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 October 18, 2017, the Company completed the sale of the Institutional Trust and Independent Fiduciary business of ETC, which was in the Investment Management segment. On September 30, 2016, the Company deconsolidated the assets and liabilities of its Mexican Private Equity business, which was in the Investment Management segment. On December 31, 2015, the Company deconsolidated the assets and liabilities of Atalanta Sosnoff, which was in the Investment Management segment, and accounted for its interest as an equity method investment from that date forward.

The Company's segment information for the years ended December 31, 2017, 2016 and 2015 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.


•	Other Acquisition Related Compensation Charges - Includes compensation charges in 2015 associated with deferred consideration, retention awards and related compensation for The Lexicon Partnership LLP ("Lexicon") employees.

•

Special Charges - Includes expenses in 2017 related to the impairment of goodwill in the Institutional Asset Management reporting unit, the impairment of the Company's investment in G5 and the transition of certain employees in conjunction with the sale of the Institutional Trust and Independent Fiduciary business of ETC. Expenses in 2016 related to an impairment charge associated with the Company's investment in Atalanta Sosnoff. Expenses in 2015 primarily related to an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit and charges related to the restructuring of the Company's investment in Atalanta Sosnoff, primarily related to the conversion of certain of Atalanta Sosnoff's profits interests held by management to equity interests. Special Charges for 2015 also include separation benefits and costs associated with the termination of certain contracts within the Company's Evercore ISI business and the finalization of a matter associated with the wind-down of the Company's U.S. Private Equity business.

•

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, and costs related to transitioning ISI's infrastructure in 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.

The following information presents each segment's contribution.



	For the Years Ended December 31,
	2017		2016		2015
Investment Banking
Net Revenues⁽¹⁾	$	1,634,268	$	1,363,859	$	1,130,915
Operating Expenses	1,175,927		1,020,327		869,301
Other Expenses⁽²⁾	35,810		92,172		108,739
Operating Income	422,531		251,360		152,875
Income from Equity Method Investments	277		1,370		978
Pre-Tax Income	$	422,808	$	252,730	$	153,853
Identifiable Segment Assets	$	1,294,103	$	1,302,351	$	1,097,373
Investment Management
Net Revenues⁽¹⁾	$	70,081	$	76,193	$	92,358
Operating Expenses	51,646		57,379		77,231
Other Expenses⁽²⁾	12,155		9,000		39,332
Operating Income (Loss)	6,280		9,814		(24,205		)
Income from Equity Method Investments	8,561		5,271		5,072
Pre-Tax Income (Loss)	$	14,841	$	15,085	$	(19,133	)
Identifiable Segment Assets	$	290,783	$	359,995	$	381,798
Total
Net Revenues⁽¹⁾	$	1,704,349	$	1,440,052	$	1,223,273
Operating Expenses	1,227,573		1,077,706		946,532
Other Expenses⁽²⁾	47,965		101,172		148,071
Operating Income	428,811		261,174		128,670
Income from Equity Method Investments	8,838		6,641		6,050
Pre-Tax Income	$	437,649	$	267,815	$	134,720
Identifiable Segment Assets	$	1,584,886	$	1,662,346	$	1,479,171


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



	For the Years Ended December 31,
	2017		2016			2015
Investment Banking^(A)	$	59,100	$	(239	)	$	(2,945	)
Investment Management^(B)	8,396		386			(2,771		)
Total Other Revenue, net	$	67,496	$	147		$	(5,716	)

(A)

Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $9,960, $9,578 and $6,041 for the years ended December 31, 2017, 2016 and 2015, respectively. Also includes an estimated gain of $77,535 related to a reduction in the liability for amounts due pursuant to the tax receivable agreement and a loss of $16,266 related to the release of cumulative foreign exchange losses resulting from the restructuring of the Company's equity method investment in G5 for the year ended December 31, 2017.


(B)	Investment Management Other Revenue, net, includes interest expense on the Notes Payable and the line of credit of $670 and $3,576 for the years ended December 31, 2016 and 2015. Also includes a gain of $7,808 related to the sale of the Institutional Trust and Independent Fiduciary business of ETC for the year ended December 31, 2017.


(2)	Other Expenses are as follows:



	For the Years Ended December 31,
	2017		2016			2015
Investment Banking
Amortization of LP Units / Interests and Certain Other Awards	$	11,444	$	80,846		$	83,673
Other Acquisition Related Compensation Charges	—		—			1,537
Special Charges	14,400		—			2,151
Acquisition and Transition Costs	555		(692		)	4,879
Fair Value of Contingent Consideration	—		1,107			2,704
Intangible Asset and Other Amortization	9,411		10,911			13,795
Total Investment Banking	35,810		92,172			108,739
Investment Management
Special Charges	11,037		8,100			38,993
Acquisition and Transition Costs	1,118		791			11
Intangible Asset and Other Amortization	—		109			328
Total Investment Management	12,155		9,000			39,332
Total Other Expenses	$	47,965	$	101,172		$	148,071

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 Years Ended December 31,
	2017		2016		2015
Net Revenues:⁽¹⁾
United States	$	1,199,236	$	1,056,796	$	900,672
Europe and Other	422,322		338,285		287,884
Latin America	15,295		44,824		40,433
Total	$	1,636,853	$	1,439,905	$	1,228,989

(1) Excludes Other Revenue and Interest Expense.

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



	December 31,
	2017		2016
Total Assets:
United States	$	1,284,163	$	1,376,101
Europe and Other	234,984		190,380
Latin America	65,739		95,865
Total	$	1,584,886	$	1,662,346