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Press release content from Business Wire. The AP news staff was not involved in its creation.

Jefferies Financial Group Announces Third Quarter 2021 Financial Results

September 30, 2021 GMT

NEW YORK--(BUSINESS WIRE)--Sep 30, 2021--

Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and nine months ended August 31, 2021. For the third quarter, Net income attributable to common shareholders was $407 million, or $1.50 per diluted share, and annualized adjusted return on tangible equity was 21.4% 1. For the nine months ended August 31, 2021, Net income attributable to common shareholders was $1.34 billion, or $4.93 per diluted share, and annualized adjusted return on tangible equity was 26.1% 2.

In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.25 per Jefferies common share, payable on November 29, 2021 to record holders of Jefferies common shares on November 15, 2021. We expect to file our Form 10-Q on or about October 8, 2021.

Highlights for the three months ended August 31, 2021:

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  • Jefferies Group LLC
    • Net revenues of $1.65 billion, a record for a third quarter and up 19% over the prior year third quarter’s then all-time record quarterly net revenues
    • Pre-tax income of $560 million, a record for a third quarter and up 54% over the prior year comparable quarter, and net earnings of $419 million, also a record for a third quarter and up 57% over the prior year quarter
    • Annualized return on tangible equity of 34.4% 3, compared with 23.2% 4 in the prior year quarter
    • All-time record quarterly Investment Banking net revenues of $1.18 billion, up 100% over the prior year quarter, including all-time record quarterly Advisory net revenues of $584 million, Equity Underwriting net revenues of $367 million and Debt Underwriting net revenues of $229 million, each a record for a third quarter,
    • Quarterly combined Capital Markets net revenues of $442 million, down 32.5% over the prior year quarter, including Equities net revenues of $237 million and Fixed Income net revenues of $206 million
    • Third quarter Asset Management net revenues (before allocated net interest 5 ) of $10 million, down significantly from the robust prior year quarter
    • Record Liquidity buffer of $9.20 billion of cash and unencumbered liquid collateral at August 31, 2021, which represented 18% of Jefferies Group’s total balance sheet

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  • Jefferies Financial Group
    • Net income attributable to common shareholders for the third quarter was $407 million, or $1.50 per diluted share, and annualized adjusted return on tangible equity was 21.4% 1
    • We repurchased 1.5 million shares for $52 million, or an average price of $34.51 per share, during the third quarter (Jefferies was precluded from purchasing shares until the July 14 announcement of our Strategic Alliance with SMBC Group 6, which, as previously reported, includes credit facilities to Jefferies Group of $350 million and Jefferies Finance of $1.9 billion, and the purchase by SMBC Group 6 of up to 4.9% of Jefferies common shares in the open market)
    • Our Board of Directors has increased our share buyback authorization by $52 million back to a total of $250 million.

Highlights for the nine months ended August 31, 2021:

  • Jefferies Group LLC
    • Record nine months net revenues of $5.40 billion, up 50% over the prior year comparable period’s then all-time record net revenues
    • Record nine months pre-tax income of $1.66 billion, up 115% over the prior year period, and record nine months net earnings of $1.23 billion, up 117% over the prior year period, demonstrating the operating leverage inherent in our business model
    • Annualized return on tangible equity of 36.2% 7, compared with 17.7% 8 in the prior year period
    • Record nine months Investment Banking net revenues of $3.25 billion, up 119% over the prior year period, including record Advisory net revenues of $1.29 billion, record Equity Underwriting net revenues of $1.19 billion and record Debt Underwriting net revenues of $712 million
    • Nine months combined Capital Markets net revenues of $1.84 billion, down 2% over the prior year period, including record Equities net revenues of $1.01 billion and Fixed Income net revenues of $826 million
    • Record nine months Asset Management revenues (before allocated net interest 5 ) of $247 million, up 42% over the prior year period, including $62 million in management, performance and similar fees and revenues earned directly or through our strategic affiliates in the current year period; performance fees and similar revenues recorded in the first nine months of the current year are attributable to performance realized in respect of the twelve months ended December 31, 2020

  • Jefferies Financial Group
    • For the nine months ended August 31, 2021, Net income attributable to common shareholders was $1.34 billion, or $4.93 per diluted share, and annualized adjusted return on tangible equity was 26.1% 2
    • Merchant Banking pre-tax income of $170 million, reflecting record nine months results from Idaho Timber and mark-to-market increases in the value of several of our investments in public and private companies
    • We repurchased 6.5 million shares for $179 million, or an average price of $27.59 per share during the first nine months of 2021; at August 31, 2021, we had 246 million shares outstanding and 276 million shares were outstanding on a fully diluted basis 9; Jefferies book value per share was $42.28 and tangible book value per fully diluted share 10 was $31.58 at August 31, 2021
    • Since April 2018, Jefferies has repurchased 125 million shares for $2.64 billion in total, or an average price of $21.20 per share; our fully diluted shares outstanding 9 have decreased by 27% over the same period
    • Jefferies has returned to shareholders $3.68 billion, or 36% of shareholders’ equity and 47% of tangible shareholders’ equity 11 since April 2018. Our shareholders’ equity at August 31, 2021 is $10.38 billion. Even with our significant return of capital to our shareholders, Jefferies tangible shareholders’ equity 11 at August 31, 2021 is $8.48 billion, which is over $650 million higher than at March 31, 2018

