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Jefferies Financial Group Announces Second Quarter 2021 Financial Results -- Jefferies Group LLC Delivers Record Second Quarter and Six Months Revenues and Net Income

Jefferies Dividend Increased 25% to $1.00 Per Share Annual Rate

Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and six months ended May 31, 2021. Net Income attributable to common shareholders for the second quarter was $353 million, or $1.30 per diluted share, and annualized adjusted return on tangible equity was 19.2%1. For the six months ended May 31, 2021, Net income attributable to common shareholders was $935 million, or $3.43 per diluted share, and annualized adjusted return on tangible equity was 27.0%2.

In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.25 per Jefferies common share, a 25% increase on the prior dividend rate, payable on August 27, 2021 to record holders of Jefferies common shares on August 16, 2021. We expect to file our Form 10-Q on or about July 9, 2021.

Highlights for the three months ended May 31, 2021:

  • Jefferies Group LLC
    • Net revenues of $1,617 million, a record for a second quarter and up 56% over the prior year second quarter's then all-time record quarterly net revenues
    • Pre-tax income of $429 million, also a record for a second quarter and up 148% over the prior year quarter, demonstrating the operating leverage inherent in our business model, and record second quarter net earnings of $318 million, up 147% over the prior year quarter
    • Annualized return on tangible equity of 26.9%3, compared with 11.6%4 in the prior year quarter
    • Record quarterly Investment Banking net revenues of $1,034 million, up 227% over the prior year quarter, including record quarterly Advisory net revenues of $391 million, record quarterly Debt Underwriting net revenues of $286 million and Equity Underwriting net revenues of $324 million, a record for a second quarter
    • Quarterly combined Capital Markets net revenues of $500 million, down 31.5% over the prior year quarter; Equities net revenues of $243 million, a record for a second quarter, and Fixed Income net revenues of $257 million
    • Record second quarter Asset Management revenues (before allocated net interest5) of $56 million, up 202% over the prior year quarter and including $15 million in management, performance and similar fees and revenues earned directly or through our strategic affiliates
    • Liquidity buffer of $8.3 billion of cash and unencumbered liquid collateral at May 31, 2021, which represented 16% of our total balance sheet
  • Jefferies Financial Group
    • Net income attributable to common shareholders for the second quarter was $353 million, or $1.30 per diluted share, and annualized adjusted return on tangible equity was

      19.2%1
    • Merchant Banking pre-tax income of $59 million, reflecting record quarterly results from Idaho Timber and mark-to-market increases in the value of several of our investments in public and private companies

Highlights for the six months ended May 31, 2021:

  • Jefferies Group LLC
    • Record six months net revenues of $3,747 million, up 70% over the prior year comparable period's then all-time record net revenues
    • Record six months pre-tax income of $1,100 million, up 170% over the prior year period, and record six months net earnings of $812 million, up 171% over the prior year period
    • Annualized return on tangible equity of 35.8%6, compared with 14.1%7 in the prior year period
    • Record six months Investment Banking net revenues of $2,067 million, up 131% over the prior year period, including record Advisory net revenues of $702 million, record Equity Underwriting net revenues of $819 million and record Debt Underwriting net revenues of $483 million
    • Record six months combined Capital Markets net revenues of $1,395 million, up 14% over the prior year period; record Equities net revenues of $774 million and Fixed Income net revenues of $621 million
    • Record six months Asset Management revenues (before allocated net interest5) of $236 million, up 362% over the prior year period, including $52 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 six months of the current year are attributable to performance realized in respect of the twelve months ended December 31, 2020
    • Liquidity buffer of $8.3 billion of cash and unencumbered liquid collateral at May 31, 2021, which represented 16% of our total balance sheet
  • Jefferies Financial Group
    • For the six months ended May 31, 2021, Net income attributable to common shareholders was $935 million, or $3.43 per diluted share, and annualized adjusted return on tangible equity was 27.0%2
    • Merchant Banking pre-tax income of $167 million, reflecting record six month results from Idaho Timber and mark-to-market increases in the value of several of our investments in public and private companies
    • We repurchased 5.0 million shares for $128 million, or an average price of $25.51 per share during the first six months of 2021; since April 2018, Jefferies has repurchased 123 million shares for $2.6 billion in total, or an average price of $21.04 per share; our share buyback authorization remains at $250 million
    • At May 31, 2021, we had 247 million shares outstanding and 278 million shares were outstanding on a fully diluted basis8
    • Jefferies book value per share was $40.77 and tangible book value per fully diluted share9 was $30.29 at May 31, 2021
    • Since April 2018, Jefferies has returned to shareholders $3.6 billion, or 35% of shareholders' equity and 46% of tangible shareholders' equity10 at the beginning of this effort. Our shareholders' equity at May 31, 2021 is $10.1 billion. Even with our significant return of capital to our shareholders, Jefferies tangible shareholders' equity10 at May 31, 2021 is $8.2 billion, which is over $300 million higher than at March 31, 2018

