Financial Corp. will host its second quarter 2016 financial results conference call on Tuesday, August 2, 2016, at 5:00 p.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to Stifel's Chairman and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID #89108255. A live audio webcast of the call, as well as a presentation highlighting the Company's results, will be available through the Company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.

Company Information

Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel's broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc., and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited. The Company's broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company's web site at www.stifel.com.

Forward-Looking Statements

This earnings release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this earnings release not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this earnings release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: the ability to successfully integrate acquired companies or the branch offices and financial advisors; a material adverse change in financial condition; the risk of borrower, depositor, and other customer attrition; a change in general business and economic conditions; changes in the interest rate environment, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies' operations, pricing, and services; and other risk factors referred to from time to time in filings made by Stifel Financial Corp. with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. Stifel Financial Corp. disclaims any intent or obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Summary Results of Operations (Unaudited)
  
   Three Months Ended   Six Months Ended  
(in thousands, except per share amounts)  6/30/16  6/30/15  % Change   3/31/16  % Change   6/30/16  6/30/15  % Change  
Revenues:                                 
 Commissions  $182,104  $183,770  (0.9 ) $197,930  (8.0 ) $380,034  $364,073  4.4  
 Principal transactions   126,426   85,543  47.8    120,948  4.5    247,374   186,275  32.8  
  Brokerage Revenues   308,530   269,313  14.6    318,878  (3.2 )  627,408   550,348  14.0  
                                  
 Capital raising   66,412   97,368  (31.8 )  53,304  24.6    119,716   172,486  (30.6 )
 Advisory fees   66,713   63,639  4.8    47,354  40.9    114,067   113,082  0.9  
  Investment banking   133,125   161,007  (17.3 )  100,658  32.3    233,783   285,568  (18.1 )
 Asset management and service fees   144,567   119,936  20.5    144,532  0.0    289,099   233,805  23.6  
 Other income   17,405   13,742  26.7    7,231  140.7    24,595   25,541  (3.7 )
Operating Revenue   603,627   563,998  7.0    571,299  5.7    1,174,885   1,095,262  7.3  
 Interest Revenue   65,780   43,851  50.0    62,786  4.8    128,607   86,588  48.5  
Total Revenue   669,407   607,849  10.1    634,085  5.6    1,303,492   1,181,850  10.3  
 Interest Expense   17,262   10,098  70.9    14,111  22.3    31,373   23,117  35.7  
Net Revenue   652,145   597,751  9.1    619,974  5.2    1,272,119   1,158,733  9.8  
                                  
Non-interest Expenses:                                 
 Compensation and benefits   460,023   409,998  12.2    411,113  11.9    871,136   765,691  13.8  
 Occupancy and equipment rental   58,746   48,346  21.5    57,255  2.6    116,002   92,516  25.4  
 Communication and office supplies   37,426   31,114  20.3    36,660  2.1    74,086   60,348  22.8  
 Commissions and floor brokerage   12,145   9,124  33.1    11,732  3.5    23,876   19,193  24.4  
 Other operating expenses   68,012   61,098  11.3    59,301  14.7    127,313   112,848  12.8  
  Total non-interest expenses   636,352   559,680  13.7    576,061  10.5    1,212,413   1,050,596  15.4  
Income before income taxes   15,793   38,071  (58.5 )  43,913  (64.0 )  59,706   108,137  (44.8 )
 Provision for income taxes   6,022   17,183  (65.0 )  16,858  (64.3 )  22,880   44,152  (48.2 )
Net income  $9,771  $20,888  (53.2 ) $27,055  (63.9 ) $36,826  $63,985  (42.4 )
Earnings per common share:                                 
 Basic  $0.15  $0.31  (51.6 )  0.40  (62.5 ) $0.55  $0.94  (41.5 )
 Diluted  $0.13  $0.27  (51.9 ) $0.36  (63.9 ) $0.48  $0.82  (41.5 )
                                  