Rich Handler, our CEO, and Brian Friedman, our President, said:

“We are humbled by and deeply grateful for the confidence and trust our clients have shown in us, not just this quarter, but over the years and decades we have worked to build the leading independent full-service global investment banking firm. Our results this quarter demonstrate that the relentless client focus of our amazing Jefferies team is the difference maker and our market position has reached a new level, particularly in Investment Banking. Net revenues in Investment Banking for the first nine months of the year were $3.25 billion and our backlog for the fourth quarter is at a new record level 12. In this most recent quarter, we completed more investment banking transactions (up 18% this quarter from Q3 2020), with more clients (up 19%), at a greater average value per transaction (up 48%) than ever before. To put this in perspective, our Investment Banking effort (supported by Equities, Fixed Income, research and our firmwide support team) arranged 424 separate transactions for 407 different clients with an aggregate deal value of $238 billion in the third quarter. Subject to market conditions, we believe we are well positioned for meaningful further growth, given our clear strategy, distinctively entrepreneurial and nimble culture, and the ongoing and consistent enhancements to our capabilities and talent. Today, we have more than 1,200 investment banking professionals, 237 of whom are Managing Directors, all dedicated to supporting our clients and their strategic and capital markets’ needs.

“We are also pleased our Equities and Fixed Income results were resilient against a backdrop of reduced market volumes and a continued low interest rate environment. While our results in Asset Management were significantly impacted by a difficult environment for multi-strategy funds and lower performance by strategies that had very strong returns during the first half of the year, we remain pleased with our progress in attracting third-party investors to our platforms.

“As of our third quarter ending August 31, 2020, Jefferies Group had last twelve months (“LTM”) net revenues, earnings before income taxes and net earnings of $4.34 billion, $796 million and $591 million, respectively. For our current LTM ending August 31, 2021, our comparable results are $7.01 billion, $2.07 billion and $1.54 billion, respectively. These significant increases of 62%, 160% and 160%, respectively, show the remarkable progress that we have achieved as a result of the investments in our business over many years and the operating leverage inherent in our business model.

“With an annualized adjusted return on tangible equity of 26.1% 2 at Jefferies Financial Group and an annualized return on tangible equity of 36.2% 7 at Jefferies Group for the nine months ended August 31, 2021, Jefferies Financial Group’s operating results are increasingly reflective of our core operating businesses at Jefferies Group. This has been a key stated goal for us, and we are extremely pleased with our progress.

“While there is always risk and uncertainty, we believe the global economy continues to be in a period of recovery and uptrend, and we therefore expect to see continued robust activity in mergers and acquisitions and capital markets – providing further opportunity for us to demonstrate the durability of our results and increased market share.

“We would like to thank our clients and employees who came together in August to proudly contribute approximately $6 million to 45 accredited charities around our planet that will use these funds to support critical needs for those in Afghanistan and Haiti, and to support our military veterans.”

Amounts herein pertaining to August 31, 2021 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 nine months ended August 31, 2021 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC.

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements 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,” 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 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.

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).

 

 

 

 

1

Adjusted return on tangible equity (a non-GAAP financial measure) is defined as Jefferies Financial Group's three months ended August 31, 2021 annualized adjusted net income divided by our adjusted tangible shareholders' equity at May 31, 2021. Refer to schedule on page 15 for reconciliation to U.S. GAAP amounts.

2

Adjusted return on tangible equity (a non-GAAP financial measure) is defined as Jefferies Financial Group's nine months ended August 31, 2021 annualized adjusted net income divided by our adjusted tangible shareholders' equity at November 30, 2020. Refer to schedule on page 15 for reconciliation to U.S. GAAP amounts.

3

Return on tangible equity (a non-GAAP financial measure) equals our three months ended August 31, 2021 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) of $4.88 billion at May 31, 2021. Tangible Jefferies Group LLC member's equity at May 31, 2021 equals Jefferies Group LLC member's equity of $6.68 billion less goodwill and identifiable intangibles assets of $1.80 billion.

4

Return on tangible equity (a non-GAAP financial measure) equals our three months ended August 31, 2020 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) of $4.61 billion at May 31, 2020. Tangible Jefferies Group LLC member's equity at May 31, 2020 equals Jefferies Group LLC member's equity of $6.41 billion less goodwill and identifiable intangibles assets of $1.80 billion.

5

Allocated net interest represents the allocation of a ratable portion of Jefferies Group LLC's long-term debt interest expense to Jefferies Group LLC's Asset Management reportable segment, net of interest income on Jefferies Group LLC's Cash and cash equivalents and other sources of liquidity, which allocation is consistent with Jefferies Group LLC's policy of allocating such items to all its business lines. Refer to Jefferies Group LLC's summary of Net Revenues by Source on page 11 and 12.

