Quarterly Dividend Increased 16.7% to $0.35
Per Common Share
Jefferies Financial Group Inc. (NYSE: JEF):
Q2 Financial Highlights
- Net earnings attributable to common shareholders of $146
million, or $0.64 per diluted common share. Our pre-tax income for
the quarter was $228 million
- Annualized return on adjusted tangible shareholders' equity1 of
9.2%
- Net revenues of $1.66 billion
- Investment Banking net revenues of $803 million
- Capital Markets net revenues of $691 million
- Asset Management net revenues (before allocated net interest4)
of $173 million
- At May 31, 2024, we had 212.1 million common shares outstanding
and 253.7 million shares outstanding on a fully diluted basis2. Our
book value per common share was $46.57 and adjusted tangible book
value per fully diluted share3 was $31.27 at May 31, 2024
Increased Quarterly Cash Dividend
The Jefferies Board of Directors declared a quarterly cash
dividend equal to $0.35 per Jefferies common share, a 16.7%
increase from the prior dividend rate, payable on August 30, 2024
to record holders of Jefferies common shares on August 19,
2024.
Management Comments
“Our second quarter net revenues of $1.66 billion reflect
continued positive momentum in Investment Banking and another solid
quarter in Capital Markets, with particularly strong performance in
Equities.
"Investment Banking net revenues of $803 million were up 8.6%
from the prior quarter and 59.4% from the same quarter last year
across all lines of business. Overall, momentum continues to build
across our Investment Banking business, as the market opportunity
improves and the investment we have made in our platform translates
to increased market share. We are increasingly optimistic about the
second half of 2024 and 2025 based on our backlog and trends we
observe today.
"Capital Markets net revenues of $691 million were modestly
lower than the prior quarter and up 24.1% versus the same quarter
last year, with strength in Equities offsetting a moderation in
Fixed Income after its strong first quarter.
"Asset Management had a reasonable performance, as market
conditions for trading in certain of our strategies normalized
after a strong first quarter.
"Our performance this year across business lines has resulted in
improved operating margins versus last year. We expect margins to
continue to improve as we realize the full potential of investments
we have made in our Investment Banking platform and the market for
investment banking activity continues to strengthen. We believe
margins also will benefit over time from maintaining a strong
discipline around expenses and leveraging investments made in
technology that drive innovation, increase productivity, and
strengthen our offerings and capabilities.
"Overall, we feel very positive about the direction and
prospects of Jefferies. Our alliance with SMBC continues to gain
momentum, we closed on the sale of Foursight, we continue to make
smart investments in technology that will support our future growth
and, most importantly, we have an incredible culture of delivering
for our clients, while supporting our people and our communities.
In light of all this, our Board of Directors has increased our
quarterly dividend 16.7% to $0.35 per common share."
Richard Handler, CEO, and Brian Friedman, President
Financial Summary
$ in thousands, except per share
amounts
Three Months Ended May
31,
Six Months Ended May
31,
2024
202313
% Change
2024
202313
% Change
Net revenues:
Investment Banking and Capital Markets
$
1,494,447
$
1,061,019
41
%
$
2,945,735
$
2,278,151
29
%
Asset Management
156,524
(30,899
)
N/M
429,907
37,556
N/M
Other
5,474
7,490
(27
)%
19,006
5,395
252
%
Net revenues
1,656,445
1,037,610
60
%
3,394,648
2,321,102
46
%
Net earnings from continuing operations
before income taxes
227,754
17,919
N/M
447,996
175,937
155
%
Income tax expense
73,107
9,235
692
%
129,066
37,929
240
%
Net earnings from continuing
operations
154,647
8,684
N/M
318,930
138,008
131
%
Net income (losses) from discontinued
operations, net of income taxes
40
—
N/M
(7,851
)
—
N/M
Net earnings
154,687
8,684
N/M
311,079
138,008
125
%
Net losses attributable to noncontrolling
interests
(4,790
)
(3,513
)
36
%
(12,228
)
(9,568
)
28
%
Net losses attributable to redeemable
noncontrolling interests
—
(198
)
(100
)%
—
(454
)
(100
)%
Preferred stock dividends
13,741
—
N/M
27,930
2,016
N/M
Net earnings attributable to common
shareholders
$
145,736
$
12,395
N/M
$
295,377
$
146,014
102
%
Earnings (losses) per common
share:
Basic from continuing operations
$
0.66
$
0.05
N/M
$
1.37
$
0.60
128
%
Basic from discontinued operations
—
—
N/M
(0.03
)
—
N/M
Basic
$
0.66
$
0.05
N/M
$
1.34
$
0.60
124
%
Diluted from continuing operations
$
0.64
$
0.05
N/M
$
1.34
$
0.60
123
%
Diluted from discontinued operations
—
—
N/M
(0.03
)
—
N/M
Diluted
$
0.64
$
0.05
N/M
$
1.31
$
0.60
118
%
Weighted average common shares
219,971
242,568
219,935
240,825
Weighted average diluted common shares
226,146
245,413
225,587
246,870
N/M — Not Meaningful
Highlights
Three Months Ended May 31, 2024
Six Months Ended May 31, 2024
- Net earnings attributable to common shareholders of:
- $146 million, or $0.64 per diluted common share
- $145 million, or $0.64 per diluted common share, from
continuing operations
- Annualized return on adjusted tangible shareholders' equity1 of
9.2%
- We had 212.1 million common shares outstanding and 253.7
million common shares outstanding on a fully diluted basis2 at May
31, 2024. Our book value per common share was $46.57 and tangible
book value per fully diluted share3 was $31.27 at May 31,
2024.
