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Segment Operating Results | 6 Months Ended
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Jun. 30, 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. In April 2020, the Company entered into an agreement for the leaders of its business in Mexico to purchase ECB, the Company's Mexico based broker-dealer focused principally on providing Investment Management services. This sale will be completed following regulatory approval. See Note 5 for further information. The Company's segment information for the three and six months ended June 30, 2020 and 2019 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 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, as well as adjustments to amounts due pursuant to the Company’s tax receivable agreement, subsequent to its initial establishment, related to changes in enacted tax rates, and 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. Other Revenue, net, also includes interest expense associated with the Company’s Notes Payable and lines of credit, as well as revenue and expenses associated with repurchase or resale transactions. 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 expenses in 2020 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. Includes expenses in 2019 related to 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.
• | 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, 2020. The following information presents each segment's contribution.
| For the Three Months Ended June 30, |  | For the Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Investment Banking |  |  |  |  |  |  |
Net Revenues(1) | $ | 495,374 |  |  | $ | 516,386 |  |  | $ | 909,030 |  |  | $ | 917,574 |
Operating Expenses | 399,476 |  |  | 385,378 |  |  | 739,271 |  |  | 697,288 |
Other Expenses(2) | 9,163 |  |  | 6,909 |  |  | 34,389 |  |  | 14,167 |
Operating Income | 86,735 |  |  | 124,099 |  |  | 135,370 |  |  | 206,119 |
Income from Equity Method Investments | 65 |  |  | 219 |  |  | 601 |  |  | 474 |
Pre-Tax Income | $ | 86,800 |  |  | $ | 124,318 |  |  | $ | 135,971 |  |  | $ | 206,593 |
Identifiable Segment Assets | $ | 2,358,662 |  |  | $ | 1,749,339 |  |  | $ | 2,358,662 |  |  | $ | 1,749,339 |
Investment Management |  |  |  |  |  |  |
Net Revenues(1) | $ | 11,701 |  |  | $ | 14,660 |  |  | $ | 25,052 |  |  | $ | 28,799 |
Operating Expenses | 11,707 |  |  | 11,925 |  |  | 24,358 |  |  | 24,166 |
Other Expenses(2) | — |  |  | — |  |  | 32 |  |  | 108 |
Operating Income (Loss) | (6 | ) |  | 2,735 |  |  | 662 |  |  | 4,525 |
Income from Equity Method Investments | 2,248 |  |  | 2,234 |  |  | 4,840 |  |  | 4,190 |
Pre-Tax Income | $ | 2,242 |  |  | $ | 4,969 |  |  | $ | 5,502 |  |  | $ | 8,715 |
Identifiable Segment Assets | $ | 140,927 |  |  | $ | 190,410 |  |  | $ | 140,927 |  |  | $ | 190,410 |
Total |  |  |  |  |  |  |
Net Revenues(1) | $ | 507,075 |  |  | $ | 531,046 |  |  | $ | 934,082 |  |  | $ | 946,373 |
Operating Expenses | 411,183 |  |  | 397,303 |  |  | 763,629 |  |  | 721,454 |
Other Expenses(2) | 9,163 |  |  | 6,909 |  |  | 34,421 |  |  | 14,275 |
Operating Income | 86,729 |  |  | 126,834 |  |  | 136,032 |  |  | 210,644 |
Income from Equity Method Investments | 2,313 |  |  | 2,453 |  |  | 5,441 |  |  | 4,664 |
Pre-Tax Income | $ | 89,042 |  |  | $ | 129,287 |  |  | $ | 141,473 |  |  | $ | 215,308 |
Identifiable Segment Assets | $ | 2,499,589 |  |  | $ | 1,939,749 |  |  | $ | 2,499,589 |  |  | $ | 1,939,749 |
(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,
| 2020 |  | 2019 |  | 2020 |  | 2019
Investment Banking(A) | $ | 11,254 |  |  | $ | 7,236 |  |  | $ | (10,153 | ) |  | $ | 13,723 |
Investment Management | (1,252 | ) |  | 2,241 |  |  | (648 | ) |  | 3,997 |
Total Other Revenue, net | $ | 10,002 |  |  | $ | 9,477 |  |  | $ | (10,801 | ) |  | $ | 17,720 |
(A) | Investment Banking Other Revenue, net, includes interest expense on the Notes Payable and lines of credit of $4,534 and $9,376 for the three and six months ended June 30, 2020, respectively, and $2,304 and $4,568 for the three and six months ended June 30, 2019, respectively.
(2) | Other Expenses are as follows:
| For the Three Months Ended June 30, |  | For the Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Investment Banking |  |  |  |  |  |  |
Amortization of LP Units and Certain Other Awards | $ | — |  |  | $ | 3,723 |  |  | $ | 1,067 |  |  | $ | 7,795 |
Special Charges, Including Business Realignment Costs | 8,558 |  |  | 1,029 |  |  | 32,202 |  |  | 2,058 |
Acquisition and Transition Costs | 98 |  |  | — |  |  | 106 |  |  | — |
Intangible Asset and Other Amortization | 507 |  |  | 2,157 |  |  | 1,014 |  |  | 4,314 |
Total Investment Banking | 9,163 |  |  | 6,909 |  |  | 34,389 |  |  | 14,167 |
Investment Management |  |  |  |  |  |  |
Special Charges, Including Business Realignment Costs | — |  |  | — |  |  | 32 |  |  | — |
Acquisition and Transition Costs | — |  |  | — |  |  | — |  |  | 108 |
Total Investment Management | — |  |  | — |  |  | 32 |  |  | 108 |
Total Other Expenses | $ | 9,163 |  |  | $ | 6,909 |  |  | $ | 34,421 |  |  | $ | 14,275 |
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,
| 2020 |  | 2019 |  | 2020 |  | 2019
Net Revenues:(1) |  |  |  |  |  |  |
United States | $ | 391,762 |  |  | $ | 386,545 |  |  | $ | 756,977 |  |  | $ | 660,667 |
Europe and Other | 100,224 |  |  | 130,144 |  |  | 180,245 |  |  | 259,428 |
Latin America | 5,087 |  |  | 4,880 |  |  | 7,661 |  |  | 8,558 |
Total | $ | 497,073 |  |  | $ | 521,569 |  |  | $ | 944,883 |  |  | $ | 928,653 |
(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, 2020 |  | December 31, 2019
Total Assets: |  |  |
United States | $ | 2,138,684 |  |  | $ | 2,158,347 |
Europe and Other | 316,430 |  |  | 373,822 |
Latin America | 44,475 |  |  | 66,444 |
Total | $ | 2,499,589 |  |  | $ | 2,598,613 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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