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 Third Quarter 2022 Financial Results By: Care of Jefferies Financial Group Inc. and Jefferies Group LLC via Business Wire September 28, 2022 at 16:15 PM EDT Q3 Financial Highlights Net income attributable to common shareholders of $195 million, or $0.78 per diluted share; adjusted net income attributable to common shareholders1 of $275 million, or $1.10 per diluted share, after removing $80 million of expense related to a regulatory settlement in the quarter Annualized return on adjusted tangible equity of 10.0%2; adjusted annualized return on adjusted tangible equity of 14.0%3 Total Investment Banking and Capital Markets and Asset Management net revenues of $1.12 billion Investment Banking net revenues of $682 million Combined Capital Markets net revenues of $452 million Asset Management net loss (before allocated net interest4) of $3 million Pre-tax gain on sale of Idaho Timber of $139 million Repurchased 4.3 million shares of common stock for $134.1 million, or an average price of $31.39 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022; at August 31, 2022, we had 228.8 million shares outstanding and 256.2 million shares outstanding on a fully diluted basis5; our book value per share was $44.98 and tangible book value per fully diluted share6 was $33.81 Since January 2018, Jefferies has repurchased 149.6 million shares of common stock7 for $3.5 billion, or an average price of $23.39 per share; Jefferies has returned to shareholders $4.8 billion since January 2018, or 48% of shareholders' equity and 63% of tangible shareholders' equity8 at the beginning of this effort Our Board of Directors has increased our share buyback authorization back to a total of $250 million "Our third quarter results reflect the strength and momentum of our Firm, our team, our brand and our market position, despite the challenges of the current market environment. Investment Banking and Equities were very resilient, and we expect we have gained market share in those areas as we continue to support our clients through this volatile time. Moreover, we achieved solid Investment Banking and Capital Markets and Asset Management net revenues of over $1.12 billion despite unrealized markdowns in our mortgage inventory and leveraged finance commitments as the current environment has particularly impacted those asset classes. Our 14.0% adjusted annualized return on adjusted tangible equity3 is respectable and was achieved despite the significant dislocation in the new issue capital markets for much of this period. "We are working very closely with our clients, so that we are able to support them further when economic and market conditions improve, and new issue activity opens up. Our backlog9 is consistent with last quarter's levels, but realization remains dependent on market conditions. "2022 is feeling like a transitional year in our business, but one in which we are making good progress in enhancing our market share. We continue to invest toward further growth, most notably in Investment Banking, guard our balance sheet and capital against the risk of the increased volatility, and prioritize our clients and our Jefferies' team. We believe this will yield a solid result for 2022, and set the stage for continued growth and success in 2023 and beyond." Richard Handler, CEO, and Brian Friedman, President Quarterly Cash Dividend The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on November 29, 2022 to record holders of Jefferies common shares on November 14, 2022. We continue to work diligently to effect the spin-off to shareholders of our holdings in Vitesse Energy by the end of our fiscal year, subject to necessary regulatory reviews and rulings. Financial Summary (Dollars in thousands, except per share amounts) Three Months Ended August 31, Nine Months Ended August 31, 2022 2021 (10) % Change 2022 2021 (10) % Change Net revenues: Investment Banking and Capital Markets $ 1,134,732 $ 1,672,943 (32)% $ 3,714,928 $ 5,259,301 (29)% Asset Management (13,803 ) 13,327 (204)% 77,300 293,204 (74)% Merchant