- Effective tax rate of 32.1%. The lower tax rate compared to the
same quarter last year of 51.5% is primarily due to the higher
amount of pre-tax income in the current quarter.
- Net earnings attributable to common shareholders of:
- $295 million, or $1.31 per diluted common share
- $301 million, or $1.34 per diluted common share, from
continuing operations
- Annualized return on adjusted tangible shareholders' equity1 of
9.4%.
- Repurchased 1.1 million shares of common stock for $44 million,
at an average price of $40.66 per share in connection with
net-share settlements related to our equity compensation
plans.
- Effective tax rate of 28.8%. The higher tax rate compared to
the prior year of 21.6% is primarily due to the recognition of a
smaller excess tax benefit on restricted stock distributed during
the current year.
Investment Banking and Capital
Markets
Investment Banking and Capital
Markets
- Investment Banking net revenues of $803 million were higher
than the prior year comparable period, with strength across all
lines of business.
- Advisory net revenues of $284 million and equity and debt
underwriting net revenues of $455 million were higher than the same
quarter last year, attributable primarily to market share
gains.
- Underwriting net revenues of $455 million increased from the
same quarter last year, due to increased equity underwriting as
equity markets remained robust driving increased overall market
volumes, as well as due to our expanded capabilities and enhanced
market position. Debt underwriting activity improved as interest
rates and inflationary concerns continued to stabilize.
- Capital Markets net revenues of $691 million were higher
compared to the prior year quarter primarily due to stronger
performance in Equities attributable to increased volumes and more
favorable trading opportunities, while Fixed Income net revenues
remained flat with the comparable prior year.
- Investment Banking net revenues were $1.54 billion, a 45%
increase, with strength in all lines of business attributable
primarily to increased market share.
- Advisory net revenues of $622 million and equity and debt
underwriting net revenues of $793 million were higher than last
year, attributable primarily to market share gains.
- Underwriting net revenues of $793 million increased from the
prior year period, due to increased activity from both equity and
debt underwriting as momentum from equity and leveraged finance
markets benefited from continued market share gains.
- Capital Markets net revenues of $1.40 billion were higher
compared to the prior year period primarily driven by stronger
Equities net revenues attributable to continued market share gains
during the period. Fixed Income net revenues remained consistent
from the comparable prior year.
Asset Management
Asset Management
- Asset Management net revenues of $157 million were
substantially higher than the prior year largely due to the
consolidation of Stratos and Tessellis, which resulted in increased
revenues, as well as the absence this year of losses in OpNet
incurred in the prior year.
- Asset Management net revenues were $430 million, substantially
higher than the prior year period, as Investment return net
revenues improved due to strong performance across multiple
investment strategies and funds. In addition, Other investments14
net revenues were meaningfully higher than the prior year largely
due to the consolidation of Stratos and Tessellis which resulted in
increased revenues offset by an increase in expenses.
