EFTA00598342.pdf

February 5. 2016 WELLS SECURITIES FARGO Equity Research LinkedIn Corporation LNKD: Expectations Reset, But Still A Stock To Own, In Our View Outperform / V • Quarter good, but guide resets the growth outlook. Revenue and EBITDA were ahead of estimates, but forward quarter and FY guide sent investors running Sector: Internet with shares slumping -28% after hrs, in our view. The magnitude of the projected growth deceleration is significant, and we lower our estimates sharply. But our Overweight fundamental view of LNKD's market position and opportunity is unchanged. User growth continues, engagement metrics—though recently mixed—remain solid and show indications of improving, and the company's core product portfolio remains Earnings Estimate Revised Down essential to a broad range of global corporate enterprises. Moreover, the competitive landscape appears to be modestly more welcoming of late, as chief 2015A 15116E 2017E CASH EPS Curr. Prior Corr. Prior rival Viadeo shuttered its Chinese operations in late December. While guidance $0.57 SaSe 0.79 San offers the market a more sober view of near-term growth, we continue to believe Q2 (June) o65 o.,56 o-So 0.93 LNKD possesses a powerful platform in a market with large barriers to entry. As Qz (Pep.) o.7fi 0.81 Len 1.12 with past guidance, we believe mgmt is striking a conservative stance here— Q4(kc.) 0.94 s.oll 1.12 1.24 particularly as they are seeing some macro pressure in EMEA and APAC and $ 2.8 4 S3-05 3.78 5406 NE verticals such as oil/gas. Flowing through results our Fint6E revenue/adj CY 42-S4 $3.05 Sso6 EBITDA/non-GAAP EPS move to $3.63B/$9stMM/$3.05 from FY P/S 67.7x 63.ox 47.4x $3.92B/$1.02B/$3.78. Based on revisions, we lower our 12 month valuation itovalA0 2 2.921 23.623 $4315 Swore, Ctuupony Ada. Was. &Jew Snozri LLC ofImam an/R.1m range to $170-$190 from $290-$300 and maintain our Outperform rating. M • M , Anit6 St Nr • MO1a.r Nif EStimcir.All Menem."'" 1' -MAMA.. % - Cv"yu"yb ay Mr Priority Stoat List • Core Talent Solutions (TS) appears on track, Sales Navigator a focus Cash EPS excludes stork-based comp for improvement. Strong field sales cited in qtr, though mgmt did note some slowdown to online sales channel. New customer acquisition was healthy at 3,000 to more than 42,000 total. Chum for TS stable, as no material increase was seen as result of price increases. Though noting high customer satisfaction and promoter scores, addl product focus is planned for Sales Navigator to reduce higher than satisfactory churn. This near-term challenge cited, mgmt reiterated Ticker LNKD positive long-term view on social selling, and we believe LNKD's distinct and deep Price (02/04/2026) $192.28 data asset should drive deeper sales of this category-defining asset. 