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

"We would like to thank our colleagues and clients for Jefferies' spectacular results thus far in 2021. Our performance reflects the continued growth and strength of our global full-service business model and our increasing market share – particularly in Investment Banking, where net revenues for the first half of the year were more than $2 billion and our backlog11 for the third quarter is at a record level. Additionally, our Equities, Fixed Income and Asset Management businesses all are performing well, even as the environment becomes more normalized relative to the uniquely exceptional first quarter.

"We intend to continue our relentless focus on serving our clients, while strategically investing in our global platform and over 4,000 employee-partners. We will strive to remain nimble, non-bureaucratic, entrepreneurial and mindful of risk, as well as continue to prioritize and value our people and culture. We are strategically hiring at all levels and we see this as a key driver of continuing growth. This is evident particularly in Investment Banking, as our capabilities, reach and brand are proving extremely scalable.

"As of our second quarter ending May 31, 2020, Jefferies Group had last twelve months ("LTM") net revenues, LTM earnings before income taxes and LTM net earnings of $3,730 million, $515 million and $388 million, respectively. For our current LTM ending May 31, 2021, our comparable numbers are $6,739 million, $1,870 million and $1,387 million, respectively. These significant increases of 81%, 263% and 257%, respectively, show the remarkable progress that we have achieved over the past year, as we rose to the unique challenges that were presented due to COVID-19 and emerged as an even stronger, more client focused and more diversified firm.

"We are humbled by the loyalty, tenacity, dedication and spirit of our employee-partners. We look forward to seeing more and more of them fully vaccinated, safe and heading back to our offices. We also plan on taking advantage of our newfound ability to offer flexibility to our team in a hybrid environment as we continue to build Jefferies together to best serve our clients."

* * * *

Amounts herein pertaining to May 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 six months ended May 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 May 31, 2021 annualized adjusted net income divided by our adjusted tangible shareholders' equity at February 28, 2021. Refer to schedule on page 14 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 six months ended May 31, 2021 annualized adjusted net income divided by our adjusted tangible shareholders' equity at November 30, 2020. Refer to schedule on page 14 for reconciliation to U.S. GAAP amounts.

3

Return on tangible equity (a non-GAAP financial measure) equals our three months ended May 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 $4,733 million at February 28, 2021. Tangible Jefferies Group LLC member's equity at February 28, 2021 equals Jefferies Group LLC member's equity of $6,540 million less goodwill and identifiable intangibles assets of $1,807 million.

4

Return on tangible equity (a non-GAAP financial measure) equals our three months ended May 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 $4,503 million at February 29, 2020. Tangible Jefferies Group LLC member's equity at February 29, 2020 equals Jefferies Group LLC member's equity of $6,313 million less goodwill and identifiable intangibles assets of $1,810 million.

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 10 and 11.

6

Return on tangible equity (a non-GAAP financial measure) equals our first six months ended May 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 $4,543 million at November 30, 2020. Tangible Jefferies Group LLC member's equity at November 30, 2020 equals Jefferies Group LLC member's equity of $6,349 million less goodwill and identifiable intangibles assets of $1,805 million.

7

Return on tangible equity (a non-GAAP financial measure) equals our first six months ended May 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 $4,311 million at November 30, 2019. Tangible Jefferies Group LLC member's equity at November 30, 2019 equals Jefferies Group LLC member's equity of $6,125 million less goodwill and identifiable intangibles assets of $1,814 million.

8

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 15 for reconciliation to U.S. GAAP amounts.

9

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 15 for reconciliation to U.S. GAAP amounts.

10

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 15 for reconciliation to U.S. GAAP amounts.

