NEW YORK--(BUSINESS WIRE)-- Jefferies Financial Group Inc. (NYSE: JEF):
Q4 Financial Highlights
"2023 was a transition year in the economy, in capital markets, in our industry and at Jefferies. It was accompanied by the challenges and sadness of geopolitical turmoil. In the face of this, Jefferies performed reasonably well and eked out a modest return on equity during what we believe to be the bottom of the current cycle.
"For Jefferies, the pain of this transition was felt primarily in Investment Banking, where curtailed new capital markets issuance was compounded by a dampening of merger and acquisition activity among our corporate and sponsor clients. Fortunately, our Equities, Fixed Income and Asset Management businesses performed well despite uncertainty, turmoil and volatility.
"We are hopeful that 2023's results will represent a trough year and, as such, it wasn't too bad. Our total net revenues of $4.7 billion and net income attributable to common shareholders of $263 million, or a 3.7% return on tangible equity, are an acceptable showing at the bottom of the cycle, even though they are far from our goals or long-term expectations. Our Investment Banking net revenues were $2.3 billion, and our Equities and Fixed Income revenues were $2.2 billion, while our Asset Management and Other net revenues totaled about $200 million. These results pale in comparison to the heady period of 2020-21 that represented the height of free money and strong stimulus. We did remind everyone at the time that those results were unique and reflected that passing moment, rather than our new run rate. However, if you go back to 2019, which is more indicative of the last "normal" year in our industry, our current results compare strongly with Investment Banking net revenues of $1.6 billion in 2019 and Equities and Fixed Income net revenues of $1.5 billion.
"Our goal (not guidance) is for our investments and progress of the last several years to position us to eventually achieve the level of results we achieved during the unique period of free money and strong stimulus, but on a durable basis, without relying on excessive "froth" in the system. We have our work cut out to achieve this, but that is the direction and objective we are all driving toward.
"Returning capital to shareholders remains one of our overriding priorities. In 2023, we returned an aggregate of $986 million to common shareholders in the form of $816 million in dividends (inclusive of the Vitesse spin-off) and the repurchase of 5 million shares for a total of $169 million, or $34.66 per share repurchased.
"We have returned $6 billion in total capital to shareholders over the last six years, representing over 78% of tangible book value at January 1, 2018. 252 million fully diluted shares remain outstanding today versus 373 million six years ago.
"We are appreciative of our recent upgrade to BBB+ by Fitch and will constantly strive to improve in this important fundamental measure with the three major ratings agencies.
"With the ongoing wind down of our legacy merchant banking portfolio, as well as our expectation of better results over the next several years, we expect Jefferies to continue to return capital to shareholders through cash dividends and share repurchases.
"While we made some profit and were vigilant on our risk during this complicated year, we are most proud of our team, who focused on our clients and enabled us to aggressively and strategically expand our capabilities. We are able to play strong offense in downturns because we have had a multi-decade consistent strategy and a culture that encourages this contrarian approach. It is one thing to make it through a transition year(s) intact. It is entirely another to come through such a period with a significantly enhanced market position, broader geographic reach, a credit rating upgrade, enhanced human capital, and an even stronger brand—all of which Jefferies achieved in 2023.
"We have pursued our investment in talent on a global basis, as we have expanded throughout Europe, Asia-Pacific, South America, Canada, and the Middle East, as well as in the United States. While our recruiting efforts have largely been in Investment Banking, we have also hired incremental talent in Equities, Fixed Income, Research, Alternative Asset Management and Support.
"Specifically, over the last three years, we have added from other firms and through internal promotion 182 Investment Banking Managing Directors, bringing our total senior team to 344 MDs as of December 1, 2023 (and 364 today), which over the three years is up 61% overall, 48% in the Americas, 78% in Europe and the Middle East, and 150% in Asia-Pacific.