6

SMBC Group is defined as Sumitomo Mitsui Financial Group, Inc., Sumitomo Mitsui Banking Corporation and SMBC Nikko Securities Inc.

7

Return on tangible equity (a non-GAAP financial measure) equals our first nine months ended August 31, 2021 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) of $4.54 billion at November 30, 2020. Tangible Jefferies Group LLC member's equity at November 30, 2020 equals Jefferies Group LLC member's equity of $6.35 billion less goodwill and identifiable intangibles assets of $1.81 billion.

8

Return on tangible equity (a non-GAAP financial measure) equals our first nine months ended August 31, 2020 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) of $4.31 billion at November 30, 2019. Tangible Jefferies Group LLC member's equity at November 30, 2019 equals Jefferies Group LLC member's equity of $6.12 billion less goodwill and identifiable intangibles assets of $1.81 billion.

9

Shares outstanding on a fully diluted basis (a non-GAAP financial measure) is defined as Jefferies Financial Group's common shares outstanding plus restricted stock units, stock options, conversion of redeemable convertible preferred shares and other shares. Refer to schedule on page 16 for reconciliation to U.S. GAAP amounts.

10

Tangible book value per fully diluted share (a non-GAAP financial measure) is defined as adjusted tangible book value divided by shares outstanding on a fully diluted basis. Refer to schedule on page 16 for reconciliation to U.S. GAAP amounts.

11

Tangible shareholders' equity (a non-GAAP financial measure) is defined as Jefferies Financial Group shareholders' equity less Intangible assets, net and goodwill. Refer to schedule on page 16 for reconciliation to U.S. GAAP amounts.

12

Backlog represents an estimate of our net revenues from expected future transactions. As an indicator of net revenues in a given future period, it is subject to limitations. The time frame for the realization of revenues from these expected transactions varies and is influenced by factors we do not control. Transactions not included in the estimate may occur, and expected transactions may also be modified or cancelled.

 

Summary for Jefferies Financial Group Inc. and Subsidiaries
(In thousands, except per share amounts)
(Unaudited)

 

 

Three Months Ended
August 31,

 

Nine Months Ended
August 31,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Net revenues

$

1,938,984

 

 

$

1,616,170

 

 

$

6,376,433

 

 

$

4,150,087

 

 

 

 

 

 

 

 

 

Income before income taxes and income (loss) related to associated companies

$

580,792

 

 

$

407,189

 

 

$

1,889,810

 

 

$

715,066

 

Income (loss) related to associated companies

(27,176)

 

 

5,053

 

 

(61,270)

 

 

(69,523)

 

Income before income taxes

553,616

 

 

412,242

 

 

1,828,540

 

 

645,543

 

Income tax provision

145,700

 

 

107,403

 

 

484,756

 

 

185,138

 

Net income

407,916

 

 

304,839

 

 

1,343,784

 

 

460,405

 

Net loss attributable to the noncontrolling interests

1,324

 

 

324

 

 

2,736

 

 

5,033

 

Net loss attributable to the redeemable noncontrolling interests

68

 

 

650

 

 

1,071

 

 

1,130

 

Preferred stock dividends

(1,849)

 

 

(1,404)

 

 

(5,101)

 

 

(4,230)

 

Net income attributable to Jefferies Financial Group Inc. common shareholders

$

407,459

 

 

$

304,409

 

 

$

1,342,490

 

 

$

462,338

 

 

 

 

 

 

 

 

 

Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:

 

 

 

 

 

 

 

Net income

$

1.54

 

 

$

1.08

 

 

$

5.05

 

 

$

1.58

 

 

 

 

 

 

 

 

 

Number of shares in calculation

263,087

 

 

280,695

 

 

264,248

 

 

289,959

 

 

 

 

 

 

 

 

 

Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:

 

 

 

 

 

 

 

Net income

$

1.50

 

 

$

1.07

 

 

$

4.93

 

 

$

1.57

 

 

 

 

 

 

 

 

 

Number of shares in calculation

271,405

 

 

285,136

 

 

271,746

 

 

294,875

 

 
 

A summary of results for the three months ended August 31, 2021 is as follows (in thousands):

 

Investment
Banking and
Capital
Markets

 

Asset
Management

 

Merchant
Banking

 

Corporate

 

Parent
Company
Interest

 

Consolidation
Adjustments

 

Total

Net revenues

$

1,650,796

 

 

$

12,604

 

 

$

271,608

 

 

$

955

 

 

$

 

 

$

3,021

 

 

$

1,938,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

758,546

 

 

15,468

 

 

21,763

 

 

6,466

 

 

 

 

 

 

802,243

 

Cost of sales (1)

64,441

 

 

4,541

 

 

151,510

 

 

 

 

 

 

 

 

220,492

 

Interest expense

 

 

 

 

5,744

 

 

 

 

13,774

 

 

 

 

19,518

 

Depreciation and amortization

21,035

 

 

494

 

 

16,584

 

 

564

 

 

 

 

 

 

38,677

 

Selling, general and other expenses

216,782

 

 

10,716

 

 

45,475

 

 

4,375

 

 

 

 

(86)

 

 

277,262

 

Total expenses

1,060,804

 