Banking 397,847 248,690 60% 825,637 812,509 2% Corporate 6,192 955 548% 8,756 2,269 286% Consolidation Adjustments (78 ) 3,069 (103)% (734 ) 9,150 (108)% Net revenues $ 1,524,890 $ 1,938,984 (21)% $ 4,625,887 $ 6,376,433 (27)% Income before income taxes $ 301,850 $ 553,616 (45)% $ 860,723 $ 1,828,540 (53)% Net income attributable to common shareholders $ 195,459 $ 407,459 (52)% $ 636,920 $ 1,342,490 (53)% Diluted earnings per share $ 0.78 $ 1.50 (48)% $ 2.48 $ 4.93 (50)% Weighted average diluted shares 251,239 271,405 258,083 271,746 Annualized return on adjusted tangible equity2 10.0 % 21.4 % 11.0 % 26.1 % Adjusted annualized return on adjusted tangible equity3 14.0 % N/A 12.4 % N/A Highlights Three months ended August 31, 2022 Nine months ended August 31, 2022 Net income attributable to common shareholders of $195 million, or $0.78 per diluted share; adjusted net income attributable to common shareholders1 of $275 million, or $1.10 per diluted share, after removing $80 million of expense related to a regulatory settlement in the quarter. Repurchased 4.3 million shares of common stock for $134.1 million, or an average price of $31.39 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022. We had 228.8 million shares outstanding and 256.2 million shares outstanding on a fully diluted basis5 at August 31, 2022. Our book value per share was $44.98 and tangible book value per fully diluted share6 was $33.81 at August 31, 2022. Our Board of Directors has increased our share buyback authorization back to a total of $250 million. Effective tax rate of 35.1%, reflecting non-deductible $80 million regulatory settlement in the current quarter; adjusted effective tax rate11 of 27.7% without the cost of this settlement. Net income attributable to common shareholders of $637 million, or $2.48 per diluted share; adjusted net income attributable to common shareholders1 of $717 million, or $2.79 per diluted share, after removing $80 million of expense related to a regulatory settlement in the third quarter. Repurchased 22.3 million shares of common stock for $756.3 million, or an average price of $33.88 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022; repurchases include 18.9 million shares of common stock in the open market for $634.0 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 August 31, 2022 Nine months ended August 31, 2022 Investment Banking and Capital Markets Investment Banking and Capital Markets Investment Banking net revenues were $682 million, as our mergers and acquisitions net revenues remained strong. Our debt and equity underwriting net revenues were lower than the same quarter last year, consistent with a reduction in industry-wide deal activity. Combined Capital Markets net revenues of $452 million were slightly higher as compared to the prior year quarter. Equities net revenues benefited from higher commissions and trading revenues, as our business continues to expand within the context of a more normalized trading environment. Fixed Income net revenues reflect mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity as a result of continued uncertainty in respect of inflation and interest rates. Investment Banking net revenues of $2.37 billion were driven by record advisory net revenues, offset by lower net revenues in debt and equity underwriting. Combined Capital Markets net revenues of $1.35 billion were lower as compared to prior year period. Equities net revenues were impacted by market volatility and global instability, primarily in the first six months of the year. Fixed Income results were impacted by lower trading volumes, mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity in the face of inflation concerns and interest rate uncertainty. Asset Management Asset Management Asset Management net revenues reflect an increase in underlying fee revenue, offset by modest investment losses reflective of the difficult trading environment as compared to the profit realized in 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 the $139 million pre-tax gain on the sale of Idaho Timber and strong