Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Jefferies Announces Second Quarter 2022 Financial Results By: Care of Jefferies Financial Group Inc. and Jefferies Group LLC via Business Wire June 27, 2022 at 16:45 PM EDT Q2 Financial Highlights Net income attributable to common shareholders of $114 million, or $0.45 per diluted share Annualized return on adjusted tangible equity of 5.8%1 Total Investment Banking and Capital Markets and Asset Management Net Revenues of $1.13 billion Investment Banking net revenues of $687 million Combined Capital Markets net revenues of $416 million Asset Management net revenues (before allocated net interest2) of $45 million Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share; at May 31, 2022, we had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3; our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36 at May 31, 2022 Since January 2018, Jefferies has repurchased 145.3 million shares of common stock5 for $3.4 billion, or an average price of $23.16 per share; Jefferies has returned to shareholders $4.6 billion, or 46% of shareholders' equity and 61% of tangible shareholders' equity6 at January 1, 2018 Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock "Our second quarter results are reasonable in the face of an extremely challenging capital markets environment, with some markets being all but shut to new issues. We achieved Investment Banking and Capital Markets and Asset Management net revenues of over $1.1 billion despite the limited new issue market, as well as some unrealized markdowns in our mortgage inventory and leveraged finance commitments. Similarly, we incurred increased expenses for conferences, travel and other marketing, which will primarily benefit future periods, as well as our $14 million charitable contributions to support Ukraine. "Our Investment Banking advisory activity remains strong as our clients continue to look to Jefferies to support them through this transition in economic and market conditions. We believe our market position continues to strengthen and we will reap the benefit of this as conditions normalize and the new issue market picks up. Our backlog7 is consistent with last quarter's strong levels but execution remains dependent on market conditions. Based on our ongoing dialogues with our clients, we believe that M&A and capital markets activity will pick up when stability and visibility improve. "We are deeply appreciative of our entire team that is persevering through this period of instability, working tirelessly to add to our significant pipeline of future deals while we wait for the market to open. We have invested heavily in human capital throughout Jefferies over the past decade, and in particular these past two years. We remain optimistic of our long-term growth and trajectory and look forward to continued success serving our ever increasing and incredibly loyal client base." 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 August 26, 2022 to record holders of Jefferies common shares on August 15, 2022. Financial Summary (Dollars in thousands, except per share amounts) Three Months Ended May 31, Six Months Ended May 31, 2022 2021 (8) % Change 2022 2021 (8) % Change Net revenues: Investment Banking and Capital Markets $ 1,098,378 $ 1,598,862 (31 )% $ 2,580,196 $ 3,586,358 (28 )% Asset Management 31,147 50,675 (39 )% 91,103 279,877 (67 )% Merchant Banking 238,255 296,815 (20 )% 427,790 563,819 (24 )% Corporate 1,818 724 151 % 2,564 1,314 95 % Consolidation Adjustments (516 ) 3,431 (115 )% (656 ) 6,081 (111 )% Net revenues $ 1,369,082 $ 1,950,507 (30 )% $ 3,100,997 $ 4,437,449 (30 )% Income before income taxes $ 166,541 $ 474,139 (65 )% $ 558,873 $ 1,274,924 (56 )% Net income attributable to common shareholders $ 114,014 $ 352,596 (68 )% $ 441,461 $ 935,031 (53 )% Diluted earnings per share $ 0.45 $ 1.30 (65 )% $ 1.70 $ 3.43 (50 )% Weighted average diluted shares 251,979 271,092 261,494 271,948 Annualized return on adjusted tangible equity1 5.8 % 19.2 % 11.2 % 27.0 % Highlights Three months ended May 31, 2022 Six months ended May 31, 2022 Net income attributable to common shareholders of $114 million, or $0.45 per diluted share. Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share, including 7.8 million shares of common stock in the open market for $250.0 million under our current Board of Directors authorization and 0.2 million shares of common stock for $8.1 million in connection with net-share settlements under our equity compensation plan. We had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3 at May 31, 2022. Our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36 at May 31, 2022. Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock. Net income attributable to common shareholders of $441 million, or $1.70 per diluted share. Repurchased 18.1 million shares of common stock for $622.2 million, or an average price of $34.47 per share, including 14.6 million shares of common stock in the open market for $500.0 million under our Board of Directors authorizations and 3.4 million shares of common stock for $122.2 million in connection with net-share settlements under our equity compensation plan. Three months ended May 31, 2022 Six months ended May 31, 2022 Investment Banking and Capital Markets Investment Banking and Capital Markets Investment Banking net revenues were $687 million, as our advisory activity remained strong, while our debt and equity underwriting net revenues were lower than the same period last year, consistent with a reduction in industry-wide deal activity. Combined Capital Markets net revenues of $416 million were lower as compared to prior year quarter. Equities net revenues benefited from record high commissions, partially offset by a challenging environment for risk assets, as our results were impacted by market volatility and global instability. Fixed Income net revenues reflect lower trading volumes, unrealized mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity as a result of increased uncertainty in respect of inflation and interest rates. Investment Banking net revenues of $1.69 billion were driven by significantly higher advisory net revenues, offset by lower net revenues in debt and equity underwriting. Combined Capital Markets net revenues of $896 million were lower as compared to prior year period. Equities net revenues were significantly impacted by market volatility and global instability. Fixed Income results were impacted by lower trading volumes in the face of inflation concerns and interest rate uncertainty. Asset Management Asset Management Asset Management net revenues reflects a difficult trading environment as compared to the prior year quarter. Asset Management net revenues reflect higher asset management fees, offset by lower investment returns and lower revenues from strategic affiliates as compared to the prior year period. Legacy Merchant Banking Legacy Merchant Banking Merchant Banking results reflect strong results at Idaho Timber, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies. We continue to work toward the realization of the Merchant Banking portfolio. Merchant Banking results reflect strong results at Idaho Timber as favorable pricing that began in 2020 has continued for much of the second quarter, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies. * * * * Amounts herein pertaining to May 31, 2022 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, 2022 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC, which we expect to file on or about July 8, 2022. 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). Notes Return on adjusted tangible equity (a non-GAAP financial measure) is defined as Jefferies' annualized adjusted net income (a non-GAAP financial measure) divided by our beginning of period adjusted tangible shareholders' equity (a non-GAAP financial measure). Refer to schedule on page 12 for 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 make clearer actual Investment return. Refer to Selected Financial and Statistical Information on pages 8 to 10. Shares outstanding on a fully diluted basis (a non-GAAP financial measure) is defined as Jefferies common shares outstanding plus restricted stock units, stock options, conversion of redeemable convertible preferred shares and other shares. Refer to schedule on page 13 for reconciliation to U.S. GAAP amounts. 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 13 for reconciliation to U.S. GAAP amounts. The 145.3 million common shares repurchased since January 2018 includes 141.2 million shares of common stock repurchased in the open market for $3.2 billion under our Board of Director authorizations and 4.1 million shares of common stock for $136.6 million repurchased in connection with net-share settlements under our equity compensation plan. 