Jefferies Financial Group Announces 2020 Financial Results

All-Time Record Quarterly and Annual Results at Jefferies Group Quarterly Cash Dividend Increase of 33% to $0.20 per Jefferies Common Share Share Repurchase Authorization Increased to $250 million Jefferies Financial Group Inc. (NYSE:JEF) today announced its financial results for the three and twelve month periods ended November 30, 2020. In […]

All-Time Record Quarterly and Annual Results at Jefferies Group

Quarterly Cash Dividend Increase of 33% to $0.20 per Jefferies Common Share

Share Repurchase Authorization Increased to $250 million

Jefferies Financial Group Inc. (NYSE:JEF) today announced its financial results for the three and twelve month periods ended November 30, 2020. In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.20 per Jefferies common share payable on February 26, 2021 to record holders of Jefferies common shares on February 12, 2021. The Jefferies Board of Directors also increased the Company’s stock buyback authorization by $193 million to a total of $250 million. We expect to file our Form 10-K on or about January 28, 2021.

Highlights for the three months ended November 30, 2020:

  • Jefferies Group LLC recorded record quarterly net revenues of $1,609 million, record pre-tax income of $406 million, record net earnings of $307 million and return on tangible equity of 26.2%1

    • Record quarterly Investment Banking net revenues of $916 million, including record Equity Underwriting net revenues of $341 million, record Advisory net revenues of $357 million, and record Debt Underwriting net revenues of $209 million
    • Combined Capital Markets net revenues of $590 million; record quarterly Equities net revenues of $327 million and Fixed Income net revenues of $263 million
    • Asset Management revenues (before allocated net interest2) of $83 million
  • Merchant Banking recorded pre-tax income of $33 million, reflecting record quarterly results from Idaho Timber and mark-to-market increases in the value of several of our investments in public companies
  • Net income attributable to Jefferies Financial Group common shareholders was $307 million, or $1.11 per diluted share
  • We repurchased 9.5 million shares for $193 million, or an average price of $20.34 per share; 249.8 million shares were outstanding and 273.6 million shares were outstanding on a fully diluted basis3 at November 30, 2020; Jefferies book value per share was $37.65 and tangible book value per fully diluted share4 was $27.38 at the end of the fourth quarter
  • Jefferies Financial Group had parent company liquidity of $1.9 billion at November 30, 2020. Jefferies Group had a record liquidity buffer of $8.6 billion of cash and unencumbered liquid collateral at November 30, 2020, which represented 18% of its total balance sheet.

Highlights for the twelve months ended November 30, 2020:

  • Jefferies Group LLC recorded record twelve months net revenues of $5,197 million, record pre-tax income of $1,177 million, record net earnings of $875 million and return on tangible equity of 20.4%5

    • Record twelve months Investment Banking net revenues of $2,398 million, including record Advisory net revenues of $1,054 million, record Equity Underwriting net revenues of $902 million and Debt Underwriting net revenues of $546 million
    • Record combined twelve months Capital Markets net revenues of $2,470 million, including record Equities net revenues of $1,129 million and record Fixed Income net revenues of $1,341 million
    • Record Asset Management revenues (before allocated net interest2) of $257 million
  • Merchant Banking pre-tax loss of $25 million, reflecting record performance from Idaho Timber, a positive contribution from Vitesse, and the previously reported gain of about $60 million from effective short-term hedges in the first quarter, more than offset by $145 million in previously reported non-cash charges in the first half of 2020 related to write-downs of our investments in WeWork, JETX and some of the real estate assets of HomeFed
  • Net income attributable to Jefferies Financial Group common shareholders of $770 million, or $2.65 per diluted share
  • Repurchases of 42.1 million shares for $813 million, or an average price of $19.29 per share; together with $161 million in dividends, an aggregate of $974 million was returned to shareholders in 2020; over the past three fiscal years, Jefferies has returned to shareholders nearly $3.4 billion

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

“The results for our fourth quarter and full year 2020 are outstanding and testament to the relentless dedication and tireless effort of the entire Jefferies team. We gained market share and have established Jefferies at yet another higher level of achievement and potential. We are optimistic that our momentum and strength will be sustained in 2021.”

