Q2 Financial Highlights
"Our second quarter results are reasonable in the face of an extremely challenging capital markets environment, with some markets being all but shut to new issues. We achieved Investment Banking and Capital Markets and Asset Management net revenues of over $1.1 billion despite the limited new issue market, as well as some unrealized markdowns in our mortgage inventory and leveraged finance commitments. Similarly, we incurred increased expenses for conferences, travel and other marketing, which will primarily benefit future periods, as well as our $14 million charitable contributions to support Ukraine.
"Our Investment Banking advisory activity remains strong as our clients continue to look to Jefferies to support them through this transition in economic and market conditions. We believe our market position continues to strengthen and we will reap the benefit of this as conditions normalize and the new issue market picks up. Our backlog7 is consistent with last quarter's strong levels but execution remains dependent on market conditions. Based on our ongoing dialogues with our clients, we believe that M&A and capital markets activity will pick up when stability and visibility improve.
"We are deeply appreciative of our entire team that is persevering through this period of instability, working tirelessly to add to our significant pipeline of future deals while we wait for the market to open. We have invested heavily in human capital throughout Jefferies over the past decade, and in particular these past two years. We remain optimistic of our long-term growth and trajectory and look forward to continued success serving our ever increasing and incredibly loyal client base."
Richard Handler, CEO, and Brian Friedman, President
Quarterly Cash Dividend
The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on August 26, 2022 to record holders of Jefferies common shares on August 15, 2022.
Financial Summary
(Dollars in thousands, except per share amounts) |
Three Months Ended May 31, |
|
|
Six Months Ended May 31, |
|
||||||||||||||
|
|
2022 |
|
|
|
2021 (8) |
% Change |
|
|
2022 |
|
|
|
2021 (8) |
% Change |
||||
Net revenues: |
|
|
|
|
|
|
|
|
|
||||||||||
Investment Banking and Capital Markets |
$ |
1,098,378 |
|
|
$ |
1,598,862 |
|
(31 |
)% |
|
$ |
2,580,196 |
|
|
$ |
3,586,358 |
|
(28 |
)% |
Asset Management |
|
31,147 |
|
|
|
50,675 |
|
(39 |
)% |
|
|
91,103 |
|
|
|
279,877 |
|
(67 |
)% |
Merchant Banking |
|
238,255 |
|
|
|
296,815 |
|
(20 |
)% |
|
|
427,790 |
|
|
|
563,819 |
|
(24 |
)% |
Corporate |
|
1,818 |
|
|
|
724 |
|
151 |
% |
|
|
2,564 |
|
|
|
1,314 |
|
95 |
% |
Consolidation Adjustments |
|
(516 |
) |
|
|
3,431 |
|
(115 |
)% |
|
|
(656 |
) |
|
|
6,081 |
|
(111 |
)% |
Net revenues |
$ |
1,369,082 |
|
|
$ |
1,950,507 |
|
(30 |
)% |
|
$ |
3,100,997 |
|
|
$ |
4,437,449 |
|
(30 |
)% |
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes |
$ |
166,541 |
|
|
$ |
474,139 |
|
(65 |
)% |
|
$ |
558,873 |
|
|
$ |
1,274,924 |
|
(56 |
)% |
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income attributable to common shareholders |
$ |
114,014 |
|
|
$ |
352,596 |
|
(68 |
)% |
|
$ |
441,461 |
|
|
$ |
935,031 |
|
(53 |
)% |
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted earnings per share |
$ |
0.45 |
|
|
$ |
1.30 |
|
(65 |
)% |
|
$ |
1.70 |
|
|
$ |
3.43 |
|
(50 |
)% |
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average diluted shares |
|
251,979 |
|
|
|
271,092 |
|
|
|
|
261,494 |
|
|
|
271,948 |
|
|
||
|
|
|
|
|
|
|
|
|
|
||||||||||
Annualized return on adjusted tangible equity1 |
|
5.8 |
% |
|
|
19.2 |
% |
|
|
|
11.2 |
% |
|
|
27.0 |
% |
|
Highlights
Three months ended May 31, 2022 |
|
Six months ended May 31, 2022 |
|
|
|
|
|
|
Three months ended May 31, 2022 |
|
Six months ended May 31, 2022 |
Investment Banking and Capital Markets |
|
Investment Banking and Capital Markets |
|
|
|
Asset Management |
|
Asset Management |
|
|
|
Legacy Merchant Banking |
|
Legacy Merchant Banking |
|
|
|
* * * *
Amounts herein pertaining to May 31, 2022 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”). More information on our results of operations for the three and six months ended May 31, 2022 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC, which we expect to file on or about July 8, 2022.
