Jefferies Financial Group Inc. (NYSE: JEF):
Q3 Financial Highlights
- Net earnings attributable to common shareholders of $51 million, or $0.22 per basic and diluted common share, inclusive of a meaningful pre-tax loss from our legacy merchant banking portfolio which generated negative net revenues of $25 million primarily as a result of certain fair value adjustments taken during the period
- Annualized return on adjusted tangible equity1 of 2.9%
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Net revenues of $1.18 billion
- Investment Banking net revenues of $645 million
- Capital Markets net revenues of $524 million
- Asset Management net revenues (before allocated net interest4) of $23 million, inclusive of a meaningful pre-tax loss from our legacy merchant banking portfolio which generated negative net revenues of $25 million primarily as a result of certain fair value adjustments taken during the period
- At August 31, 2023, we had 210.4 million common shares outstanding and 252.1 million shares outstanding on a fully diluted basis2. Our book value per common share was $46.09 and tangible book value per fully diluted share3 was $31.51 at August 31, 2023
- We currently have a $250 million authorization for future share repurchases
"Our third quarter net revenues of $1.18 billion reflect an improving market environment. We are increasingly optimistic that we have come off the bottom of the cycle and that momentum in investment banking will continue.
"Investment Banking generated $645 million of net revenues, an increase of 28% from last quarter due to modestly improved mergers and acquisitions activity and a more receptive leveraged finance and new issue market, as the green shoots we mentioned last quarter have multiplied.
"Our strategy during down cycles has always been to play offense by investing in our future. This is the main theme for us in 2023, made possible by our strong capital base and solid global brand and platform. The dislocation and changes in strategy among some of our competitors created distinct opportunity this year. As we will discuss during our upcoming Investor Day on October 16, 2023, we are adding outstanding new Managing Directors to our Investment Banking effort across the globe. We started 2023 with 299 Managing Directors in Investment Banking and expect to begin 2024 with over 360 total Managing Directors, an increase of 20%. The 360 Managing Directors would be up 70% from the 212 Investment Banking Managing Directors that wore the Jefferies' jersey at the beginning of 2020. We look forward to the results we can achieve when we deliver our never better global investment banking capabilities in a more normal capital formation environment, which we anticipate in 2024, subject to unforeseen surprises. 2023 has been a challenging one in investment banking, with much of the new issue market shut or subdued until the last few months, but we couldn’t be more pleased with our future potential thanks to our existing and new Investment Banking Managing Directors.
"Capital markets revenues of $524 million are solid, but reflect some normalized seasonal slowness that summer often brings. Our team is solid and we have made ongoing investments in sales, trading, and research across the globe. As expected, we have kept our risk manageable throughout the volatility and are consistent in our passion to keep our balance sheet simple, clean and highly liquid. We are pleased with the diversification throughout our equities and fixed income businesses and take pride in the durable revenues they have generated globally over most recent quarters.
"Although we are still very early in our enhanced strategic alliance with SMBC, we completed several meaningful deals with joint clients during the third quarter and this has continued into the fourth quarter. It is early in our partnership, but we are more optimistic than ever that this is the right win-win combination in our industry.
"We are proud to have raised $7 million during the quarter for humanitarian support to help the victims of the Maui Wildfire. Time and again our clients, employee-partners, shareholders and vendors come together to help those less fortunate. We are all proud to be Jefferies."
Richard Handler, CEO, and Brian Friedman, President
Quarterly Cash Dividend
The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on November 28, 2023 to record holders of Jefferies common shares on November 13, 2023.