results at Vitesse, partially offset by a decline in the value of several of our investments in public companies. We continue to work toward the liquidation of our Merchant Banking portfolio. Merchant Banking results reflect strong results at Idaho Timber and Vitesse, as well as the gain on the sale of Idaho Timber, partially offset by a decline in the value of several of our investments in public companies. * * * * Amounts herein pertaining to August 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 nine months ended August 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 October 7, 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 Adjusted net income attributable to common shareholders (a non-GAAP financial measure) excludes the $80 million expense ($80 million, net of tax) related to a regulatory settlement in the current quarter. Refer to schedule on page 12 for reconciliation to U.S. GAAP amounts. 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. Adjusted return on adjusted tangible equity (a non-GAAP financial measure) is defined as Jefferies' annualized adjusted net income excluding the net income impact of the $80 million of expense ($80 million, net of tax) related to a regulatory settlement in the current quarter (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 13 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 14 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 14 for reconciliation to U.S. GAAP amounts. The 149.6 million common shares repurchased since January 2018 includes 145.5 million shares of common stock repurchased in the open market for $3.4 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 13 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. Adjusted effective tax rate (a non-GAAP financial measure) excludes the $80 million expense related to a regulatory settlement in the current quarter. Refer to schedule on page 14 for reconciliation to U.S. GAAP amounts. Summary (In thousands, except per share amounts) (Unaudited) Three Months Ended August 31, Nine Months Ended August 31, 2022 2021 2022 2021 Net revenues $ 1,524,890 $ 1,938,984 $ 4,625,887 $ 6,376,433 Income before income taxes and loss related to associated companies $ 306,677 $ 580,792 $ 917,235 $ 1,889,810 Loss related to associated companies (4,827 ) (27,176 ) (56,512 ) (61,270 ) Income before income taxes 301,850 553,616 860,723 1,828,540 Income tax provision 105,909 145,700 219,949 484,756 Net income 195,941 407,916 640,774 1,343,784 Net loss attributable to the noncontrolling interests 1,243 1,324 1,116 2,736 Net loss attributable to the redeemable noncontrolling interests 345 68 1,241 1,071 Preferred stock dividends (2,070 ) (1,849 ) (6,211 ) (5,101 ) Net income attributable to common shareholders $ 195,459 $ 407,459 $ 636,920 $ 1,342,490 Basic earnings per common share attributable to Jefferies common shareholders: Net income $ 0.80 $ 1.54 $ 2.54 $ 5.05 Basic: weighted average shares 243,853 263,087 250,168 264,248 Diluted earnings per common share attributable to Jefferies common shareholders: Net income $ 0.78 $ 1.50 $ 2.48 $ 4.93 Diluted: weighted average shares 251,239 271,405 258,083 271,746 A summary of results for the three months ended August 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 $ 1,134,732 $ (13,803 ) $ 397,847 $ 6,192 $ — $ (78 ) $ 1,524,890 Expenses: Cost of sales — — 123,436 — — — 123,436 Compensation and benefits 521,214 12,808 10,584 13,856 — — 558,462 Non-compensation expenses: Floor brokerage and clearing fees 79,727 4,959 — — — — 84,686 Selling, general and other expenses 343,648 11,662 37,651 5,339 — (78 ) 398,222 Interest expense — — 1,223 — 8,997 — 10,220 Depreciation and amortization 23,366 401 18,997 423 — — 43,187 Total non-compensation expenses 446,741 17,022 57,871 5,762 8,997 (78 ) 536,315 Total expenses 967,955 29,830 191,891 19,618 8,997 (78 ) 1,218,213 Income (loss) before income taxes and loss related to associated companies 166,777 (43,633 ) 205,956 (13,426 ) (8,997 ) — 306,677 Loss related to associated companies — — (4,827 ) — — — (4,827 ) Income (loss) before