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. 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 nine months ended September 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. 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 previously announced expansion of the Company's headquarters in New York. 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 nine months ended September 30, 2018.

The following information presents each segment's contribution.



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2018		2017			2018		2017
Investment Banking
Net Revenues⁽¹⁾	$	366,834	$	388,299		$	1,252,709	$	1,115,478
Operating Expenses	287,809		293,264			946,629		844,573
Other Expenses⁽²⁾	7,888		11,748			21,805		26,663
Operating Income	71,137		83,287			284,275		244,242
Income (Loss) from Equity Method Investments	—		(75		)	297		(111		)
Pre-Tax Income	$	71,137	$	83,212		$	284,572	$	244,131
Identifiable Segment Assets	$	1,294,106	$	1,239,812		$	1,294,106	$	1,239,812
Investment Management
Net Revenues⁽¹⁾	$	14,425	$	18,302		$	40,590	$	48,840
Operating Expenses	11,022		14,027			32,973		40,441
Other Expenses⁽²⁾	—		492			21		7,976
Operating Income	3,403		3,783			7,596		423
Income from Equity Method Investments	2,298		1,902			6,545		5,618
Pre-Tax Income	$	5,701	$	5,685		$	14,141	$	6,041
Identifiable Segment Assets	$	411,501	$	321,223		$	411,501	$	321,223
Total
Net Revenues⁽¹⁾	$	381,259	$	406,601		$	1,293,299	$	1,164,318
Operating Expenses	298,831		307,291			979,602		885,014
Other Expenses⁽²⁾	7,888		12,240			21,826		34,639
Operating Income	74,540		87,070			291,871		244,665
Income from Equity Method Investments	2,298		1,827			6,842		5,507
Pre-Tax Income	$	76,838	$	88,897		$	298,713	$	250,172
Identifiable Segment Assets	$	1,705,607	$	1,561,035		$	1,705,607	$	1,561,035


(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,
	2018		2017			2018		2017
Investment Banking^(A)	$	4,108	$	(878	)	$	3,219	$	(3,431	)
Investment Management^(B)	1,747		2,018			3,987		1,803
Total Other Revenue, net	$	5,855	$	1,140		$	7,206	$	(1,628	)

(A)

Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,300 and $6,861 for the three and nine months ended September 30, 2018, respectively, and $2,488 and $7,494 for the three and nine months ended September 30, 2017, respectively. Also includes ($343) and ($606) of principal trading losses for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.


(B)	Includes $1,952 and $1,427 of net realized and unrealized gains on private equity investments for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.


(2)	Other Expenses are as follows:



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2018		2017		2018		2017
Investment Banking
Amortization of LP Units / Interests and Certain Other Awards	$	3,764	$	9,249	$	11,470	$	4,980
Special Charges	1,967		—		3,864		14,400
Acquisition and Transition Costs	—		107		—		107
Intangible Asset and Other Amortization	2,157		2,392		6,471		7,176
Total Investment Banking	7,888		11,748		21,805		26,663
Investment Management
Special Charges	—		—		—		7,107
Acquisition and Transition Costs	—		492		21		869
Total Investment Management	—		492		21		7,976
Total Other Expenses	$	7,888	$	12,240	$	21,826	$	34,639

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 September 30,				For the Nine Months Ended September 30,
	2018		2017		2018		2017
Net Revenues:⁽¹⁾
United States	$	290,944	$	305,062	$	1,023,686	$	842,814
Europe and Other	82,063		94,654		239,226		314,154
Latin America	2,397		5,745		23,181		8,978
Total	$	375,404	$	405,461	$	1,286,093	$	1,165,946

(1) Excludes Other Revenue, Including Interest and Investments, and Interest Expense.

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



	September 30, 2018		December 31, 2017
Total Assets:
United States	$	1,438,902	$	1,284,163
Europe and Other	200,020		234,984
Latin America	66,685		65,739
Total	$	1,705,607	$	1,584,886