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 12 for reconciliation to U.S. GAAP amounts. Backlog represents an estimate of our net revenues from expected future transactions. As an indicator of net revenues in a given 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. In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. Summary (In thousands, except per share amounts) (Unaudited) Three Months Ended May 31, Six Months Ended May 31, 2022 2021 2022 2021 Net revenues $ 1,369,082 $ 1,950,507 $ 3,100,997 $ 4,437,449 Income before income taxes and loss related to associated companies $ 188,241 $ 497,665 $ 610,558 $ 1,309,018 Loss related to associated companies (21,700 ) (23,526 ) (51,685 ) (34,094 ) Income before income taxes 166,541 474,139 558,873 1,274,924 Income tax provision 49,683 120,820 114,040 339,056 Net income 116,858 353,319 444,833 935,868 Net (income) loss attributable to the noncontrolling interests (1,096 ) 669 (127 ) 1,412 Net loss attributable to the redeemable noncontrolling interests 323 234 896 1,003 Preferred stock dividends (2,071 ) (1,626 ) (4,141 ) (3,252 ) Net income attributable to common shareholders $ 114,014 $ 352,596 $ 441,461 $ 935,031 Basic earnings per common share attributable to Jefferies common shareholders: Net income $ 0.46 $ 1.33 $ 1.73 $ 3.51 Basic: weighted average shares 249,142 263,280 253,330 264,829 Diluted earnings per common share attributable to Jefferies common shareholders: Net income $ 0.45 $ 1.30 $ 1.70 $ 3.43 Diluted: weighted average shares 251,979 271,092 261,494 271,948 A summary of results for the three months ended May 31, 2022 is as follows (in thousands): Investment Banking and Capital Markets Asset Management Merchant Banking Corporate Parent Company Interest Consolidation Adjustments Total Net revenues $ 1,098,378 $ 31,147 $ 238,255 $ 1,818 $ — $ (516 ) $ 1,369,082 Expenses: Cost of sales — — 130,449 — — — 130,449 Compensation and benefits 522,860 10,816 39,319 5,482 — — 578,477 Non-compensation expenses: Floor brokerage and clearing fees 85,247 8,769 — — — — 94,016 Selling, general and other expenses 279,442 10,122 32,834 6,043 — (160 ) 328,281 Interest expense — — 926 — 8,385 — 9,311 Depreciation and amortization 22,766 467 16,655 419 — — 40,307 Total non-compensation expenses 387,455 19,358 50,415 6,462 8,385 (160 ) 471,915 Total expenses 910,315 30,174 220,183 11,944 8,385 (160 ) 1,180,841 Income (loss) before income taxes and loss related to associated companies 188,063 973 18,072 (10,126 ) (8,385 ) (356 ) 188,241 Loss related to associated companies — — (21,700 ) — — — (21,700 ) Income (loss) before income taxes $ 188,063 $ 973 $ (3,628 ) $ (10,126 ) $ (8,385 ) $ (356 ) 166,541 Income tax provision 49,683 Net income $ 116,858 A summary of results for the three months ended May 31, 2021 is as follows (in thousands): Investment Banking and Capital Markets (1) Asset Management (1) Merchant Banking (1) Corporate Parent Company Interest Consolidation Adjustments (1) Total Net revenues $ 1,598,862 $ 50,675 $ 296,815 $ 724 $ — $ 3,431 $ 1,950,507 Expenses: Cost of sales — — 143,847 — — — 143,847 Compensation and benefits 778,284 21,671 24,252 7,035 — — 831,242 Non-compensation expenses: Floor brokerage and clearing fees 66,211 10,599 — — — — 76,810 Selling, general and other expenses 293,276 10,768 32,631 4,910 — (25 ) 341,560 Interest expense 5,271 — 843 — 13,829 — 19,943 Depreciation and amortization 20,805 489 17,268 878 — — 39,440 Total non-compensation expenses 385,563 21,856 50,742 5,788 13,829 (25 ) 477,753 Total expenses 1,163,847 43,527 218,841 12,823 13,829 (25 ) 1,452,842 Income (loss) before income taxes and loss related to associated companies 435,015 7,148 77,974 (12,099 ) (13,829 ) 3,456 497,665 Loss related to associated companies — — (23,526 ) — — — (23,526 ) Income (loss) before income taxes $ 435,015 $ 7,148 $ 54,448 $ (12,099 ) $ (13,829 ) $ 3,456 474,139 Income tax provision 120,820 Net income $ 353,319 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. A summary of results for the six months ended May 31, 2022 is as follows (in thousands): Investment Banking and Capital Markets Asset Management Merchant Banking Corporate Parent Company Interest Consolidation Adjustments Total Net revenues $ 2,580,196 $ 91,103 $ 427,790 $ 2,564 $ — $ (656 ) $ 3,100,997 Expenses: Cost of sales — — 226,120 — — — 226,120 Compensation and benefits 1,247,136 30,752 78,642 11,631 — — 1,368,161 Non-compensation expenses: Floor brokerage and clearing fees 157,413 20,564 — — — — 177,977 Selling, general and other expenses 520,378 21,976 59,504 11,980 — (300 ) 613,538 Interest expense — — 1,623 — 16,776 — 18,399 Depreciation and amortization 46,321 829 38,251 843 — — 86,244 Total non-compensation expenses 724,112 43,369 99,378 12,823 16,776 (300 ) 896,158 Total expenses 1,971,248 74,121 404,140 24,454 16,776 (300 ) 2,490,439 Income (loss) before income taxes and loss related to associated companies 608,948 16,982 23,650 (21,890 ) (16,776 ) (356 ) 610,558 Loss related to associated companies — — (51,685 ) — — — (51,685 ) Income (loss) before income taxes $ 608,948 $ 16,982 $ (28,035 ) $ (21,890 ) $ (16,776 ) $ (356 ) 558,873 Income tax provision 114,040 Net income $ 444,833 A summary of results for the six months ended May 31, 2021 is as follows (in thousands): Investment Banking and Capital Markets (1) Asset Management (1) Merchant Banking (1) Corporate Parent Company Interest Consolidation Adjustments (1) Total Net revenues $ 3,586,358 $ 279,877 $ 563,819 $ 1,314 $ — $ 6,081 $ 4,437,449 Expenses: Cost of sales — — 239,406 — — — 239,406 Compensation and benefits 1,887,979 44,456 48,781 22,569 — — 2,003,785 Non-compensation expenses: Floor brokerage and clearing fees 132,785 20,441 — — — — 153,226 Selling, general and other expenses 522,009 22,932 59,151 9,579 — (174 ) 613,497 Interest expense 10,824 — 1,755 — 27,731 — 40,310 Depreciation and amortization 41,515 968 33,982 1,742 — — 78,207 Total non-compensation expenses 707,133 44,341 94,888 11,321 27,731 (174 ) 885,240 Total expenses 2,595,112 88,797 383,075 33,890 27,731 (174 ) 3,128,431 Income (loss) before income taxes and loss related to associated companies 991,246 191,080 180,744 (32,576 ) (27,731 ) 6,255 1,309,018 Loss related to associated companies — — (34,094 ) — — — (34,094 ) Income (loss) before income taxes $ 991,246 $ 191,080 $ 146,650 $ (32,576 ) $ (27,731 ) $ 6,255 1,274,924 Income tax provision 339,056 Net income $ 935,868 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. Selected Financial and Statistical Information (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 371,760 $ 543,769 $ 390,508 Equity underwriting 122,435 156,100 324,462 Debt underwriting 107,020 245,179 285,730 Total underwriting 229,455 401,279 610,192 Other investment banking (2) 85,746 58,134 82,461 Total investment banking 686,961 1,003,182 1,083,161 Equities 254,807 277,047 242,949 Fixed income 161,478 202,800 257,197 Total capital markets 416,285 479,847 500,146 Other (2) (4,868 ) (1,211 ) 15,555 Total Investment Banking and Capital Markets Net Revenues (3) 1,098,378 1,481,818 1,598,862 Asset management fees and revenues (4) 14,116 44,502 22,490 Investment return (5) 30,637 29,530 39,624 Allocated net interest (5) (13,606 ) (14,076 ) (11,439 ) Total Asset Management Net Revenues 31,147 59,956 50,675 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 1,129,525 $ 1,541,774 $ 1,649,537 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 94,016 $ 83,961 $ 76,810 Underwriting costs 13,191 8,128 33,031 Technology and communications 108,630 104,555 95,285 Occupancy and equipment rental 24,561 25,250 28,771 Business development 47,880 24,376 27,039 Professional services 52,192 51,118 54,240 Depreciation and amortization 23,233 23,917 21,294 Other 43,110 39,363 70,949 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 406,813 $ 360,668 $ 407,419 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 533,676 $ 744,212 $ 799,955 Compensation and benefits expenses as a percentage of net revenues 47.2 % 48.3 % 48.5 % (Amounts in Thousands, Except Other Data) (Unaudited) Six Months Ended May 31, 2022 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 915,529 $ 701,947 Equity underwriting 278,535 819,268 Debt underwriting 352,199 483,097 Total underwriting 630,734 1,302,365 Other investment banking (2) 143,880 165,483 Total investment banking 1,690,143 2,169,795 Equities 531,854 773,965 Fixed income 364,278 620,556 Total capital markets 896,132 1,394,521 Other (2) (6,079 ) 22,042 Total Investment Banking and Capital Markets Net Revenues (3) 2,580,196 3,586,358 Asset management fees and revenues (4) 58,618 88,799 Investment return (5) 60,167 212,916 Allocated net interest (5) (27,682 ) (21,838 ) Total Asset Management Net Revenues 91,103 279,877 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 2,671,299 $ 3,866,235 