"We certainly do not want to jinx ourselves, and we never provide guidance given the complicated world in which we operate, but the two of us could not be more excited to enter 2024 to experience what we can accomplish as a global team. In our combined 55+ years at Jefferies, we have never seen our Firm better positioned, and we have a straightforward path for our unique global franchise to deliver excellent long-term total returns to our shareholders, with lower-risk Investment Banking revenue driving our growth, a diversified sales, trading and research platform serving our clients and the foundation of a strong alternative asset management business. Critically important, our front-office effort is complemented by a solid and experienced Support team. It is impossible to estimate with clarity when our opportunity will fully normalize, but it always does, and we are ready! Given the Fed’s statement in December, it may even be sooner than we had expected."
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 February 27, 2024 to record holders of Jefferies common shares on February 16, 2024.
Financial Summary
(Dollars in thousands, except per share amounts) | Three Months Ended November 30, |
|
| Twelve Months Ended November 30, |
| ||||||||||||||
|
| 2023 |
|
|
| 202214, 15 |
| % Change |
|
| 2023 |
|
|
| 202214, 15 |
| % Change | ||
Net revenues: |
|
|
|
|
|
|
|
|
| ||||||||||
Investment Banking and Capital Markets | $ | 1,057,997 |
|
| $ | 1,052,594 |
| 1 | % |
| $ | 4,504,379 |
|
| $ | 4,741,261 |
| (5 | ) |
Asset Management |
| 140,646 |
|
|
| 389,068 |
| (64 | )% |
|
| 188,345 |
|
|
| 1,243,491 |
| (85 | )% |
Other |
| (1,437 | ) |
|
| (3,580 | ) | (60 | )% |
|
| 7,693 |
|
|
| (5,914 | ) | N/M |
|
Net revenues |
| 1,197,206 |
|
|
| 1,438,082 |
| (17 | )% |
|
| 4,700,417 |
|
|
| 5,978,838 |
| (21 | )% |
Net earnings before income taxes |
| 87,261 |
|
|
| 194,840 |
| (55 | )% |
|
| 354,269 |
|
|
| 1,055,562 |
| (66 | )% |
Income tax expense |
| 16,828 |
|
|
| 53,903 |
| (69 | )% |
|
| 91,881 |
|
|
| 273,852 |
| (66 | )% |
Net earnings |
| 70,433 |
|
|
| 140,937 |
| (50 | )% |
|
| 262,388 |
|
|
| 781,710 |
| (66 | )% |
Net losses attributable to noncontrolling interests |
| (1,506 | ) |
|
| (1,280 | ) | 18 | % |
|
| (14,846 | ) |
|
| (2,397 | ) | 519 | % |
Net losses attributable to redeemable noncontrolling interests |
| — |
|
|
| (101 | ) | (100 | )% |
|
| (454 | ) |
|
| (1,342 | ) | (66 | )% |
Preferred stock dividends |
| 6,300 |
|
|
| 2,070 |
| 204 | % |
|
| 14,616 |
|
|
| 8,281 |
| 77 | % |
Net earnings attributable to Jefferies Financial Group Inc. common shareholders | $ | 65,639 |
|
| $ | 140,248 |
| (53 | )% |
| $ | 263,072 |
|
| $ | 777,168 |
| (66 | )% |
Earnings per common share: |
|
|
|
|
|
|
|
|
| ||||||||||
Basic | $ | 0.30 |
|
| $ | 0.58 |
| (48 | )% |
| $ | 1.12 |
|
| $ | 3.13 |
| (64 | )% |
Diluted | $ | 0.29 |
|
| $ | 0.57 |
| (49 | )% |
| $ | 1.10 |
|
| $ | 3.06 |
| (64 | )% |
Weighted average common shares |
| 220,441 |
|
|
| 239,312 |
|
|
|
| 232,609 |
|
|
| 247,378 |
|
| ||
Weighted average diluted common shares |
| 224,584 |
|
|
| 248,338 |
|
|
|
| 236,620 |
|
|
| 255,571 |
|
| ||
Annualized return on adjusted tangible equity1 |
| 3.8 | % |
|
| 7.2 | % |
|
|
| 3.7 | % |
|
| 10.3 | % |
|
N/M — Not Meaningful
Highlights
Three Months Ended November 30, 2023 |
| Twelve Months Ended November 30, 2023 |
|
|
|
Investment Banking and Capital Markets |
| Investment Banking and Capital Markets |
|
|
|
Asset Management |
| Asset Management |
|
|
|
* * * *
Amounts herein pertaining to November 30, 2023 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Annual Report on Form 10-K with the Securities and Exchange Commission (“SEC”). More information on our results of operations for the year ended November 30, 2023 will be provided upon filing our Annual Report on Form 10-K with the SEC, which we expect to file on or about January 26, 2024.
