Segment Operating Results

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

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 the Institutional Asset Management, Wealth Management and Private Equity sectors. On September 30, 2016, the Company deconsolidated the assets and liabilities of its Mexican Private Equity business, which was in the Investment Management segment.

The Company's segment information for the three and nine months ended September 30, 2017 and 2016 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.

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, 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, facilities management and senior management activities.

Other Expenses include the following:

• Amortization of LP Units/Interests and Certain Other Awards - Includes amortization costs or the reversal of expenses associated with the vesting of Class E LP Units, Class G and H LP Interests, and Class J LP Units issued in conjunction with the acquisition of ISI and certain other related awards.

• Special Charges - Includes expenses in 2017 related to the impairment of goodwill in the Company's Institutional Asset Management reporting unit and the impairment of the Company's investment in G5 | Evercore.

• 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, as well as the reversal of a provision for certain settlements in 2016 which was previously established in the fourth quarter of 2015.

• Fair Value of Contingent Consideration - Includes expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company's acquisitions.

• 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.

One client accounted for more than 10% of the Company's consolidated Net Revenues for the three months ended September 30, 2017.

The following information presents each segment's contribution.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Investment Banking
Net Revenues (1)	$	388,299		$	368,634		$	1,115,478		$	936,504
Operating Expenses	293,264			268,666			844,573			707,846
Other Expenses (2)	11,748			17,422			26,663			75,854
Operating Income	83,287			82,546			244,242			152,804
Income (Loss) from Equity Method Investments	(75		)	(112		)	(111		)	(94		)
Pre-Tax Income	$	83,212		$	82,434		$	244,131		$	152,710
Identifiable Segment Assets	$	1,239,812		$	1,114,565		$	1,239,812		$	1,114,565
Investment Management
Net Revenues (1)	$	18,302		$	17,680		$	48,840		$	58,179
Operating Expenses	14,027			14,843			40,441			46,357
Other Expenses (2)	492			298			7,976			811
Operating Income	3,783			2,539			423			11,011
Income from Equity Method Investments	1,902			1,290			5,618			4,223
Pre-Tax Income	$	5,685		$	3,829		$	6,041		$	15,234
Identifiable Segment Assets	$	321,223		$	347,065		$	321,223		$	347,065
Total
Net Revenues (1)	$	406,601		$	386,314		$	1,164,318		$	994,683
Operating Expenses	307,291			283,509			885,014			754,203
Other Expenses (2)	12,240			17,720			34,639			76,665
Operating Income	87,070			85,085			244,665			163,815
Income from Equity Method Investments	1,827			1,178			5,507			4,129
Pre-Tax Income	$	88,897		$	86,263		$	250,172		$	167,944
Identifiable Segment Assets	$	1,561,035		$	1,461,630		$	1,561,035		$	1,461,630

(1) Net revenues include Other Revenue, net, allocated to the segments as follows:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2017			2016		2017			2016
Investment Banking (A)	$	(535	)	$	200	$	(2,825	)	$	270
Investment Management (B)	66			522		376			337
Total Other Revenue, net	$	(469	)	$	722	$	(2,449	)	$	607

(A) Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,488 and $7,494for the three and nine months ended September 30, 2017, respectively, and $2,592 and $6,946for the three and nine months ended September 30, 2016, respectively.

(B) Investment Management Other Revenue, net, includes interest expense on the Notes Payable and the line of credit of $670 for the nine months ended September 30, 2016.

(2) Other Expenses are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Investment Banking
Amortization of LP Units / Interests and Certain Other Awards	$	9,249	$	13,859	$	4,980	$	66,356
Special Charges	—		—		14,400		—
Acquisition and Transition Costs	107		41		107		(692		)
Fair Value of Contingent Consideration	—		984		—		1,671
Intangible Asset and Other Amortization	2,392		2,538		7,176		8,519
Total Investment Banking	11,748		17,422		26,663		75,854
Investment Management
Special Charges	—		—		7,107		—
Acquisition and Transition Costs	492		298		869		702
Intangible Asset and Other Amortization	—		—		—		109
Total Investment Management	492		298		7,976		811
Total Other Expenses	$	12,240	$	17,720	$	34,639	$	76,665

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 and private equity funds located and managed in the following geographical areas:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Net Revenues: (1)
United States	$	305,258	$	322,128	$	842,907	$	714,983
Europe and Other	94,705		54,690		314,205		247,371
Latin America	7,107		8,774		9,655		31,722
Total	$	407,070	$	385,592	$	1,166,767	$	994,076

(1) Excludes Other Revenue and Interest Expense.

The Company's total assets are located in the following geographical areas:

	September 30, 2017		December 31, 2016
Total Assets:
United States	$	1,280,698	$	1,376,101
Europe and Other	207,605		190,380
Latin America	72,732		95,865
Total	$	1,561,035	$	1,662,346