Amounts herein pertaining to May 31, 2024 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, 2024 will be provided upon filing our Quarterly Report on Form
10-Q with the SEC, which we expect to file on or about July 9,
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
$ in thousands (unaudited)
Quarter Ended
May 31, 2024
February 29, 2024
May 31, 202313
Net revenues by source:
Advisory
$
283,898
$
338,567
$
254,157
Equity underwriting
249,187
209,303
148,429
Debt underwriting
205,499
129,194
89,889
Total underwriting
454,686
338,497
238,318
Other investment banking
64,594
62,608
11,458
Total Investment Banking
803,178
739,672
503,933
Equities
407,092
359,138
278,691
Fixed income
284,177
352,478
278,395
Total Capital Markets
691,269
711,616
557,086
Total Investment Banking and Capital
Markets Net revenues5
1,494,447
1,451,288
1,061,019
Asset management fees and revenues6
16,818
59,657
15,929
Investment return
32,942
117,640
32,477
Other investments, inclusive of net
interest14
122,767
111,098
(66,180
)
Allocated net interest4
(16,003
)
(15,012
)
(13,125
)
Total Asset Management Net
revenues
156,524
273,383
(30,899
)
Other
5,474
13,532
7,490
Total Net revenues by source
$
1,656,445
$
1,738,203
$
1,037,610
Non-interest expenses:
Compensation and benefits
$
861,993
$
926,871
$
575,868
Brokerage and clearing fees
110,536
109,670
96,592
Underwriting costs
18,552
18,484
13,169
Technology and communications
135,238
137,512
118,936
Occupancy and equipment rental
29,327
28,153
24,395
Business development
68,630
57,651
43,587
Professional services
75,493
77,844
68,514
Depreciation and amortization
49,946
43,202
25,310
Cost of sales
37,462
34,671
2,362
Other
41,514
83,903
50,958
Total Non-interest expenses
$
1,428,691
$
1,517,961
$
1,019,691
$ in thousands (unaudited)
Six Months Ended May
31,
2024
202313
Net revenues by source:
Advisory
$
622,465
$
551,335
Equity underwriting
458,490
273,874
Debt underwriting
334,693
170,064
Total underwriting
793,183
443,938
Other investment banking
127,202
71,504
Total Investment Banking
1,542,850
1,066,777
Equities
766,230
583,985
Fixed income
636,655
627,389
Total Capital Markets
1,402,885
1,211,374
Total Investment Banking and Capital
Markets Net revenues5
2,945,735
2,278,151
Asset management fees and revenues6
76,475
58,625
Investment return
150,582
59,911
Other investments, inclusive of net
interest14
233,865
(58,757
)
Allocated net interest4
(31,015
)
(22,223
)
Total Asset Management Net
revenues
429,907
37,556
Other
19,006
5,395
Total Net revenues by source
$
3,394,648
$
2,321,102
Non-interest expenses:
Compensation and benefits
$
1,788,864
$
1,278,926
Brokerage and clearing fees
220,206
177,066
Underwriting costs
37,036
26,376
Technology and communications
272,750
232,321
Occupancy and equipment rental
57,480
51,710
Business development
126,281
80,425
Professional services
153,337
130,675
Depreciation and amortization
93,148
58,602
Cost of sales
72,133
4,530
Other
125,417
104,534
Total Non-interest expenses
$
2,946,652
$
2,145,165
Financial Data and Metrics
Unaudited
Quarter Ended
May 31,
2024
February 29,
2024
May 31,
2023
Other Data:
Number of trading days
64
61
64
Number of trading loss days7
1
3
10
Average VaR (in millions)8
$
13.36
$
15.13
$
15.14
Six Months Ended May
31,
2024
2023
Other Data:
Number of trading days
125
124
Number of trading loss days7
4
13
Average VaR (in millions)8
$
14.22
$
14.03
In millions, except other data
(unaudited)
Quarter Ended
May 31,
2024
February 29,
2024
May 31,
2023
Financial position:
Total assets
$
63,001
$
60,933
$
53,740
Cash and cash equivalents
10,842
7,616
8,005
Financial instruments owned
22,787
23,212
21,002
Level 3 financial instruments owned9
691
589
860
Goodwill and intangible assets
2,057
2,064
1,873
Total equity
9,952
9,867
9,765
Total shareholders' equity
9,875
9,780
9,696
Tangible shareholders' equity10
7,818
7,716
7,823
Other data and financial
ratios:
Leverage ratio11
6.3
6.2
5.5
Tangible gross leverage ratio12
7.8
7.6
6.6
Number of employees at period end
7,611
7,745
5,335
Number of employees excluding OpNet and
Stratos at period end
5,635
5,790
5,335
Components of Numerators and Denominators for Earnings Per
Common Share
Three Months Ended May
31,
Six Months Ended May
31,
In thousands, except per share amounts
2024
2023
2024
2023
Numerator for earnings per common share
from continuing operations:
Net earnings from continuing
operations
$
154,647
$
8,684
$
318,930
$
138,008
Less: Net losses attributable to
noncontrolling interests
(3,785
)
(3,711
)
(10,237
)
(10,022
)
Mandatorily redeemable convertible
preferred share dividends
—
—
—
(2,016
)
Allocation of earnings to participating
securities
(13,741
)
(4
)
(27,930
)
(830
)
Net earnings from continuing operations
attributable to common shareholders for basic earnings per
share
$
144,691
$
12,391
$
301,237
$
145,184
Adjustment to allocation of earnings to
participating securities related to diluted shares
—
(1
)
—
(31
)
Mandatorily redeemable convertible
preferred share dividends
—
—
—
2,016
Net earnings from continuing operations
attributable to common shareholders for diluted earnings per
share
$
144,691
$
12,390
$
301,237
$
147,169
Numerator for earnings per common share
from discontinued operations:
Net earnings (losses) from discontinued
operations, net of taxes
$
40
$
—
$
(7,851
)
$
—
Less: Net losses attributable to
noncontrolling interests
(1,005
)
—
(1,991
)
—
Net earnings (losses) from discontinued
operations attributable to common shareholders for basic and
diluted earnings per share
$
1,045
$
—
$
(5,860
)
$
—
Net earnings attributable to common
shareholders for basic earnings per share
$
145,736
$
12,391
$
295,377
$
145,184
Net earnings attributable to common
shareholders for diluted earnings per share
$
145,736
$
12,390
$
295,377
$
147,169
Denominator for earnings per common
share:
Weighted average common shares
outstanding
212,039
232,842
211,787
230,193
Weighted average shares of restricted
stock outstanding with future service required
(2,329
)
(1,853
)
(2,366
)
(1,989
)
Weighted average restricted stock units
outstanding with no future service required
10,261
11,579
10,514
12,621
Weighted average common shares
219,971
242,568
219,935
240,825
Stock options and other share-based
awards
3,470
1,618
3,124
2,086
Senior executive compensation plan
restricted stock unit awards
2,705
1,227
2,528
2,072
Mandatorily redeemable convertible
preferred shares
—
—
—
1,887
Weighted average diluted common
shares
226,146
245,413
225,587
246,870
Earnings (losses) per common
share:
Basic from continuing operations
$
0.66
$
0.05
$
1.37
$
0.60
Basic from discontinued operations
—
—
(0.03
)
—
Basic
$
0.66
$
0.05
$
1.34
$
0.60
Diluted from continuing operations
$
0.64
$
0.05
$
1.34
$
0.60
Diluted from discontinued operations
—
—
(0.03
)
—
Diluted
$
0.64
$
0.05
$
1.31
$
0.60
Notes
- Annualized return on adjusted tangible shareholders' equity
represents a non-GAAP financial measure. Refer to schedule on page
11 for a reconciliation to U.S. GAAP amounts.
- Shares outstanding on a fully diluted basis (a non-GAAP
financial measure) is defined as common shares outstanding plus
preferred shares, restricted stock units, stock options and other
shares. Refer to schedule on page 12 for a reconciliation to U.S.
GAAP amounts.
- Adjusted tangible book value per fully diluted share (a
non-GAAP financial measure) is defined as adjusted tangible book
value (a non-GAAP financial measure) divided by shares outstanding
on a fully diluted basis (a non-GAAP financial measure). Refer to
schedule on page 12 for a reconciliation to U.S. GAAP amounts.
- Allocated net interest represents an allocation to Asset
Management of certain of our long-term debt interest expense, net
of interest income on our Cash and cash equivalents and other
sources of liquidity. Allocated net interest has been disaggregated
to increase transparency and to present direct Asset Management
revenues. We believe that aggregating Allocated net interest would
obscure the revenue results by including an amount that is unique
to our credit spreads, debt maturity profile, capital structure,
liquidity risks and allocation methods.
- 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.
- Asset management fees and revenues include management and
performance fees from funds and accounts managed by us as well as
our share of fees received by affiliated asset management companies
with which we have revenue and profit share arrangements, as well
as earnings on our ownership interest in affiliated asset
managers.
- Number of trading loss days is calculated based on trading
activities in our Investment Banking and Capital Markets and Asset
Management business segments, excluding certain Other
investments.
