Revenues from contracts with customers

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenues from contracts with customers

Revenue from contracts with customers

Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised goods or services to customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company's progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised good or service.

The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for those promised goods or services (i.e., the "transaction price"). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period during which uncertainties are expected to be resolved and the amount of consideration that is susceptible to factors outside of the Company's influence, such as market volatility or the judgment and actions of third parties.

The Company earns revenue from contracts with customers and other sources (principal transactions, interest and other). The following provides detailed information on the recognition of the Company's revenue from contracts with customers:

Commissions

Commissions from Sales and Trading — The Company earns commission revenue by executing, settling and clearing transactions with clients primarily in exchange-traded and over-the-counter corporate equity and debt securities, money market instruments and exchange-traded options and futures contracts. A substantial portion of the Company's revenue is derived from commissions from private clients through accounts with transaction-based pricing. Trade execution and clearing services, when provided together, represent a single performance obligation, as the services are not separately identifiable in the context of the contract. Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, are recognized at a point in time on trade date when the performance obligation is satisfied.

Commission revenue is generally paid on settlement date, which is generally two business days after trade date for equity securities and corporate bond transactions and one day for government securities, options and commodities transactions. The Company records a receivable on the trade date and receives a payment on the settlement date.

Mutual Fund Income — The Company earns mutual fund income for sales and distribution of mutual fund shares, which consists of a fixed fee amount and a variable amount. The Company recognizes mutual fund income at a point in time on the trade date when the performance obligation is satisfied which is when the mutual fund interest is sold to the investor. The ongoing distribution fees for distributing investment products from mutual fund companies are generally considered variable consideration because they are based on the value of AUM and are uncertain on trade date. The Company recognizes distribution fees over the investment period as the amounts become known and the portion recognized in the current period may relate to distribution services performed in prior periods. Mutual fund income is generally received within 90 days.

Advisory Fees

The Company earns management and performance (or incentive) fees in connection with the advisory and asset management services it provides to various types of funds, asset-based programs and investment vehicles through its subsidiaries. Management fees are generally based on the account value at the valuation date per the respective asset management agreements and are recognized over time as the customer receives the benefits of the services evenly throughout the term of the contract. Performance fees are recognized when the return on client AUM exceeds a specified benchmark return or as other performance targets over a 12-month measurement period are met. Performance fees are considered variable and they are recognized at a point in time as they are subject to fluctuation and/or are contingent on a future event over the measurement period and are not subject to adjustment once the measurement period ends. Such fees are computed as of the fund's year-end when the measurement period ends and generally are recorded as earned in the fourth quarter of the Company's fiscal year. Both management and performance fees are generally received within 90 days.

Investment Banking

The Company earns underwriting revenues by providing capital raising solutions for corporate clients through initial public offerings, follow-on offerings, equity-linked offerings, private investments in public entities, and private placements. Underwriting revenues are recognized at a point in time on trade date, as the client obtains the control and benefit of the capital markets offering at that point. These fees are generally received within 90 days after the transactions are completed. Transaction-related expenses, primarily consisting of legal, travel and other costs directly associated with the transaction, are deferred and recognized in the same period as the related investment banking transaction revenue. Underwriting revenues and related expenses are presented gross on the condensed consolidated income statements.

Revenue from financial advisory services includes fees generated in connection with mergers, acquisitions, and restructuring transactions. Such revenue and fees are primarily recorded at a point in time when services for the transactions are completed and income is reasonably determinable, generally as set forth under the terms of the engagement. Payment for advisory services is generally due upon completion of the transaction or milestone. Retainer fees and fees earned from certain advisory services are recognized ratably over the service period as the customer receives the benefit of the services throughout the term of the contracts, and such fees are collected based on the terms of the contracts.

Bank Deposit Sweep Income

Bank deposit sweep income consists of revenue earned from the FDIC-insured bank deposit program. Under this program, client funds are swept into deposit accounts at participating banks and are eligible for FDIC deposit insurance up to FDIC standard maximum deposit insurance amounts. Fees are earned over time and are generally received within 30 days.

Disaggregation of Revenue

The following presents the Company's revenue from contracts with customers disaggregated by major business activity and other sources of revenue for the three and nine months ended September 30, 2022 and 2021:

(Expressed in thousands)	For the Three Months Ended September 30, 2022
	Reportable Segments
	Private Client		Asset Management		Capital Markets		Corporate/Other		Total
Revenue from contracts with customers:
Commissions from sales and trading	$	39,290	$	—	$	42,699	$	12	$	82,001
Mutual fund and insurance income	7,603		—		1		3		7,607
Advisory fees	78,055		24,865		—		7		102,927
Investment banking - capital markets	1,950		—		7,173		—		9,123
Investment banking - advisory	—		—		29,270		—		29,270
Bank deposit sweep income	35,769		—		—		—		35,769
Other	5,126		—		652		39		5,817
Total revenue from contracts with customers	167,793		24,865		79,795		61		272,514
Other sources of revenue:
Interest	14,471		—		2,265		625		17,361
Principal transactions, net	(884)		—		8,637		(1,251)		6,502
Other	(2,766)		5		250		245		(2,266)
Total other sources of revenue	10,821		5		11,152		(381)		21,597
Total revenue	$	178,614	$	24,870	$	90,947	$	(320)	$	294,111