Please refer to the Jefferies Financial Group Annual Letter from our CEO and President for broader perspective on 2020, as well as our strategy and outlook.

* * * *

Amounts herein pertaining to November 30, 2020 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 three and twelve month periods ended November 30, 2020 will be provided upon filing our Annual Report on Form 10-K 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

Return on tangible equity (a non-GAAP financial measure) equals our three months ended November 30, 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 $4,682 million at August 31, 2020. Tangible Jefferies Group LLC member’s equity at August 31, 2020 equals Jefferies Group LLC member’s equity of $6,488 million less goodwill and identifiable intangibles assets of $1,806 million.

2

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 pages 9 and 10.

3

Shares outstanding on a fully diluted basis, a non-GAAP measure, is defined as Jefferies Financial Group’s common shares outstanding plus restricted stock units and other shares. Refer to schedule on page 14 for reconciliation to U.S. GAAP amounts.

4

Tangible book value per fully diluted share, a non-GAAP measure, is defined as Tangible book value divided by shares outstanding on a fully diluted basis. Tangible book value, a non-GAAP measure, is defined as Jefferies Financial Group shareholders’ equity (book value) less Intangible assets, net and goodwill. Shares outstanding on a fully diluted basis, a non-GAAP measure, is defined as Jefferies Financial Group’s common shares outstanding plus restricted stock units and other shares. Refer to schedule on page 14 for reconciliation to U.S. GAAP amounts.

5

Return on tangible equity (a non-GAAP financial measure) equals our twelve months ended November 30, 2020 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.

Summary for Jefferies Financial Group Inc. and Subsidiaries

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

November 30, 2020

 

Three Months Ended

November 30, 2019

 

Twelve Months Ended

November 30, 2020

 

Twelve Months Ended

November 30, 2019

 

 

 

 

 

 

 

 

Net revenues

$

1,860,787

 

 

$

1,106,098

 

 

$

6,010,874

 

 

$

3,892,976

 

 

 

 

 

 

 

 

 

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

$

427,500

 

 

$

151,320

 

 

$

1,142,566

 

 

$

275,613

 

Income (loss) related to associated companies

(5,960)

 

 

81,229

 

 

(75,483)

 

 

202,995

 

Income before income taxes

421,540

 

 

232,549

 

 

1,067,083

 

 

478,608

 

Income tax provision (benefit)

113,535

 

 

38,671

 

 

298,673

 

 

(483,955)

 

Net income

308,005

 

 

193,878

 

 

768,410

 

 

962,563

 

Net loss attributable to the noncontrolling interests

238

 

 

2,606

 

 

5,271

 

 

1,847

 

Net loss attributable to the redeemable noncontrolling interests

428

 

 

333

 

 

1,558

 

 

286

 

Preferred stock dividends

(1,404)

 

 

(1,276)

 

 

(5,634)

 

 

(5,103)

 

Net income attributable to Jefferies Financial Group Inc. common shareholders

$

307,267

 

 

$

195,541

 

 

$

769,605

 

 

$

959,593

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Net income

$

1.12

 

 

$

0.63

 

 

$

2.68

 

 

$

3.07

 

 

 

 

 

 

 

 

 

Number of shares in calculation

272,901

 

 

310,266

 

 

285,693

 

 

310,694

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Net income

$

1.11

 

 

$

0.62

 

 

$

2.65

 

 

$

3.03

 

 

 

 

 

 

 

 

 

Number of shares in calculation

277,342

 

 

316,566

 

 

290,490

 

 

317,032

 

A summary of results for the three months ended November 30, 2020 is as follows (in thousands):

 

Investment

Banking and

Capital

Markets (1)

 

Asset

Management (1)

 

Merchant

Banking (1)

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

1,537,362

 