52-Week Range: $165-277 • Marketing Solutions (MS) sheds network and display to focus on high- Shares Outstanding: (MM) 233.6 growth Sponsored Updates. We were surprised to hear of the closing of off- Market Cap.: (MM) $25,688.6 platform targeting product Lead Accelerator, as it contributed to our bullish 500: 1,91545 stance on Marketing Solutions (19% of Fris rev) and was a product arising out of Avg. Daily Vol.: 1,671,880 LNKD's acquisition of b-to-b marketing platform Bizo. That said, Sponsored Dividend/Yield: $o.00/o.o% Update momentum is strong (over 100% growth in FY'is, now less than so% LT Debt: (MM) $1,226.5 share of MS), so we continue to see validation of LNKD's marketing platform and LT Debt/Total Cap.: 20.0% targeting capabilities. The expected addition of conversion tracking and ROE: o.o% enhanced targeting should aid an already strong offering. 3-5 Yr. Est. Growth Rate: 25.o% Valuation Range: $170.00 to $190.00 from $290.00 to $300.00 CY 2016 Est P/C. EPS-to-Growth: 2.5% Our 12-month valuation range equates to 19.3x EV/EBITDA using our FY17 Last Reporting Date: 02/04/2016 estimates, a premium valuation we believe to be merited by LNKD's leadership After Close position, multiple revenue segments and attractive economic model. Risks include Rem, Qmpartv Rota, ;Wit Rego SaNAtteg. ac riSSWOMArd ROarn declining member growth, corporate customer churn, risk, shareholder Peter Stabler, Senior Analyst dilution via stock grants, data breaches, and rising competitive pressure. Investment Thesis: Blake Nelson, Associate Analyst We favor LNKD's position as the leading, global professional social network, where (415) 396-4064 the company's "clean signal" identity data powers connectivity to the benefit of members, corporate recruiters, and b-to-b marketers. We believe an expanding portfolio of products and international growth opportunities provides a ramp to multiple years of double-digit revenue growth and margin and earnings expansion. Please see page 6 for rating definitions, important disclosures and required analyst certifications MI estimates/forecasts are as of 02/05/16 unless otherwise stated. Together we'll go far Wells Fargo Securities, LLC does and seeks to do business with companies ipt le__ _ covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision. EFTA00598342  WELLS FARGO SECURITIES, LLC Internet EQUITY RESEARCH DEPARTMENT Exhibit 1.4Q2015 Reported vs. Estimated 4015 PERFORMANCE FtEVIBN 4015 4014 Y/Y 3015 010 (terilMons) Actual °inmate Difference Actual Change Actual Change Talent Soluttris Revenue 535.3 539.5 -0.8% 369.3 44.9% 502.1 6.6% Isletkebrog Sobtions Revenue 182.6 170.6 7.0% 152.7 19.5% 139.5 30.8% RernurnSubscrotions Revenue 144.0 144.9 -0.7% 121.4 18.7% 137.9 4.4% Total net revenue 861.9 855.1 0.8% 643A 34.0% 779.6 10.6% Cost of revenue (ex-S8C) 105.0 107.9 -2.7% 77.9 34.8% 98.4 6.7% Gross profit (ex-SSC) 756.9 747.2 7.3% 565.5 33.8% 681.2 11.7% Sales & Marl*Wig (ex-SBC) 264.8 267.9 -7.2% 2052 29.0% 238.5 11.0% Product Development (ex-SBC) 152.3 162.5 -6.3% 106.3 43.3% 144.7 5.2% General & Administrative (ex-SBC) 91.2 102.6 -17.2% 74.7 22.0% 89.9 1.4% = 129.6 124.8 3.8% 71.1 82.2% 117.9 9.9% Total operaung expenses (ex-S8C) 508.2 533.0 -4.6% 386.6 31.4% 473.0 7.4% Cperabrog Ocoee (loes) (N:n-GAAP) 165.9 136.3 27.7% 120.4 37.8% 135.7 21.4% Adjusted EMMA 248.5 2142 16.0% 178.9 38.9% 208.1 