Weighted average number of common shares outstanding:                                 
 Basic   66,792   68,370  (2.3 )  67,579  (1.2 )  67,186   68,189  (1.5 )
 Diluted   75,982   77,856  (2.4 )  76,086  (0.1 )  76,084   77,624  (2.0 )
                                  
 
Statistical Information
(in thousands, except per share amounts)
   6/30/16  6/30/15  % Change  3/31/16  % Change  
Statistical Information:                    
 Book value per share  $37.41  $36.35  2.9  $36.37  2.9  
 Financial advisors 2   2,838   2,823  0.5   2,849  (0.4 )
 Full-time associates   7,185   6,952  3.4   7,100  1.2  
 Locations   400   398  0.5   401  (0.2 )
 Total client assets 3  $237,510,000  $190,241,000  24.9  $232,013,000  2.4  
               
2Includes 667, 736, and 688 independent contractors at June 30, 2016, June 30, 2015, and March 31, 2016, respectively.
3On July 1, 2016, we sold the independent contractor business acquired with the Sterne Agee transaction in June 2015. As of June 30, 2016, there were 540 independent contractors included in the disposed business unit and $11.5 billion of total client assets.
  
Business Segment Results
   
Summary Segment Results (Unaudited)  
   Three Months Ended   Six Months Ended  
(in 000s)  6/30/16   6/30/15   % Change   3/31/16   % Change   6/30/16   6/30/15   % Change  
Net revenues:                                      
 Global Wealth Management  $386,039   $343,382   12.4   $379,805   1.6   $765,843   $672,792   13.8  
 Institutional Group   260,920    258,538   0.9    241,276   8.1    502,196    497,145   1.0  
 Other   5,186    (4,169 ) 224.4    (1,107 ) (568.4 )  4,080    (11,204 ) 136.4  
   $652,145   $597,751   9.1   $619,974   5.2   $1,272,119   $1,158,733   9.8  
Operating contribution:                                      
 Global Wealth Management  $105,053   $93,975   11.8   $93,335   12.6   $198,387   $192,823   2.9  
 Institutional Group   42,414    41,942   1.1    29,194   45.3    71,705    74,273   (3.5 )
 Other   (131,674 )  (97,846 ) 34.6    (78,616 ) 67.5    (210,386 )  (158,959 ) 32.4  
   $15,793   $38,071   (58.5 ) $43,913   (64.0 ) $59,706   $108,137   (44.8 )
As a percentage of net revenues:                                      
 Compensation and benefits                                      
  Global Wealth Management   56.6    57.1        58.3        57.4    56.4      
  Institutional Group   58.8    61.9        62.4        60.5    62.3      
 Non-comp. operating expenses                                      
  Global Wealth Management   16.2    15.5        17.1        16.7    14.9      
  Institutional Group   25.0    21.9        25.5        25.2    22.8      
 Income before income taxes                                      
  Global Wealth Management   27.2    27.4        24.6        25.9    28.7      
  Institutional Group   16.2    16.2        12.1        14.3    14.9      
                                       
Global Wealth Management Summary Results of Operations (Unaudited)
  
   Three Months Ended   Six Months Ended  
(in 000s)  6/30/16  6/30/15  % Change   3/31/16  % Change   6/30/16  6/30/15  % Change  
Revenues:                            
 Commissions  $127,241  $125,121  1.7   $131,554  (3.3 ) $258,794  $241,335  7.2  
 Principal transactions   44,938   33,682  33.4    41,411  8.5    86,349   75,689  14.1  
  Brokerage revenues   172,179   158,803  8.4    172,965  (0.5 )  345,143   317,024  (8.9 )
                                  