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).
Selected Financial Information
(Amounts in Thousands) (Unaudited) | Quarter Ended | ||||||||||
| November 30, 2023 |
| August 31, 202315 |
| November 30, 202214, 15 | ||||||
Net revenues by source: |
|
|
|
|
| ||||||
Advisory | $ | 312,310 |
|
| $ | 335,271 |
|
| $ | 381,411 |
|
Equity underwriting |
| 132,158 |
|
|
| 154,211 |
|
|
| 109,440 |
|
Debt underwriting |
| 129,436 |
|
|
| 110,708 |
|
|
| 61,731 |
|
Total underwriting |
| 261,594 |
|
|
| 264,919 |
|
|
| 171,171 |
|
Other investment banking |
| 2,842 |
|
|
| 44,453 |
|
|
| 9,994 |
|
Total Investment Banking |
| 576,746 |
|
|
| 644,643 |
|
|
| 562,576 |
|
Equities |
| 271,477 |
|
|
| 268,015 |
|
|
| 249,212 |
|
Fixed income |
| 209,774 |
|
|
| 255,573 |
|
|
| 240,806 |
|
Total Capital Markets |
| 481,251 |
|
|
| 523,588 |
|
|
| 490,018 |
|
Total Investment Banking and Capital Markets Net revenues5 |
| 1,057,997 |
|
|
| 1,168,231 |
|
|
| 1,052,594 |
|
Asset management fees and revenues6 |
| 18,695 |
|
|
| 16,358 |
|
|
| 13,440 |
|
Investment return4 |
| 62,892 |
|
|
| 31,658 |
|
|
| 156,613 |
|
Merchant banking, inclusive of net interest |
| 73,627 |
|
|
| (25,145 | ) |
|
| 230,974 |
|
Allocated net interest4 |
| (14,568 | ) |
|
| (12,728 | ) |
|
| (11,959 | ) |
Total Asset Management Net revenues |
| 140,646 |
|
|
| 10,143 |
|
|
| 389,068 |
|
Other |
| (1,437 | ) |
|
| 3,735 |
|
|
| (3,580 | ) |
Total Net revenues by source | $ | 1,197,206 |
|
| $ | 1,182,109 |
|
| $ | 1,438,082 |
|
|
|
|
|
|
| ||||||
Non-interest expenses: |
|
|
|
|
| ||||||
Compensation and benefits | $ | 612,287 |
|
| $ | 644,059 |
|
| $ | 659,121 |
|
Floor brokerage and clearing fees |
| 98,410 |
|
|
| 91,226 |
|
|
| 85,143 |
|
Underwriting costs |
| 19,829 |
|
|
| 14,877 |
|
|
| 9,076 |
|
Technology and communications |
| 122,128 |
|
|
| 122,579 |
|
|
| 114,957 |
|
Occupancy and equipment rental |
| 26,630 |
|
|
| 27,711 |
|
|
| 28,420 |
|
Business development |
| 55,649 |
|
|
| 41,467 |
|
|
| 42,610 |
|
Professional services |
| 70,875 |
|
|
| 64,897 |
|
|
| 71,042 |
|
Depreciation and amortization |
| 28,311 |
|
|
| 25,288 |
|
|
| 43,471 |
|
Cost of sales |
| 23,287 |
|
|
| 1,618 |
|
|
| 91,281 |
|
Other |
| 52,539 |
|
|
| 57,316 |
|
|
| 98,121 |
|
Total Non-interest expenses | $ | 1,109,945 |
|
| $ | 1,091,038 |
|
| $ | 1,243,242 |
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
(Amounts in Thousands) (Unaudited) | Twelve Months Ended November 30, | ||||||
|
| 2023 |
|
|
| 202214, 15 |
|
Net revenues by source: |
|
|
| ||||
Advisory | $ | 1,198,916 |
|
| $ | 1,778,003 |
|
Equity underwriting |
| 560,243 |