11

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

May 31,

 

Six Months Ended

May 31,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Net revenues

$

1,950,507

 

 

$

1,147,589

 

 

$

4,437,449

 

 

$

2,533,917

 

 

 

 

 

 

 

 

 

Income before income taxes and loss related to associated companies

$

497,665

 

 

$

82,228

 

 

$

1,309,018

 

 

$

307,877

 

Loss related to associated companies

(23,526

)

 

(6,721

)

 

(34,094

)

 

(74,576

)

Income before income taxes

474,139

 

 

75,507

 

 

1,274,924

 

 

233,301

 

Income tax provision

120,820

 

 

31,962

 

 

339,056

 

 

77,735

 

Net income

353,319

 

 

43,545

 

 

935,868

 

 

155,566

 

Net loss attributable to the noncontrolling interests

669

 

 

2,580

 

 

1,412

 

 

4,709

 

Net loss attributable to the redeemable noncontrolling interests

234

 

 

198

 

 

1,003

 

 

480

 

Preferred stock dividends

(1,626

)

 

(1,404

)

 

(3,252

)

 

(2,826

)

Net income attributable to Jefferies Financial Group Inc. common shareholders

$

352,596

 

 

$

44,919

 

 

$

935,031

 

 

$

157,929

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Net income

$

1.33

 

 

$

0.16

 

 

$

3.51

 

 

$

0.53

 

 

 

 

 

 

 

 

 

Number of shares in calculation

263,280

 

 

286,764

 

 

264,829

 

 

294,589

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Net income

$

1.30

 

 

$

0.16

 

 

$

3.43

 

 

$

0.53

 

 

 

 

 

 

 

 

 

Number of shares in calculation

271,092

 

 

286,764

 

 

271,948

 

 

295,301

 

A summary of results for the three months ended May 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

$

1,572,964

 

 

$

54,554

 

 

$

318,828

 

 

$

724

 

 

$

 

 

$

3,437

 

 

$

1,950,507

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

774,549

 

 

21,671

 

 

27,987

 

 

7,035

 

 

 

 

 

 

831,242

 

Cost of sales (1)

66,211

 

 

10,599

 

 

143,847

 

 

 

 

 

 

 

 

220,657

 

Interest expense

 

 

 

 

6,114

 

 

 

 

13,829

 

 

 

 

19,943

 

Depreciation and amortization

20,778

 

 

489

 

 

17,295

 

 

878

 

 

 

 

 

 

39,440

 

Selling, general and other expenses

284,868

 

 

10,740

 

 

41,061

 

 

4,910

 

 

 

 

(19

)

 

341,560

 

Total expenses

1,146,406

 

 

43,499

 

 

236,304

 

 

12,823

 

 

13,829

 

 

(19

)

 

1,452,842

 

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

426,558

 

 

11,055

 

 

82,524

 

 

(12,099

)

 

(13,829

)

 

3,456

 

 

497,665

 

Loss related to associated companies

 

 

 

 

(23,526

)

 

 

 

 

 

 

 

(23,526

)

Income (loss) before income taxes

$

426,558

 

 

$

11,055

 

 

$

58,998

 

 

$

(12,099

)

 

$

(13,829

)

 

$

3,456

 

 

474,139

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

120,820

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

353,319

 

A summary of results for the three months ended May 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

$

1,028,832

 

 

$

7,391

 

 

$

107,162

 

 

$

1,525

 

 

$

 

 

$

2,679

 

 

$

1,147,589

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

551,821

 

 

26,502

 

 

13,973

 

 

6,171

 

 

 

 

 

 

598,467

 

Cost of sales (1)

67,601

 

 

7,878

 

 

80,771

 

 

 

 

 

 

 

 

156,250

 

Interest expense

 

 

 

 

8,282

 

 

 

 

12,878

 

 

 

 

21,160

 

Depreciation and amortization

19,981

 

 

2,133

 

 

17,378

 

 

874

 

 

 

 

 

 

40,366

 

Selling, general and other expenses

174,895

 

 

12,431

 

 

54,753

 

 

7,334

 

 

 

 

(295

)

 

249,118

 

Total expenses

814,298

 

 

48,944

 

 

175,157

 

 

14,379

 

 

12,878

 

 

(295

)

 

1,065,361

 

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

214,534

 

 

(41,553

)

 

(67,995

)

 

(12,854

)

 

(12,878

)

 

2,974

 

 

82,228

 

Loss related to associated companies

 

 

 

 

(6,721

)

 

 

 

 

 

 

 

(6,721

)

Income (loss) before income taxes

$

214,534

 

 

$

(41,553

)

 

$

(74,716

)

 

$

(12,854

)

 

$

(12,878

)

 

$

2,974

 

 

75,507

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

31,962

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

43,545

 

 

(1) Includes Floor brokerage and clearing fees.