 

31,219

 

 

241,076

 

 

11,405

 

 

13,774

 

 

(86)

 

 

1,358,192

 

Income (loss) before income taxes and loss related to associated companies

589,992

 

 

(18,615)

 

 

30,532

 

 

(10,450)

 

 

(13,774)

 

 

3,107

 

 

580,792

 

Loss related to associated companies

 

 

 

 

(27,176)

 

 

 

 

 

 

 

 

(27,176)

 

Income (loss) before income taxes

$

589,992

 

 

$

(18,615)

 

 

$

3,356

 

 

$

(10,450)

 

 

$

(13,774)

 

 

$

3,107

 

 

553,616

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

145,700

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

407,916

 

 
 

A summary of results for the three months ended August 31, 2020 is as follows (in thousands):

 

Investment
Banking and
Capital
Markets

 

Asset
Management

 

Merchant
Banking

 

Corporate

 

Parent
Company
Interest

 

Consolidation
Adjustments

 

Total

Net revenues

$

1,274,115

 

 

$

118,558

 

 

$

220,887

 

 

$

591

 

 

$

 

 

$

2,019

 

 

$

1,616,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

719,822

 

 

10,652

 

 

20,573

 

 

9,790

 

 

 

 

 

 

760,837

 

Cost of sales (1)

60,640

 

 

6,103

 

 

82,657

 

 

 

 

 

 

 

 

149,400

 

Interest expense

 

 

 

 

7,398

 

 

 

 

14,114

 

 

 

 

21,512

 

Depreciation and amortization

22,225

 

 

2,018

 

 

14,408

 

 

869

 

 

 

 

 

 

39,520

 

Selling, general and

other expenses

190,105

 

 

12,181

 

 

30,157

 

 

5,550

 

 

 

 

(281)

 

 

237,712

 

Total expenses

992,792

 

 

30,954

 

 

155,193

 

 

16,209

 

 

14,114

 

 

(281)

 

 

1,208,981

 

Income (loss) before income taxes and income related to associated companies

281,323

 

 

87,604

 

 

65,694

 

 

(15,618)

 

 

(14,114)

 

 

2,300

 

 

407,189

 

Income related to associated companies

 

 

 

 

5,053

 

 

 

 

 

 

 

 

5,053

 

Income (loss) before income taxes

$

281,323

 

 

$

87,604

 

 

$

70,747

 

 

$

(15,618)

 

 

$

(14,114)

 

 

$

2,300

 

 

412,242

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

107,403

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

304,839

 

(1) Includes Floor brokerage and clearing fees.

A summary of results for the nine months ended August 31, 2021 is as follows (in thousands):

 

Investment
Banking and
Capital
Markets

 

Asset
Management

 

Merchant
Banking

 

Corporate

 

Parent
Company
Interest

 

Consolidation
Adjustments

 

Total

Net revenues

$

5,183,269

 

 

$

293,892

 

 

$

887,939

 

 

$

2,269

 

 

$

 

 

$

9,064

 

 

$

6,376,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

2,639,307

 

 

59,924

 

 

77,762

 

 

29,035

 

 

 

 

 

 

2,806,028

 

Cost of sales (1)

197,226

 

 

24,982

 

 

390,916

 

 

 

 

 

 

 

 

613,124

 

Interest expense

 

 

 

 

18,323

 

 

 

 

41,505

 

 

 

 

59,828

 

Depreciation and amortization

62,497

 

 

1,462

 

 

50,619

 

 

2,306

 

 

 

 

 

 

116,884

 

Selling, general and other expenses

724,406

 

 

33,619

 

 

119,078

 

 

13,954

 

 

 

 

(298)

 

 

890,759

 

Total expenses

3,623,436

 

 

119,987

 

 

656,698

 

 

45,295

 

 

41,505

 

 

(298)

 

 

4,486,623

 

Income (loss) before income taxes and loss related to associated companies

1,559,833

 

 

173,905

 

 

231,241

 

 

(43,026)

 

 

(41,505)

 

 

9,362

 

 

1,889,810

 

Loss related to associated companies

 

 

 

 

(61,270)

 

 

 

 

 

 

 

 

(61,270)

 

Income (loss) before income taxes

$

1,559,833

 

 

$

173,905

 

 

$

169,971

 

 

$

(43,026)

 

 

$

(41,505)

 

 

$

9,362

 

 

1,828,540

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

484,756

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

1,343,784

 

 
 

A summary of results for the nine months ended August 31, 2020 is as follows (in thousands):

 

Investment
Banking and
Capital
Markets

 

Asset
Management

 

Merchant
Banking

 

Corporate

 

Parent
Company
Interest

 

Consolidation
Adjustments

 

Total

Net revenues

$

3,451,776

 

 

$

146,278

 

 

$

532,608

 

 

$

11,908

 

 

$

 

 

$

7,517

 

 

$

4,150,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,892,567

 

 

59,375

 

 

51,736

 

 

25,819

 

 

 

 

 

 

2,029,497

 

Cost of sales (1)

181,115

 

 

20,288

 

 

235,871

 

 

 

 

 