Financial Summary
(Dollars in thousands, except per share amounts) | Three Months Ended August 31, | Nine Months Ended August 31, | |||||||||||||||||
2023 | 202214, 16 | % Change | 2023 | 202214, 16 | % Change | ||||||||||||||
Net revenues: | |||||||||||||||||||
Investment Banking and Capital Markets | $ | 1,168,231 | $ | 1,115,957 | 5 | % | $ | 3,446,382 | $ | 3,688,667 | (7 | )% | |||||||
Asset Management | 10,143 | 398,250 | (97 | )% | 47,699 | 854,423 | (94 | )% | |||||||||||
Other | 3,735 | (4,363 | ) | N/M | 9,130 | (2,334 | ) | N/M | |||||||||||
Net revenues | 1,182,109 | 1,509,844 | (22 | )% | 3,503,211 | 4,540,756 | (23 | )% | |||||||||||
Net earnings before income taxes | 91,071 | 301,850 | (70 | )% | 267,008 | 860,723 | (69 | )% | |||||||||||
Income tax expense | 37,124 | 105,909 | (65 | )% | 75,053 | 219,949 | (66 | )% | |||||||||||
Net earnings | 53,947 | 195,941 | (72 | )% | 191,955 | 640,774 | (70 | )% | |||||||||||
Net losses attributable to noncontrolling interests | (3,772 | ) | (1,243 | ) | 203 | % | (13,340 | ) | (1,116 | ) | N/M | ||||||||
Net losses attributable to redeemable noncontrolling interests | — | (345 | ) | (100 | )% | (454 | ) | (1,241 | ) | (63 | )% | ||||||||
Preferred stock dividends | 6,300 | 2,070 | 204 | % | 8,316 | 6,211 | 34 | % | |||||||||||
Net earnings attributable to Jefferies Financial Group Inc. common shareholders | $ | 51,419 | $ | 195,459 | (74 | )% | $ | 197,433 | $ | 636,920 | (69 | )% | |||||||
Net earnings per common share attributable to Jefferies Financial Group Inc.: | |||||||||||||||||||
Basic | $ | 0.22 | $ | 0.80 | (73 | )% | $ | 0.83 | $ | 2.54 | (67 | )% | |||||||
Diluted | $ | 0.22 | $ | 0.78 | (72 | )% | $ | 0.82 | $ | 2.48 | (67 | )% | |||||||
Weighted average common shares | 228,353 | 243,853 | 236,666 | 250,168 | |||||||||||||||
Weighted average diluted common shares | 232,041 | 251,239 | 240,658 | 258,083 | |||||||||||||||
Annualized return on adjusted tangible equity1 | 2.9 | % | 10.0 | % | 3.4 | % | 11.0 | % | |||||||||||
N/M — Not Meaningful
Highlights
Three Months Ended August 31, 2023 | Nine Months Ended August 31, 2023 | |
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Investment Banking and Capital Markets | Investment Banking and Capital Markets | |
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Asset Management | Asset Management | |
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Amounts herein pertaining to August 31, 2023 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”). More information on our results of operations for the three and nine months ended August 31, 2023 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC, which we expect to file on or about October 6, 2023.
This press release contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current views and include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” "would," or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward-looking statements may also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC. We undertake no obligation to update or revise any such forward-looking statement to reflect subsequent circumstances.
Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s).
Selected Financial Information
(Amounts in Thousands) (Unaudited) | Quarter Ended | ||||||||||
August 31,
| May 31, 202316 | August 31, 202214, 16 | |||||||||
Net revenues by source: | |||||||||||
Advisory | $ | 335,271 | $ | 254,157 | $ | 481,419 | |||||
Equity underwriting | 154,211 | 148,429 | 150,972 | ||||||||
Debt underwriting | 110,708 | 89,889 | 76,943 | ||||||||
Total underwriting | 264,919 | 238,318 | 227,915 | ||||||||
Other investment banking | 44,453 | 11,458 | (52,497 | ) | |||||||
Total Investment Banking | 644,643 | 503,933 | 656,837 | ||||||||
Equities | 268,015 | 278,691 | 275,641 | ||||||||
Fixed income | 255,573 | 278,395 | 183,479 | ||||||||
Total Capital Markets | 523,588 | 557,086 | 459,120 | ||||||||
Total Investment Banking and Capital Markets Net revenues5 | 1,168,231 | 1,061,019 | 1,115,957 | ||||||||
Asset management fees and revenues6 | 16,358 | 15,929 | 17,069 | ||||||||
Investment return4 | 31,658 | 32,477 | (35,488 | ) | |||||||
Merchant banking, inclusive of net interest | (25,145 | ) | (66,180 | ) | 430,009 | ||||||
Allocated net interest4 | (12,728 | ) | (13,125 | ) | (13,340 | ) | |||||
Total Asset Management Net revenues | |||||||||||
