XML 46 R31.htm IDEA: XBRL DOCUMENT v3.20.4
Segment Operating Results
 12 Months Ended
Dec. 31, 2020
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 Institutional Asset Management and Wealth Management and interests in private equity funds which are not managed by the Company. The Company completed the sales of its ECB businesses in 2020. In addition, in 2020, the Company completed the transition of its advisory presence in Mexico to a strategic alliance relationship with a newly-formed independent strategic advisory firm founded by certain former employees. See Note 5 for further information.
The Company's segment information for the years ended December 31, 2020, 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 the following:
•Interest income and income (losses) earned on investment securities, including our investment funds and futures contracts 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
•Adjustments to amounts due pursuant to the Company’s tax receivable agreement, subsequent to its initial establishment, related to changes in enacted tax rates
•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
•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
•A net loss on the sales of the Company's businesses at ECB, as well as a loss related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of the Company's businesses in Mexico in 2020
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, Including Business Realignment Costs – Includes the following expenses for the years ended December 31, 2020, 2019 and 2018:
◦2020 – Includes expenses related to separation and transition benefits and related costs as a result of the Company's review of its operations and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of the Company's headquarters in New York and the Company's business realignment initiatives, as well as charges related to the impairment of assets resulting from the wind-down of the Company's businesses in Mexico
◦2019 – Includes expenses related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York, the impairment of goodwill in the Company's Institutional Asset Management reporting unit and separation and transition benefits for certain employees terminated as a result of the Company's review of its operations
◦2018 – Includes expenses 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. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York
•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, including costs in 2020 associated with the sale of the Company's ECB businesses.
•Fair Value of Contingent Consideration – Includes expense, or the reversal of 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,
 202020192018
Investment Banking
Net Revenues(1)
$2,217,386 $1,951,795 $2,012,023 
Operating Expenses1,637,542 1,485,477 1,448,301 
Other Expenses(2)
49,112 33,618 30,366 
Operating Income530,732 432,700 533,356 
Income from Equity Method Investments1,546 916 518 
Pre-Tax Income $532,278 $433,616 $533,874 
Identifiable Segment Assets$3,186,864 $2,393,647 $1,923,783 
Investment Management
Net Revenues(1)
$46,519 $56,903 $52,682 
Operating Expenses50,473 48,645 43,940 
Other Expenses(2)
345 3,247 21 
Operating Income (Loss)(4,299)5,011 8,721 
Income from Equity Method Investments12,852 10,080 8,776 
Pre-Tax Income $8,553 $15,091 $17,497 
Identifiable Segment Assets$184,024 $204,966 $201,884 
Total
Net Revenues(1)
$2,263,905 $2,008,698 $2,064,705 
Operating Expenses1,688,015 1,534,122 1,492,241 
Other Expenses(2)
49,457 36,865 30,387 
Operating Income526,433 437,711 542,077 
Income from Equity Method Investments14,398 10,996 9,294 
Pre-Tax Income$540,831 $448,707 $551,371 
Identifiable Segment Assets$3,370,888 $2,598,613 $2,125,667 
(1)Net revenues include Other Revenue, net, allocated to the segments as follows:
 For the Years Ended December 31,
 202020192018
Investment Banking(A)
$(19,845)$19,023 $(3,156)
Investment Management(B)
(7,878)6,292 4,436 
Total Other Revenue, net$(27,723)$25,315 $1,280 
(A)Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and lines of credit of $18,197, $12,917 and $9,201 for the years ended December 31, 2020, 2019 and 2018, respectively. Investment Banking Other Revenue, net, also includes a loss of $21,070 related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of the Company's businesses in Mexico for the year ended December 31, 2020.
(B)Investment Management Other Revenue, net, includes a net loss of $3,441 related to the sale of the Company's ECB businesses and a loss of $6,295 related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of the Company's businesses in Mexico for the year ended December 31, 2020.
(2)Other Expenses are as follows:
 For the Years Ended December 31,
 202020192018
Investment Banking
Amortization of LP Units and Certain Other Awards$1,067 $18,183 $15,241 
Special Charges, Including Business Realignment Costs46,600 7,202 5,012 
Acquisition and Transition Costs262 705 — 
Fair Value of Contingent Consideration— — 1,485 
Intangible Asset and Other Amortization1,183 7,528 8,628 
Total Investment Banking49,112 33,618 30,366 
Investment Management
Special Charges, Including Business Realignment Costs45 2,939 — 
Acquisition and Transition Costs300 308 21 
Total Investment Management345 3,247 21 
Total Other Expenses$49,457 $36,865 $30,387 
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 Years Ended December 31,
 202020192018
Net Revenues:(1)
United States$1,767,976 $1,464,551 $1,591,883 
Europe and Other497,102 501,425 438,602 
Latin America26,550 17,407 32,940 
Total$2,291,628 $1,983,383 $2,063,425 
(1) Excludes Other Revenue, Including Interest and Investments, and Interest Expense.
The Company's total assets are located in the following geographical areas:
December 31,
20202019
Total Assets:
United States$2,862,343 $2,158,347 
Europe and Other504,977 373,822 
Latin America3,568 66,444 
Total$3,370,888 $2,598,613