This press release contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current views and include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” "would," or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward-looking statements may also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC. We undertake no obligation to update or revise any such forward-looking statement to reflect subsequent circumstances.
Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s).
Notes
Summary
(In thousands, except per share amounts) (Unaudited) |
|
|
|
|
|
|
|
||||||||
|
Three Months Ended May 31, |
|
Six Months Ended May 31, |
||||||||||||
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net revenues |
$ |
1,369,082 |
|
|
$ |
1,950,507 |
|
|
$ |
3,100,997 |
|
|
$ |
4,437,449 |
|
Income before income taxes and loss related to associated companies |
$ |
188,241 |
|
|
$ |
497,665 |
|
|
$ |
610,558 |
|
|
$ |
1,309,018 |
|
Loss related to associated companies |
|
(21,700 |
) |
|
|
(23,526 |
) |
|
|
(51,685 |
) |
|
|
(34,094 |
) |
Income before income taxes |
|
166,541 |
|
|
|
474,139 |
|
|
|
558,873 |
|
|
|
1,274,924 |
|
Income tax provision |
|
49,683 |
|
|
|
120,820 |
|
|
|
114,040 |
|
|
|
339,056 |
|
Net income |
|
116,858 |
|
|
|
353,319 |
|
|
|
444,833 |
|
|
|
935,868 |
|
Net (income) loss attributable to the noncontrolling interests |
|
(1,096 |
) |
|
|
669 |
|
|
|
(127 |
) |
|
|
1,412 |
|
Net loss attributable to the redeemable noncontrolling interests |
|
323 |
|
|
|
234 |
|
|
|
896 |
|
|
|
1,003 |
|
Preferred stock dividends |
|
(2,071 |
) |
|
|
(1,626 |
) |
|
|
(4,141 |
) |
|
|
(3,252 |
) |
Net income attributable to common shareholders |
$ |
114,014 |
|
|
$ |
352,596 |
|
|
$ |
441,461 |
|
|
$ |
935,031 |
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per common share attributable to Jefferies common shareholders: |
|
|
|
|
|
|
|
||||||||
Net income |
$ |
0.46 |
|
|
$ |
1.33 |
|
|
$ |
1.73 |
|
|
$ |
3.51 |
|
|
|
|
|
|
|
|
|
||||||||
Basic: weighted average shares |
|
249,142 |
|
|
|
263,280 |
|
|
|
253,330 |
|
|
|
264,829 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per common share attributable to Jefferies common shareholders: |
|
|
|
|
|
|
|
||||||||
Net income |
$ |
0.45 |
|
|
$ |
1.30 |
|
|
$ |
1.70 |
|
|
$ |
3.43 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted: weighted average shares |
|
251,979 |
|
|
|
271,092 |
|
|
|
261,494 |
|
|
|
271,948 |
|
A summary of results for the three months ended May 31, 2022 is as follows (in thousands):
|
Investment Banking and Capital Markets |
|
Asset Management |
|
Merchant Banking |
|
Corporate |
|
Parent Company Interest |
|
Consolidation Adjustments |
|
Total |
||||||||||||
Net revenues |
$ |
1,098,378 |
|
$ |
31,147 |
|
$ |
238,255 |
|
|
$ |
1,818 |
|
|
$ |
— |
|
|
$ |
(516 |
) |
|
$ |
1,369,082 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales |
|
— |
|
|
— |
|
|
130,449 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
130,449 |
|
Compensation and benefits |
|
522,860 |
|
|
10,816 |
|
|
39,319 |
|
|
|
5,482 |
|
|
|
— |
|
|
|
— |
|
|
|
578,477 |
|
Non-compensation expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Floor brokerage and clearing fees |
|
85,247 |
|
|
8,769 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
94,016 |
|