19.4% Other neon. (expense). net (2.6) (2.3) 114% (1.4) 86.5% (2.3) 12.4% hcorre (loss) before taxes (Non-GAAP) 163.3 134.0 27.8% 119.0 37.2% 134.4 21.5% Rovislon (bent[) fix imam taxes (Non-GAAP) 37.6 30.8 27.8% 41.7 -9.8% 30.9 21.5% Nm-GAAPNet ',cows (loss) 125.7 103.2 27.8% 77.4 62.5% 103.5 21.5% Diluted EPS (GAAP) (0.06) (036) 42.4% 002 -363.4% (0.36) -82.4% Diluted EPS (Non-GAAP) 0.94 077 222% 061 54.9% 0.78 20.6% Nm-GAAPDruted shares outstanding 133.6 134.0 -0.3% 1273 4.9% 132.5 0.8% Margin Analysis (% of Revenue) Cost of revenue (ex-IM: ex-SEIC) 12.2% 12.6% -44 by 111% r 70p 12.6% -44 Op Sales and marketing (ex-SBC) 30.7% 31.3% -61by 31.9% -778 by 30.6% 13 by Product developrrent (ex-S13C) 17.7% 19.0% -133 by 16.5% 775bp 18.6% -89 by General and adMnistratIve (ex-S13C) 10.6% 12.0% -142 by 11.6% -704 by 11.5% -95 by 15.0% 14.6% 44 bp 11.1% ' 3981m 15.1% -9 by TOtal operaung expenses (ex-58C) 59.0% 62.3% -3370p 60.1% -772 Op 60.7% -171 by Adjusted EBITDA Margin 28.8% 25.1% 378 by 27.8% 103 by 26.7% 214 by Revenue by Segments Tale. Solutions Revenue 535.3 5395 -0.8% 369.3 r 44.9% 502.1 6.6% Markebng SoluMte Revenue 182.6 170.6 7.0% 152.7 r 19.5% 139.5 30.8% FteMum Subscriptixe Revenue 144.0 144.9 -07% 121.4 r 18.7% 137.9 4.4% Growth % Tale Solutions Revenue 44.9% 46.1% -113 by 41.3% 362 Op 45.7% -78 Op Markebng Sakai:as Revenue 19.5% 11.7% 783 by 56.3% 46750p 27.8% -823 Op FterriumSubscriptkas Revenue 18.7% 19.4% -78 by 37.7% -1,904 Op 20.5% -184 Op Source: Company reports, Welts Fargo Securities, LW estimates 2 EFTA00598343  WELLS FARGO SECURITIES, LLC LinkedIn Corporation EQUITY RESEARCH DEPARTMENT Exhibit 2. IQ't6 Estimate Revisions 1016E 1016EWY %Change (SmiMona) 1015A New Previous 5 Var %Var New Original Talent Solutions Revenue 396.4 532.9 567.1 (342) -6.0% 34.4% 43.1% Marketing Soketre Revenue 119.2 155.4 149.7 5.7 3.8% 30.3% 25.6% Premium Subscriptions Revenue 122.1 145.3 155.9 (10.6) -6.8% 19.0% 27.6% Total net revenue 637.7 833.5 872.7 (39.1) -4.5% 30.7% 36.9% Cost of revenue (ex-SBC) 78.4 105.7 114.5 (8.8) -7.7% 34.8% 46.0% Gross profit (ex-SSC) 569.3 727.8 758.2 (30A) -4.0% 30.1% 35.6% Sales & Marketing (ex-SBC) 210.6 290.1 275.2 14.9 5.4% 37.7% 30.6% Product Cevebprrent (ex-SBC) 115.6 151.1 158.2 (7.1) -4.5% 30.7% 36.9% General & Adrniasaative (ex-S8C) 73.3 95.8 100.3 (4.5) -4.5% 30.7% 36.9% 74.0 133.0 132.9 0.1 0.1% 79.8% 79.6% Total operating expenses (ex-SBC) 399.5 537.0 533.7 3.3 0.6% 34.4% 33.6% Operating income (bss)(N:n-GAAP) 97.7 105.9 139.7 (33.8) -24.2% 8.4% 43.0% Adjusted 03ITDA 159.9 190.9 224.5 (33.7) -15.0% 19.4% 40.5% Other income (expense). net (3.5) (7.0) (2.3) (4.7) 203.9% 102.4% -33.4% booms (Ices) before taxes (Non-GAAP) 91.2 98.9 137.0 (38.5) -28.0% 4.9% 45.8% Provision (bereft) for income taxes (Non-GAAP) 21.7 22.7 31.6 (8.9) -28.0% 4.9% 45.8% Non-GAAP Net [corm (loss) 72.7 76.1 105.8 (29.7) -28.0% 4.8% 45.6% fluted Non-GAAP On 0.57 0.56 0.70 -0.22 -28.2% -0.4% 38.7% fluted GAAP BPS (Reported) (0.34) (0.67) (0.41) -0.26 62.0% 97.9% 22.2% Non-GAAP Muted shares outstanding 128.3 135.0 134.7 0.3 