 

$

88,977

 

 

$

231,852

 

 

$

1,350

 

 

$

 

 

$

1,246

 

 

$

1,860,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

842,513

 

 

30,152

 

 

25,336

 

 

13,365

 

 

 

 

 

 

911,366

 

Cost of sales (2)

59,968

 

 

5,221

 

 

102,717

 

 

 

 

 

 

 

 

167,906

 

Interest expense

 

 

 

 

6,972

 

 

 

 

13,672

 

 

 

 

20,644

 

Depreciation and amortization

21,012

 

 

471

 

 

16,735

 

 

865

 

 

 

 

 

 

39,083

 

Selling, general and other expenses

239,795

 

 

9,328

 

 

41,138

 

 

6,513

 

 

 

 

(2,486)

 

 

294,288

 

Total expenses

1,163,288

 

 

45,172

 

 

192,898

 

 

20,743

 

 

13,672

 

 

(2,486)

 

 

1,433,287

 

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

374,074

 

 

43,805

 

 

38,954

 

 

(19,393)

 

 

(13,672)

 

 

3,732

 

 

427,500

 

Loss related to associated companies

 

 

 

 

(5,960)

 

 

 

 

 

 

 

 

(5,960)

 

Income (loss) before income taxes

$

374,074

 

 

$

43,805

 

 

$

32,994

 

 

$

(19,393)

 

 

$

(13,672)

 

 

$

3,732

 

 

421,540

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

113,535

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

308,005

 

A summary of results for the three months ended November 30, 2019 is as follows (in thousands):

 

Investment

Banking and

Capital

Markets (1)

 

Asset

Management (1)

 

Merchant

Banking (1)

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

761,104

 

 

$

(10,554)

 

 

$

343,388

 

 

$

10,699

 

 

$

 

 

$

1,461

 

 

$

1,106,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

409,899

 

 

14,556

 

 

17,129

 

 

16,273

 

 

 

 

 

 

457,857

 

Cost of sales (2)

53,713

 

 

6,314

 

 

86,532

 

 

 

 

 

 

 

 

146,559

 

Interest expense

 

 

 

 

8,608

 

 

 

 

8,750

 

 

 

 

17,358

 

Depreciation and amortization

20,877

 

 

570

 

 

19,901

 

 

923

 

 

 

 

 

 

42,271

 

Selling, general and other expenses

213,457

 

 

11,010

 

 

51,557

 

 

14,963

 

 

 

 

(254)

 

 

290,733

 

Total expenses

697,946

 

 

32,450

 

 

183,727

 

 

32,159

 

 

8,750

 

 

(254)

 

 

954,778

 

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

63,158

 

 

(43,004)

 

 

159,661

 

 

(21,460)

 

 

(8,750)

 

 

1,715

 

 

151,320

 

Income (loss) related to associated companies

 

 

(133)

 

 

81,294

 

 

 

 

 

 

68

 

 

81,229

 

Income (loss) before income taxes

$

63,158

 

 

$

(43,137)

 

 

$

240,955

 

 

$

(21,460)

 

 

$

(8,750)

 

 

$

1,783

 

 

232,549

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

38,671

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

193,878

 

(1)

We now present Asset Management as a separate reporting segment. Prior year amounts have been reclassified to conform to current segment disclosure.

(2)

Includes Floor brokerage and clearing fees.

A summary of results for the twelve months ended November 30, 2020 is as follows (in thousands):

 

Investment

Banking and

Capital

Markets (1)

 

Asset

Management (1)

 

Merchant

Banking (1)

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

4,989,138

 

 

$

235,255

 

 

$

764,460

 

 

$

13,258

 

 

$

 

 

$

8,763

 

 

$

6,010,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

2,735,080

 

 

89,527

 

 

77,072

 

 

39,184

 

 

 

 

 

 

2,940,863

 

Cost of sales (2)

241,083

 

 

25,509

 

 

338,588

 

 

 

 

 

 

 

 

605,180

 