Selling, general and other expenses |
|
279,442 |
|
|
10,122 |
|
|
32,834 |
|
|
|
6,043 |
|
|
|
— |
|
|
|
(160 |
) |
|
|
328,281 |
|
Interest expense |
|
— |
|
|
— |
|
|
926 |
|
|
|
— |
|
|
|
8,385 |
|
|
|
— |
|
|
|
9,311 |
|
Depreciation and amortization |
|
22,766 |
|
|
467 |
|
|
16,655 |
|
|
|
419 |
|
|
|
— |
|
|
|
— |
|
|
|
40,307 |
|
Total non-compensation expenses |
|
387,455 |
|
|
19,358 |
|
|
50,415 |
|
|
|
6,462 |
|
|
|
8,385 |
|
|
|
(160 |
) |
|
|
471,915 |
|
Total expenses |
|
910,315 |
|
|
30,174 |
|
|
220,183 |
|
|
|
11,944 |
|
|
|
8,385 |
|
|
|
(160 |
) |
|
|
1,180,841 |
|
Income (loss) before income taxes and loss related to associated companies |
|
188,063 |
|
|
973 |
|
|
18,072 |
|
|
|
(10,126 |
) |
|
|
(8,385 |
) |
|
|
(356 |
) |
|
|
188,241 |
|
Loss related to associated companies |
|
— |
|
|
— |
|
|
(21,700 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(21,700 |
) |
Income (loss) before income taxes |
$ |
188,063 |
|
$ |
973 |
|
$ |
(3,628 |
) |
|
$ |
(10,126 |
) |
|
$ |
(8,385 |
) |
|
$ |
(356 |
) |
|
|
166,541 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
49,683 |
|
||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
116,858 |
|
A summary of results for the three months ended May 31, 2021 is as follows (in thousands):
|
Investment Banking and Capital Markets (1) |
|
Asset Management (1) |
|
Merchant Banking (1) |
|
Corporate |
|
Parent Company Interest |
|
Consolidation Adjustments (1) |
|
Total |
||||||||||||
Net revenues |
$ |
1,598,862 |
|
$ |
50,675 |
|
$ |
296,815 |
|
|
$ |
724 |
|
|
$ |
— |
|
|
$ |
3,431 |
|
|
$ |
1,950,507 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales |
|
— |
|
|
— |
|
|
143,847 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
143,847 |
|
Compensation and benefits |
|
778,284 |
|
|
21,671 |
|
|
24,252 |
|
|
|
7,035 |
|
|
|
— |
|
|
|
— |
|
|
|
831,242 |
|
Non-compensation expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Floor brokerage and clearing fees |
|
66,211 |
|
|
10,599 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
76,810 |
|
Selling, general and other expenses |
|
293,276 |
|
|
10,768 |
|
|
32,631 |
|
|
|
4,910 |
|
|
|
— |
|
|
|
(25 |
) |
|
|
341,560 |
|
Interest expense |
|
5,271 |
|
|
— |
|
|
843 |
|
|
|
— |
|
|
|
13,829 |
|
|
|
— |
|
|
|
19,943 |
|
Depreciation and amortization |
|
20,805 |
|
|
489 |
|
|
17,268 |
|
|
|
878 |
|
|
|
— |
|
|
|
— |
|
|
|
39,440 |
|
Total non-compensation expenses |
|
385,563 |
|
|
21,856 |
|
|
50,742 |
|
|
|
5,788 |
|
|
|
13,829 |
|
|
|
(25 |
) |
|
|
477,753 |
|
Total expenses |
|
1,163,847 |
|
|
43,527 |
|
|
218,841 |
|
|
|
12,823 |
|
|
|
13,829 |
|
|
|
(25 |
) |
|
|
1,452,842 |
|
Income (loss) before income taxes and loss related to associated companies |
|
435,015 |
|
|
7,148 |
|
|
77,974 |
|
|
|
(12,099 |
) |
|
|
(13,829 |
) |
|
|
3,456 |
|
|
|
497,665 |
|
Loss related to associated companies |
|
— |
|
|
— |
|
|
(23,526 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23,526 |
) |
Income (loss) before income taxes |
$ |
435,015 |
|
$ |
7,148 |
|
$ |
54,448 |
|
|
$ |
(12,099 |
) |
|
$ |
(13,829 |
) |
|
$ |
3,456 |
|
|
|
474,139 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
120,820 |
|
||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
353,319 |
|
(1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure.