 

 

 

437,274

 

Interest expense

 

 

 

 

24,453

 

 

 

 

39,773

 

 

 

 

64,226

 

Depreciation and amortization

61,322

 

 

4,776

 

 

50,627

 

 

2,631

 

 

 

 

 

 

119,356

 

Selling, general and

other expenses

570,958

 

 

36,717

 

 

157,990

 

 

19,684

 

 

 

 

(681)

 

 

784,668

 

Total expenses

2,705,962

 

 

121,156

 

 

520,677

 

 

48,134

 

 

39,773

 

 

(681)

 

 

3,435,021

 

Income (loss) before income taxes and loss related to associated companies

745,814

 

 

25,122

 

 

11,931

 

 

(36,226)

 

 

(39,773)

 

 

8,198

 

 

715,066

 

Loss related to associated companies

 

 

 

 

(69,523)

 

 

 

 

 

 

 

 

(69,523)

 

Income (loss) before income taxes

$

745,814

 

 

$

25,122

 

 

$

(57,592)

 

 

$

(36,226)

 

 

$

(39,773)

 

 

$

8,198

 

 

645,543

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

185,138

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

460,405

 

(1) Includes Floor brokerage and clearing fees.

The following financial tables provide information for the results of Jefferies Group LLC and should be read in conjunction with Jefferies Group LLC’s Annual Report on Form 10-K for the year ended November 30, 2020. Amounts herein pertaining to August 31, 2021 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2021.

 

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

 

 

Quarter Ended

 

August 31, 2021

 

May 31, 2021

 

August 31, 2020

Revenues:

 

 

 

 

 

Commissions and other fees

$

214,393

 

 

$

222,643

 

 

$

204,313

 

Principal transactions

225,797

 

 

325,059

 

 

560,665

 

Investment banking

1,180,676

 

 

1,000,700

 

 

615,837

 

Asset management fees and revenues

10,309

 

 

14,567

 

 

6,772

 

Interest

194,670

 

 

206,958

 

 

195,960

 

Other

28,902

 

 

66,769

 

 

11,526

 

Total revenues

1,854,747

 

 

1,836,696

 

 

1,595,073

 

Interest expense

204,717

 

 

219,278

 

 

211,629

 

Net revenues

1,650,030

 

 

1,617,418

 

 

1,383,444

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

Compensation and benefits

767,564

 

 

789,836

 

 

725,555

 

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

 

 

Floor brokerage and clearing fees

69,129

 

 

76,617

 

 

66,744

 

Technology and communications

106,793

 

 

107,962

 

 

102,635

 

Occupancy and equipment rental

28,590

 

 

32,839

 

 

27,053

 

Business development

24,276

 

 

27,023

 

 

7,637

 

Professional services

55,011

 

 

59,780

 

 

41,173

 

Underwriting costs

21,474

 

 

33,031

 

 

29,071

 

Other

17,472

 

 

61,031

 

 

20,175

 

Total non-compensation expenses

322,745

 

 

398,283

 

 

294,488

 

Total non-interest expenses

1,090,309

 

 

1,188,119

 

 

1,020,043

 

Earnings before income taxes

559,721

 

 

429,299

 

 

363,401

 

Income tax expense

140,567

 

 

110,846

 

 

95,870

 

Net earnings

419,154

 

 

318,453

 

 

267,531

 

Net losses attributable to noncontrolling interests

(597)

 

 

(363)

 

 

(531)

 

Net earnings attributable to Jefferies Group LLC

$

419,751

 

 

$

318,816

 

 

$

268,062

 

 

 

 

 

 

 

Pre-tax operating margin

33.9

%

 

26.5

%

 

26.3

%

Effective tax rate

25.1

%

 

25.8

%

 

26.4

%

 

 

 

 

 

 

 

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

Nine Months Ended

 

August 31, 2021

 

August 31, 2020

Revenues:

 

 

 

Commissions and other fees

$

673,974

 

 

$

627,115

 

Principal transactions

1,342,075

 

 

1,399,850

 

Investment banking

3,185,038

 

 

1,595,330

 

Asset management fees and revenues

62,259

 

 

23,068

 

Interest

620,649

 

 

702,569

 

Other

156,259

 

 

(6,020)

 

Total revenues

6,040,254

 

 

4,341,912

 

Interest expense

643,440

 

 

753,405

 

Net revenues

5,396,814

 

 

3,588,507

 

 

 

 

 

Non-interest expenses:

 

 

 

Compensation and benefits

2,677,294

 

 

1,932,332

 

 

 

 

 

Non-compensation expenses:

 

 

 

Floor brokerage and clearing fees

222,326

 

 

204,943

 

Technology and communications

319,096

 

 

287,413

 

Occupancy and equipment rental

89,419

 

 

78,951

 

Business development

69,280

 

 

45,953

 

Professional services

159,079

 

 

127,832

 

Underwriting costs

90,641

 

 

59,085

 

Other

109,489

 

 

80,351

 

Total non-compensation expenses

1,059,330

 

 

884,528

 

Total non-interest expenses

3,736,624

 

 

2,816,860

 