Interest expense

 

 

 

 

31,425

 

 

 

 

53,445

 

 

 

 

84,870

 

Depreciation and amortization

82,334

 

 

5,247

 

 

67,362

 

 

3,496

 

 

 

 

 

 

158,439

 

Selling, general and other expenses

810,753

 

 

46,045

 

 

199,128

 

 

26,197

 

 

 

 

(3,167)

 

 

1,078,956

 

Total expenses

3,869,250

 

 

166,328

 

 

713,575

 

 

68,877

 

 

53,445

 

 

(3,167)

 

 

4,868,308

 

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

1,119,888

 

 

68,927

 

 

50,885

 

 

(55,619)

 

 

(53,445)

 

 

11,930

 

 

1,142,566

 

Loss related to associated companies

 

 

 

 

(75,483)

 

 

 

 

 

 

 

 

(75,483)

 

Income (loss) before income taxes

$

1,119,888

 

 

$

68,927

 

 

$

(24,598)

 

 

$

(55,619)

 

 

$

(53,445)

 

 

$

11,930

 

 

1,067,083

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

298,673

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

768,410

 

A summary of results for the twelve months ended November 30, 2019 is as follows (in thousands):

 

Investment

Banking and

Capital

Markets (1)

 

Asset

Management (1)

 

Merchant

Banking (1)

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

3,035,988

 

 

$

84,894

 

 

$

735,213

 

 

$

32,833

 

 

$

 

 

$

4,048

 

 

$

3,892,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,641,814

 

 

63,305

 

 

61,767

 

 

58,005

 

 

 

 

 

 

1,824,891

 

Cost of sales (2)

202,425

 

 

20,715

 

 

319,641

 

 

 

 

 

 

 

 

542,781

 

Interest expense

 

 

 

 

34,129

 

 

 

 

53,048

 

 

 

 

87,177

 

Depreciation and amortization

77,549

 

 

2,042

 

 

69,805

 

 

3,475

 

 

 

 

 

 

152,871

 

Selling, general and other expenses

767,150

 

 

40,432

 

 

162,832

 

 

39,820

 

 

 

 

(591)

 

 

1,009,643

 

Total expenses

2,688,938

 

 

126,494

 

 

648,174

 

 

101,300

 

 

53,048

 

 

(591)

 

 

3,617,363

 

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

347,050

 

 

(41,600)

 

 

87,039

 

 

(68,467)

 

 

(53,048)

 

 

4,639

 

 

275,613

 

Income related to associated companies

 

 

474

 

 

202,453

 

 

 

 

 

 

68

 

 

202,995

 

Income (loss) before income taxes

$

347,050

 

 

$

(41,126)

 

 

$

289,492

 

 

$

(68,467)

 

 

$

(53,048)

 

 

$

4,707

 

 

478,608

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

(483,955)

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

962,563

 

(1)

We now present Asset Management as a separate reporting segment. Prior year amounts have been reclassified to conform to current segment disclosure.

(2)

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, 2019. Amounts herein pertaining to November 30, 2020 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC’s Annual Report on Form 10-K for the year ended November 30, 2020.

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

Quarter Ended

 

 

November 30, 2020

 

August 31, 2020

 

November 30, 2019

Revenues:

 

 

 

 

 

Commissions and other fees

$

196,143

 

 

$

204,313

 

 

$

182,466

 

Principal transactions

467,163

 

 

560,665

 

 

137,256

 

Investment banking

906,164

 

 

615,837

 

 

400,513

 

Asset management fees and revenues

5,626

 

 

6,772

 

 

3,935

 

Interest

191,646

 

 

195,960

 

 

333,507

 

Other

43,652

 

 

11,526

 

 

15,859

 

Total revenues

1,810,394

 

 

1,595,073

 

 

1,073,536

 

Interest expense

201,424

 

 

211,629

 

 

325,734

 

Net revenues

1,608,970

 

 

1,383,444

 

 

747,802

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

Compensation and benefits

860,243

 

