Segment Reporting

6 Months Ended

Jun. 30, 2017

Segment Reporting

Segment Reporting

(14) Segment Reporting

The Company is organized into four geographic operating segments through which the Company’s chief operating decision maker manages the Company’s business. The U.S., Canadian, European and Asia Pacific Operations segments provide the following categories of products and services:

· Execution Services — includes (a) liquidity matching through POSIT, (b) self-directed trading using algorithms (including single stocks and portfolio lists) and smart routing, (c) portfolio trading and single stock sales trading desks providing execution expertise and (d) futures and options trading

· Workflow Technology  — includes trade order and execution management software applications in addition to network connectivity

· Analytics — includes (a) tools enabling portfolio managers and traders to improve pre-trade, real-time and post-trade execution performance, (b) portfolio construction and optimization decisions and (c) securities valuation

The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The Company allocates resources to, and evaluates the performance of, its reportable segments based on income or loss before income tax expense (benefit). Consistent with the Company’s resource allocation and operating performance evaluation approach, the effects of inter-segment activities are eliminated except in limited circumstances where certain technology related costs are allocated to a segment to support that segment’s revenue producing activities. Commissions and fees revenue for trade executions and commission share revenues are principally attributed to each segment based upon the location of execution of the related transaction except that commissions and fees for trade executions by Canadian clients in the U.S. market are attributed to the Canadian Operations instead of the U.S. Operations. Recurring revenues are principally attributed based upon the location of the client using the respective service.

Regional segment results exclude the impact of Corporate activity, which is presented separately and includes investment income from treasury activity, certain non-operating revenues and other gains as well as costs not associated with operating the businesses within the Company’s regional segments.  These costs include, among others, (a) the costs of being a public company, such as certain staff costs, a portion of external audit fees, and reporting, filing and listing costs, (b) intangible asset amortization, (c) interest expense, (d) professional fees associated with the Company's global transfer pricing structure, (e) foreign exchange gains or losses and (f) certain non-operating expenses.

A summary of the segment financial information is as follows (dollars in thousands):

	U.S.		Canadian		European		Asia Pacific
	Operations		Operations		Operations		Operations		Corporate		Consolidated
Three Months Ended June 30, 2017
Total revenues	$	52,763	$	15,984	$	38,739	$	13,720	$	375	$	121,581
(Loss) income before income tax (benefit) expense		(5,030)		3,131		10,827		1,535		(5,376)		5,087
Identifiable assets		456,071		108,698		339,337		52,570		—		956,676
Three Months Ended June 30, 2016
Total revenues (1)	$	58,574	$	15,790	$	32,203	$	11,280	$	2,763	$	120,610
(Loss) income before income tax (benefit) expense (1) (2) (3) (4)		(2,874)		2,782		6,284		(93)		(15,757)		(9,658)
Identifiable assets		504,998		99,036		429,986		72,196		—		1,106,216
Six Months Ended June 30, 2017
Total revenues	$	106,156	$	32,466	$	75,451	$	27,663	$	680	$	242,416
(Loss) income before income tax (benefit) expense		(11,634)		6,629		22,028		3,380		(11,505)		8,898
Six Months Ended June 30, 2016
Total revenues (1)	$	124,903	$	31,886	$	63,342	$	22,037	$	3,110	$	245,278
(Loss) income before income tax (benefit) expense (1) (2) (3) (4)		(769)		6,120		11,963		(693)		(29,917)		(13,296)

The following notes relate to Corporate activity:

(1) The Company received insurance proceeds of $2.4 million in June 2016 from its corporate insurance carrier to settle a claim for lost profits arising from an August 2015 outage in its outsourced primary data center in the U.S. Additionally, the Company generated a nominal gain on the completion of the sale of its investment research operations in May 2016.

(2) During the three months ended June 30, 2016, the Company incurred $4.4 million in restructuring charges related to (a) the reduction in its single stock sales trading and sales organizations and (b) the closing of its U.S. matched-book securities lending operations and its Canadian arbitrage trading desk.

(3) The Company’s current CEO was granted cash and stock awards upon the commencement of his employment in January 2016, a significant portion of which replaced awards he forfeited at his former employer. The amount expensed for these awards during the three and six month periods ended June 30, 2016 was $0.5 million and $3.3 million, respectively. Due to U.S. tax regulations, only a small portion of the amount expensed for these awards during the three and six months ended June 30, 2016 was eligible for a tax deduction.

(4) During the three and six month periods ended June 30, 2016, the Company established a reserve of $2.3 million and $4.8 million, respectively, for the arbitration case with its former CEO. In addition, the Company incurred legal fees related to this matter of $2.4 million and $2.7 million during the three and six month periods ended June 30, 2016, respectively. The Company settled the arbitration case in June 2016.

The table below details the total revenues for the categories of products and services provided by the Company (dollars in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Revenues:
Execution Services	$	86,797	$	83,408	$	173,084	$	173,201
Workflow Technology		23,352		23,094		46,452		46,687
Analytics		11,057		11,345		22,200		22,280
Corporate (non-product)		375		2,763		680		3,110
Total Revenues	$	121,581	$	120,610	$	242,416	$	245,278