0.2% 5.2% 5.0% Margin Analysis (% of Revenue) Ccet of revenue (ex-M: ex-SBC) 12_3% 12.7% 13.1% 39 by 82 by Sates and marketing (ex-SBC) 33.0% 34.8% 31.5% 177 bp -150 bp Product development (ex-S13C) 18.1% 18.1% 18.1% 0 bp 0 bp General and administrative (ex-SBC) 11.5% 11.5% 11.5% 0 by 0 by 11.6% 16.0% 15.2% 436 by 363 by Adjusted 03ITDA Margin 25.1% 22.9% 25.7% -217 by 66 bp Revenue by Segments Talent Solutions Revenue 396.4 532.9 567.1 34.4% 43.1% Marketing Santa, Revenue 119.2 155.4 149.7 30.3% 256% Premium Subscriptions Revenue 122.1 145.3 155.9 19.0% 276% Growth % Talent Solutions Revenue 36.0% 31.4% 43.1% -156 bp 708 bp Marketing &Ostia Revenue 38.5% 30.3% 25.6% •816 by -1.291 bp Prenium Sutecriptions Revenue 27.8% 19.0% 27.6% •886 bp -21 Op Source: Company reports, Wells Fargo Securities, LLC estimates 3 EFTA00598344  WELLS FARGO SECURITIES, LLC Internet EQUITY RESEARCH DEPARTMENT Exhibit 3. FY2016 Estimate Revisions 2016E 2016EWY %Change (Sm Intone) 2015A New Previous $ Yar %Vas New Original Talent Soblions Revenue 1,8772 2,372.3 2.489.8 (117.5) -4.7% 26.4% 32.6% Marketing Solutions Revenue 581.3 683.3 757.8 (94.5) -12.5% 14.1% 30.4% PreniumSubscrptions Revenue 532A 596.9 670.1 (73.2) -102% 12.1% 25.9% Total net revenue 2290.9 3,632.5 3,917.7 (285.2) -7.3% 21.5% 31.0% Cost of revenue (ex-SBC) 389.9 480.7 513.9 (53.2) -10.4% 24.6% 39.0% Gross profit (ex-SBC) 2,621.1 3,171.8 3,403.8 (232.0) -6.8% 21.0% 29.9% Sates 8 Mwkeling (ex-SBC) 952.1 1,180.5 1,206.9 (46.4) -3.8% 21.9% 26.8% Product Oevebprrent (ex-SBC) 5417 648.1 717.9 (69.8) -9.7% 19.4% 32.3% General 8 Adninistrative (ex-SBC) 346.7 412.1 459.9 (47.9) -10.4% 18.8% 32.6% 420.5 582.0 531.5 30.5 5.7% 33.7% 26.4% Total operatng expenses (ex-SBC) 1,841.5 2,220.6 2,384.7 (164.1) -6.9% 20.6% 29.5% Operatng irxorre (loss) (Non-GAAP) 494.0 589.2 679.6 (110.4) -16.2% 15.2% 37.6% Adjusted BVTGA 779.8 951.2 1,019.1 (67.9) -6.7% 22.0% 30.7% Ober income (expense). net (9A) (27.0) (9.2) (17.8) 193.0% 186.3% -2.3% hcorre (loss) before taxes (Non-GAAP) 484.6 542.2 6704 (128.2) -19.1% 11.9% 38.3% Rovision (benefit) for ixorre taxes (Non-GAAP) 111.5 124.7 154.2 (29.5) -19.1% 11.9% 38.3% Non-GAAP Net hcome (loss) 373.5 417.5 516.2 (98.7) -19.1% 11.8% 38.2% Diluted Non-GAAP EPS 2.84 3.05 3.78 -0.73 -19.3% 7.4% 33.1% Ciliated GAAP EPS (Reported) (1.29) (2.34) (1.36) -0.99 72.7% 80.9% 4.7% Non-GAAP Muted shares outstanding 1312 137.0 136.7 0.3 0.3% 4.4% 4.2% Margin Analysis (% of Revenue) Cost of revenue (ex-MI: ex-S8C) 12.4% 12.7% 13.1% 32 by 75 by Sales and rnarketing (ex-SBC) 31.8% 31.9% 30.8% 11 bp -103 bp Product devebprrent (ex-SBC) 18.1% 17.8% 18.3% -30 bp 18 by General and adninistrafive (ex-SBC) 11 6% 11.3% 11.7% -25 bp 15 bp 14.1% 15.5% 13.6% 141 bp -49 bp Adjusted EBITOA Margin 26.1% 26.2% 26.0% 11 bp -6 bp Revenue by Segments Talent Solutions Revenue 1.8772 2,372.3 2,489.8 (117.5) -4.7% 26.4% 32.6% Marketing Solutions Revenue 581.3 883.3 757.8 (94.5) -12.5% 14.1% 30.4% Premium Subscrptions Revenue 532.4 596.9 670.1 (73.2) -10.9% 12.1% 25.9% Growth % Talent Soblions Revenue 41.4% 