 

A summary of results for the six months ended May 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

$

3,532,473

 

 

$

281,288

 

 

$

616,331

 

 

$

1,314

 

 

$

 

 

$

6,043

 

 

$

4,437,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,880,761

 

 

44,456

 

 

55,999

 

 

22,569

 

 

 

 

 

 

2,003,785

 

Cost of sales (1)

132,785

 

 

20,441

 

 

239,406

 

 

 

 

 

 

 

 

392,632

 

Interest expense

 

 

 

 

12,579

 

 

 

 

27,731

 

 

 

 

40,310

 

Depreciation and amortization

41,462

 

 

968

 

 

34,035

 

 

1,742

 

 

 

 

 

 

78,207

 

Selling, general and other expenses

507,624

 

 

22,903

 

 

73,603

 

 

9,579

 

 

 

 

(212

)

 

613,497

 

Total expenses

2,562,632

 

 

88,768

 

 

415,622

 

 

33,890

 

 

27,731

 

 

(212

)

 

3,128,431

 

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

969,841

 

 

192,520

 

 

200,709

 

 

(32,576

)

 

(27,731

)

 

6,255

 

 

1,309,018

 

Loss related to associated companies

 

 

 

 

(34,094

)

 

 

 

 

 

 

 

(34,094

)

Income (loss) before income taxes

$

969,841

 

 

$

192,520

 

 

$

166,615

 

 

$

(32,576

)

 

$

(27,731

)

 

$

6,255

 

 

1,274,924

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

339,056

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

935,868

 

 

A summary of results for the six months ended May 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

$

2,177,661

 

 

$

27,720

 

 

$

311,721

 

 

$

11,317

 

 

$

 

 

$

5,498

 

 

$

2,533,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,172,745

 

 

48,723

 

 

31,163

 

 

16,029

 

 

 

 

 

 

1,268,660

 

Cost of sales (1)

120,475

 

 

14,185

 

 

153,214

 

 

 

 

 

 

 

 

287,874

 

Interest expense

 

 

 

 

17,055

 

 

 

 

25,659

 

 

 

 

42,714

 

Depreciation and amortization

39,097

 

 

2,758

 

 

36,219

 

 

1,762

 

 

 

 

 

 

79,836

 

Selling, general and other expenses

380,853

 

 

24,536

 

 

127,833

 

 

14,134

 

 

 

 

(400

)

 

546,956

 

Total expenses

1,713,170

 

 

90,202

 

 

365,484

 

 

31,925

 

 

25,659

 

 

(400

)

 

2,226,040

 

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

464,491

 

 

(62,482

)

 

(53,763

)

 

(20,608

)

 

(25,659

)

 

5,898

 

 

307,877

 

Loss related to associated companies

 

 

 

 

(74,576

)

 

 

 

 

 

 

 

(74,576

)

Income (loss) before income taxes

$

464,491

 

 

$

(62,482

)

 

$

(128,339

)

 

$

(20,608

)

 

$

(25,659

)

 

$

5,898

 

 

233,301

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

77,735

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

155,566

 

 

(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 May 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 May 31, 2021.