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 177,977 $ 153,226 Underwriting costs 21,319 69,167 Technology and communications 213,185 187,224 Occupancy and equipment rental 49,811 52,554 Business development 72,256 45,030 Professional services 103,310 92,876 Depreciation and amortization 47,150 42,483 Other 82,473 108,914 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 767,481 $ 751,474 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 1,277,888 $ 1,932,435 Compensation and benefits expenses as a percentage of net revenues 47.8 % 50.0 % (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Other Data: Number of trading days 64 61 64 Number of trading loss days (6) 10 8 20 Average VaR (in millions) (7) $ 11.84 $ 12.12 $ 15.77 Six Months Ended May 31, 2022 2021 (1) Other Data: Number of trading days 125 124 Number of trading loss days (6) 18 29 Average VaR (in millions) (7) $ 11.98 $ 15.89 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Previously reported results are presented on a comparable basis. (2) In the first quarter of 2022, we also made a change to present our share of the net earnings of Berkadia Commercial Mortgage Holding LLC within Investment banking net revenues, which was previously presented within our Other business category. Previously reported results are presented on a comparable basis. (3) 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. (4) Includes 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. (5) 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 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 our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods. (6) Number of trading loss days is calculated based on trading activities in our Investment Banking and Capital Markets and Asset Management business segments. (7) VaR estimates the potential loss in value of trading positions in our Investment Banking and Capital Markets and Asset Management business segments 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, 2021. Financial Data and Metrics (Amounts in Millions, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Financial position (1): Total assets $ 57,214 $ 60,036 $ 57,979 Total assets less goodwill and intangible assets for the period $ 55,329 $ 58,142 $ 56,066 Cash and cash equivalents $ 8,523 $ 8,501 $ 8,443 Financial instruments owned $ 20,248 $ 21,633 $ 19,938 Level 3 financial instruments owned (2) $ 740 $ 640 $ 735 Goodwill and intangible assets $ 1,885 $ 1,895 $ 1,912 Total equity $ 10,368 $ 10,549 $ 10,095 Total shareholders' equity $ 10,300 $ 10,490 $ 10,073 Tangible equity (3) $ 8,415 $ 8,596 $ 8,160 Other data and financial ratios: Leverage ratio (1) (4) 5.5 5.7 5.7 Tangible gross leverage ratio (1) (5) 6.6 6.8 6.9 Number of employees, at period end 5,619 5,625 5,151 (1) Amounts pertaining to May 31, 2022 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three and six months ended May 31, 2022. (2) 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. (3) Tangible equity (a non-GAAP financial measure) represents total Jefferies shareholders' equity less goodwill and identifiable intangible assets. We believe that tangible 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) Leverage ratio equals total assets divided by total equity. (5) Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio. Non-GAAP Reconciliations The following tables reconcile our 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. Return on Adjusted Tangible Equity Reconciliation The table below reconciles our Net income attributable to common shareholders to adjusted net income and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands): Three Months Ended May 31, Six Months Ended May 31, 2022 2021 2022 2021 Net income attributable to common shareholders (GAAP) $ 114,014 $ 352,596 $ 441,461 $ 935,031 Intangible amortization and impairment expense, net of tax 1,739 2,664 4,781 5,251 Adjusted net income (non-GAAP) $ 115,753 $ 355,260 $ 446,242 $ 940,282 Annualized adjusted net income (non-GAAP) $ 463,012 $ 1,421,040 $ 892,484 $ 1,880,564 February 28, November 30, 2022 2021 2021 2020 Shareholders' equity (GAAP) $ 10,490,300 $ 9,745,862 $ 10,553,755 $ 9,403,893 Less: Intangible assets, net and goodwill (1,894,721 ) (1,914,322 ) (1,897,500 ) (1,913,467 ) Less: Deferred tax asset (382,741 ) (410,420 ) (327,547 ) (393,687 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (162,339 ) (36,759 ) (378,907 ) (142,189 ) Adjusted tangible shareholders' equity (non-GAAP) $ 8,050,499 $ 7,384,361 $ 7,949,801 $ 6,954,550 Return on adjusted tangible equity 5.8 % 19.2 % 11.2 % 27.0 % Jefferies Shareholders' Equity GAAP Reconciliation The table below reconciles our shareholders' equity to tangible shareholders' equity (in thousands): December 31, 2017 Shareholders' equity (GAAP) $ 10,105,957 Intangible assets, net and goodwill (2,463,180 ) Tangible shareholders' equity (non-GAAP) $ 7,642,777 Jefferies 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, 2022 Book value (GAAP) $ 10,300,177 Redeemable convertible preferred shares convertible to common shares (1) 125,000 Stock options (2) 120,089 Intangible assets, net and goodwill (1,885,043 ) Adjusted tangible book value (non-GAAP) $ 8,660,223 Common shares outstanding (GAAP) 232,321 Restricted stock units ("RSUs") 16,629 Redeemable convertible preferred shares converted to common shares (1) 4,441 Stock options (2) 5,061 Other 1,141 Fully diluted shares outstanding (non-GAAP) (3) 259,593 Book value per share outstanding $ 44.34 Tangible book value per fully diluted share outstanding $ 33.36 (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, 2022 of 5,061,000 multiplied by the weighted average exercise price of $23.73 on May 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on May 31, 2022. (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. View source version on businesswire.com: https://www.businesswire.com/news/home/20220627005667/en/Contacts Jonathan Freedman 212.778.8913 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Jefferies Announces Second Quarter 2022 Financial Results By: Care of Jefferies Financial Group Inc. and Jefferies Group LLC via Business Wire June 27, 2022 at 16:45 PM EDT Q2 Financial Highlights Net income attributable to common shareholders of $114 million, or $0.45 per diluted share Annualized return on adjusted tangible equity of 5.8%1 Total Investment Banking and Capital Markets and Asset Management Net Revenues of $1.13 billion Investment Banking net revenues of $687 million Combined Capital Markets net revenues of $416 million Asset Management net revenues (before allocated net interest2) of $45 million Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share; at May 31, 2022, we had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3; our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36 at May 31, 2022 Since January 2018, Jefferies has repurchased 145.3 million shares of common stock5 for $3.4 billion, or an average price of $23.16 per share; Jefferies has returned to shareholders $4.6 billion, or 46% of shareholders' equity and 61% of tangible shareholders' equity6 at January 1, 2018 Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock "Our second quarter results are reasonable in the face of an extremely challenging capital markets environment, with some markets being all but shut to new issues. We achieved Investment Banking and Capital Markets and Asset Management net revenues of over $1.1 billion despite the limited new issue market, as well as some unrealized markdowns in our mortgage inventory and leveraged finance commitments. Similarly, we incurred increased expenses for conferences, travel and other marketing, which will primarily benefit future periods, as well as our $14 million charitable contributions to support Ukraine. "Our Investment Banking advisory activity remains strong as our clients continue to look to Jefferies to support them through this transition in economic and market conditions. We believe our market position continues to strengthen and we will reap the benefit of this as conditions normalize and the new issue market picks up. Our backlog7 is consistent with last quarter's strong levels but execution remains dependent on market conditions. Based on our ongoing dialogues with our clients, we believe that M&A and capital markets activity will pick up when stability and visibility improve. "We are deeply appreciative of our entire team that is persevering through this period of instability, working tirelessly to add to our significant pipeline of future deals while we wait for the market to open. We have invested heavily in human capital throughout Jefferies over the past decade, and in particular these past two years. We remain optimistic of our long-term growth and trajectory and look forward to continued success serving our ever increasing and incredibly loyal client base." 