income taxes $ 166,777 $ (43,633 ) $ 201,129 $ (13,426 ) $ (8,997 ) $ — 301,850 Income tax provision 105,909 Net income $ 195,941 A summary of results for the three months ended August 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 $ 1,672,943 $ 13,327 $ 248,690 $ 955 $ — $ 3,069 $ 1,938,984 Expenses: Cost of sales — — 151,510 — — — 151,510 Compensation and benefits 762,725 15,468 17,584 6,466 — — 802,243 Non-compensation expenses: Floor brokerage and clearing fees 64,441 4,541 — — — — 68,982 Selling, general and other expenses 222,357 10,719 39,849 4,375 — (38 ) 277,262 Interest expense 4,982 — 762 — 13,774 — 19,518 Depreciation and amortization 21,065 494 16,554 564 — — 38,677 Total non-compensation expenses 312,845 15,754 57,165 4,939 13,774 (38 ) 404,439 Total expenses 1,075,570 31,222 226,259 11,405 13,774 (38 ) 1,358,192 Income (loss) before income taxes and loss related to associated companies 597,373 (17,895 ) 22,431 (10,450 ) (13,774 ) 3,107 580,792 Loss related to associated companies — — (27,176 ) — — — (27,176 ) Income (loss) before income taxes $ 597,373 $ (17,895 ) $ (4,745 ) $ (10,450 ) $ (13,774 ) $ 3,107 553,616 Income tax provision 145,700 Net income $ 407,916 (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 nine months ended August 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 $ 3,714,928 $ 77,300 $ 825,637 $ 8,756 $ — $ (734 ) $ 4,625,887 Expenses: Cost of sales — — 349,556 — — — 349,556 Compensation and benefits 1,768,350 43,560 89,226 25,487 — — 1,926,623 Non-compensation expenses: Floor brokerage and clearing fees 237,140 25,523 — — — — 262,663 Selling, general and other expenses 864,026 33,638 97,155 17,319 — (378 ) 1,011,760 Interest expense — — 2,846 — 25,773 — 28,619 Depreciation and amortization 69,687 1,230 57,248 1,266 — — 129,431 Total non-compensation expenses 1,170,853 60,391 157,249 18,585 25,773 (378 ) 1,432,473 Total expenses 2,939,203 103,951 596,031 44,072 25,773 (378 ) 3,708,652 Income (loss) before income taxes and loss related to associated companies 775,725 (26,651 ) 229,606 (35,316 ) (25,773 ) (356 ) 917,235 Loss related to associated companies — — (56,512 ) — — — (56,512 ) Income (loss) before income taxes $ 775,725 $ (26,651 ) $ 173,094 $ (35,316 ) $ (25,773 ) $ (356 ) 860,723 Income tax provision 219,949 Net income $ 640,774 A summary of results for the nine months ended August 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 $ 5,259,301 $ 293,204 $ 812,509 $ 2,269 $ — $ 9,150 $ 6,376,433 Expenses: Cost of sales — — 390,916 — — — 390,916 Compensation and benefits 2,650,704 59,924 66,365 29,035 — — 2,806,028 Non-compensation expenses: Floor brokerage and clearing fees 197,226 24,982 — — — — 222,208 Selling, general and other expenses 744,366 33,651 99,000 13,954 — (212 ) 890,759 Interest expense 15,806 — 2,517 — 41,505 — 59,828 Depreciation and amortization 62,580 1,462 50,536 2,306 — — 116,884 Total non-compensation expenses 1,019,978 60,095 152,053 16,260 41,505 (212 ) 1,289,679 Total expenses 3,670,682 120,019 609,334 45,295 41,505 (212 ) 4,486,623 Income (loss) before income taxes and loss related to associated companies 1,588,619 173,185 203,175 (43,026 ) (41,505 ) 9,362 1,889,810 Loss related to associated companies — — (61,270 ) — — — (61,270 ) Income (loss) before income taxes $ 1,588,619 $ 173,185 $ 141,905 $ (43,026 ) $ (41,505 ) $ 9,362 1,828,540 Income tax provision 484,756 Net income $ 1,343,784 (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 August 31, 2022 May 31, 2022 August 31 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 486,762 $ 371,760 $ 583,887 Equity underwriting 150,972 122,435 367,460 Debt underwriting 76,943 107,020 229,273 Total underwriting 227,915 229,455 596,733 Other investment banking (2) (32,877 ) 85,746 42,997 Total investment banking 681,800 686,961 1,223,617 Equities 277,448 254,807 236,532 Fixed income 174,618 161,478 205,795 Total capital markets 452,066 416,285 442,327 Other (2) 866 (4,868 ) 6,999 Total Investment Banking and Capital Markets Net Revenues (3) 1,134,732 1,098,378 1,672,943 Asset management