 

725,555

 

 

422,548

 

 

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

 

 

Floor brokerage and clearing fees

65,189

 

 

66,744

 

 

58,773

 

Technology and communications

99,417

 

 

102,635

 

 

87,931

 

Occupancy and equipment rental

28,229

 

 

27,053

 

 

31,885

 

Business development

21,650

 

 

7,637

 

 

34,728

 

Professional services

52,056

 

 

41,173

 

 

45,296

 

Underwriting costs

36,551

 

 

29,071

 

 

14,617

 

Other

39,828

 

 

20,175

 

 

28,153

 

Total non-compensation expenses

342,920

 

 

294,488

 

 

301,383

 

Total non-interest expenses

1,203,163

 

 

1,020,043

 

 

723,931

 

Earnings before income taxes

405,807

 

 

363,401

 

 

23,871

 

Income tax expense

98,893

 

 

95,870

 

 

495

 

Net earnings

306,914

 

 

267,531

 

 

23,376

 

Net loss attributable to noncontrolling interests

(200)

 

 

(531)

 

 

(1,784)

 

Net earnings attributable to Jefferies Group LLC

$

307,114

 

 

$

268,062

 

 

$

25,160

 

 

 

 

 

 

 

 

Pre-tax operating margin

25.2

%

 

26.3

%

 

3.2

%

Effective tax rate

24.4

%

 

26.4

%

 

2.1

%

 

 

 

 

 

 

 

 

 

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

 

 

Twelve Months Ended

 

 

November 30, 2020

 

November 30, 2019

Revenues:

 

 

 

Commissions and other fees

$

823,258

 

 

$

676,309

 

Principal transactions

1,867,013

 

 

769,258

 

Investment banking

2,501,494

 

 

1,528,729

 

Asset management fees and revenues

28,694

 

 

20,285

 

Interest

894,215

 

 

1,496,529

 

Other

37,632

 

 

93,422

 

Total revenues

6,152,306

 

 

4,584,532

 

Interest expense

954,829

 

 

1,472,002

 

Net revenues

5,197,477

 

 

3,112,530

 

 

 

 

 

 

Non-interest expenses:

 

 

 

Compensation and benefits

2,792,575

 

 

1,684,054

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

Floor brokerage and clearing fees

270,132

 

 

227,471

 

Technology and communications

386,830

 

 

335,395

 

Occupancy and equipment rental

107,180

 

 

119,472

 

Business development

67,603

 

 

138,158

 

Professional services

179,888

 

 

162,668

 

Underwriting costs

95,636

 

 

50,662

 

Other

120,179

 

 

69,981

 

Total non-compensation expenses

1,227,448

 

 

1,103,807

 

Total non-interest expenses

4,020,023

 

 

2,787,861

 

Earnings before income taxes

1,177,454

 

 

324,669

 

Income tax expense

302,748

 

 

80,284

 

Net earnings

874,706

 

 

244,385

 

Net loss attributable to noncontrolling interests

(4,597)

 

 

(1,644)

 

Net earnings attributable to Jefferies Group LLC

$

879,303

 

 

$

246,029

 

 

 

 

 

 

Pre-tax operating margin

22.7

%

 

10.4

%

Effective tax rate

25.7

%

 

24.7

%

 

 

 

 

 

 

 

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

November 30,

2020

 

August 31,

2020

 

November 30,

2019

Net Revenues by Source:

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

$

356,823

 

 

$

171,438

 

 

$

195,035

 

 

 

 

 

 

 

 

Equity underwriting

340,561

 

 

305,380

 

 

105,119

 

Debt underwriting

208,780

 

 

139,019

 

 

100,359

 

Total underwriting

549,341

 

 

444,399

 

 

205,478

 

Other investment banking

9,446

 

 

(27,013)

 

 

(7,501)

 

Total investment banking

915,610

 

 

588,824

 

 

393,012

 

 

 

 

 

 

 

 

Equities

327,314

 