|
|
| 538,947 |
|
Debt underwriting |
| 410,208 |
|
|
| 490,873 |
|
Total underwriting |
| 970,451 |
|
|
| 1,029,820 |
|
Other investment banking |
| 118,799 |
|
|
| 78,882 |
|
Total Investment Banking |
| 2,288,166 |
|
|
| 2,886,705 |
|
Equities |
| 1,123,477 |
|
|
| 1,054,064 |
|
Fixed income |
| 1,092,736 |
|
|
| 800,492 |
|
Total Capital Markets |
| 2,216,213 |
|
|
| 1,854,556 |
|
Total Investment Banking and Capital Markets Net revenues5 |
| 4,504,379 |
|
|
| 4,741,261 |
|
Asset management fees and revenues6 |
| 93,678 |
|
|
| 89,127 |
|
Investment return4 |
| 154,461 |
|
|
| 156,594 |
|
Merchant banking, inclusive of net interest |
| (10,275 | ) |
|
| 1,052,199 |
|
Allocated net interest4 |
| (49,519 | ) |
|
| (54,429 | ) |
Total Asset Management Net revenues |
| 188,345 |
|
|
| 1,243,491 |
|
Other |
| 7,693 |
|
|
| (5,914 | ) |
Total Net revenues by source | $ | 4,700,417 |
|
| $ | 5,978,838 |
|
|
|
|
| ||||
Non-interest expenses: |
|
|
| ||||
Compensation and benefits | $ | 2,535,272 |
|
| $ | 2,589,044 |
|
Floor brokerage and clearing fees |
| 366,702 |
|
|
| 347,805 |
|
Underwriting costs |
| 61,082 |
|
|
| 42,067 |
|
Technology and communications |
| 477,028 |
|
|
| 444,011 |
|
Occupancy and equipment rental |
| 106,051 |
|
|
| 108,001 |
|
Business development |
| 177,541 |
|
|
| 150,500 |
|
Professional services |
| 266,447 |
|
|
| 240,978 |
|
Depreciation and amortization |
| 112,201 |
|
|
| 172,902 |
|
Cost of sales |
| 29,435 |
|
|
| 440,837 |
|
Other |
| 214,389 |
|
|
| 387,131 |
|
Total Non-interest expenses | $ | 4,346,148 |
|
| $ | 4,923,276 |
|
|
|
|
|
Financial Data and Metrics
(Unaudited) | Quarter Ended | |||||||
| November 30, 2023 |
| August 31, 2023 |
| November 30, 2022 | |||
Other Data: |
|
|
|
|
| |||
Number of trading days |
| 63 |
|
| 64 |
|
| 63 |
Number of trading loss days7 |
| 7 |
|
| 6 |
|
| 3 |
Average VaR (in millions)8 | $ | 12.36 |
| $ | 13.87 |
| $ | 10.62 |
|
|
|
|
|
| |||
|
|
| Twelve Months Ended November 30, | |||||
|
|
| 2023 |
| 2022 | |||
Other Data: |
|
|
|
|
| |||
Number of trading days |
|
|
| 251 |
|
| 252 | |
Number of trading loss days7 |
|
|
| 26 |
|
| 30 | |
Average VaR (in millions)8 |
|
| $ | 13.57 |
| $ | 11.04 |
(Amounts in Millions, Except Other Data) (Unaudited) | Quarter Ended | |||||||
| November 30, 2023 |
| August 31, 2023 |
| November 30, 2022 | |||
Financial position9: |
|
|
|
|
| |||
Total assets | $ | 57,905 |
| $ | 56,045 |
| $ | 51,058 |
Total assets less goodwill and intangible assets for the period |
| 55,860 |
|
| 54,173 |
|
| 49,182 |
Cash and cash equivalents |
| 8,526 |
|
| 8,817 |
|
| 9,703 |
Financial instruments owned |