A summary of results for the six months ended May 31, 2022 is as follows (in thousands):
|
Investment Banking and Capital Markets |
|
Asset Management |
|
Merchant Banking |
|
Corporate |
|
Parent Company Interest |
|
Consolidation Adjustments |
|
Total |
||||||||||||
Net revenues |
$ |
2,580,196 |
|
$ |
91,103 |
|
$ |
427,790 |
|
|
$ |
2,564 |
|
|
$ |
— |
|
|
$ |
(656 |
) |
|
$ |
3,100,997 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales |
|
— |
|
|
— |
|
|
226,120 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
226,120 |
|
Compensation and benefits |
|
1,247,136 |
|
|
30,752 |
|
|
78,642 |
|
|
|
11,631 |
|
|
|
— |
|
|
|
— |
|
|
|
1,368,161 |
|
Non-compensation expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Floor brokerage and clearing fees |
|
157,413 |
|
|
20,564 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
177,977 |
|
Selling, general and other expenses |
|
520,378 |
|
|
21,976 |
|
|
59,504 |
|
|
|
11,980 |
|
|
|
— |
|
|
|
(300 |
) |
|
|
613,538 |
|
Interest expense |
|
— |
|
|
— |
|
|
1,623 |
|
|
|
— |
|
|
|
16,776 |
|
|
|
— |
|
|
|
18,399 |
|
Depreciation and amortization |
|
46,321 |
|
|
829 |
|
|
38,251 |
|
|
|
843 |
|
|
|
— |
|
|
|
— |
|
|
|
86,244 |
|
Total non-compensation expenses |
|
724,112 |
|
|
43,369 |
|
|
99,378 |
|
|
|
12,823 |
|
|
|
16,776 |
|
|
|
(300 |
) |
|
|
896,158 |
|
Total expenses |
|
1,971,248 |
|
|
74,121 |
|
|
404,140 |
|
|
|
24,454 |
|
|
|
16,776 |
|
|
|
(300 |
) |
|
|
2,490,439 |
|
Income (loss) before income taxes and loss related to associated companies |
|
608,948 |
|
|
16,982 |
|
|
23,650 |
|
|
|
(21,890 |
) |
|
|
(16,776 |
) |
|
|
(356 |
) |
|
|
610,558 |
|
Loss related to associated companies |
|
— |
|
|
— |
|
|
(51,685 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(51,685 |
) |
Income (loss) before income taxes |
$ |
608,948 |
|
$ |
16,982 |
|
$ |
(28,035 |
) |
|
$ |
(21,890 |
) |
|
$ |
(16,776 |
) |
|
$ |
(356 |
) |
|
|
558,873 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
114,040 |
|
||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
444,833 |
|
A summary of results for the six months ended May 31, 2021 is as follows (in thousands):
|
Investment Banking and Capital Markets (1) |
|
Asset Management (1) |
|
Merchant Banking (1) |
|
Corporate |
|
Parent Company Interest |
|
Consolidation Adjustments (1) |
|
Total |
||||||||||||
Net revenues |
$ |
3,586,358 |
|
$ |
279,877 |
|
$ |
563,819 |
|
|
$ |
1,314 |
|
|
$ |
— |
|
|
$ |
6,081 |
|
|
$ |
4,437,449 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales |
|
— |
|
|
— |
|
|
239,406 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
239,406 |
|
Compensation and benefits |
|
1,887,979 |
|
|
44,456 |
|
|
48,781 |
|
|
|
22,569 |
|
|
|
— |
|
|
|
— |
|
|
|
2,003,785 |
|
Non-compensation expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Floor brokerage and clearing fees |
|
132,785 |
|
|
20,441 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
153,226 |
|
Selling, general and other expenses |
|
522,009 |
|
|
22,932 |
|
|
59,151 |
|
|
|
9,579 |
|
|
|
— |
|
|
|
(174 |
) |
|
|
613,497 |
|
Interest expense |
|
10,824 |
|
|
— |
|
|
1,755 |
|
|
|
— |
|
|
|
27,731 |
|
|
|
— |
|
|
|
40,310 |
|
Depreciation and amortization |
|
41,515 |
|
|
968 |
|
|
33,982 |
|
|
|
1,742 |
|
|
|
— |
|
|
|
— |
|
|
|
78,207 |
|
Total non-compensation expenses |
|
707,133 |
|
|
44,341 |
|
|
94,888 |
|
|
|
11,321 |
|
|
|
27,731 |
|
|
|
(174 |
) |
|
|
885,240 |
|
Total expenses |
|
2,595,112 |
|
|
88,797 |
|
|
383,075 |
|
|
|
33,890 |
|
|
|
27,731 |
|
|
|
(174 |
) |
|
|
3,128,431 |
|
Income (loss) before income taxes and loss related to associated companies |
|
991,246 |
|
|
191,080 |
|
|
180,744 |
|
|
|
(32,576 |
) |
|
|
(27,731 |
) |
|
|
6,255 |
|
|
|
1,309,018 |
|
Loss related to associated companies |
|
— |
|
|
— |
|
|
(34,094 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(34,094 |
) |
Income (loss) before income taxes |
$ |
991,246 |
|
$ |
191,080 |
|
$ |
146,650 |
|
|
$ |
(32,576 |
) |
|
$ |
(27,731 |
) |
|
$ |
6,255 |
|
|
|
1,274,924 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
339,056 |
|
||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
935,868 |
|
(1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure.