- VaR estimates the potential loss in value of 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 7A "Quantitative and
Qualitative Disclosures About Market Risk" in our Annual Report on
Form 10-K for the year ended November 30, 2023.
- 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.
- Tangible shareholders' equity (a non-GAAP financial measure) is
defined as shareholders' equity less Intangible assets and
goodwill. We believe that tangible shareholders' equity is
meaningful for valuation purposes, as financial companies are often
measured as a multiple of tangible shareholders' equity, making
these ratios meaningful for investors.
- Leverage ratio equals total assets divided by total
equity.
- Tangible gross leverage ratio (a non-GAAP financial measure)
equals total assets less goodwill and intangible assets divided by
tangible shareholders' equity. The tangible gross leverage ratio is
used by rating agencies in assessing our leverage ratio.
- During the third quarter of 2023, we refined our allocated net
interest methodology to better reflect net interest expense across
our business units based on use of capital. As a result, the
presentation of Net revenues and Net revenues by source has been
recast to conform with the revised methodology.
- Beginning in fiscal 2024, we now refer to "Merchant banking" as
“Other investments” in our Asset Management reportable
segment.
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
Three Months Ended May
31,
Six Months Ended May
31,
$ in thousands
2024
2023
2024
2023
Net earnings attributable to common
shareholders (GAAP)
$
145,736
$
12,395
$
295,377
$
146,014
Intangible amortization and impairment
expense, net of tax
5,799
1,193
9,946
3,220
Adjusted net earnings to common
shareholders (non-GAAP)
151,535
13,588
305,323
149,234
Preferred stock dividends
13,741
—
27,930
2,016
Adjusted net earnings to total
shareholders (non-GAAP)
$
165,276
$
13,588
$
333,253
$
151,250
Annualized adjusted net earnings to total
shareholders (non-GAAP)
$
661,104
$
54,352
$
666,506
$
302,500
Net earnings impact for net (earnings)
losses from discontinued operations, net of noncontrolling
interests
(1,045
)
—
5,861
—
Adjusted net earnings to total
shareholders from continuing operations (non-GAAP)
164,231
13,588
339,114
151,250
Annualized adjusted net earnings to total
shareholders from continuing operations (non-GAAP)
656,924
54,352
678,228
302,500
February 29,
November 30,
2024
2023
2023
2022
Shareholders' equity (GAAP)
$
9,780,097
$
9,755,243
$
9,709,827
$
10,232,845
Less: Intangible assets, net and
goodwill
(2,063,956
)
(1,872,850
)
(2,044,776
)
(1,875,576
)
Less: Deferred tax asset, net
(466,468
)
(486,012
)
(458,343
)
(387,862
)
Less: Weighted average impact of dividends
and share repurchases
(49,053
)
(70,895
)
(115,344
)
(195,393
)
Adjusted tangible shareholders' equity
(non-GAAP)
$
7,200,620
$
7,325,486
$
7,091,364
$
7,774,014
Annualized return on adjusted tangible
shareholders' equity (non-GAAP)
9.2
%
0.7
%
9.4
%
3.9
%
Annualized adjusted net earnings to
shareholders on adjusted tangible shareholders' equity from
continuing operations (non-GAAP)
9.1
%
0.7
%
9.6
%
3.9
%
Adjusted Tangible Book Value and Fully Diluted Shares
Outstanding GAAP Reconciliation
Reconciliation of book value (shareholders' equity) to adjusted
tangible book value and common shares outstanding to fully diluted
shares outstanding:
$ in thousands, except per share
amounts
May 31, 2024
Book value (GAAP)
$
9,875,056
Stock options(1)
114,939
Intangible assets, net and goodwill
(2,057,302
)
Adjusted tangible book value
(non-GAAP)
$
7,932,693
Common shares outstanding (GAAP)
212,053
Preferred shares
21,000
Restricted stock units ("RSUs")
14,180
Stock options(1)
5,065
Other
1,365
Adjusted fully diluted shares
outstanding (non-GAAP)(2)
253,663
Book value per common share
outstanding
$
46.57
Adjusted tangible book value per fully
diluted share outstanding (non-GAAP)
$
31.27
(1)
Stock options added to book value are
equal to the total number of stock options outstanding as of May
31, 2024 of 5.1 million multiplied by the weighted average exercise
price of $22.69 on May 31, 2024.
(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/20240626864565/en/
FOR MORE INFORMATION Jonathan Freedman 212.778.8913
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