Earnings before income taxes

1,660,190

 

 

771,647

 

Income tax expense

428,718

 

 

203,855

 

Net earnings

1,231,472

 

 

567,792

 

Net losses attributable to noncontrolling interests

(1,163)

 

 

(4,397)

 

Net earnings attributable to Jefferies Group LLC

$

1,232,635

 

 

$

572,189

 

 

 

 

 

Pre-tax operating margin

30.8

%

 

21.5

%

Effective tax rate

25.8

%

 

26.4

%

 

 

 

 

 

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

August 31, 2021

 

May 31, 2021

 

August 31, 2020

Net Revenues by Source:

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

$

583,887

 

 

$

390,508

 

 

$

171,438

 

 

 

 

 

 

 

 

Equity underwriting

367,460

 

 

324,462

 

 

305,380

 

Debt underwriting

229,329

 

 

285,730

 

 

139,019

 

Total underwriting

596,789

 

 

610,192

 

 

444,399

 

Other investment banking

(360)

 

 

32,971

 

 

(27,013)

 

Total investment banking

1,180,316

 

 

1,033,671

 

 

588,824

 

 

 

 

 

 

 

 

Equities

236,532

 

 

242,949

 

 

318,824

 

Fixed income

205,795

 

 

257,197

 

 

336,347

 

Total capital markets

442,327

 

 

500,146

 

 

655,171

 

 

 

 

 

 

 

 

Other

28,153

 

 

39,147

 

 

30,120

 

 

 

 

 

 

 

 

Total Investment Banking and Capital Markets (1) (2)

1,650,796

 

 

1,572,964

 

 

1,274,115

 

 

 

 

 

 

 

 

Asset management fees and revenues

10,309

 

 

14,567

 

 

6,772

 

Investment return (3) (4)

80

 

 

41,326

 

 

115,556

 

Allocated net interest (3) (5)

(11,155)

 

 

(11,439)

 

 

(12,999)

 

Total Asset Management

(766)

 

 

44,454

 

 

109,329

 

 

 

 

 

 

 

 

Net Revenues

$

1,650,030

 

 

$

1,617,418

 

 

$

1,383,444

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

Number of trading days

65

 

 

64

 

 

65

 

Number of trading loss days

20

 

 

20

 

 

8

 

 

 

 

 

 

 

 

Average firmwide VaR (in millions) (6)

$

12.69

 

 

$

15.77

 

 

$

10.46

 

(1)

 

Includes net interest revenues of $5.2 million, $3.7 million and $3.3 million for the quarters ended August 31, 2021, May 31, 2021 and August 31, 2020, respectively.

(2)

 

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.

(3)

 

Net revenues attributed to the Investment return in Jefferies Group LLC Asset Management have been disaggregated to separately present Investment return and Allocated net interest (see footnote 5 below). This disaggregation is intended 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 Jefferies Group LLC's credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods.

(4)

 

Includes direct net interest expenses of $4.1 million, $4.5 million and $6.0 million for the quarters ended August 31, 2021, May 31, 2021 and August 31, 2020, respectively.

(5)

 

Allocated net interest represents the allocation of Jefferies Group LLC's long-term debt interest expense to Jefferies Group LLC's Asset Management, net of interest income on Jefferies Group LLC's Cash and cash equivalents and other sources of liquidity (refer to page 13).

(6)

 

VaR estimates the potential loss in value of Jefferies Group LLC's trading positions 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 7 "Management's Discussion and Analysis" in Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2020.

  

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

Nine Months Ended

 

 

August 31, 2021

 

August 31, 2020

Net Revenues by Source:

 

 

 

 

 

 

 

 

Advisory

$

1,285,834

 

 

$

696,677

 

 

 

 

 

 

Equity underwriting

1,186,728

 

 

561,455

 

Debt underwriting

712,476

 

 

337,198

 

Total underwriting

1,899,204

 

 

898,653

 

Other investment banking

62,436

 

 

(112,776)

 

Total investment banking

3,247,474

 

 

1,482,554

 

 

 

 

 

 

Equities

1,010,497

 

 

801,596

 

Fixed income

826,351

 

 

1,077,673

 

Total capital markets

1,836,848

 

 

1,879,269

 

 

 

 

 

 

Other

98,947

 

 

89,953

 

 

 

 

 

 

Total Investment Banking and Capital Markets (1) (2)

5,183,269

 

 

3,451,776

 

 

 

 

 

 

Asset management fees and revenues

62,259

 

 

23,068

 

Investment return (3) (4)

184,279

 

 

150,339

 

Allocated net interest (3) (5)

(32,993)

 

 

(36,676)

 

Total Asset Management

213,545

 

 

136,731

 

 

 

 

 

 

Net Revenues

$

5,396,814

 

 

$

3,588,507

 

 

 

 

 

 

Other Data:

 

 

 

Number of trading days

189

 

 

189

 

Number of trading loss days

49

 

 

23

 

 

 

 

 

 

Average firmwide VaR (in millions) (6)

$

14.79

 

 

$

9.04

 

(1)

 

Includes net interest revenues of $21.1 million and $5.4 million for the nine months ended August 31, 2021 and 2020, respectively.