 Asset management and service fees   144,360   119,734  20.6    144,352  0.0    288,712   233,400  23.7  
 Net interest   54,246   37,454  44.8    51,767  4.8    106,055   75,378  40.7  
 Investment banking   9,502   15,128  (37.2 )  8,410  13.0    17,911   25,228  (29.0 )
 Other income   5,752   12,263  (53.1 )  2,311  148.9    8,022   21,762  (63.1 )
  Net revenues   386,039   343,382  12.4    379,805  1.6    765,843   672,792  13.8  
Non-interest expenses:                                 
 Compensation and benefits   218,553   196,234  11.4    221,416  (1.3 )  439,968   379,477  15.9  
 Non-compensation operating expenses   62,433   53,173  17.4    65,054  (4.0 )  127,488   100,492  26.9  
  Total non-interest expenses   280,986   249,407  12.7    286,470  (1.9 )  567,456   479,969  18.2  
Income before income taxes  $105,053  $93,975  11.8   $93,335  12.6   $198,387  $192,823  2.9  
                                  
As a percentage of net revenues:                                 
 Compensation and benefits   56.6   57.1       58.3       57.4   56.4     
 Non-compensation operating expenses   16.2   15.5       17.1       16.7   14.9     
 Income before income taxes   27.2   27.4       24.6       25.9   28.7     
                         
    
   Stifel Bank & Trust (Unaudited)
   Key Statistical Information
(in 000s, except percentages)  6/30/16   6/30/15   % Change  3/31/16   % Change
Other information:                     
 Assets  $9,430,534   $4,786,248   97.0  $8,310,224   13.5
 Investment securities   4,579,752    1,907,282   140.1   4,147,647   10.4
 Retained loans, net   4,588,600    2,626,508   74.7   3,737,209   22.8
 Loans held for sale   250,725    183,911   36.3   132,900   88.7
 Deposits   7,881,219    4,313,940   82.7   7,218,100   9.2
                       
 Allowance as a percentage of loans   0.86 %  0.98 %     0.94 %  
 Non-performing assets as a percentage of total assets   0.37 %  0.13 %     0.28 %  
                 
Institutional Group Summary Results of Operations (Unaudited)
  
   Three Months Ended   Six Months Ended  
(in 000s)  6/30/16  6/30/15  % Change   3/31/16  % Change   6/30/16  6/30/15  % Change  
Revenues:                                 
 Commissions  $54,864  $58,649  (6.5 ) $66,376  (17.3 ) $121,240  $122,738  (1.2 )
 Principal transactions   81,488   51,861  57.1    79,537  2.5    161,026   110,587  45.6  
 Brokerage revenues   136,352   110,510  23.4    145,913  (6.6 )  282,266   233,325  21.0  
 Capital raising   56,100   82,690  (32.2 )  44,895  25.0    100,995   147,707  (31.6 )
 Advisory fees   67,523   63,189  6.9    47,354  42.6    114,876   112,632  2.0  
 Investment banking   123,623   145,879  (15.3 )  92,249  34.0    215,871   260,339  (17.1 )
 Other 4   945   2,149  (56.0 )  3,114  (69.7 )  4,059   3,481  16.6  
  Net revenues   260,920   258,538  0.9    241,276  8.1    502,196   497,145  1.0  
Non-interest expenses:                                 
 Compensation and benefits   153,371   160,077  (4.2 )  150,618  1.8    303,989   309,488  (1.8 )
 Non-compensation operating expenses   65,135   56,519  15.2    61,464  6.0    126,502   113,384  11.6  
  Total non-interest expenses   218,506   216,596  0.9    212,082  3.0    430,491   422,872  1.8  
Income before income taxes  $42,414  $41,942  1.1   $29,194  45.3   $71,705  $74,273  (3.5 )
                                  
As a percentage of net revenues:                                 
 Compensation and benefits   58.8   61.9       62.4       60.5   62.3     
 Non-compensation operating expenses   25.0   21.9       25.5       25.2   22.8     
 Income before income taxes   16.2   16.2       12.1       14.3   14.9     
                         
