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 and Wealth Management and interests in private equity funds which are not managed by the Company. 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.

The Company's segment information for the three and six months ended June 30, 2018 and 2017 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, 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, 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 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. Also 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.


•	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, 2018.

The following information presents each segment's contribution.



	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018		2017			2018		2017
Investment Banking
Net Revenues⁽¹⁾	$	435,675	$	356,409		$	885,875	$	727,179
Operating Expenses	327,137		269,717			658,820		551,309
Other Expenses⁽²⁾	5,880		33,894			13,917		14,915
Operating Income	102,658		52,798			213,138		160,955
Income (Loss) from Equity Method Investments	297		113			297		(36		)
Pre-Tax Income	$	102,955	$	52,911		$	213,435	$	160,919
Identifiable Segment Assets	$	1,354,810	$	1,135,094		$	1,354,810	$	1,135,094
Investment Management
Net Revenues⁽¹⁾	$	12,802	$	14,061		$	26,165	$	30,538
Operating Expenses	10,678		13,109			21,951		26,414
Other Expenses⁽²⁾	—		7,484			21		7,484
Operating Income (Loss)	2,124		(6,532		)	4,193		(3,360		)
Income from Equity Method Investments	2,122		1,957			4,247		3,716
Pre-Tax Income (Loss)	$	4,246	$	(4,575	)	$	8,440	$	356
Identifiable Segment Assets	$	257,714	$	316,192		$	257,714	$	316,192
Total
Net Revenues⁽¹⁾	$	448,477	$	370,470		$	912,040	$	757,717
Operating Expenses	337,815		282,826			680,771		577,723
Other Expenses⁽²⁾	5,880		41,378			13,938		22,399
Operating Income	104,782		46,266			217,331		157,595
Income from Equity Method Investments	2,419		2,070			4,544		3,680
Pre-Tax Income	$	107,201	$	48,336		$	221,875	$	161,275
Identifiable Segment Assets	$	1,612,524	$	1,451,286		$	1,612,524	$	1,451,286


(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,
	2018		2017			2018			2017
Investment Banking^(A)	$	539	$	(1,375	)	$	(889	)	$	(2,553	)
Investment Management^(B)	632		(1,410		)	2,240			(215		)
Total Other Revenue, net	$	1,171	$	(2,785	)	$	1,351		$	(2,768	)

(A)

Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,300 and $4,561 for the three and six months ended June 30, 2018, respectively, and $2,425 and $5,006 for the three and six months ended June 30, 2017, respectively. Also includes ($253) and ($263) of principal trading losses for the three and six months ended June 30, 2017, respectively, to conform to the current presentation.


(B)	Includes ($1,589) and ($525) of net realized and unrealized losses on private equity investments for the three and six months ended June 30, 2017, respectively, to conform to the current presentation.


(2)	Other Expenses are as follows:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Investment Banking
Amortization of LP Units / Interests and Certain Other Awards	$	3,723	$	17,102	$	7,706	$	(4,269	)
Special Charges	—		14,400		1,897		14,400
Intangible Asset and Other Amortization	2,157		2,392		4,314		4,784
Total Investment Banking	5,880		33,894		13,917		14,915
Investment Management
Special Charges	—		7,107		—		7,107
Acquisition and Transition Costs	—		377		21		377
Total Investment Management	—		7,484		21		7,484
Total Other Expenses	$	5,880	$	41,378	$	13,938	$	22,399

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,
	2018		2017		2018		2017
Net Revenues:⁽¹⁾
United States	$	346,225	$	274,652	$	732,742	$	537,752
Europe and Other	91,933		96,589		157,163		219,500
Latin America	9,148		2,014		20,784		3,233
Total	$	447,306	$	373,255	$	910,689	$	760,485

(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, 2018		December 31, 2017
Total Assets:
United States	$	1,355,434	$	1,284,163
Europe and Other	188,487		234,984
Latin America	68,603		65,739
Total	$	1,612,524	$	1,584,886