(Expressed in thousands)	For the Three Months Ended September 30, 2021
	Reportable Segments
	Private Client		Asset Management		Capital Markets		Corporate/Other		Total
Revenue from contracts with customers:
Commissions from sales and trading	$	42,214	$	—	$	39,535	$	(2)	$	81,747
Mutual fund and insurance income	9,134		—		2		6		9,142
Advisory fees	89,849		26,890		—		12		116,751
Investment banking - capital markets	5,599		—		29,488		—		35,087
Investment banking - advisory	—		—		51,814		—		51,814
Bank deposit sweep income	3,909		—		—		—		3,909
Other	2,765		—		196		10		2,971
Total revenue from contracts with customers	153,470		26,890		121,035		26		301,421
Other sources of revenue:
Interest	7,624		—		1,631		85		9,340
Principal transactions, net	(189)		—		5,804		(1,121)		4,494
Other	(41)		4		115		9		87
Total other sources of revenue	7,394		4		7,550		(1,027)		13,921
Total revenue	$	160,864	$	26,894	$	128,585	$	(1,001)	$	315,342

(Expressed in thousands)	For the Nine Months Ended September 30, 2022
	Reportable Segments
	Private Client		Asset Management		Capital Markets		Corporate/Other		Total
Revenue from contracts with customers:
Commissions from sales and trading	$	120,753	$	—	137,760		29		$	258,542
Mutual fund and insurance income	23,733		—		7		25		23,765
Advisory fees	249,667		76,289		117		25		326,098
Investment banking - capital markets	7,615		—		26,407		—		34,022
Investment banking - advisory	35		—		59,459		—		59,494
Bank deposit sweep income	54,968		—		—		—		54,968
Other	12,770		—		1,449		227		14,446
Total revenue from contracts with customers	469,541		76,289		225,199		306		771,335
Other sources of revenue:
Interest	32,987		—		4,950		730		38,667
Principal transactions, net	(5,050)		—		16,717		(1,543)		10,124
Other	(23,546)		13		406		362		(22,765)
Total other sources of revenue	4,391		13		22,073		(451)		26,026
Total revenue	$	473,932	$	76,302	$	247,272	$	(145)	$	797,361

(Expressed in thousands)	For the Nine Months Ended September 30, 2021
	Reportable Segments
	Private Client		Asset Management		Capital Markets		Corporate/Other		Total
Revenue from contracts with customers:
Commissions from sales and trading	$	135,122	$	—	$	137,742	$	(1)	$	272,863
Mutual fund and insurance income	27,575		—		6		87		27,668
Advisory fees	255,701		76,658		3		37		332,399
Investment banking - capital markets	19,879		—		157,765		—		177,644
Investment banking - advisory	250		—		138,250		—		138,500
Bank deposit sweep income	11,629		—		—		—		11,629
Other	10,359		—		957		43		11,359
Total revenue from contracts with customers	460,515		76,658		434,723		166		972,062
Other sources of revenue:
Interest	21,335		—		5,449		131		26,915
Principal transactions, net	1,987		—		19,636		41		21,664
Other	7,913		10		321		32		8,276
Total other sources of revenue	31,235		10		25,406		204		56,855
Total revenue	$	491,750	$	76,668	$	460,129	$	370	$	1,028,917

Contract Balances

The timing of the Company's revenue recognition may differ from the timing of payment by its customers. The Company records receivables when revenue is recognized prior to payment and it has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.

The Company had receivables related to revenue from contracts with customers of $32.9 million and $37.2 million at September 30, 2022 and December 31, 2021, respectively. The Company had no significant impairments related to these receivables during the three and nine months ended September 30, 2022.

Deferred revenue relates to IRA fees received annually in advance on customers' IRA accounts and investment banking fees received from certain advisory transactions where the performance obligations have not yet been satisfied. Total deferred revenue was $994,000 and $235,000 at September 30, 2022 and December 31, 2021, respectively.

The following presents the Company's contract assets and deferred revenue balances from contracts with customers, which are included in other assets and other liabilities, respectively, on the condensed consolidated balance sheet:

(Expressed in thousands)	As of
	September 30, 2022		December 31, 2021
Contract assets (receivables):
Commission (1)	$	5,990	$	2,886
Mutual fund income (2)	5,078		6,205
Advisory fees (3)	3,404		4,546
Bank deposit sweep income (4)	6,625		595
Investment banking fees (5)	7,065		17,765
Other	4,765		5,195
Total contract assets	$	32,927	$	37,192
Deferred revenue (payables):
Investment banking fees (6)	$	230	$	235
IRA fees (7)	764		—
Total deferred revenue	$	994	$	235

(1)Commission recorded on trade date but not yet settled.

(2)Mutual fund income earned but not yet received.

(3)Management and performance fees earned but not yet received.

(4)Fees earned from FDIC-insured bank deposit program but not yet received.

(5)Underwriting revenue and advisory fees earned but not yet received.

(6)Retainer fees and fees received from certain advisory transactions where the performance

obligations have not yet been satisfied.

(7) Fee received in advance on an annual basis.