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 August 26, 2022 to record holders of Jefferies common shares on August 15, 2022. Financial Summary (Dollars in thousands, except per share amounts) Three Months Ended May 31, Six Months Ended May 31, 2022 2021 (8) % Change 2022 2021 (8) % Change Net revenues: Investment Banking and Capital Markets $ 1,098,378 $ 1,598,862 (31 )% $ 2,580,196 $ 3,586,358 (28 )% Asset Management 31,147 50,675 (39 )% 91,103 279,877 (67 )% Merchant Banking 238,255 296,815 (20 )% 427,790 563,819 (24 )% Corporate 1,818 724 151 % 2,564 1,314 95 % Consolidation Adjustments (516 ) 3,431 (115 )% (656 ) 6,081 (111 )% Net revenues $ 1,369,082 $ 1,950,507 (30 )% $ 3,100,997 $ 4,437,449 (30 )% Income before income taxes $ 166,541 $ 474,139 (65 )% $ 558,873 $ 1,274,924 (56 )% Net income attributable to common shareholders $ 114,014 $ 352,596 (68 )% $ 441,461 $ 935,031 (53 )% Diluted earnings per share $ 0.45 $ 1.30 (65 )% $ 1.70 $ 3.43 (50 )% Weighted average diluted shares 251,979 271,092 261,494 271,948 Annualized return on adjusted tangible equity1 5.8 % 19.2 % 11.2 % 27.0 % Highlights Three months ended May 31, 2022 Six months ended May 31, 2022 Net income attributable to common shareholders of $114 million, or $0.45 per diluted share. Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share, including 7.8 million shares of common stock in the open market for $250.0 million under our current Board of Directors authorization and 0.2 million shares of common stock for $8.1 million in connection with net-share settlements under our equity compensation plan. We had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3 at May 31, 2022. Our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36 at May 31, 2022. Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock. Net income attributable to common shareholders of $441 million, or $1.70 per diluted share. Repurchased 18.1 million shares of common stock for $622.2 million, or an average price of $34.47 per share, including 14.6 million shares of common stock in the open market for $500.0 million under our Board of Directors authorizations and 3.4 million shares of common stock for $122.2 million in connection with net-share settlements under our equity compensation plan. Three months ended May 31, 2022 Six months ended May 31, 2022 Investment Banking and Capital Markets Investment Banking and Capital Markets Investment Banking net revenues were $687 million, as our advisory activity remained strong, while our debt and equity underwriting net revenues were lower than the same period last year, consistent with a reduction in industry-wide deal activity. Combined Capital Markets net revenues of $416 million were lower as compared to prior year quarter. Equities net revenues benefited from record high commissions, partially offset by a challenging environment for risk assets, as our results were impacted by market volatility and global instability. Fixed Income net revenues reflect lower trading volumes, unrealized mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity as a result of increased uncertainty in respect of inflation and interest rates. Investment Banking net revenues of $1.69 billion were driven by significantly higher advisory net revenues, offset by lower net revenues in debt and equity underwriting. Combined Capital Markets net revenues of $896 million were lower as compared to prior year period. Equities net revenues were significantly impacted by market volatility and global instability. Fixed Income results were impacted by lower trading volumes in the face of inflation concerns and interest rate uncertainty. Asset Management Asset Management Asset Management net revenues reflects a difficult trading environment as compared to the prior year quarter. Asset Management net revenues reflect higher asset management fees, offset by lower investment returns and lower revenues from strategic affiliates as compared to the prior year period. Legacy Merchant Banking Legacy Merchant Banking Merchant Banking results reflect strong results at Idaho Timber, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies. We continue to work toward the realization of the Merchant Banking portfolio. Merchant Banking results reflect strong results at Idaho Timber as favorable pricing that began in 2020 has continued for much of the second quarter, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies. * * * * Amounts herein pertaining to May 31, 2022 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, 2022 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC, which we expect to file on or about July 8, 2022. 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). Notes Return on adjusted tangible equity (a non-GAAP financial measure) is defined as Jefferies' annualized adjusted net income (a non-GAAP financial measure) divided by our beginning of period adjusted tangible shareholders' equity (a non-GAAP financial measure). Refer to schedule on page 12 for 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 make clearer actual Investment return. Refer to Selected Financial and Statistical Information on pages 8 to 10. Shares outstanding on a fully diluted basis (a non-GAAP financial measure) is defined as Jefferies common shares outstanding plus restricted stock units, stock options, conversion of redeemable convertible preferred shares and other shares. Refer to schedule on page 13 for reconciliation to U.S. GAAP amounts. 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 13 for reconciliation to U.S. GAAP amounts. The 145.3 million common shares repurchased since January 2018 includes 141.2 million shares of common stock repurchased in the open market for $3.2 billion under our Board of Director authorizations and 4.1 million shares of common stock for $136.6 million repurchased in connection with net-share settlements under our equity compensation plan. 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 12 for reconciliation to U.S. GAAP amounts. Backlog represents an estimate of our net revenues from expected future transactions. As an indicator of net revenues in a given 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. In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. Summary (In thousands, except per share amounts) (Unaudited) Three Months Ended May 31, Six Months Ended May 31, 2022 2021 2022 2021 Net revenues $ 1,369,082 $ 1,950,507 $ 3,100,997 $ 4,437,449 Income before income taxes and loss related to associated companies $ 188,241 $ 497,665 $ 610,558 $ 1,309,018 Loss related to associated companies (21,700 ) (23,526 ) (51,685 ) (34,094 ) Income before income taxes 166,541 474,139 558,873 1,274,924 Income tax provision 49,683 120,820 114,040 339,056 Net income 116,858 353,319 444,833 935,868 Net (income) loss attributable to the noncontrolling interests (1,096 ) 669 (127 ) 1,412 Net loss attributable to the redeemable noncontrolling interests 323 234 896 1,003 Preferred stock dividends (2,071 ) (1,626 ) (4,141 ) (3,252 ) Net income attributable to common shareholders $ 114,014 $ 352,596 $ 441,461 $ 935,031 Basic earnings per common share attributable to Jefferies common shareholders: Net income $ 0.46 $ 1.33 $ 1.73 $ 3.51 Basic: weighted average shares 249,142 263,280 253,330 264,829 Diluted earnings per common share attributable to Jefferies common shareholders: Net income $ 0.45 $ 1.30 $ 1.70 $ 3.43 Diluted: weighted average shares 251,979 271,092 261,494 271,948 A summary of results for the three months ended May 31, 2022 is as follows (in thousands): Investment Banking and Capital Markets Asset Management Merchant Banking Corporate Parent Company Interest Consolidation Adjustments Total Net revenues $ 1,098,378 $ 31,147 $ 238,255 $ 1,818 $ — $ (516 ) $ 1,369,082 Expenses: Cost of sales — — 130,449 — — — 130,449 Compensation and benefits 522,860 10,816 39,319 5,482 — — 578,477 Non-compensation expenses: Floor brokerage and clearing fees 85,247 8,769 — — — — 94,016 Selling, general and other expenses 279,442 10,122 32,834 6,043 — (160 ) 328,281 Interest expense — — 926 — 8,385 — 9,311 Depreciation and amortization 22,766 467 16,655 419 — — 40,307 Total non-compensation expenses 387,455 19,358 50,415 6,462 8,385 (160 ) 471,915 Total expenses 910,315 30,174 220,183 11,944 8,385 (160 ) 1,180,841 Income (loss) before income taxes and loss related to associated companies 188,063 973 18,072 (10,126 ) (8,385 ) (356 ) 188,241 Loss related to associated companies — — (21,700 ) — — — (21,700 ) Income (loss) before income taxes $ 188,063 $ 973 $ (3,628 ) $ (10,126 ) $ (8,385 ) $ (356 ) 166,541 Income tax provision 49,683 Net income $ 116,858 A summary of results for the three months ended May 31, 2021 is as follows (in thousands): Investment Banking and Capital Markets (1) Asset Management (1) Merchant Banking (1) Corporate Parent Company Interest Consolidation Adjustments (1) Total Net revenues $ 1,598,862 $ 50,675 $ 296,815 $ 724 $ — $ 3,431 $ 1,950,507 Expenses: Cost of sales — — 143,847 — — — 143,847 Compensation and benefits 778,284 21,671 24,252 7,035 — — 831,242 Non-compensation expenses: Floor brokerage and clearing fees 66,211 10,599 — — — — 76,810 Selling, general and other expenses 293,276 10,768 32,631 4,910 — (25 ) 341,560 Interest expense 5,271 — 843 — 13,829 — 19,943 Depreciation and amortization 20,805 489 17,268 878 — — 39,440 Total non-compensation expenses 385,563 21,856 50,742 5,788 13,829 (25 ) 477,753 Total expenses 1,163,847 43,527 218,841 12,823 13,829 (25 ) 1,452,842 Income (loss) before income taxes and loss related to associated companies 435,015 7,148 77,974 (12,099 ) (13,829 ) 3,456 497,665 Loss related to associated companies — — (23,526 ) — — — (23,526 ) Income (loss) before income taxes $ 435,015 $ 7,148 $ 54,448 $ (12,099 ) $ (13,829 ) $ 3,456 474,139 Income tax provision 120,820 Net income $ 353,319 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. A summary of results for the six months ended May 31, 2022 is as follows (in thousands): Investment Banking and Capital Markets Asset Management Merchant Banking Corporate Parent Company Interest Consolidation Adjustments Total Net revenues $ 2,580,196 $ 91,103 $ 427,790 $ 2,564 $ — $ (656 ) $ 3,100,997 Expenses: Cost of sales — — 226,120 — — — 226,120 Compensation and benefits 1,247,136 30,752 78,642 11,631 — — 1,368,161 Non-compensation expenses: Floor brokerage and clearing fees 157,413 20,564 — — — — 177,977 Selling, general and other expenses 520,378 21,976 59,504 11,980 — (300 ) 613,538 Interest expense — — 1,623 — 16,776 — 18,399 Depreciation and amortization 46,321 829 38,251 843 — — 86,244 Total non-compensation expenses 724,112 43,369 99,378 12,823 16,776 (300 ) 896,158 Total expenses 1,971,248 74,121 404,140 24,454 16,776 (300 ) 2,490,439 Income (loss) before income taxes and loss related to associated companies 608,948 16,982 23,650 (21,890 ) (16,776 ) (356 ) 610,558 Loss related to associated companies — — (51,685 ) — — — (51,685 ) Income (loss) before income taxes $ 608,948 $ 16,982 $ (28,035 ) $ (21,890 ) $ (16,776 ) $ (356 ) 558,873 Income tax provision 114,040 Net income $ 444,833 A summary of results for the six months ended May 31, 2021 is as follows (in thousands): Investment Banking and Capital Markets (1) Asset Management (1) Merchant Banking (1) Corporate Parent Company Interest Consolidation Adjustments (1) Total Net revenues $ 3,586,358 $ 279,877 $ 563,819 $ 1,314 $ — $ 6,081 $ 4,437,449 Expenses: Cost of sales — — 239,406 — — — 239,406 Compensation and benefits 1,887,979 44,456 48,781 22,569 — — 2,003,785 Non-compensation expenses: Floor brokerage and clearing fees 132,785 20,441 — — — — 153,226 Selling, general and other expenses 522,009 22,932 59,151 9,579 — (174 ) 613,497 Interest expense 10,824 — 1,755 — 27,731 — 40,310 Depreciation and amortization 41,515 968 33,982 1,742 — — 78,207 Total non-compensation expenses 707,133 44,341 94,888 11,321 27,731 (174 ) 885,240 Total expenses 2,595,112 88,797 383,075 33,890 27,731 (174 ) 3,128,431 Income (loss) before income taxes and loss related to associated companies 991,246 191,080 180,744 (32,576 ) (27,731 ) 6,255 1,309,018 Loss related to associated companies — — (34,094 ) — — — (34,094 ) Income (loss) before income taxes $ 991,246 $ 191,080 $ 146,650 $ (32,576 ) $ (27,731 ) $ 6,255 1,274,924 Income tax provision 339,056 Net income $ 935,868 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. Selected Financial and Statistical Information (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 371,760 $ 543,769 $ 390,508 Equity underwriting 122,435 156,100 324,462 Debt underwriting 107,020 245,179 285,730 Total underwriting 229,455 401,279 610,192 Other investment banking (2) 85,746 58,134 82,461 Total investment banking 686,961 1,003,182 1,083,161 Equities 254,807 277,047 242,949 Fixed income 161,478 202,800 257,197 Total capital markets 416,285 479,847 500,146 Other (2) (4,868 ) (1,211 ) 15,555 Total Investment Banking and Capital Markets Net Revenues (3) 1,098,378 1,481,818 1,598,862 Asset management fees and revenues (4) 14,116 44,502 22,490 Investment return (5) 30,637 29,530 39,624 Allocated net interest (5) (13,606 ) (14,076 ) (11,439 ) Total Asset Management Net Revenues 31,147 59,956 50,675 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 1,129,525 $ 1,541,774 $ 1,649,537 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 94,016 $ 83,961 $ 76,810 Underwriting costs 13,191 8,128 33,031 Technology and communications 108,630 104,555 95,285 Occupancy and equipment rental 24,561 25,250 28,771 Business development 47,880 24,376 27,039 Professional services 52,192 51,118 54,240 Depreciation and amortization 23,233 23,917 21,294 Other 43,110 39,363 70,949 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 406,813 $ 360,668 $ 407,419 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 533,676 $ 744,212 $ 799,955 Compensation and benefits expenses as a percentage of net revenues 47.2 % 48.3 % 48.5 % (Amounts in Thousands, Except Other Data) (Unaudited) Six Months Ended May 31, 2022 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 915,529 $ 701,947 Equity underwriting 278,535 819,268 Debt underwriting 352,199 483,097 Total underwriting 630,734 1,302,365 Other investment banking (2) 143,880 165,483 Total investment banking 1,690,143 2,169,795 Equities 531,854 773,965 Fixed income 364,278 620,556 Total capital markets 896,132 1,394,521 Other (2) (6,079 ) 22,042 Total Investment Banking and Capital Markets Net Revenues (3) 2,580,196 3,586,358 Asset management fees and revenues (4) 58,618 88,799 Investment return (5) 60,167 212,916 Allocated net interest (5) (27,682 ) (21,838 ) Total Asset Management Net Revenues 91,103 279,877 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 2,671,299 $ 3,866,235 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 177,977 $ 153,226 Underwriting costs 21,319 69,167 Technology and communications 213,185 187,224 Occupancy and equipment rental 49,811 52,554 Business development 72,256 45,030 Professional services 103,310 92,876 Depreciation and amortization 47,150 42,483 Other 82,473 108,914 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 767,481 $ 751,474 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 1,277,888 $ 1,932,435 Compensation and benefits expenses as a percentage of net revenues 47.8 % 50.0 % (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Other Data: Number of trading days 64 61 64 Number of trading loss days (6) 10 8 20 Average VaR (in millions) (7) $ 11.84 $ 12.12 $ 15.77 Six Months Ended May 31, 2022 2021 (1) Other Data: Number of trading days 125 124 Number of trading loss days (6) 18 29 Average VaR (in millions) (7) $ 11.98 $ 15.89 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Previously reported results are presented on a comparable basis. (2) In the first quarter of 2022, we also made a change to present our share of the net earnings of Berkadia Commercial Mortgage Holding LLC within Investment banking net revenues, which was previously presented within our Other business category. Previously reported results are presented on a comparable basis. (3) 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. (4) Includes 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. (5) 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 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 our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods. (6) Number of trading loss days is calculated based on trading activities in our Investment Banking and Capital Markets and Asset Management business segments. (7) VaR estimates the potential loss in value of trading positions in our Investment Banking and Capital Markets and Asset Management business segments 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, 2021. Financial Data and Metrics (Amounts in Millions, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Financial position (1): Total assets $ 57,214 $ 60,036 $ 57,979 Total assets less goodwill and intangible assets for the period $ 55,329 $ 58,142 $ 56,066 Cash and cash equivalents $ 8,523 $ 8,501 $ 8,443 Financial instruments owned $ 20,248 $ 21,633 $ 19,938 Level 3 financial instruments owned (2) $ 740 $ 640 $ 735 Goodwill and intangible assets $ 1,885 $ 1,895 $ 1,912 Total equity $ 10,368 $ 10,549 $ 10,095 Total shareholders' equity $ 10,300 $ 10,490 $ 10,073 Tangible equity (3) $ 8,415 $ 8,596 $ 8,160 Other data and financial ratios: Leverage ratio (1) (4) 5.5 5.7 5.7 Tangible gross leverage ratio (1) (5) 6.6 6.8 6.9 Number of employees, at period end 5,619 5,625 5,151 (1) Amounts pertaining to May 31, 2022 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three