fees and revenues (4) 17,069 14,116 18,869 Investment return (5) (19,671 ) 30,637 5,613 Allocated net interest (5) (11,201 ) (13,606 ) (11,155 ) Total Asset Management Net Revenues (13,803 ) 31,147 13,327 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 1,120,929 $ 1,129,525 $ 1,686,270 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 84,686 $ 94,016 $ 68,982 Underwriting costs 11,672 13,191 21,474 Technology and communications 108,256 108,630 93,808 Occupancy and equipment rental 24,944 24,561 24,961 Business development 36,658 47,880 24,380 Professional services 55,231 52,192 49,543 Depreciation and amortization 23,767 23,233 21,559 Other 118,549 43,110 23,892 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 463,763 $ 406,813 $ 328,599 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 534,022 $ 533,676 $ 778,193 Compensation and benefits expenses as a percentage of net revenues 47.6 % 47.2 % 46.1 % (Amounts in Thousands, Except Other Data) (Unaudited) Nine Months Ended May 31, 2022 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 1,402,291 $ 1,285,834 Equity underwriting 429,507 1,186,728 Debt underwriting 429,142 712,370 Total underwriting 858,649 1,899,098 Other investment banking (2) 111,003 208,480 Total investment banking 2,371,943 3,393,412 Equities 809,302 1,010,497 Fixed income 538,896 826,351 Total capital markets 1,348,198 1,836,848 Other (2) (5,213 ) 29,041 Total Investment Banking and Capital Markets Net Revenues (3) 3,714,928 5,259,301 Asset management fees and revenues (4) 75,687 107,668 Investment return (5) 40,496 218,529 Allocated net interest (5) (38,883 ) (32,993 ) Total Asset Management Net Revenues 77,300 293,204 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 3,792,228 $ 5,552,505 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 262,663 $ 222,208 Underwriting costs 32,991 90,641 Technology and communications 321,441 281,032 Occupancy and equipment rental 74,755 77,515 Business development 108,914 69,410 Professional services 158,541 142,419 Depreciation and amortization 70,917 64,042 Other 201,022 132,806 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 1,231,244 $ 1,080,073 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 1,811,910 $ 2,710,628 Compensation and benefits expenses as a percentage of net revenues 47.8 % 48.8 % (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended August 31, 2022 May 31, 2022 August 31 2021 (1) Other Data: Number of trading days 64 64 65 Number of trading loss days (6) 9 10 20 Average VaR (in millions) (7) $ 9.6 $ 11.84 $ 12.69 Nine Months Ended August 31, 2022 2021 (1) Other Data: Number of trading days 189 189 Number of trading loss days (6) 27 49 Average VaR (in millions) (7) $ 11.18 $ 14.79 (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 August 31, 2022 May 31, 2022 August 31 2021 (1) Financial position (1): Total assets $ 55,230 $ 57,214 $ 58,037 Total assets less goodwill and intangible assets for the period $ 53,355 $ 55,329 $ 56,132 Cash and cash equivalents $ 9,478 $ 8,523 $ 9,481 Financial instruments owned $ 20,249 $ 20,248 $ 19,735 Level 3 financial instruments owned (2) $ 764 $ 740 $ 671 Goodwill and intangible assets $ 1,874 $ 1,885 $ 1,905 Total equity $ 10,360 $ 10,368 $ 10,401 Total shareholders' equity $ 10,293 $ 10,300 $ 10,382 Tangible equity (3) $ 8,418 $ 8,415 $ 8,477 Other data and financial ratios: Leverage ratio (1) (4) 5.3 5.5 5.6 Tangible gross leverage ratio (1) (5) 6.3 6.6 6.6 Number of employees, at period end 5,347 5,619 5,493 (1) Amounts pertaining to August 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 nine months ended August 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. Components of Denominator for Earnings Per Share The denominators used to calculate basic and diluted earnings per share are as follows (in thousands): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Weighted average common shares outstanding 230,988 236,546 Weighted average shares of restricted stock with future service (710 ) (1,075 ) Weighted average restricted stock units outstanding with no future