| 21,747 |
|
| 22,805 |
|
| 18,666 |
Level 3 financial instruments owned10 |
| 681 |
|
| 918 |
|
| 791 |
Goodwill and intangible assets |
| 2,045 |
|
| 1,872 |
|
| 1,876 |
Total equity |
| 9,802 |
|
| 9,765 |
|
| 10,295 |
Total shareholders' equity |
| 9,710 |
|
| 9,699 |
|
| 10,233 |
Tangible shareholders' equity11 |
| 7,665 |
|
| 7,827 |
|
| 8,357 |
Other data and financial ratios: |
|
|
|
|
| |||
Leverage ratio9, 12 |
| 5.9 |
|
| 5.7 |
|
| 5.0 |
Tangible gross leverage ratio9, 13 |
| 7.3 |
|
| 6.9 |
|
| 5.9 |
Number of employees, at period end16 |
| 7,564 |
|
| 5,505 |
|
| 5,381 |
Number of employees excluding OpNet and Stratos, at period end |
| 5,661 |
|
| 5,505 |
|
| 5,381 |
Components of Numerators and Denominators for Earnings Per Common Share
The numerators and denominators used to calculate basic and diluted earnings per common share are as follows (in thousands):
|
| Three Months Ended November 30, 2023 |
| Twelve Months Ended November 30, 2023 | ||||
Numerator for earnings per common share: |
|
|
|
| ||||
Net earnings attributable to Jefferies Financial Group Inc. |
| $ | 71,938 |
|
| $ | 275,672 |
|
Allocation of earnings to participating securities |
|
| (6,389 | ) |
|
| (14,729 | ) |
Net earnings attributable to Jefferies Financial Group Inc. common shareholders for basic earnings per share |
|
| 65,549 |
|
|
| 260,943 |
|
Net earnings attributable to Jefferies Financial Group Inc. common shareholders for diluted earnings per share |
|
| 65,549 |
|
|
| 260,943 |
|
|
|
|
|
| ||||
Denominator for earnings per common share: |
|
|
|
| ||||
Weighted average common shares outstanding |
|
| 210,505 |
|
|
| 222,325 |
|
Weighted average shares of restricted stock outstanding with future service required |
|
| (1,907 | ) |
|
| (1,920 | ) |
Weighted average restricted stock units outstanding with no future service required |
|
| 11,843 |
|
|
| 12,204 |
|
Denominator for basic earnings per common share – weighted average shares |
|
| 220,441 |
|
|
| 232,609 |
|
Stock options and other share-based awards |
|
| 2,224 |
|
|
| 2,085 |
|
Senior executive compensation plan restricted stock unit awards |
|
| 1,919 |
|
|
| 1,926 |
|
Denominator for diluted earnings per common share |
|
| 224,584 |
|
|
| 236,620 |
|
|
|
|
|
| ||||
Earnings per common share: |
|
|
|
| ||||
Basic |
| $ | 0.30 |
|
| $ | 1.12 |
|
Diluted |
| $ | 0.29 |
|
| $ | 1.10 |
|
Notes
Non-GAAP Reconciliations
The following tables reconcile our non-GAAP financial measures to their respective U.S. GAAP financial measures. Management believes such non-GAAP financial 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.