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
  
   Three Months Ended   Six Months Ended  
(in 000s)  6/30/16  6/30/15  % Change   3/31/16  % Change   6/30/16  6/30/15  % Change  
Institutional brokerage:                                 
 Equity  $55,008  $58,551  (6.1 ) $62,273  (11.7 ) $117,281  $120,548  (2.7 )
 Fixed income   81,344   51,959  56.6    83,640  (2.7 )  164,985   112,777  46.3  
Institutional brokerage   136,352   110,510  23.4    145,913  (6.6 )  282,266   233,325  21.0  
                                  
Investment banking:                                 
 Capital raising:                                 
   Equity   27,018   49,550  (45.5 )  18,930  42.7    45,947   93,837  (51.0 )
   Fixed income   29,082   33,140  (12.2 )  25,965  12.0    55,048   53,870  2.2  
  Capital raising   56,100   82,690  (32.2 )  44,895  25.0    100,995   147,707  (31.6 )
 Advisory fees:   67,523   63,189  6.9    47,354  42.6    114,876   112,632  2.0  
Investment banking  $123,623  $145,879  (15.3 ) $92,249  34.0   $215,871  $260,339  (17.1 )
                         
4Includes net interest, asset management and service fees, and other income.
  

Non-GAAP Financial Measures

The Company utilized certain non-GAAP calculations as additional measures to aid in understanding and analyzing the Company's financial results for the three months ended June 30, 2016. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Company's core operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company's results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. These non-GAAP amounts primarily exclude acquisition related expenses which management believes are duplicative and will be eliminated and other expenses which in management's view are not representative of on-going business.

A limitation of utilizing these non-GAAP measures is that the GAAP accounting effects of these merger-related charges do in fact reflect the underlying financial results of the Company's business and these effects should not be ignored in evaluating and analyzing its financial results. Therefore, the Company believes that GAAP measures and the same respective non-GAAP measures of the Company's financial performance should be considered together.

The following table provides details with respect to reconciling GAAP measures for the three months ended June 30, 2016 to the aforementioned expenses on a non-GAAP basis for the same period.

       
(000s)  Three months ended June 30, 2016  Six months ended June 30, 2016
GAAP net income  $9,771  $36,826
         
Duplicative expenses:        
 Compensation and benefits        
   Cost synergies   3,132   8,024
   Restructuring costs   222   481
  Total duplicative expenses - compensation and benefits   3,354   8,505
 Non-compensation operating expenses        
   Cost synergies   11,378   19,512
  Total duplicative expenses - non-compensation operating expenses   11,378   19,512
  Total duplicative expenses   14,732   28,017
Acquisition-related expenses:        
 Compensation and benefits   10,806   22,084
 Non-compensation operating expenses   1,298   2,721
  Total acquisition-related expenses   12,104   24,805
Stock-based compensation expense   35,976   35,976
Amortization of intangible assets   5,854   6,563
Total adjustments   68,666   95,361
Provision for income taxes   26,145   36,542
Non-GAAP net income  $52,292  $95,645
         

Duplicative expenses - Expenses related to items that will run-off as we integrate the acquired business into the Company. These expenses included salaries and benefits, rent, licenses and subscriptions. Management considers these a cost of the acquisition and not representative of the costs of running the Company's on-going business; therefore, the duplicative costs are included as adjustments to arrive at non-GAAP net income.

Acquisition-related expenses - Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, professional fees and legal costs. These costs were directly related to the acquisition and are not representative of the costs of running the Company's on-going business.

Stock-based compensation expense - On June 30, 2016, the Company's Board of Directors removed the continuing service requirements associated with restricted stock units that were granted to certain employees of Barclays in December 2015. As a result of the modification, there are no continuing service requirements associated with these restricted stock units, and accordingly, all unrecognized expense related to these awards were expensed in the second quarter of 2016. The Company views the expensing of restricted stock units related to the acquisition and not representative of the costs of running the Company's on-going business.

Amortization of intangible assets -- Amortization of intangible assets acquired.

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