service 13,575 14,697 Denominator for basic earnings per share 243,853 250,168 Stock options and other share based awards 1,171 1,485 Senior executive compensation plan restricted stock unit awards 1,774 1,989 Mandatorily redeemable convertible preferred shares 4,441 4,441 Denominator for diluted earnings per share 251,239 258,083 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. Net Income Attributable to Common Shareholders and Earnings Per Share GAAP Reconciliation Reconciliation of Jefferies net income attributable to common shareholders to adjusted net income attributable to common shareholders and diluted earnings per share to adjusted diluted earnings per share (in thousands, except per share amounts): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Net income attributable to common shareholders (GAAP) $ 195,459 $ 636,920 Net income impact for regulatory settlement 80,000 80,000 Adjusted net income attributable to common shareholders (non-GAAP) $ 275,459 $ 716,920 Jefferies Financial Group diluted earnings per share (GAAP) $ 0.78 $ 2.48 Diluted earnings per share impact for regulatory settlement 0.32 0.31 Adjusted Jefferies Financial Group diluted earnings per share (non-GAAP) $ 1.10 $ 2.79 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 August 31, Nine Months Ended August 31, 2022 2021 2022 2021 Net income attributable to common shareholders (GAAP) $ 195,459 $ 407,459 $ 636,920 $ 1,342,490 Intangible amortization and impairment expense, net of tax 1,638 2,618 6,350 7,869 Adjusted net income (non-GAAP) $ 197,097 $ 410,077 $ 643,270 $ 1,350,359 Annualized adjusted net income (non-GAAP) $ 788,388 $ 1,640,308 $ 857,693 $ 1,800,479 May 31, November 30, 2022 2021 2021 2020 Shareholders' equity (GAAP) $ 10,300,177 $ 10,072,634 $ 10,553,755 $ 9,403,893 Less: Intangible assets, net and goodwill (1,885,043 ) (1,912,480 ) (1,897,500 ) (1,913,467 ) Less: Deferred tax asset (401,268 ) (452,467 ) (327,547 ) (393,687 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (93,106 ) (56,862 ) (539,674 ) (189,771 ) Adjusted tangible shareholders' equity (non-GAAP) $ 7,920,760 $ 7,650,825 $ 7,789,034 $ 6,906,968 Return on adjusted tangible equity 10.0 % 21.4 % 11.0 % 26.1 % Adjusted Return on Adjusted Tangible Equity Reconciliation The table below reconciles our Net income attributable to common shareholders to adjusted net income excluding regulatory settlement expense and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Net income attributable to common shareholders (GAAP) $ 195,459 $ 636,920 Intangible amortization and impairment expense, net of tax 1,638 6,350 Net income impact for regulatory settlement 80,000 80,000 Adjusted net income excluding regulatory settlement (non-GAAP) $ 277,097 $ 723,270 Annualized adjusted net income excluding regulatory settlement (non-GAAP) $ 1,108,388 $ 964,360 May 31, 2022 November 30, 2021 Shareholders' equity (GAAP) $ 10,300,177 $ 10,553,755 Less: Intangible assets, net and goodwill (1,885,043 ) (1,897,500 ) Less: Deferred tax asset (401,268 ) (327,547 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (93,106 ) (539,674 ) Adjusted tangible shareholders' equity (non-GAAP) $ 7,920,760 $ 7,789,034 Adjusted return on adjusted tangible equity 14.0 % 12.4 % Jefferies Shareholders' Equity GAAP Reconciliation At the beginning of the press release, we disclose how much we have returned to shareholders through buybacks and dividends since the beginning of 2018 and what percentage that is of shareholders' equity and tangible shareholders' equity at the beginning of 2018. The table below reconciles our shareholders' equity to tangible shareholders' equity at the beginning of 2018 (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): August 31, 2022 Book value (GAAP) $ 10,292,531 Redeemable convertible preferred shares convertible to common shares (1) 125,000 Stock options (2) 119,384 Intangible assets, net and goodwill (1,874,435 ) Adjusted tangible book value (non-GAAP) $ 8,662,480 Common shares outstanding (GAAP) 228,807 Restricted stock units ("RSUs") 16,792 Redeemable convertible preferred