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

May 31, 2021

 

February 28, 2021

 

May 31, 2020

Revenues:

 

 

 

 

 

Commissions and other fees

$

222,643

 

 

$

236,938

 

 

$

243,267

 

Principal transactions

325,059

 

 

791,219

 

 

467,283

 

Investment banking

1,000,700

 

 

1,003,662

 

 

387,491

 

Asset management fees and revenues

14,567

 

 

37,383

 

 

4,576

 

Interest

206,958

 

 

219,021

 

 

211,941

 

Other

66,769

 

 

60,588

 

 

(47,275

)

Total revenues

1,836,696

 

 

2,348,811

 

 

1,267,283

 

Interest expense

219,278

 

 

219,445

 

 

232,916

 

Net revenues

1,617,418

 

 

2,129,366

 

 

1,034,367

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

Compensation and benefits

789,836

 

 

1,119,894

 

 

571,547

 

 

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

 

 

Floor brokerage and clearing fees

76,617

 

 

76,580

 

 

77,619

 

Technology and communications

107,962

 

 

104,341

 

 

95,594

 

Occupancy and equipment rental

32,839

 

 

27,990

 

 

24,395

 

Business development

27,023

 

 

17,981

 

 

8,359

 

Professional services

59,780

 

 

44,288

 

 

41,994

 

Underwriting costs

33,031

 

 

36,136

 

 

12,485

 

Other

61,031

 

 

30,986

 

 

29,506

 

Total non-compensation expenses

398,283

 

 

338,302

 

 

289,952

 

Total non-interest expenses

1,188,119

 

 

1,458,196

 

 

861,499

 

Earnings before income taxes

429,299

 

 

671,170

 

 

172,868

 

Income tax expense

110,846

 

 

177,305

 

 

43,972

 

Net earnings

318,453

 

 

493,865

 

 

128,896

 

Net loss attributable to noncontrolling interests

(363

)

 

(203

)

 

(1,842

)

Net earnings attributable to Jefferies Group LLC

$

318,816

 

 

$

494,068

 

 

$

130,738

 

 

 

 

 

 

 

 

Pre-tax operating margin

26.5

%

 

31.5

%

 

16.7

%

Effective tax rate

25.8

%

 

26.4

%

 

25.4

%

 

 

 

 

 

 

 

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

 

 

Six Months Ended

 

 

May 31, 2021

 

May 31, 2020

Revenues:

 

 

 

Commissions and other fees

$

459,581

 

 

$

422,802

 

Principal transactions

1,116,278

 

 

839,185

 

Investment banking

2,004,362

 

 

979,493

 

Asset management fees and revenues

51,950

 

 

16,296

 

Interest

425,979

 

 

506,609

 

Other

127,357

 

 

(17,546

)

Total revenues

4,185,507

 

 

2,746,839

 

Interest expense

438,723

 

 

541,776

 

Net revenues

3,746,784

 

 

2,205,063

 

 

 

 

 

 

Non-interest expenses:

 

 

 

Compensation and benefits

1,909,730

 

 

1,206,777

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

Floor brokerage and clearing fees

153,197

 

 

138,199

 

Technology and communications

212,303

 

 

184,778

 

Occupancy and equipment rental

60,829

 

 

51,898

 

Business development

45,004

 

 

38,316

 

Professional services

104,068

 

 

86,659

 

Underwriting costs

69,167

 

 

30,014

 

Other

92,017

 

 

60,176

 

Total non-compensation expenses

736,585

 

 

590,040

 

Total non-interest expenses

2,646,315

 

 

1,796,817

 

Earnings before income taxes

1,100,469

 

 

408,246

 

Income tax expense

288,151

 

 

107,985

 

Net earnings

812,318

 

 

300,261

 

Net loss attributable to noncontrolling interests

(566

)

 

(3,866

)

Net earnings attributable to Jefferies Group LLC

$

812,884

 

 

$

304,127

 

 

 

 

 

 

Pre-tax operating margin

29.4

%

 

18.5

%

Effective tax rate

26.2

%

 

26.5

%

 

 

 

 

 

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

May 31, 2021

 

February 28, 2021

 

May 31, 2020

Net Revenues by Source:

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

$

390,508

 

 

$

311,439

 

 

$

182,081

 

Equity underwriting

324,462

 

 

494,806

 

 

124,383

 

Debt underwriting

285,730

 

 

197,417

 

 

81,027

 

Total underwriting

610,192

 

 

692,223

 

 

205,410

 

Other investment banking

32,971

 

 

29,825

 

 

(71,234

)

Total investment banking

1,033,671

 

 

1,033,487

 

 

316,257

 

 

 

 

 

 

 

 

Equities

242,949

 

 

531,016

 

 

237,131

 

Fixed income

257,197

 

 

363,359

 

 

493,144

 

Total capital markets

500,146

 

 

894,375

 

 

730,275

 

 

 

 

 

 

 

 