and six months ended May 31, 2022. (2) 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. (3) Tangible equity (a non-GAAP financial measure) represents total Jefferies shareholders' equity less goodwill and identifiable intangible assets. We believe that tangible 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) Leverage ratio equals total assets divided by total equity. (5) Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio. Non-GAAP Reconciliations The following tables reconcile our 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. Return on Adjusted Tangible Equity Reconciliation The table below reconciles our Net income attributable to common shareholders to adjusted net income and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands): Three Months Ended May 31, Six Months Ended May 31, 2022 2021 2022 2021 Net income attributable to common shareholders (GAAP) $ 114,014 $ 352,596 $ 441,461 $ 935,031 Intangible amortization and impairment expense, net of tax 1,739 2,664 4,781 5,251 Adjusted net income (non-GAAP) $ 115,753 $ 355,260 $ 446,242 $ 940,282 Annualized adjusted net income (non-GAAP) $ 463,012 $ 1,421,040 $ 892,484 $ 1,880,564 February 28, November 30, 2022 2021 2021 2020 Shareholders' equity (GAAP) $ 10,490,300 $ 9,745,862 $ 10,553,755 $ 9,403,893 Less: Intangible assets, net and goodwill (1,894,721 ) (1,914,322 ) (1,897,500 ) (1,913,467 ) Less: Deferred tax asset (382,741 ) (410,420 ) (327,547 ) (393,687 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (162,339 ) (36,759 ) (378,907 ) (142,189 ) Adjusted tangible shareholders' equity (non-GAAP) $ 8,050,499 $ 7,384,361 $ 7,949,801 $ 6,954,550 Return on adjusted tangible equity 5.8 % 19.2 % 11.2 % 27.0 % Jefferies Shareholders' Equity GAAP Reconciliation The table below reconciles our shareholders' equity to tangible shareholders' equity (in thousands): December 31, 2017 Shareholders' equity (GAAP) $ 10,105,957 Intangible assets, net and goodwill (2,463,180 ) Tangible shareholders' equity (non-GAAP) $ 7,642,777 Jefferies 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, 2022 Book value (GAAP) $ 10,300,177 Redeemable convertible preferred shares convertible to common shares (1) 125,000 Stock options (2) 120,089 Intangible assets, net and goodwill (1,885,043 ) Adjusted tangible book value (non-GAAP) $ 8,660,223 Common shares outstanding (GAAP) 232,321 Restricted stock units ("RSUs") 16,629 Redeemable convertible preferred shares converted to common shares (1) 4,441 Stock options (2) 5,061 Other 1,141 Fully diluted shares outstanding (non-GAAP) (3) 259,593 Book value per share outstanding $ 44.34 Tangible book value per fully diluted share outstanding $ 33.36 (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, 2022 of 5,061,000 multiplied by the weighted average exercise price of $23.73 on May 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on May 31, 2022. (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. View source version on businesswire.com: https://www.businesswire.com/news/home/20220627005667/en/Contacts Jonathan Freedman 212.778.8913
Q2 Financial Highlights Net income attributable to common shareholders of $114 million, or $0.45 per diluted share Annualized return on adjusted tangible equity of 5.8%1 Total Investment Banking and Capital Markets and Asset Management Net Revenues of $1.13 billion Investment Banking net revenues of $687 million Combined Capital Markets net revenues of $416 million Asset Management net revenues (before allocated net interest2) of $45 million Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share; at May 31, 2022, we had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3; our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36 at May 31, 2022 Since January 2018, Jefferies has repurchased 145.3 million shares of common stock5 for $3.4 billion, or an average price of $23.16 per share; Jefferies has returned to shareholders $4.6 billion, or 46% of shareholders' equity and 61% of tangible shareholders' equity6 at January 1, 2018 Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock "Our second quarter results are reasonable in the face of an extremely challenging capital markets environment, with some markets being all but shut to new issues. We achieved Investment Banking and Capital Markets and Asset Management net revenues of over $1.1 billion despite the limited new issue market, as well as some unrealized markdowns in our mortgage inventory and leveraged finance commitments. Similarly, we incurred increased expenses for conferences, travel and other marketing, which will primarily benefit future periods, as well as our $14 million charitable contributions to support Ukraine. "Our Investment Banking advisory activity remains strong as our clients continue to look to Jefferies to support them through this transition in economic and market conditions. We believe our market position continues to strengthen and we will reap the benefit of this as conditions normalize and the new issue market picks up. Our backlog7 is consistent with last quarter's strong levels but execution remains dependent on market conditions. Based on our ongoing dialogues with our clients, we believe that M&A and capital markets activity will pick up when stability and visibility improve. "We are deeply appreciative of our entire team that is persevering through this period of instability, working tirelessly to add to our significant pipeline of future deals while we wait for the market to open. We have invested heavily in human capital throughout Jefferies over the past decade, and in particular these past two years. We remain optimistic of our long-term growth and trajectory and look forward to continued success serving our ever increasing and incredibly loyal client base." 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 August 26, 2022 to record holders of Jefferies common shares on August 15, 2022. Financial Summary (Dollars in thousands, except per share amounts) Three Months Ended May 31, Six Months Ended May 31, 2022 2021 (8) % Change 2022 2021 (8) % Change Net revenues: Investment Banking and Capital Markets $ 1,098,378 $ 1,598,862 (31 )% $ 2,580,196 $ 3,586,358 (28 )% Asset Management 31,147 50,675 (39 )% 91,103 279,877 (67 )% Merchant Banking 238,255 296,815 (20 )% 427,790 563,819 (24 )% Corporate 1,818 724 151 % 2,564 1,314 95 % Consolidation Adjustments (516 ) 3,431 (115 )% (656 ) 6,081 (111 )% Net revenues $ 1,369,082 $ 1,950,507 (30 )% $ 3,100,997 $ 4,437,449 (30 )% Income before income taxes $ 166,541 $ 474,139 (65 )% $ 558,873 $ 1,274,924 (56 )% Net income attributable to common shareholders $ 114,014 $ 352,596 (68 )% $ 441,461 $ 935,031 (53 )% Diluted earnings per share $ 0.45 $ 1.30 (65 )% $ 1.70 $ 3.43 (50 )% Weighted average diluted shares 251,979 271,092 261,494 271,948 Annualized return on adjusted tangible equity1 5.8 % 19.2 % 11.2 % 27.0 % Highlights Three months ended May 31, 2022 Six months ended May 31, 2022 Net income attributable to common shareholders of $114 million, or $0.45 per diluted share. Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share, including 7.8 million shares of common stock in the open market for $250.0 million under our current Board of Directors authorization and 0.2 million shares of common stock for $8.1 million in connection with net-share settlements under our equity compensation plan. We had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3 at May 31, 2022. Our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36 at May 31, 2022. Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock. Net income attributable to common shareholders of $441 million, or $1.70 per diluted share. Repurchased 18.1 million shares of common stock for $622.2 million, or an average price of $34.47 per share, including 14.6 million shares of common stock in the open market for $500.0 million under our Board of Directors authorizations and 3.4 million shares of common stock for $122.2 million in connection with net-share settlements under our equity compensation plan. Three months ended May 31, 2022 Six months ended May 31, 2022 Investment Banking and Capital Markets Investment Banking and Capital Markets Investment Banking net revenues were $687 million, as our advisory activity remained strong, while our debt and equity underwriting net revenues were lower than the same period last year, consistent with a reduction in industry-wide deal activity. Combined Capital Markets net revenues of $416 million were lower as compared to prior year quarter. Equities net revenues benefited from record high commissions, partially offset by a challenging environment for risk assets, as our results were impacted by market volatility and global instability. Fixed Income net revenues reflect lower trading volumes, unrealized mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity as a result of increased uncertainty in respect of inflation and interest rates. Investment Banking net revenues of $1.69 billion were driven by significantly higher advisory net revenues, offset by lower net revenues in debt and equity underwriting. Combined Capital Markets net revenues of $896 million were lower as compared to prior year period. Equities net revenues were significantly impacted by market volatility and global instability. Fixed Income results were impacted by lower trading volumes in the face of inflation concerns and interest rate uncertainty. Asset Management Asset Management Asset Management net revenues reflects a difficult trading environment as compared to the prior year quarter. Asset Management net revenues reflect higher asset management fees, offset by lower investment returns and lower revenues from strategic affiliates as compared to the prior year period. Legacy Merchant Banking Legacy Merchant Banking Merchant Banking results reflect strong results at Idaho Timber, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies. We continue to work toward the realization of the Merchant Banking portfolio. Merchant Banking results reflect strong results at Idaho Timber as favorable pricing that began in 2020 has continued for much of the second quarter, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies. * * * * Amounts herein pertaining to May 31, 2022 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, 2022 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC, which we expect to file on or about July 8, 2022. 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). Notes Return on adjusted tangible equity (a non-GAAP financial measure) is defined as Jefferies' annualized adjusted net income (a non-GAAP financial measure) divided by our beginning of period adjusted tangible shareholders' equity (a non-GAAP financial measure). Refer to schedule on page 12 for 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 make clearer actual Investment return. Refer to Selected Financial and Statistical Information on pages 8 to 10. Shares outstanding on a fully diluted basis (a non-GAAP financial measure) is defined as Jefferies common shares outstanding plus restricted stock units, stock options, conversion of redeemable convertible preferred shares and other shares. Refer to schedule on page 13 for reconciliation to U.S. GAAP amounts. 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 13 for reconciliation to U.S. GAAP amounts. The 145.3 million common shares repurchased since January 2018 includes 141.2 million shares of common stock repurchased in the open market for $3.2 billion under our Board of Director authorizations and 4.1 million shares of common stock for $136.6 million repurchased in connection with net-share settlements under our equity compensation plan. 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 12 for reconciliation to U.S. GAAP amounts. Backlog represents an estimate of our net revenues from expected future transactions. As an indicator of net revenues in a given 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. In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. Summary (In thousands, except per share amounts) (Unaudited) Three Months Ended May 31, Six Months Ended May 31, 2022 2021 2022 2021 Net revenues $ 1,369,082 $ 1,950,507 $ 3,100,997 $ 4,437,449 Income before income taxes and loss related to associated companies $ 188,241 $ 497,665 $ 610,558 $ 1,309,018 Loss related to associated companies (21,700 ) (23,526 ) (51,685 ) (34,094 ) Income before income taxes 166,541 474,139 558,873 1,274,924 Income tax provision 49,683 120,820 114,040 339,056 Net income 116,858 353,319 444,833 935,868 Net (income) loss attributable to the noncontrolling interests (1,096 ) 669 (127 ) 1,412 Net loss attributable to the redeemable noncontrolling interests 323 234 896 1,003 Preferred stock dividends (2,071 ) (1,626 ) (4,141 ) (3,252 ) Net income attributable to common shareholders $ 114,014 $ 352,596 $ 441,461 $ 935,031 Basic earnings per common share attributable to Jefferies common shareholders: Net income $ 0.46 $ 1.33 $ 1.73 $ 3.51 Basic: weighted average shares 249,142 263,280 253,330 264,829 Diluted earnings per common share attributable to Jefferies common shareholders: Net income $ 0.45 $ 1.30 $ 1.70 $ 3.43 Diluted: weighted average shares 251,979 271,092 261,494 271,948 A summary of results for the three months ended May 31, 2022 is as follows (in thousands): Investment Banking and Capital Markets Asset Management Merchant Banking Corporate Parent Company Interest Consolidation Adjustments Total Net revenues $ 1,098,378 $ 31,147 $ 238,255 $ 1,818 $ — $ (516 ) $ 1,369,082 Expenses: Cost of sales — — 130,449 — — — 130,449 Compensation and benefits 522,860 10,816 39,319 5,482 — — 578,477 Non-compensation expenses: Floor brokerage and clearing fees 85,247 8,769 — — — — 94,016 Selling, general and other expenses 279,442 10,122 32,834 6,043 — (160 ) 328,281 Interest expense — — 926 — 8,385 — 9,311 Depreciation and amortization 22,766 467 16,655 419 — — 40,307 Total non-compensation expenses 387,455 19,358 50,415 6,462 8,385 (160 ) 471,915 Total expenses 910,315 30,174 220,183 11,944 8,385 (160 ) 1,180,841 Income (loss) before income taxes and loss related to associated companies 188,063 973 18,072 (10,126 ) (8,385 ) (356 ) 188,241 Loss related to associated companies — — (21,700 ) — — — (21,700 ) Income (loss) before income taxes $ 188,063 $ 973 $ (3,628 ) $ (10,126 ) $ (8,385 ) $ (356 ) 166,541 Income tax provision 49,683 Net income $ 116,858 A summary of results for the three months ended May 31, 2021 is as follows (in thousands): Investment Banking and Capital Markets (1) Asset Management (1) Merchant Banking (1) Corporate Parent Company Interest Consolidation Adjustments (1) Total Net revenues $ 1,598,862 $ 50,675 $ 296,815 $ 724 $ — $ 3,431 $ 1,950,507 Expenses: Cost of sales — — 143,847 — — — 143,847 Compensation and benefits 778,284 21,671 24,252 7,035 — — 831,242 Non-compensation expenses: Floor brokerage and clearing fees 66,211 10,599 — — — — 76,810 Selling, general and other expenses 293,276 10,768 32,631 4,910 — (25 ) 341,560 Interest expense 5,271 — 843 — 13,829 — 19,943 Depreciation and amortization 20,805 489 17,268 878 — — 39,440 Total non-compensation expenses 385,563 21,856 50,742 5,788 13,829 (25 ) 477,753 Total expenses 1,163,847 43,527 218,841 12,823 13,829 (25 ) 1,452,842 Income (loss) before income taxes and loss related to associated companies 435,015 7,148 77,974 (12,099 ) (13,829 ) 3,456 497,665 Loss related to associated companies — — (23,526 ) — — — (23,526 ) Income (loss) before income taxes $ 435,015 $ 7,148 $ 54,448 $ (12,099 ) $ (13,829 ) $ 3,456 474,139 Income tax provision 120,820 Net income $ 353,319 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. A summary of results for the six months ended May 31, 2022 is as follows (in thousands): Investment Banking and Capital Markets Asset Management Merchant Banking Corporate Parent Company Interest Consolidation Adjustments Total Net revenues $ 2,580,196 $ 91,103 $ 427,790 $ 2,564 $ — $ (656 ) $ 3,100,997 Expenses: Cost of sales — — 226,120 — — — 226,120 Compensation and benefits 1,247,136 30,752 78,642 11,631 — — 1,368,161 Non-compensation expenses: Floor brokerage and clearing fees 157,413 20,564 — — — — 177,977 Selling, general and other expenses 520,378 21,976 59,504 11,980 — (300 ) 613,538 Interest expense — — 1,623 — 16,776 — 18,399 Depreciation and amortization 46,321 829 38,251 843 — — 86,244 Total non-compensation expenses 724,112 43,369 99,378 12,823 16,776 (300 ) 896,158 Total expenses 1,971,248 74,121 404,140 24,454 16,776 (300 ) 2,490,439 Income (loss) before income taxes and loss related to associated companies 608,948 16,982 23,650 (21,890 ) (16,776 ) (356 ) 610,558 Loss related to associated companies — — (51,685 ) — — — (51,685 ) Income (loss) before income taxes $ 608,948 $ 16,982 $ (28,035 ) $ (21,890 ) $ (16,776 ) $ (356 ) 558,873 Income tax provision 114,040 Net income $ 444,833 A summary of results for the six months ended May 31, 2021 is as follows (in thousands): Investment Banking and Capital Markets (1) Asset Management (1) Merchant Banking (1) Corporate Parent Company Interest Consolidation Adjustments (1) Total Net revenues $ 3,586,358 $ 279,877 $ 563,819 $ 1,314 $ — $ 6,081 $ 4,437,449 Expenses: Cost of sales — — 239,406 — — — 239,406 Compensation and benefits 1,887,979 44,456 48,781 22,569 — — 2,003,785 Non-compensation expenses: Floor brokerage and clearing fees 132,785 20,441 — — — — 153,226 Selling, general and other expenses 522,009 22,932 59,151 9,579 — (174 ) 613,497 Interest expense 10,824 — 1,755 — 27,731 — 40,310 Depreciation and amortization 41,515 968 33,982 1,742 — — 78,207 Total non-compensation expenses 707,133 44,341 94,888 