Selected Financial and Statistical Information
(Amounts in Thousands, Except Other Data) (Unaudited) |
|||||||||||
|
Quarter Ended |
||||||||||
|
May 31, 2022 |
|
February 28, 2022 |
|
May 31 2021 (1) |
||||||
Investment Banking, Capital Markets and Asset Management Net Revenues: |
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Advisory |
$ |
371,760 |
|
|
$ |
543,769 |
|
|
$ |
390,508 |
|
|
|
|
|
|
|
||||||
Equity underwriting |
|
122,435 |
|
|
|
156,100 |
|
|
|
324,462 |
|
Debt underwriting |
|
107,020 |
|
|
|
245,179 |
|
|
|
285,730 |
|
Total underwriting |
|
229,455 |
|
|
|
401,279 |
|
|
|
610,192 |
|
|
|
|
|
|
|
||||||
Other investment banking (2) |
|
85,746 |
|
|
|
58,134 |
|
|
|
82,461 |
|
|
|
|
|
|
|
||||||
Total investment banking |
|
686,961 |
|
|
|
1,003,182 |
|
|
|
1,083,161 |
|
|
|
|
|
|
|
||||||
Equities |
|
254,807 |
|
|
|
277,047 |
|
|
|
242,949 |
|
Fixed income |
|
161,478 |
|
|
|
202,800 |
|
|
|
257,197 |
|
Total capital markets |
|
416,285 |
|
|
|
479,847 |
|
|
|
500,146 |
|
|
|
|
|
|
|
||||||
Other (2) |
|
(4,868 |
) |
|
|
(1,211 |
) |
|
|
15,555 |
|
|
|
|
|
|
|
||||||
Total Investment Banking and Capital Markets Net Revenues (3) |
|
1,098,378 |
|
|
|
1,481,818 |
|
|
|
1,598,862 |
|
|
|
|
|
|
|
||||||
Asset management fees and revenues (4) |
|
14,116 |
|
|
|
44,502 |
|
|
|
22,490 |
|
Investment return (5) |
|
30,637 |
|
|
|
29,530 |
|
|
|
39,624 |
|
Allocated net interest (5) |
|
(13,606 |
) |
|
|
(14,076 |
) |
|
|
(11,439 |
) |
Total Asset Management Net Revenues |
|
31,147 |
|
|
|
59,956 |
|
|
|
50,675 |
|
|
|
|
|
|
|
||||||
Total Investment Banking, Capital Markets and Asset Management Net Revenues |
$ |
1,129,525 |
|
|
$ |
1,541,774 |
|
|
$ |
1,649,537 |
|
|
|
|
|
|
|
||||||
Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: |
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Floor brokerage and clearing fees |
$ |
94,016 |
|
|
$ |
83,961 |
|
|
$ |
76,810 |
|
Underwriting costs |
|
13,191 |
|
|
|
8,128 |
|
|
|
33,031 |
|
Technology and communications |
|
108,630 |
|
|
|
104,555 |
|
|
|
95,285 |
|
Occupancy and equipment rental |
|
24,561 |
|
|
|
25,250 |
|
|
|
28,771 |
|
Business development |
|
47,880 |
|
|
|
24,376 |
|
|
|
27,039 |
|
Professional services |
|
52,192 |
|
|
|
51,118 |
|
|
|
54,240 |
|
Depreciation and amortization |
|
23,233 |
|
|
|
23,917 |
|
|
|
21,294 |
|
Other |
|
43,110 |
|
|
|
39,363 |
|
|
|
70,949 |
|
|
|
|
|
|
|
||||||
Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses |
$ |
406,813 |
|
|
$ |
360,668 |
|
|
$ |
407,419 |
|
|
|
|
|
|
|
||||||
Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: |
|
|
|
|
|
||||||
Compensation and benefits |
$ |
533,676 |
|
|
$ |
744,212 |
|
|
$ |
799,955 |
|
Compensation and benefits expenses as a percentage of net revenues |
|
47.2 |
% |
|
|
48.3 |
% |
|
|
48.5 |
% |
|
|
|
|
|
|
(Amounts in Thousands, Except Other Data) (Unaudited) |
||||||||
|
|
Six Months Ended May 31, |
||||||
|
|
|
2022 |
|
|
|
2021 (1) |
|
Investment Banking, Capital Markets and Asset Management Net Revenues: |
|
|
|
|
||||
|
|
|
|
|
||||
Advisory |
|
$ |
915,529 |
|
|
$ |
701,947 |
|
|
|
|
|
|
||||
Equity underwriting |
|
|
278,535 |
|
|
|
819,268 |
|
Debt underwriting |
|
|
352,199 |
|
|
|
483,097 |
|
Total underwriting |
|
|
630,734 |
|
|
|
1,302,365 |
|
|
|
|
|
|
||||
Other investment banking (2) |
|
|
143,880 |
|
|
|