26.4% 32.3% -1.502 by -905 by Markethg Solutions Revenue 27.9% 14.1% 33.1% -1.381 bp 518 bp Prenium Subscriptions Revenue 22.0% 12.1% 25.7% -984 bp 369 bp Source: Company reports, Wells Fargo Securities, LLC estimates 4 EFTA00598345  WELLS FARGO SECURITIES, LLC Linkedln Corporation EQUITY RESEARCH DEPARTMENT Exhibit 4. Income Statement 11mIllions) 2013A 2014A 2016A 1016E 2018E 3016E 4016E 2018E 2017E Revenue 1.528.6 2,218.8 2,990.9 833.6 8703 923.5 1.005.0 3.692.6 4314.7 7.o•Y 57.2% 4S2% 348% 30.7% 22.3% 18.5% 16.6% 21.5% 18.8% Gast of revenue (ex.SBG) 187.3 264.8 369.9 105.7 1104 117.1 127.5 460.7 568.0 Gross pro« (ex'SBC) 1.341.2 1.9619 2.621.1 7271 780.1 806.3 877.5 3.171.8 3.748.7 Gross magi, (ex-SBC) 87.7% 88.1% 87.6% 87.3% 87.3% 87.3% 87.3% 87.3% 86.9% Saks 8, /briefing (ex313Q 485.9 713.9 962.1 290.1 287.3 281.7 301.5 1.160.5 1.337.1 Product Deveberrent (ex.S8C) 296.7 381.5 612.7 151.1 1570 167.1 172.9 848.1 769.1 General 8. Adrrostattue tex.SBG) 182.4 266.0 346.7 95.8 110.8 104.1 101.3 412.1 465.0 Am:Meet-on of Mangible assets 18.4 34.6 134.7 48.0 440 44.0 44.0 180.0 200.0 DepreceSon 118.1 202.3 285.8 85.0 990 99.0 99.0 382.0 420.0 Operatog scone (loss) (Non•GAAP) 258.1 389.9 494.0 105.9 1060 154.4 202.9 569.2 737.5 Adjusted EBITDA 376.2 692.2 779.8 190.9 2050 263.4 301.9 961.2 1,157.5 all7DA margin 24.8% 28.7% 26.1% 229% 23.6% 27.4% 30.0% 28.2% 28.8% Other income (expense). net 1.4 1.0 •60 .270 0.0 tricorns (loss) Stab taxes (Nm-GAAP) 259.5 390.9 484.6 98.9 100.0 147.4 196.9 542.2 737.5 Ftovision(bendit) for neon taxes (Non.GAAP) 67.6 1368 111.5 22.7 23.0 33.9 46.1 124.7 169.6 Nan•GAAP Net boons (Ices) 191.8 254.1 373.5 76.1 77.0 113.5 150.8 417.5 587.9 Muted WS (Non•GAAP) 1.61 202 2.84 0.66 0.58 0.82 108 3.05 4.06 Non-GAAPOI.fied shares outstanding 118.9 126.0 131.2 135.0 136.4 137.7 139.1 137.0 139.7 fluted WS (CRAP) 0.24 -0.12 .0.67 .1.10 .0.39 4/.18 •1.42 Revenue by Segments Total Talent Solutions Revenue 910.2 1.327.6 1.877.2 532.9 5813 610.9 666.9 2.372.3 2.853.8 Iforkeeng Sciutems Revenue 311.8 454.6 581.3 155.4 161.8 162.3 183.8 613.3 769.4 Premise Subscript«, Revenue 303.5 436.5 532.4 145.3 147.1 150.3 154.3 596.9 691.5 %of Revenue Told Tak411152446,115 Raver« 59.5% 59.8% 62.8% 63.9% 64.5% 66.2% 66.4% 65.3% 66.1% Idakeeng Sdutcos Revenue 20.4% 20.5% 19.4% 18.6% 18.6% 17.6% 113% 113% 17.8% Premix"' Subscript«, Revenue 20.1% 19.7% 17.8% 17.4% 16.9% 16.3% 15.4% 114% 160% Growth % Told Talent Solutions %Ver)] 664% 45.9% 41.4% 34.4% 26.7% 21.7% 24.6% 26.4% 203% fAerkeeng Solutcos Revenue 32.7% 45.7% 27.9% 30.3% 15.6% 16.3% 0.7% 14.1% 16.0% ROIT~Subscripecres Revenue 74.7% 424% 22.0% 19.0% 14.6% 8.9% 7.2% 121% 15.8% Source: Company reports, Wells Fargo Securities, LLC estimates S EFTA00598346  WELLS FARGO SECURITIES, LLC Internet EQUITY RESEARCH DEPARTMENT Company Description: LinkedIn is an online professional network with more than 330 million registered members in over 200 countries as of Q3 2014. The company's platform enables users to create digital profiles to manage and expand professional networks and discover