Segment Operating Results | Segment Operating Results Business Segments – The Company's business results are categorized into the following two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Investment Management includes advising third-party investors in Institutional Asset Management and Wealth Management and interests in private equity funds which are not managed by the Company. The Company's segment information for the three and six months ended June 30, 2019 and 2018 is prepared using the following methodology: • Revenue, expenses and income (loss) from equity method investments directly associated with each segment are included in determining pre-tax income. • Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other performance and time-based factors. • Segment assets are based on those directly associated with each segment, or for certain assets shared across segments, those assets are allocated based on the most relevant measures applicable, including headcount and other factors. • Investment gains and losses, interest income and interest expense are allocated between the segments based on the segment in which the underlying asset or liability is held. Other Revenue, net, included in each segment's Net Revenues includes income (losses) earned on marketable securities, including our investment funds which are used as an economic hedge against our deferred cash compensation program, certificates of deposit, cash and cash equivalents and on the Company’s debt security investment in G5, as well as adjustments to amounts due pursuant to the Company’s tax receivable agreement, subsequent to its initial establishment related to changes in enacted tax rates, and gains (losses) resulting from foreign currency fluctuations, principal trading and realized and unrealized gains and losses on interests in Private Equity funds which are not managed by the Company. Other Revenue, net, also includes interest expense associated with the Company’s Notes Payable, subordinated borrowings and lines of credit, as well as revenue and expenses associated with repurchase or resale transactions. Each segment's Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segment and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, execution, clearing and custody fees, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, technology, human capital, facilities management and senior management activities. Other Expenses include the following: • Amortization of LP Units and Certain Other Awards – Includes amortization costs associated with the vesting of Class J LP Units issued in conjunction with the acquisition of ISI and certain other related awards. • Special Charges – Includes expenses in 2019 related to the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of the Company's headquarters in New York. Includes expenses in 2018 related to separation benefits and costs for the termination of certain contracts associated with closing the Company's agency trading platform in the U.K. • Acquisition and Transition Costs – Includes costs incurred in connection with acquisitions, divestitures and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services. • Intangible Asset and Other Amortization – Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions. The Company evaluates segment results based on net revenues and pre-tax income, both including and excluding the impact of the Other Expenses. No client accounted for more than 10% of the Company's Consolidated Net Revenues for the three and six months ended June 30, 2019 . The following information presents each segment's contribution. For the Three Months Ended June 30, For the Six Months Ended June 30, 2019 2018 2019 2018 Investment Banking Net Revenues (1) $ 516,386 $ 435,675 $ 917,574 $ 885,875 Operating Expenses 385,378 327,137 697,288 658,820 Other Expenses (2) 6,909 5,880 14,167 13,917 Operating Income 124,099 102,658 206,119 213,138 Income from Equity Method Investments 219 297 474 297 Pre-Tax Income $ 124,318 $ 102,955 $ 206,593 $ 213,435 Identifiable Segment Assets $ 1,749,339 $ 1,354,810 $ 1,749,339 $ 1,354,810 Investment Management Net Revenues (1) $ 14,660 $ 12,802 $ 28,799 $ 26,165 Operating Expenses 11,925 10,678 24,166 21,951 Other Expenses (2) — — 108 21 Operating Income 2,735 2,124 4,525 4,193 Income from Equity Method Investments 2,234 2,122 4,190 4,247 Pre-Tax Income $ 4,969 $ 4,246 $ 8,715 $ 8,440 Identifiable Segment Assets $ 190,410 $ 257,714 $ 190,410 $ 257,714 Total Net Revenues (1) $ 531,046 $ 448,477 $ 946,373 $ 912,040 Operating Expenses 397,303 337,815 721,454 680,771 Other Expenses (2) 6,909 5,880 14,275 13,938 Operating Income 126,834 104,782 210,644 217,331 Income from Equity Method Investments 2,453 2,419 4,664 4,544 Pre-Tax Income $ 129,287 $ 107,201 $ 215,308 $ 221,875 Identifiable Segment Assets $ 1,939,749 $ 1,612,524 $ 1,939,749 $ 1,612,524 (1) Net revenues include Other Revenue, net, allocated to the segments as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, 2019 2018 2019 2018 Investment Banking (A) $ 7,236 $ 539 $ 13,723 $ (889 ) Investment Management 2,241 632 3,997 2,240 Total Other Revenue, net $ 9,477 $ 1,171 $ 17,720 $ 1,351 (A) Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and lines of credit of $2,304 and $4,568 for the three and six months ended June 30, 2019 , respectively, and $2,300 and $4,561 for the three and six months ended June 30, 2018, respectively . (2) Other Expenses are as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, 2019 2018 2019 2018 Investment Banking Amortization of LP Units and Certain Other Awards $ 3,723 $ 3,723 $ 7,795 $ 7,706 Special Charges 1,029 — 2,058 1,897 Intangible Asset and Other Amortization 2,157 2,157 4,314 4,314 Total Investment Banking 6,909 5,880 14,167 13,917 Investment Management Acquisition and Transition Costs — — 108 21 Total Investment Management — — 108 21 Total Other Expenses $ 6,909 $ 5,880 $ 14,275 $ 13,938 Geographic Information – The Company manages its business based on the profitability of the enterprise as a whole. The Company's revenues were derived from clients located and managed in the following geographical areas: For the Three Months Ended June 30, For the Six Months Ended June 30, 2019 2018 2019 2018 Net Revenues: (1) United States $ 386,545 $ 346,225 $ 660,667 $ 732,742 Europe and Other 130,144 91,933 259,428 157,163 Latin America 4,880 9,148 8,558 20,784 Total $ 521,569 $ 447,306 $ 928,653 $ 910,689 (1) Excludes Other Revenue, Including Interest and Investments, and Interest Expense. The Company's total assets are located in the following geographical areas: June 30, 2019 December 31, 2018 Total Assets: United States $ 1,592,362 $ 1,757,589 Europe and Other 281,959 298,917 Latin America 65,428 69,161 Total $ 1,939,749 $ 2,125,667 |