165,483 |
|
|
|
|
|
|
||||
Total investment banking |
|
|
1,690,143 |
|
|
|
2,169,795 |
|
|
|
|
|
|
||||
Equities |
|
|
531,854 |
|
|
|
773,965 |
|
Fixed income |
|
|
364,278 |
|
|
|
620,556 |
|
Total capital markets |
|
|
896,132 |
|
|
|
1,394,521 |
|
|
|
|
|
|
||||
Other (2) |
|
|
(6,079 |
) |
|
|
22,042 |
|
|
|
|
|
|
||||
Total Investment Banking and Capital Markets Net Revenues (3) |
|
|
2,580,196 |
|
|
|
3,586,358 |
|
|
|
|
|
|
||||
Asset management fees and revenues (4) |
|
|
58,618 |
|
|
|
88,799 |
|
Investment return (5) |
|
|
60,167 |
|
|
|
212,916 |
|
Allocated net interest (5) |
|
|
(27,682 |
) |
|
|
(21,838 |
) |
Total Asset Management Net Revenues |
|
|
91,103 |
|
|
|
279,877 |
|
|
|
|
|
|
||||
Total Investment Banking, Capital Markets and Asset Management Net Revenues |
|
$ |
2,671,299 |
|
|
$ |
3,866,235 |
|
|
|
|
|
|
||||
Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: |
|
|
|
|
||||
|
|
|
|
|
||||
Floor brokerage and clearing fees |
|
$ |
177,977 |
|
|
$ |
153,226 |
|
Underwriting costs |
|
|
21,319 |
|
|
|
69,167 |
|
Technology and communications |
|
|
213,185 |
|
|
|
187,224 |
|
Occupancy and equipment rental |
|
|
49,811 |
|
|
|
52,554 |
|
Business development |
|
|
72,256 |
|
|
|
45,030 |
|
Professional services |
|
|
103,310 |
|
|
|
92,876 |
|
Depreciation and amortization |
|
|
47,150 |
|
|
|
42,483 |
|
Other |
|
|
82,473 |
|
|
|
108,914 |
|
|
|
|
|
|
||||
Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses |
|
$ |
767,481 |
|
|
$ |
751,474 |
|
|
|
|
|
|
||||
Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: |
|
|
|
|
||||
Compensation and benefits |
|
$ |
1,277,888 |
|
|
$ |
1,932,435 |
|
Compensation and benefits expenses as a percentage of net revenues |
|
|
47.8 |
% |
|
|
50.0 |
% |
|
|
|
|
|
(Amounts in Thousands, Except Other Data) (Unaudited) |
|||||||||
|
|
|
|
|
|
||||
|
Quarter Ended |
||||||||
|
May 31, 2022 |
|
February 28, 2022 |
|
May 31 2021 (1) |
||||
Other Data: |
|
|
|
|
|
||||
Number of trading days |
|
64 |
|
|
61 |
|
|
64 |
|
Number of trading loss days (6) |
|
10 |
|
|
8 |
|
|
20 |
|
Average VaR (in millions) (7) |
$ |
11.84 |
|
$ |
12.12 |
|
$ |
15.77 |
|
|
|
|
|
|
|
||||
|
|
|
Six Months Ended May 31, |
||||||
|
|
|
2022 |
|
|
2021 (1) |
|||
Other Data: |
|
|
|
|
|
||||
Number of trading days |
|
|
|
125 |
|
|
124 |
|
|
Number of trading loss days (6) |
|
|
|
18 |
|
|
29 |
|
|
Average VaR (in millions) (7) |
|
|
$ |
11.98 |
|
$ |
15.89 |
|
(1) |
In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Previously reported results are presented on a comparable basis. |
(2) |
In the first quarter of 2022, we also made a change to present our share of the net earnings of Berkadia Commercial Mortgage Holding LLC within Investment banking net revenues, which was previously presented within our Other business category. Previously reported results are presented on a comparable basis. |
(3) |
Allocated net interest is not separately disaggregated for Investment Banking and Capital Markets. This presentation is aligned to our Investment Banking and Capital Markets internal performance measurement. |
(4) |
Includes management and performance fees from funds and accounts managed by us as well as our share of fees received by affiliated asset management companies with which we have revenue and profit share arrangements, as well as earnings on our ownership interest in affiliated asset managers. |