Other

39,147

 

 

31,647

 

 

(17,700

)

 

 

 

 

 

 

 

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

1,572,964

 

 

1,959,509

 

 

1,028,832

 

 

 

 

 

 

 

 

Asset management fees and revenues

14,567

 

 

37,383

 

 

4,576

 

Investment return (3) (4)

41,326

 

 

142,873

 

 

13,944

 

Allocated net interest (3) (5)

(11,439

)

 

(10,399

)

 

(12,985

)

Total Asset Management

44,454

 

 

169,857

 

 

5,535

 

 

 

 

 

 

 

 

Net Revenues

$

1,617,418

 

 

$

2,129,366

 

 

$

1,034,367

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

Number of trading days

64

 

 

60

 

 

63

 

Number of trading loss days

20

 

 

9

 

 

11

 

 

 

 

 

 

 

 

Average firmwide VaR (in millions) (6)

$

15.77

 

 

$

16.02

 

 

$

9.16

 

(1)

Includes net interest revenues (expense) of $3.7 million, $12.2 million and $(0.8) million for the quarters ended May 31, 2021, February 28, 2021 and May 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 expense of $4.5 million, $2.3 million and $7.2 million for the quarters ended May 31, 2021, February 28, 2021 and May 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 12).

(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)

 

 

 

 

 

 

 

Six Months Ended

 

 

May 31, 2021

 

May 31, 2020

Net Revenues by Source:

 

 

 

 

 

 

 

 

Advisory

$

701,947

 

 

$

525,239

 

Equity underwriting

819,268

 

 

256,075

 

Debt underwriting

483,147

 

 

198,179

 

Total underwriting

1,302,415

 

 

454,254

 

Other investment banking

62,796

 

 

(85,763

)

Total investment banking

2,067,158

 

 

893,730

 

 

 

 

 

 

Equities

773,965

 

 

482,772

 

Fixed income

620,556

 

 

741,326

 

Total capital markets

1,394,521

 

 

1,224,098

 

 

 

 

 

 

Other

70,794

 

 

59,833

 

 

 

 

 

 

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

3,532,473

 

 

2,177,661

 

 

 

 

 

 

Asset management fees and revenues

51,950

 

 

16,296

 

Investment return (3) (4)

184,199

 

 

34,783

 

Allocated net interest (3) (5)

(21,838

)

 

(23,677

)

Total Asset Management

214,311

 

 

27,402

 

 

 

 

 

 

Net Revenues

$

3,746,784

 

 

$

2,205,063

 

 

 

 

 

 

Other Data:

 

 

 

Number of trading days

124

 

 

124

 

Number of trading loss days

29

 

 

15

 

 

 

 

 

 

Average firmwide VaR (in millions) (6)

$

15.89

 

 

$

8.29

 

(1)

Includes net interest revenues of $15.9 million and $2.1 million for the six months ended May 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 expense of $6.8 million and $13.6 million for the six months ended May 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 12).

(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

 

May 31,

2021

 

February 28,

2021

 

May 31,

2020

Financial position:

 

 

 

 

 

Total assets (1)

$

52,171

 

 

$

51,386

 

 

$

45,084

 

Average total assets for the period (1)

$

59,841

 

 

$

59,774

 

 

$

56,480

 

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

$

58,038

 

 

$

57,967

 

 

$

54,673

 

 

 

 

 

 

 

Cash and cash equivalents (1)

$

6,221

 

 

$

6,707

 

 

$

5,252

 

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

$

8,259

 

 

$

8,114

 

 

$

6,542

 

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

15.8

%

 

15.8

%

 

14.5

%

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

16.4

%

 

16.4

%

 

15.1

%

 

 

 

 

 

 

Financial instruments owned (1)

$

19,412

 

 

$

18,571

 

 

$

18,125

 

Goodwill and intangible assets (1)

$

1,805

 

 

$

1,807

 

 

$

1,800

 

 

 

 

 

 

 

Total equity (including noncontrolling interests) (1)

$

6,687

 

 

$

6,556

 

 

$

6,430

 

Total Jefferies Group LLC member's equity (1)

$

6,681

 

 

$

6,540

 

 

$

6,412

 

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

$

4,876

 

 

$

4,733

 

 

$

4,612

 

 

 

 

 

 

 

Level 3 financial instruments:

 

 

 

 

 

Level 3 financial instruments owned (1) (4)

$

399

 

 

$

365

 

 

$

413

 

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

0.8

%

 

0.7

%

 

0.9

%

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

2.1

%

 

2.0

%

 

2.3

%

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

8.2

%

 

7.7

%

 

9.0

%

 

 

 

 

 

 

Other data and financial ratios:

 

 

 

 

 

Total long-term capital (1) (5)

$

13,406

 

 

$

13,237

 

 

$

12,102

 

Leverage ratio (1) (6)

7.8

 

 

7.8

 

 

7.0

 

Tangible gross leverage ratio (1) (7)

10.3

 

 

10.5

 

 

9.4

 

 

 

 

 

 

 

Number of trading days

64

 

 

60

 

 

63

 

Number of trading loss days

20

 

 

9

 

 

11

 

Average firmwide VaR (8)

$

15.77

 

 

$

16.02

 

 

$

9.16

 

 

 

 

 

 

 

Number of employees, at period end

4,121

 

 

3,984

 

 

3,850

 

 

Jefferies Group LLC and Subsidiaries

Financial Highlights - Footnotes

 

 

 

 

 

 

 

 

(1)

Amounts pertaining to May 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 May 31, 2021.

 

 

(2)

At May 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 $1,651 million, in aggregate, and $387 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 February 28, 2021 were $991 million and $416 million, respectively, and at May 31, 2020, were $998 million and $292 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 May 31, 2021, February 28, 2021 and May 31, 2020, total long-term capital includes Jefferies Group LLC's long-term debt of $6,719 million, $6,681 million and $5,672 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

May 31, 2021

 

Six Months

Ended

May 31, 2021

 

 

 

 

 

Net income attributable to Jefferies Financial Group common shareholders (GAAP)

 

$

352,596

 

 

$

935,031

 

Intangible amortization expense, net of tax

 

2,664

 

 

5,251

 

Adjusted net income (non-GAAP)

 

$

355,260

 

 

$

940,282

 

Annualized adjusted net income (non-GAAP)

 

$

1,421,040

 

 

$

1,880,564

 

 

 

 

 

 

 

 

February 28, 2021

 

November 30, 2020

 

 

 

 

 

Shareholders' equity (GAAP)

 

$

9,745,862

 

 

$

9,403,893

 

Less: Intangible assets, net and goodwill

 

(1,914,322)

 

 

(1,913,467)

 

Less: Deferred tax asset

 

(410,420)

 

 

(393,687)

 

Less: Weighted average quarter-to-date or year-to-date impact of 2021 cash dividends and share repurchases

 

(36,759)

 

 

(142,189)

 

Adjusted tangible shareholders' equity (non-GAAP)

 

$

7,384,361

 

 

$

6,954,550

 

 

 

 

 

 

Adjusted return on tangible equity

 

19.2

%

 

27.0

%

 

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):

 

 

May 31, 2021

 

 

 

Book value (GAAP)

 

$

10,072,634

 

Redeemable convertible preferred shares converted to common shares (1)

 

125,000

 

Stock options (2)

 

122,062

 

Intangible assets, net and goodwill

 

(1,912,480

)

Adjusted tangible book value (non-GAAP)

 

$

8,407,216

 

 

 

 

Common shares outstanding (GAAP)

 

247,032

 

Restricted stock units ("RSUs")

 

19,842

 

Redeemable convertible preferred shares converted to common shares (1)

 

4,441

 

Stock options (2)

 

5,156

 

Other

 

1,110

 

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

 

277,581

 

 

 

 

Book value per share outstanding

 

$

40.77

 

Tangible book value per fully diluted share outstanding

 

$

30.29

 

(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, 2021 of 5,156,000 multiplied by the weighted average exercise price of $23.67 on May 31, 2021. Stock options added to fully diluted shares are equal to the total stock options outstanding on May 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):

 

 

May 31,

2021

 

March 31,

2018

 

 

 

 

 

Shareholders' equity (GAAP)

 

$

10,072,634

 

 

$

10,259,080

 

Intangible assets, net and goodwill

 

(1,912,480

)

 

(2,450,957

)

Tangible shareholders' equity (non-GAAP)

 

$

8,160,154

 

 

$

7,808,123

 

 

Contacts

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

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