 

318,824

 

 

200,128

 

Fixed income

263,119

 

 

336,347

 

 

163,016

 

Total capital markets

590,433

 

 

655,171

 

 

363,144

 

 

 

 

 

 

 

 

Other

31,319

 

 

30,120

 

 

4,948

 

 

 

 

 

 

 

 

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

1,537,362

 

 

1,274,115

 

 

761,104

 

 

 

 

 

 

 

 

Asset management fees and revenues

5,626

 

 

6,772

 

 

3,935

 

Investment return (3) (4)

77,790

 

 

115,556

 

 

(7,637)

 

Allocated net interest (3) (5)

(11,808)

 

 

(12,999)

 

 

(9,600)

 

Total Asset Management

71,608

 

 

109,329

 

 

(13,302)

 

 

 

 

 

 

 

 

Net Revenues

$

1,608,970

 

 

$

1,383,444

 

 

$

747,802

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

Number of trading days

63

 

 

65

 

 

63

 

Number of trading loss days

3

 

 

8

 

 

10

 

 

 

 

 

 

 

 

Average firmwide VaR (in millions) (6)

$

14.92

 

 

$

10.46

 

 

$

7.70

 

(1)

Includes net interest revenues of $6.9 million, $3.3 million and $22.6 million for the quarters ended November 30, 2020, August 31, 2020 and November 30, 2019, 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 net interest expense of $4.9 million, $6.0 million and $5.2 million for the quarters ended November 30, 2020, August 31, 2020 and November 30, 2019, 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 11).

(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, 2019.

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

Twelve Months Ended

 

 

November 30,

2020

 

November 30,

2019

Net Revenues by Source:

 

 

 

 

 

 

 

 

Advisory

$

1,053,500

 

 

$

767,421

 

 

 

 

 

 

Equity underwriting

902,016

 

 

361,972

 

Debt underwriting

545,978

 

 

407,336

 

Total underwriting

1,447,994

 

 

769,308

 

Other investment banking

(103,330)

 

 

(14,617)

 

Total investment banking

2,398,164

 

 

1,522,112

 

 

 

 

 

 

Equities

1,128,910

 

 

773,979

 

Fixed income

1,340,792

 

 

681,362

 

Total capital markets

2,469,702

 

 

1,455,341

 

 

 

 

 

 

Other

121,272

 

 

58,535

 

 

 

 

 

 

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

4,989,138

 

 

3,035,988

 

 

 

 

 

 

Asset management fees and revenues

28,694

 

 

20,285

 

Investment return (3) (4)

228,129

 

 

96,805

 

Allocated net interest (3) (5)

(48,484)

 

 

(40,548)

 

Total Asset Management

208,339

 

 

76,542

 

 

 

 

 

 

Net Revenues

$

5,197,477

 

 

$

3,112,530

 

 

 

 

 

 

Other Data:

 

 

 

Number of trading days

252

 

 

250

 

Number of trading loss days

26

 

 

33

 

 

 

 

 

 

Average firmwide VaR (in millions) (6)

$

10.51

 

 

$

8.79

 

(1)

Includes net interest revenues of $12.3 million and $74.0 million for the twelve months ended November 30, 2020 and 2019, 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 net interest expenses of $24.5 million and $8.9 million for the twelve months ended November 30, 2020 and 2019, 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 11).

(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, 2019.

Jefferies Group LLC and Subsidiaries

Financial Highlights

(Amounts in Millions, Except Where Noted)

(Unaudited)

 

 

 

 

 

 

 

 

Quarter Ended

 

November 30,

2020

 

August 31,

2020

 

November 30,

2019

Financial position:

 

 

 

 

 

 

Total assets (1)

$

47,752

 

 

$

46,660

 

 

$

43,516

 

Average total assets for the period (1)

$

56,503

 

 

$

54,654

 

 

$

52,539

 

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

$

54,807

 

 

$

52,965

 

 

$

50,727

 

 

 

 

 

 

 

 