(5) |
Allocated net interest represents an allocation to Asset Management of certain of our long-term debt interest expense, net of interest income on our Cash and cash equivalents and other sources of liquidity. Allocated net interest has been disaggregated to increase transparency and to make clearer actual Investment return. We believe that aggregating Investment return and Allocated net interest would obscure the Investment return by including an amount that is unique to our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods. |
(6) |
Number of trading loss days is calculated based on trading activities in our Investment Banking and Capital Markets and Asset Management business segments. |
(7) |
VaR estimates the potential loss in value of trading positions in our Investment Banking and Capital Markets and Asset Management business segments due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended November 30, 2021. |
Financial Data and Metrics
(Amounts in Millions, Except Other Data) (Unaudited) |
||||||||
|
||||||||
|
Quarter Ended |
|||||||
|
May 31, 2022 |
|
February 28, 2022 |
|
May 31 2021 (1) |
|||
Financial position (1): |
|
|
|
|
|
|||
Total assets |
$ |
57,214 |
|
$ |
60,036 |
|
$ |
57,979 |
Total assets less goodwill and intangible assets for the period |
$ |
55,329 |
|
$ |
58,142 |
|
$ |
56,066 |
Cash and cash equivalents |
$ |
8,523 |
|
$ |
8,501 |
|
$ |
8,443 |
Financial instruments owned |
$ |
20,248 |
|
$ |
21,633 |
|
$ |
19,938 |
Level 3 financial instruments owned (2) |
$ |
740 |
|
$ |
640 |
|
$ |
735 |
Goodwill and intangible assets |
$ |
1,885 |
|
$ |
1,895 |
|
$ |
1,912 |
Total equity |
$ |
10,368 |
|
$ |
10,549 |
|
$ |
10,095 |
Total shareholders' equity |
$ |
10,300 |
|
$ |
10,490 |
|
$ |
10,073 |
Tangible equity (3) |
$ |
8,415 |
|
$ |
8,596 |
|
$ |
8,160 |
|
|
|
|
|
|
|||
Other data and financial ratios: |
|
|
|
|
|
|||
Leverage ratio (1) (4) |
|
5.5 |
|
|
5.7 |
|
|
5.7 |
Tangible gross leverage ratio (1) (5) |
|
6.6 |
|
|
6.8 |
|
|
6.9 |
|
|
|
|
|
|
|||
Number of employees, at period end |
|
5,619 |
|
|
5,625 |
|
|
5,151 |
(1) | Amounts pertaining to May 31, 2022 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three and six months ended May 31, 2022. |
(2) | Level 3 financial instruments represent those financial instruments classified as such under Accounting Standards Codification 820, accounted for at fair value and included within Financial instruments owned. |
(3) | Tangible equity (a non-GAAP financial measure) represents total Jefferies shareholders' equity less goodwill and identifiable intangible assets. We believe that tangible equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible equity, making these ratios meaningful for investors. |
(4) | Leverage ratio equals total assets divided by total equity. |
(5) | Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio. |
Non-GAAP Reconciliations
The following tables reconcile our non-GAAP measures to their respective U.S. GAAP measures. Management believes such non-GAAP measures are useful to investors as they allow them to view our results through the eyes of management, while facilitating a comparison across historical periods. These measures should not be considered a substitute for, or superior to, measures prepared in accordance with U.S. GAAP.