11,321 27,731 (174 ) 885,240 Total expenses 2,595,112 88,797 383,075 33,890 27,731 (174 ) 3,128,431 Income (loss) before income taxes and loss related to associated companies 991,246 191,080 180,744 (32,576 ) (27,731 ) 6,255 1,309,018 Loss related to associated companies — — (34,094 ) — — — (34,094 ) Income (loss) before income taxes $ 991,246 $ 191,080 $ 146,650 $ (32,576 ) $ (27,731 ) $ 6,255 1,274,924 Income tax provision 339,056 Net income $ 935,868 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure. Selected Financial and Statistical Information (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 371,760 $ 543,769 $ 390,508 Equity underwriting 122,435 156,100 324,462 Debt underwriting 107,020 245,179 285,730 Total underwriting 229,455 401,279 610,192 Other investment banking (2) 85,746 58,134 82,461 Total investment banking 686,961 1,003,182 1,083,161 Equities 254,807 277,047 242,949 Fixed income 161,478 202,800 257,197 Total capital markets 416,285 479,847 500,146 Other (2) (4,868 ) (1,211 ) 15,555 Total Investment Banking and Capital Markets Net Revenues (3) 1,098,378 1,481,818 1,598,862 Asset management fees and revenues (4) 14,116 44,502 22,490 Investment return (5) 30,637 29,530 39,624 Allocated net interest (5) (13,606 ) (14,076 ) (11,439 ) Total Asset Management Net Revenues 31,147 59,956 50,675 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 1,129,525 $ 1,541,774 $ 1,649,537 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 94,016 $ 83,961 $ 76,810 Underwriting costs 13,191 8,128 33,031 Technology and communications 108,630 104,555 95,285 Occupancy and equipment rental 24,561 25,250 28,771 Business development 47,880 24,376 27,039 Professional services 52,192 51,118 54,240 Depreciation and amortization 23,233 23,917 21,294 Other 43,110 39,363 70,949 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 406,813 $ 360,668 $ 407,419 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 533,676 $ 744,212 $ 799,955 Compensation and benefits expenses as a percentage of net revenues 47.2 % 48.3 % 48.5 % (Amounts in Thousands, Except Other Data) (Unaudited) Six Months Ended May 31, 2022 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 915,529 $ 701,947 Equity underwriting 278,535 819,268 Debt underwriting 352,199 483,097 Total underwriting 630,734 1,302,365 Other investment banking (2) 143,880 165,483 Total investment banking 1,690,143 2,169,795 Equities 531,854 773,965 Fixed income 364,278 620,556 Total capital markets 896,132 1,394,521 Other (2) (6,079 ) 22,042 Total Investment Banking and Capital Markets Net Revenues (3) 2,580,196 3,586,358 Asset management fees and revenues (4) 58,618 88,799 Investment return (5) 60,167 212,916 Allocated net interest (5) (27,682 ) (21,838 ) Total Asset Management Net Revenues 91,103 279,877 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 2,671,299 $ 3,866,235 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 177,977 $ 153,226 Underwriting costs 21,319 69,167 Technology and communications 213,185 187,224 Occupancy and equipment rental 49,811 52,554 Business development 72,256 45,030 Professional services 103,310 92,876 Depreciation and amortization 47,150 42,483 Other 82,473 108,914 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 767,481 $ 751,474 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 1,277,888 $ 1,932,435 Compensation and benefits expenses as a percentage of net revenues 47.8 % 50.0 % (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Other Data: Number of trading days 64 61 64 Number of trading loss days (6) 10 8 20 Average VaR (in millions) (7) $ 11.84 $ 12.12 $ 15.77 Six Months Ended May 31, 2022 2021 (1) Other Data: Number of trading days 125 124 Number of trading loss days (6) 18 29 Average VaR (in millions) (7) $ 11.98 $ 15.89 (1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Previously reported results are presented on a comparable basis. (2) In the first quarter of 2022, we also made a change to present our share of the net earnings of Berkadia Commercial Mortgage Holding LLC within Investment banking net revenues, which was previously presented within our Other business category. Previously reported results are presented on a comparable basis. (3) 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. (4) Includes 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. (5) 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 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 our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods. (6) Number of trading loss days is calculated based on trading activities in our Investment Banking and Capital Markets and Asset Management business segments. (7) VaR estimates the potential loss in value of trading positions in our Investment Banking and Capital Markets and Asset Management business segments 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, 2021. Financial Data and Metrics (Amounts in Millions, Except Other Data) (Unaudited) Quarter Ended May 31, 2022 February 28, 2022 May 31 2021 (1) Financial position (1): Total assets $ 57,214 $ 60,036 $ 57,979 Total assets less goodwill and intangible assets for the period $ 55,329 $ 58,142 $ 56,066 Cash and cash equivalents $ 8,523 $ 8,501 $ 8,443 Financial instruments owned $ 20,248 $ 21,633 $ 19,938 Level 3 financial instruments owned (2) $ 740 $ 640 $ 735 Goodwill and intangible assets $ 1,885 $ 1,895 $ 1,912 Total equity $ 10,368 $ 10,549 $ 10,095 Total shareholders' equity $ 10,300 $ 10,490 $ 10,073 Tangible equity (3) $ 8,415 $ 8,596 $ 8,160 Other data and financial ratios: Leverage ratio (1) (4) 5.5 5.7 5.7 Tangible gross leverage ratio (1) (5) 6.6 6.8 6.9 Number of employees, at period end 5,619 5,625 5,151 (1) Amounts pertaining to May 31, 2022 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three and six months ended May 31, 2022. (2) 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. (3) Tangible equity (a non-GAAP financial measure) represents total Jefferies shareholders' equity less goodwill and identifiable intangible assets. We believe that tangible 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) Leverage ratio equals total assets divided by total equity. (5) Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio. Non-GAAP Reconciliations The following tables reconcile our 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. Return on Adjusted Tangible Equity Reconciliation The table below reconciles our Net income attributable to common shareholders to adjusted net income and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands): Three Months Ended May 31, Six Months Ended May 31, 2022 2021 2022 2021 Net income attributable to common shareholders (GAAP) $ 114,014 $ 352,596 $ 441,461 $ 935,031 Intangible amortization and impairment expense, net of tax 1,739 2,664 4,781 5,251 Adjusted net income (non-GAAP) $ 115,753 $ 355,260 $ 446,242 $ 940,282 Annualized adjusted net income (non-GAAP) $ 463,012 $ 1,421,040 $ 892,484 $ 1,880,564 February 28, November 30, 2022 2021 2021 2020 Shareholders' equity (GAAP) $ 10,490,300 $ 9,745,862 $ 10,553,755 $ 9,403,893 Less: Intangible assets, net and goodwill (1,894,721 ) (1,914,322 ) (1,897,500 ) (1,913,467 ) Less: Deferred tax asset (382,741 ) (410,420 ) (327,547 ) (393,687 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (162,339 ) (36,759 ) (378,907 ) (142,189 ) Adjusted tangible shareholders' equity (non-GAAP) $ 8,050,499 $ 7,384,361 $ 7,949,801 $ 6,954,550 Return on adjusted tangible equity 5.8 % 19.2 % 11.2 % 27.0 % Jefferies Shareholders' Equity GAAP Reconciliation The table below reconciles our shareholders' equity to tangible shareholders' equity (in thousands): December 31, 2017 Shareholders' equity (GAAP) $ 10,105,957 Intangible assets, net and goodwill (2,463,180 ) Tangible shareholders' equity (non-GAAP) $ 7,642,777 Jefferies 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, 2022 Book value (GAAP) $ 10,300,177 Redeemable convertible preferred shares convertible to common shares (1) 125,000 Stock options (2) 120,089 Intangible assets, net and goodwill (1,885,043 ) Adjusted tangible book value (non-GAAP) $ 8,660,223 Common shares outstanding (GAAP) 232,321 Restricted stock units ("RSUs") 16,629 Redeemable convertible preferred shares converted to common shares (1) 4,441 Stock options (2) 5,061 Other 1,141 Fully diluted shares outstanding (non-GAAP) (3) 259,593 Book value per share outstanding $ 44.34 Tangible book value per fully diluted share outstanding $ 33.36 (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, 2022 of 5,061,000 multiplied by the weighted average exercise price of $23.73 on May 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on May 31, 2022. (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. View source version on businesswire.com: https://www.businesswire.com/news/home/20220627005667/en/