Cash and cash equivalents (1)

$

7,112

 

 

$

6,750

 

 

$

5,568

 

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

$

8,605

 

 

$

8,089

 

 

$

6,918

 

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

18.0

%

 

17.3

%

 

15.9

%

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

18.7

%

 

18.0

%

 

16.6

%

 

 

 

 

 

 

 

Financial instruments owned (1)

$

17,686

 

 

$

17,556

 

 

$

16,363

 

Goodwill and intangible assets (1)

$

1,805

 

 

$

1,806

 

 

$

1,814

 

Right-of-use assets (1) (3)

$

487

 

 

$

500

 

 

N/A

 

 

 

 

 

Total equity (including noncontrolling interests) (1)

$

6,366

 

 

$

6,504

 

 

$

6,130

 

Total Jefferies Group LLC member’s equity (1)

$

6,349

 

 

$

6,488

 

 

$

6,125

 

Tangible Jefferies Group LLC member’s equity (1) (4)

$

4,543

 

 

$

4,682

 

 

$

4,311

 

 

 

 

 

 

 

Level 3 financial instruments:

 

 

 

 

 

Level 3 financial instruments owned (1) (5)

$

379

 

 

$

433

 

 

$

307

 

Level 3 financial instruments owned – % total assets (1) (5)

0.8

%

 

0.9

%

 

0.7

%

Level 3 financial instruments owned – % total financial instruments (1) (5)

2.1

%

 

2.5

%

 

1.9

%

Level 3 financial instruments owned – % tangible Jefferies Group LLC member’s equity (1) (5)

8.3

%

 

9.2

%

 

7.1

%

 

 

 

 

 

Other data and financial ratios:

 

 

 

 

Total long-term capital (1) (6)

$

13,022

 

 

$

12,492

 

 

$

12,343

 

Leverage ratio (1) (7)

7.5

 

 

7.2

 

 

7.1

 

Tangible gross leverage ratio (1) (8)

10.1

 

 

9.6

 

 

9.7

 

Adjusted tangible gross leverage ratio (1) (3) (9)

11.2

 

 

10.6

 

 

N/A

 

 

 

 

 

Number of trading days

63

 

 

65

 

 

63

 

Number of trading loss days

3

 

 

8

 

 

10

 

Average firmwide VaR (10)

$

14.92

 

 

$

10.46

 

 

$

7.70

 

 

 

 

 

 

 

 

Number of employees, at period end

3,922

 

 

3,893

 

 

3,815

 

N/A — Not Applicable

Jefferies Group LLC and Subsidiaries

Financial Highlights – Footnotes

 

(1)

Amounts pertaining to November 30, 2020 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.

(2)

At November 30, 2020, 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 $1,180 million, in aggregate, and $313 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 August 31, 2020 were $1,123 million and $216 million, respectively, and at November 30, 2019, were $973 million and $377 million, respectively.

(3)

Jefferies Group LLC adopted the new lease standard on December 1, 2019 using a modified retrospective transition approach. Accordingly, reported financial information for historical comparable periods is not revised and continues to be reported under the accounting standards in effect during those historical periods. We elected not to reassess whether existing contracts are or contain leases, or the lease classification and initial direct costs of existing leases upon transition. At transition on December 1, 2019, the adoption of this standard resulted in the recognition of right-of-use assets of $520 million, reflected in Premises and equipment in Jefferies Group LLC’s Consolidated Statement of Financial Condition.

(4)

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.

(5)

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.

(6)

At November 30, 2020, August 31, 2020 and November 30, 2019, total long-term capital includes Jefferies Group LLC’s long-term debt of $6,656 million, $5,987 million and $6,214 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by amounts outstanding under the revolving credit facility, amounts from secured term loans and the amount of debt maturing in less than one year, as applicable.

(7)

Leverage ratio equals total assets divided by total equity.

(8)

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.

(9)

Adjusted tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets and right-of-use assets divided by tangible Jefferies Group LLC member’s equity less right-of-use assets.