Annualized Return on Adjusted Tangible Equity Reconciliation
The table below reconciles our Net earnings attributable to common shareholders to adjusted net earnings and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands):
|
| Three Months Ended November 30, |
| Twelve Months Ended November 30, | ||||||||||||
|
| 2023 |
|
|
| 2022 |
|
|
| 2023 |
|
|
| 2022 |
| |
Net earnings attributable to Jefferies Financial Group Inc. common shareholders (GAAP) |
| $ | 65,639 |
|
| $ | 140,248 |
|
| $ | 263,072 |
|
| $ | 777,168 |
|
Intangible amortization and impairment expense, net of tax |
|
| 1,939 |
|
|
| 1,742 |
|
|
| 6,638 |
|
|
| 8,100 |
|
Adjusted net earnings (non-GAAP) |
| $ | 67,578 |
|
| $ | 141,990 |
|
| $ | 269,710 |
|
| $ | 785,268 |
|
Annualized adjusted net earnings (non-GAAP) |
| $ | 270,312 |
|
| $ | 567,960 |
|
| $ | 269,710 |
|
| $ | 785,268 |
|
|
| August 31, |
| November 30, | ||||||||||||
|
|
| 2023 |
|
|
| 2022 |
|
|
| 2022 |
|
|
| 2021 |
|
Shareholders' equity (GAAP) |
| $ | 9,698,847 |
|
| $ | 10,292,531 |
|
| $ | 10,232,845 |
|
| $ | 10,553,755 |
|
Less: Intangible assets, net and goodwill |
|
| (1,872,144 | ) |
|
| (1,874,435 | ) |
|
| (1,875,576 | ) |
|
| (1,897,500 | ) |
Less: Deferred tax asset |
|
| (573,630 | ) |
|
| (398,397 | ) |
|
| (387,862 | ) |
|
| (327,547 | ) |
Less: Weighted average impact of dividends and share repurchases |
|
| (50,727 | ) |
|
| (115,869 | ) |
|
| (732,517 | ) |
|
| (670,949 | ) |
Adjusted tangible shareholders' equity (non-GAAP) |
| $ | 7,202,346 |
|
| $ | 7,903,830 |
|
| $ | 7,236,890 |
|
| $ | 7,657,759 |
|
Annualized return on adjusted tangible equity (non-GAAP) |
|
| 3.8 | % |
|
| 7.2 | % |
|
| 3.7 | % |
|
| 10.3 | % |
Adjusted Tangible Book Value and Fully Diluted 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):
|
|
| November 30, 2023 |
|
Book value (GAAP) |
| $ | 9,709,827 |
|
Stock options(1) |
|
| 114,939 |
|
Intangible assets, net and goodwill |
|
| (2,044,776 | ) |
Adjusted tangible book value (non-GAAP) |
| $ | 7,779,990 |
|
Common shares outstanding (GAAP) |
|
| 210,627 |
|
Preferred shares |
|
| 21,000 |
|
Restricted stock units ("RSUs") |
|
| 14,352 |
|
Stock options(1) |
|
| 5,065 |
|
Other |
|
| 1,365 |
|
Fully diluted shares outstanding (non-GAAP)(2) |
|
| 252,409 |
|
Book value per common share outstanding |
| $ | 46.10 |
|
Tangible book value per fully diluted share outstanding (non-GAAP) |
| $ | 30.82 |
|
(1) | Stock options added to book value are equal to the total number of stock options outstanding as of November 30, 2023 of 5.1 million multiplied by the weighted average exercise price of $22.69 on November 30, 2023. Stock options added to fully diluted shares are equal to the total stock options outstanding on November 30, 2023. | ||
(2) | Fully diluted shares outstanding include vested and unvested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans until the performance period is complete. Fully diluted shares outstanding also include all stock options and the impact of mandatorily convertible preferred shares if-converted to common shares. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240108520874/en/
Jonathan Freedman 212.778.8913
Source: Jefferies Financial Group Inc.