(2)

 

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.

(3)

 

Net revenues attributed to the Investment return in Jefferies Group LLC Asset Management have been disaggregated to separately present Investment return and Allocated net interest (see footnote 5 below). This disaggregation is intended 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 Jefferies Group LLC's credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods.

(4)

 

Includes direct net interest expenses of $10.9 million and $19.6 million for the nine months ended August 31, 2021 and 2020, respectively.

(5)

 

Allocated net interest represents the allocation of Jefferies Group LLC's long-term debt interest expense to Jefferies Group LLC's Asset Management, net of interest income on Jefferies Group LLC's Cash and cash equivalents and other sources of liquidity (refer to page 13).

(6)

 

VaR estimates the potential loss in value of Jefferies Group LLC's trading positions 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 7 "Management's Discussion and Analysis" in Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2020.

  

Jefferies Group LLC and Subsidiaries

Financial Highlights

(Amounts in Millions, Except Where Noted)

(Unaudited)

 

 

 

 

 

 

 

Quarter Ended

 

August 31,
2021

 

May 31,
2021

 

August 31,
2020

Financial position:

 

 

 

 

 

Total assets (1)

$

52,047

 

 

$

52,171

 

 

$

46,660

 

Average total assets for the period (1)

$

58,757

 

 

$

59,841

 

 

$

54,654

 

Average total assets less goodwill and intangible assets for the period (1)

$

56,955

 

 

$

58,038

 

 

$

52,965

 

 

 

 

 

 

 

Cash and cash equivalents (1)

$

7,186

 

 

$

6,221

 

 

$

6,750

 

Cash and cash equivalents and other sources of liquidity (1) (2)

$

9,201

 

 

$

8,259

 

 

$

8,089

 

Cash and cash equivalents and other sources of liquidity - % total assets (1) (2)

17.7

%

 

15.8

%

 

17.3

%

Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1) (2)

18.3

%

 

16.4

%

 

18.0

%

 

 

 

 

 

 

Financial instruments owned (1)

$

19,184

 

 

$

19,412

 

 

$

17,556

 

Goodwill and intangible assets (1)

$

1,799

 

 

$

1,805

 

 

$

1,806

 

 

 

 

 

 

 

Total equity (including noncontrolling interests) (1)

$

6,901

 

 

$

6,687

 

 

$

6,504

 

Total Jefferies Group LLC member's equity (1)

$

6,897

 

 

$

6,681

 

 

$

6,488

 

Tangible Jefferies Group LLC member's equity (1) (3)

$

5,098

 

 

$

4,876

 

 

$

4,682

 

 

 

 

 

 

 

Level 3 financial instruments:

 

 

 

 

 

Level 3 financial instruments owned (1) (4)

$

380

 

 

$

399

 

 

$

433

 

Level 3 financial instruments owned - % total assets (1) (4)

0.7

%

 

0.8

%

 

0.9

%

Level 3 financial instruments owned - % total financial instruments (1) (4)

2.0

%

 

2.1

%

 

2.5

%

Level 3 financial instruments owned - % tangible Jefferies Group LLC member's equity (1) (4)

7.5

%

 

8.2

%

 

9.2

%

 

 

 

 

 

 

Other data and financial ratios:

 

 

 

 

 

Total long-term capital (1) (5)

$

13,569

 

 

$

13,406

 

 

$

12,492

 

Leverage ratio (1) (6)

7.5

 

 

7.8

 

 

7.2

 

Tangible gross leverage ratio (1) (7)

9.9

 

 

10.3

 

 

9.6

 

 

 

 

 

 

 

Number of trading days

65

 

 

64

 

 

65

 

Number of trading loss days

20

 

 

20

 

 

8

 

Average firmwide VaR (8)

$

12.69

 

 

$

15.77

 

 

$

10.46

 

 

 

 

 

 

 

Number of employees, at period end

4,444

 

 

4,121

 

 

3,893

 

 

Jefferies Group LLC and Subsidiaries

Financial Highlights - Footnotes

 

 

 

 

 

 

 

 

 

(1)

 

Amounts pertaining to August 31, 2021 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC's Quarterly Report on Form 10-Q for the quarter ended August 31, 2021.

 

 

 

(2)

 

At August 31, 2021, other sources of liquidity include high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities of $1,647 million, in aggregate, and $368 million, being the estimated amount of additional secured financing that could be reasonably expected to be obtained from Jefferies Group LLC's financial instruments that are currently not pledged after considering reasonable financing haircuts. The corresponding amounts included in other sources of liquidity at May 31, 2021 were $1,651 million and $387 million, respectively, and at August 31, 2020, were $1,123 million and $216 million, respectively.

 

 

 

(3)

 

Tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) represents total Jefferies Group LLC member's equity less goodwill and identifiable intangible assets. We believe that tangible Jefferies Group LLC member's 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)

 

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.

 

 

 

(5)

 

At August 31, 2021, May 31, 2021 and August 31, 2020, total long-term capital includes Jefferies Group LLC's long-term debt of $6,668 million, $6,719 million and $5,987 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by amounts outstanding under secured credit facilities, amounts from secured term loans and the amount of debt maturing in less than one year, as applicable.