(10)

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, 2019.

Merchant Banking Net Asset Overview

The table below presents estimated fair values of our largest Merchant Banking investments. We anticipate discontinuing this disclosure going forward as we believe the wind down of the portfolio diminishes the value of this information, which requires meaningful management time and expenditure to produce. We will continue to discuss developments at the portfolio companies as they arise.

As of November 30, 2020

($ Millions)

 

 

 

(Unaudited)

Book Value

 

Estimated

Fair Value (2)

 

Basis for Fair Value Estimate

Linkem

 

$

199

 

 

$

685

 

 

Income approach and market comparable method

Real estate assets (1)

 

532

 

 

542

 

 

Various

Oil and Gas (Vitesse and JETX)

 

527

 

 

529

 

 

Income approach, market comparable and market transaction method

Idaho Timber

 

86

 

 

165

 

 

Income approach and market comparable method

FXCM

 

133

 

 

164

 

 

Income approach and market comparable method

Investments in Public Companies

 

192

 

 

192

 

 

Mark-to-market (same for GAAP book value)

Other

 

271

 

 

382

 

 

Various

Total Portfolio

 

$

1,940

 

 

$

2,659

 

 

 

(1)

Primarily HomeFed

(2)

The following table reconciles financial results reported in accordance with U.S. GAAP to non-GAAP financial results. The table above contains non-GAAP financial information to aid investors in viewing our businesses and investments through the eyes of management while facilitating a comparison across historical periods. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, reported results prepared in accordance with U.S. GAAP.

Reconciliation of Book Value of Merchant Banking Investments to Estimated Fair Value

($ Millions)

 

 

 

(Unaudited)

Book Value

November 30, 2020

 

Fair Value

Adjustments

 

Estimated

Fair Value

November 30, 2020

 

 

 

(GAAP)

 

 

 

(Non-GAAP)

 

Linkem

 

$

199

 

 

$

486

 

 

$

685

 

 

Real estate assets

 

532

 

 

10

 

 

542

 

 

Oil and Gas (Vitesse and JETX)

 

527

 

 

2

 

 

529

 

 

Idaho Timber

 

86

 

 

79

 

 

165

 

 

FXCM

 

133

 

 

31

 

 

164

 

 

Investments in Public Companies

 

192

 

 

 

 

192

 

 

Other

 

271

 

 

111

 

 

382

 

 

Total Portfolio

 

$

1,940

 

 

$

719

 

 

$

2,659

 

 

Jefferies Financial Group Inc.

Non-GAAP Reconciliation

The following table reconciles 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 Book Value and Shares Outstanding GAAP Reconciliation

The table below reconciles our book value to tangible book value and our common shares outstanding to fully diluted shares outstanding (in thousands, except per share amounts):

 

 

As Reported,

November 30,

2020

 

 

 

Book value (GAAP)

 

$

9,403,893

 

Less: Intangibles assets, net and goodwill

 

(1,913,467)

 

Tangible book value (non-GAAP)

 

$

7,490,426

 

 

 

 

Common shares outstanding (GAAP)

 

249,751

 

Restricted stock units (“RSUs”)

 

22,753

 

Other

 

1,115

 

Fully diluted shares outstanding (non-GAAP) (1)

 

273,619

 

 

 

 

Book value per share outstanding

 

$

37.65

 

Tangible book value per fully diluted share outstanding

 

$

27.38

 

 

 

 

(1) Fully diluted shares outstanding exclude preferred shares as they are antidilutive. Fully diluted shares outstanding include vested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans.

 

Della C. Mae

Next Post

Stocks notch gains on Wall Street while Treasury yields climb

Wed Jan 13 , 2021
Stan Choe, Damian J. Troise and Alex Veiga Wall Street capped a wobbly day of trading Tuesday with modest gains, while Treasury yields extended their recent rally. The S&P 500 inched up less than 0.1% after flipping between small gains and losses for much of the day. About 62% of […]