business opportunities. While profile creation is free, LinkedIn generates revenue from enterprises and members through three product lines: Talent Solutions, Marketing Solutions and Premium Subscriptions. The company was founded in 2003 and is headquartered in Mountain View, CA. Required Disclosures LinkedIn Corporation (LNICD) 3-yr. Price Performance 5311.00 530095 5290 90 5280 85 5270 80 5280.75 1 A, Tv 5250.70 • ti 624065 411;11 6230.60 N, i 6220.55 1 1 1.4 ni vi h r —1 f) 6210.50 \ r 1 1,, .I. 5.200A5 i 10 itoof 14 1 I, ) 1 A Po 'I_ 519040 5180.35 oi vil - Is,\ fir ?,± * e 1 8 5170 30 1). 4\ 1 2. 5160 25 i tt 515020 .J '. D 4 : . 5130.10 1 5120.05 5110.00 ei in et in in en en rn Willi. i gE izEREE RE r .ji.i .glilliiiiiii§ iliiiiii _ — Date Date Published Price (S) Rating Code Val. Rng. Low VaL Rag. High Close Price (9) 12'132014 Stabler . ' 2314 219.78 260 00 270.00 231.84 237.97 28000 290.00 26140 • 512315 252.13 1 27000 280.00 205.21 • 10302015 217.00 1 29000 moo 240.87 Source Wells Fargo Securities. LLC estimates and Racers data Symbol Key Rating Code Key • Rating Downgrade • Waage. Resumption. Drop or Suspend 1 0utpaicanary SR Suspended • Rating Dogmas • Analyst Owe, 2 Market Perform'Hold NR Not Rated • Valuation Reece Change 1 Split/Mummers 3 UnderpetanSe0 NE No Estimate Additional Information Available Upon Request I certify that: 0 All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report. 6 EFTA00598347  WELLS FARGO SECURITIES, LLC LinkedIn Corporation EQUITY RESEARCH DEPARTMENT • Wells Fargo Securities, LLC maintains a market in the common stock of LinkedIn Corporation. • Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from LinkedIn Corporation. • Wells Fargo Securities, LLC or its affiliates has a significant financial interest in Linkeiln Corporation. LNKD: Risks include declining member growth, corporate customer churn, I= risk, shareholder dilution via stock grants, data breaches, and rising competitive pressure. Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC's research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue. STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. VOLATILITY RATING V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least S of the past 24 months or if the analyst expects significant volatility. MI IPO stocks are automatically rated volatile within the first 24 months of trading. As of: February 5, 2016 43% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Outperform. services for 38% of its Equity Research Outperform-rated companies. 55% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Market Perform. services for so% of its Equity Research Market Perform-rated companies. 1% of companies covered by Wells Fargo Securities, LLC Wells Fargo Securities, LLC has provided investment banking Equity Research are rated Underperform. services for 7% of its Equity Research Underperform-rated companies. Important Disclosure for International Clients EEA - The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. 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