 

 

 

(6)

 

Leverage ratio equals total assets divided by total equity.

 

 

 

(7)

 

Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible Jefferies Group LLC member's equity. The tangible gross leverage ratio is used by rating agencies in assessing Jefferies Group LLC's leverage ratio.

 

 

 

(8)

 

VaR estimates the potential loss in value of Jefferies Group LLC's trading positions 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 7 "Management's Discussion and Analysis" in Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2020.

  

Jefferies Financial Group Inc.
Non-GAAP Reconciliation

The following tables reconcile Jefferies Financial Group 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.

Jefferies Financial Group Adjusted Return on Tangible Equity Reconciliation

The table below reconciles our Net income attributable to Jefferies Financial Group to adjusted net income and our Shareholders’ equity to adjusted tangible shareholders’ equity (in thousands):

 

 

Three Months
Ended
August 31, 2021

 

Nine Months
Ended
August 31, 2021

 

 

 

 

 

Net income attributable to Jefferies Financial Group common

shareholders (GAAP)

 

$

407,459

 

 

$

1,342,490

 

Intangible amortization expense, net of tax

 

2,618

 

 

7,869

 

Adjusted net income (non-GAAP)

 

$

410,077

 

 

$

1,350,359

 

Annualized adjusted net income (non-GAAP)

 

$

1,640,308

 

 

$

1,800,479

 

 

 

 

 

 

 

 

May 31,
2021

 

November 30,
2020

 

 

 

 

 

Shareholders' equity (GAAP)

 

$

10,072,634

 

 

$

9,403,893

 

Less: Intangible assets, net and goodwill

 

(1,912,480)

 

 

(1,913,467)

 

Less: Deferred tax asset

 

(452,467)

 

 

(393,687)

 

Less: Weighted average quarter-to-date or year-to-date impact of 2021 cash

dividends and share repurchases

 

(56,862)

 

 

(189,771)

 

Adjusted tangible shareholders' equity (non-GAAP)

 

$

7,650,825

 

 

$

6,906,968

 

 

 

 

 

 

Adjusted return on tangible equity

 

21.4

%

 

26.1

%

 

Jefferies Financial Group 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):

 

 

August 31,
2021

 

March 31,
2018

 

 

 

 

 

Book value (GAAP)

 

$

10,381,883

 

 

$

10,259,080

 

Redeemable convertible preferred shares converted to common shares (1)

 

125,000

 

 

 

Stock options (2)

 

121,568

 

 

 

Intangible assets, net and goodwill

 

(1,905,163)

 

 

(2,450,957)

 

Adjusted tangible book value (non-GAAP)

 

$

8,723,288

 

 

$

7,808,123

 

 

 

 

 

 

Common shares outstanding (GAAP)

 

245,557

 

 

357,216

 

Restricted stock units ("RSUs")

 

19,976

 

 

19,693

 

Redeemable convertible preferred shares converted to common shares (1)

 

4,441

 

 

 

Stock options (2)

 

5,132

 

 

 

Other

 

1,119

 

 

854

 

Fully diluted shares outstanding (non-GAAP) (3)

 

276,225

 

 

377,763

 

 

 

 

 

 

Book value per share outstanding

 

$

42.28

 

 

$

28.72

 

Tangible book value per fully diluted share outstanding

 

$

31.58

 

 

$

20.67

 

(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. As of March 31, 2018, the redeemable convertible preferred shares were anti-dilutive and not included in adjusted tangible book value or fully diluted shares outstanding.

(2) Stock options added to book value are equal to the total number of stock options outstanding as of August 31, 2021 of 5,132,000 multiplied by the weighted average exercise price of $23.69 on August 31, 2021. Stock options added to fully diluted shares are equal to the total stock options outstanding on August 31, 2021.

(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.

Jefferies Financial Group Shareholders’ Equity GAAP Reconciliation

The table below reconciles our shareholders’ equity to tangible shareholders’ equity (in thousands):

 

 

August 31,
2021

 

March 31,
2018

 

 

 

 

 

Shareholders' equity (GAAP)

 

$

10,381,883

 

 

$

10,259,080

 

Intangible assets, net and goodwill

 

(1,905,163)

 

 

(2,450,957)

 

Tangible shareholders' equity (non-GAAP)

 

$

8,476,720

 

 

$

7,808,123

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20210930005963/en/

CONTACT: Teresa S. Gendron

Chief Financial Officer

Jefferies Financial Group Inc.

Tel. (212) 460-1932

Matt Larson

Chief Financial Officer

Jefferies Group LLC

Tel. (212) 284-2338

KEYWORD: UNITED STATES NORTH AMERICA NEW YORK

INDUSTRY KEYWORD: PROFESSIONAL SERVICES FINANCE

SOURCE: Care of Jefferies Financial Group Inc. and Jefferies Group LLC

Copyright Business Wire 2021.

PUB: 09/30/2021 04:15 PM/DISC: 09/30/2021 04:16 PM

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