-

GAAP net income of $5.7 million, or $0.17 per diluted share compared to GAAP net income of $82.3 million, or $2.40 per diluted share for the fourth quarter of 2015.

-

GAAP results for the fourth quarter of 2016 include (i) a charge of $3.6 million pre-tax, or $0.09 per share after taxes, representing the amount by which the final SEC settlement related to discontinued activity involving pre-released American Depositary Receipts (ADRs) exceeded the reserve established in the third quarter of 2016, as well as legal fees related to this matter, (ii) a restructuring charge of $5.3 million pre-tax, or $0.10 per share after taxes, related to management delayering and the elimination of certain positions, (iii) a pre-tax charge of $0.6 million, or $0.02 per share after taxes, for the amount expensed for upfront awards granted to ITG’s CEO. These charges were offset by an after-tax gain of $7.3 million, or $0.22 per share, related to a reduction in tax reserves from resolving a multi-year contingency in the U.S.

-

GAAP net income for the fourth quarter of 2015 includes (i) a pre-tax gain from the sale of the energy research operations of $107.7 million, or $2.66 per share after-tax; and (ii) a tax charge of $6.5 million, or $0.19 per share, to amend the capital structure of ITG’s operations outside North America.

-

Adjusted net income of $5.3 million, or $0.16 per diluted share, compared to an adjusted net loss of $2.5 million, or $0.07 per diluted share in the fourth quarter of 2015, in each case excluding the charges and gains listed above. Adjusted net income (as well as GAAP net income) for the fourth quarter of 2016 includes a reduction in compensation expenses of $2.4 million, or $0.05 per share after taxes, related to an increase in the proportion of deferred equity in ITG’s full-year 2016 compensation plan for better alignment with long-term growth objectives. 

-

Revenues of $119.6 million, compared to revenues of $224.2 million and adjusted revenues of $116.5 million in the fourth quarter of 2015. Adjusted revenues for the fourth quarter of 2015 exclude the pre-tax gain on the sale of the energy research operations.

-

Expenses of $121.7 million and adjusted expenses of $112.3 million compared to expenses of $119.5 million in the fourth quarter of 2015.  Adjusted expenses for the fourth quarter of 2016 exclude the charges listed above.

-

Average daily trading volume in the U.S. of 145 million shares versus 125 million shares in the fourth quarter of 2015. POSIT® average daily U.S. volume was 58 million shares compared to 49 million shares in the fourth quarter of 2015. Total average daily U.S. volume traded through POSIT Alert® was 16 million shares, compared to 8 million shares in the fourth quarter of 2015.

-

In Europe, average daily value traded in POSIT was $1.1 billion compared to $1.2 billion in the fourth quarter of 2015, including the effects of currency translation. Total average daily value traded through POSIT Alert in Europe increased 60% compared to the fourth quarter of 2015.

Three Months Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Revenues:

Commissions and fees

$

$

$

$

Recurring

Other

Total revenues

Expenses:

Compensation and employee benefits

Transaction processing

Occupancy and equipment

Telecommunications and data processing services

Restructuring charges

 —

 —

Other general and administrative

Interest expense

Total expenses

(Loss) income before income tax (benefit) expense

Income tax (benefit) expense

Net income (loss)

$

$

$

$

Income (loss) per share:

Basic

$

$

$

$

Diluted

$

$

$

$

Basic weighted average number of common shares outstanding

Diluted weighted average number of common shares outstanding

Three Months Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Revenues by Geographic Region:

U.S. Operations

$

$

$

$

Canadian Operations

European Operations

Asia Pacific Operations

Corporate (non-product)

Total Revenues

$

$

$

$

Three Months Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Revenues by Product Group:

Execution Services (1)

$

$

$

$

Workflow Technology (2)

Analytics

Corporate (non-product)

Total Revenues

$

$

$

$

(1)

In December 2015, the Company sold its energy research operations and in May 2016 the Company sold its remaining investment research operations, both of which were within the Research Sales and Trading (RS&T) product group. Beginning in the second quarter 2016, the remaining portfolio trading and high-touch execution offerings, previously grouped within RS&T, were combined with the electronic execution and liquidity solutions, previously grouped with the Electronic Brokerage (EB) product group, to form the new Execution Services product group to create an optimal alignment for cross-selling synergies. The entire historic activity of EB and RS&T, including the divested research operations, has been reclassified to the Execution Services product group to conform to the current presentation.

(2)

Previously known as Platforms.

December 31,

December 31,

2016

2015

Assets

Cash and cash equivalents

$

$

Cash restricted or segregated under regulations and other

Deposits with clearing organizations

Securities owned, at fair value

Receivables from brokers, dealers and clearing organizations

Receivables from customers

Premises and equipment, net

Capitalized software, net

Goodwill

Intangibles, net

Income taxes receivable

Deferred taxes

Other assets

Total assets

$

$

Liabilities and Stockholders’ Equity

Liabilities:

Accounts payable and accrued expenses

$

$

Short-term bank loans

Payables to brokers, dealers and clearing organizations

Payables to customers

Securities sold, not yet purchased, at fair value

Income taxes payable

Term debt

Total liabilities

Commitments and contingencies

Stockholders’ Equity:

Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding

 —

 —

Common stock, $0.01 par value; 100,000,000 shares authorized; 52,456,165 and 52,300,885 shares issued at December 31, 2016 and December 31, 2015, respectively

Additional paid-in capital

Retained earnings

Common stock held in treasury, at cost; 19,830,032 and 19,207,419 shares at December 31, 2016 and December 31, 2015, respectively

Accumulated other comprehensive income (net of tax)

Total stockholders’ equity

Total liabilities and stockholders’ equity

$

$

Three Months Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Total revenues

$

$

$

$

Less:

Other revenues - gains (1)

 —

 —

 —

Gain on the sale of energy research operations (2)

 —

 —

Adjusted revenues

Total expenses

Less:

ADR settlement and associated costs (3)

 —

 —

Restructuring (4)

 —

 —

Compensation awards for current CEO (5)

 —

 —

Arbitration case with former CEO and associated costs (6)

 —

 —

 —

Trading pilot settlement and associated costs (7)

 —

 —

 —

Gain from currency translation adjustment (8)

 —

 —

 —

Adjusted expenses

(Loss) income before income tax (benefit) expense

Effect of adjustments

Adjusted pre-tax income (loss)

Income tax (benefit) expense

Tax effect of adjustments (1) – (7)

Adjustment to tax reserves from resolving a multi-year contingency in the U.S. (9)

 —

 —

Tax incurred to amend capital structure outside North America (10)

 —

 —

Adjusted income tax expense (benefit)

Net income (loss)

$

$

$

$

Net effect of adjustments

Adjusted net income (loss)

$

$

$

$

Diluted income (loss) per share

$

$

$

$

Net effect of adjustments

Adjusted diluted income (loss) per share

$

$

$

$

(1)

In the second quarter of 2016, the Company received insurance proceeds of $2.4 million from its corporate insurance carrier to settle a claim for lost profits arising from an August 2015 outage in its outsourced primary data center in the U.S. Additionally, the Company generated a nominal gain on the completion of the sale of its investment research operations in May 2016.

(2)

In December 2015, the Company completed the sale of the subsidiaries conducting its energy research operations to an affiliate of Warburg Pincus, a global private equity firm, for $120.5 million. The pre-tax gain of $107.7 million is net of a working capital adjustment on the closing balance sheet, direct costs relating to the sale and the carrying value of the net assets disposed.

(3)

In the third quarter of 2016, the Company accrued $22.1 million for a potential settlement with the SEC with respect to an inquiry involving pre-released ADRs and incurred legal and other related costs associated with this matter of $1.6 million. In the fourth quarter of 2016, the Company incurred an additional charge of $2.3 million based on the final settlement amount along with legal and other related costs associated with this matter of $1.3 million.

(4)

During the second quarter of 2016, the Company incurred restructuring charges of $4.3 million related to (a) the reduction in its high-touch trading and sales organizations and (b) the closing of its U.S. matched-book securities lending operations and its Canadian arbitrage trading desk. In the fourth quarter of 2016, the Company incurred additional restructuring charges of $5.3 million related to management delayering and the elimination of certain positions.

(5)

The Company’s current Chief Executive Officer was granted cash and stock awards upon the commencement of his employment in January 2016, a significant portion of which replaced awards he forfeited at his former employer. Due to U.S. tax regulations, only a small portion of the amount expensed for these awards was eligible for a tax deduction.

(6)

In the first half of 2016, the Company incurred a charge of $4.8 million, net of an insurance recovery of $0.5 million, to settle an arbitration case with its former CEO and incurred legal fees of $2.7 million.  In the third quarter of 2016, the Company recorded a reimbursement of $0.9 million of these legal fees from its insurance carrier.

(7)

In August 2015, the Company reached a final settlement with the SEC to pay an aggregate amount of $20.3 million in connection with the SEC’s investigation into a proprietary trading pilot operated during 2010 and 2011. During 2015, the Company incurred $4.9 million in legal and other related costs associated with this matter.  

(8)

In the third quarter of 2016, the Company substantially completed the liquidation of its investment in its Israel entity that ceased operations in December 2013. During the Company’s period of ownership and through December 2013, the Company had accumulated foreign exchange translation gains as a component of equity, which have been reclassified as a gain that reduced other general and administrative expenses in the Condensed Consolidated Statement of Operations.

(9)

In the fourth quarter of 2016, the Company resolved a multi-year tax contingency in the U.S. and reduced tax reserves by $7.3 million.

(10)

In December 2015, the Company amended the capital structure of its holding company outside North America to provide continued flexibility for the movement of capital. This amendment accelerated the U.S. taxation of amounts earned outside of North America, resulting in a tax charge of $6.5 million.

Three Months Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Net Income (Loss) (1)(2)

$

$

$

$

Impact of adjustments, after-tax

Adjusted net income (loss)

Deduct:

Investment income

Add Back:

Interest expense

Income tax (benefit) expense

Tax effect of adjustments

Depreciation and Amortization

Adjusted earnings before interest, taxes, depreciation, and amortization

$

$

$

$

(1)

Net income includes pre-tax charges for non-cash stock-based compensation of $6.2 million and $4.5 million for the three months ended December 31, 2016 and 2015, respectively.

(2)

Net income includes pre-tax charges for non-cash stock-based compensation of $25.6 million and $16.7 million for the years ended December 31, 2016 and 2015, respectively.