Return on Adjusted Tangible Equity Reconciliation
The table below reconciles our Net income attributable to common shareholders to adjusted net income and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands):
|
|
|
Three Months Ended May 31, |
|
Six Months Ended May 31, |
||||||||||||
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income attributable to common shareholders (GAAP) |
|
$ |
114,014 |
|
|
$ |
352,596 |
|
|
$ |
441,461 |
|
|
$ |
935,031 |
|
|
Intangible amortization and impairment expense, net of tax |
|
|
1,739 |
|
|
|
2,664 |
|
|
|
4,781 |
|
|
|
5,251 |
|
|
Adjusted net income (non-GAAP) |
|
$ |
115,753 |
|
|
$ |
355,260 |
|
|
$ |
446,242 |
|
|
$ |
940,282 |
|
|
Annualized adjusted net income (non-GAAP) |
|
$ |
463,012 |
|
|
$ |
1,421,040 |
|
|
$ |
892,484 |
|
|
$ |
1,880,564 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
||||||||||||
|
|
|
February 28, |
|
November 30, |
||||||||||||
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Shareholders' equity (GAAP) |
|
$ |
10,490,300 |
|
|
$ |
9,745,862 |
|
|
$ |
10,553,755 |
|
|
$ |
9,403,893 |
|
|
Less: Intangible assets, net and goodwill |
|
|
(1,894,721 |
) |
|
|
(1,914,322 |
) |
|
|
(1,897,500 |
) |
|
|
(1,913,467 |
) |
|
Less: Deferred tax asset |
|
|
(382,741 |
) |
|
|
(410,420 |
) |
|
|
(327,547 |
) |
|
|
(393,687 |
) |
|
Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases |
|
|
(162,339 |
) |
|
|
(36,759 |
) |
|
|
(378,907 |
) |
|
|
(142,189 |
) |
|
Adjusted tangible shareholders' equity (non-GAAP) |
|
$ |
8,050,499 |
|
|
$ |
7,384,361 |
|
|
$ |
7,949,801 |
|
|
$ |
6,954,550 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Return on adjusted tangible equity |
|
|
5.8 |
% |
|
|
19.2 |
% |
|
|
11.2 |
% |
|
|
27.0 |
% |
Jefferies Shareholders' Equity GAAP Reconciliation
The table below reconciles our shareholders' equity to tangible shareholders' equity (in thousands):
|
|
|
December 31, 2017 |
||
|
|
|
|
||
|
Shareholders' equity (GAAP) |
|
$ |
10,105,957 |
|
|
Intangible assets, net and goodwill |
|
|
(2,463,180 |
) |
|
Tangible shareholders' equity (non-GAAP) |
|
$ |
7,642,777 |
|
Jefferies Book Value and Shares Outstanding GAAP Reconciliation
The table below reconciles our book value (shareholders' equity) to adjusted tangible book value and our common shares outstanding to fully diluted shares outstanding (in thousands, except per share amounts):
|
|
|
May 31, 2022 |
||
|
|
|
|
||
|
Book value (GAAP) |
|
$ |
10,300,177 |
|
|
Redeemable convertible preferred shares convertible to common shares (1) |
|
|
125,000 |
|
|
Stock options (2) |
|
|
120,089 |
|
|
Intangible assets, net and goodwill |
|
|
(1,885,043 |
) |
|
Adjusted tangible book value (non-GAAP) |
|
$ |
8,660,223 |
|
|
|
|
|
||
|
Common shares outstanding (GAAP) |
|
|
232,321 |
|
|
Restricted stock units ("RSUs") |
|
|
16,629 |
|
|
Redeemable convertible preferred shares converted to common shares (1) |
|
|
4,441 |
|
|
Stock options (2) |
|
|
5,061 |
|
|
Other |
|
|
1,141 |
|
|
Fully diluted shares outstanding (non-GAAP) (3) |
|
|
259,593 |
|
|
|
|
|
||
|
Book value per share outstanding |
|
$ |
44.34 |
|
|
Tangible book value per fully diluted share outstanding |
|
$ |
33.36 |
|
(1) |
Redeemable convertible preferred shares added to book value and fully diluted shares assume that the redeemable convertible preferred shares are converted to common shares. |
|
|
(2) |
Stock options added to book value are equal to the total number of stock options outstanding as of May 31, 2022 of 5,061,000 multiplied by the weighted average exercise price of $23.73 on May 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on May 31, 2022. |
|
(3) |
Fully diluted shares outstanding include vested and unvested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans. Fully diluted shares outstanding also include all stock options and the additional common shares if our redeemable convertible preferred shares were converted to common shares. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20220627005667/en/
Jonathan Freedman 212.778.8913