shares converted to common shares (1) 4,441 Stock options (2) 5,027 Other 1,155 Fully diluted shares outstanding (non-GAAP) (3) 256,222 Book value per share outstanding $ 44.98 Tangible book value per fully diluted share outstanding $ 33.81 (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 August 31, 2022 of 5,026,532 multiplied by the weighted average exercise price of $23.75 on August 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on August 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. Effective Tax Rate GAAP Reconciliation The table below reconciles our effective tax rate to adjusted effective tax rate: Three Months Ended August 31, 2022 Effective tax rate (GAAP) 35.1% Effective tax rate impact for regulatory settlement (7.4) % Adjusted effective tax rate (non-GAAP) 27.7% View source version on businesswire.com: https://www.businesswire.com/news/home/20220928005883/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 Third Quarter 2022 Financial Results By: Care of Jefferies Financial Group Inc. and Jefferies Group LLC via Business Wire September 28, 2022 at 16:15 PM EDT Q3 Financial Highlights Net income attributable to common shareholders of $195 million, or $0.78 per diluted share; adjusted net income attributable to common shareholders1 of $275 million, or $1.10 per diluted share, after removing $80 million of expense related to a regulatory settlement in the quarter Annualized return on adjusted tangible equity of 10.0%2; adjusted annualized return on adjusted tangible equity of 14.0%3 Total Investment Banking and Capital Markets and Asset Management net revenues of $1.12 billion Investment Banking net revenues of $682 million Combined Capital Markets net revenues of $452 million Asset Management net loss (before allocated net interest4) of $3 million Pre-tax gain on sale of Idaho Timber of $139 million Repurchased 4.3 million shares of common stock for $134.1 million, or an average price of $31.39 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022; at August 31, 2022, we had 228.8 million shares outstanding and 256.2 million shares outstanding on a fully diluted basis5; our book value per share was $44.98 and tangible book value per fully diluted share6 was $33.81 Since January 2018, Jefferies has repurchased 149.6 million shares of common stock7 for $3.5 billion, or an average price of $23.39 per share; Jefferies has returned to shareholders $4.8 billion since January 2018, or 48% of shareholders' equity and 63% of tangible shareholders' equity8 at the beginning of this effort Our Board of Directors has increased our share buyback authorization back to a total of $250 million "Our third quarter results reflect the strength and momentum of our Firm, our team, our brand and our market position, despite the challenges of the current market environment. Investment Banking and Equities were very resilient, and we expect we have gained market share in those areas as we continue to support our clients through this volatile time. Moreover, we achieved solid Investment Banking and Capital Markets and Asset Management net revenues of over $1.12 billion despite unrealized markdowns in our mortgage inventory and leveraged finance commitments as the current environment has particularly impacted those asset classes. Our 14.0% adjusted annualized return on adjusted tangible equity3 is respectable and was achieved despite the significant dislocation in the new issue capital markets for much of this period. "We are working very closely with our clients, so that we are able to support them further when economic and market conditions improve, and new issue activity opens up. Our backlog9 is consistent with last quarter's levels, but realization remains dependent on market conditions. "2022 is feeling like a transitional year in our business, but one in which we are making good progress in enhancing our market share. We continue to invest toward further growth, most notably in Investment Banking, guard our balance sheet and capital against the risk of the increased volatility, and prioritize our clients and our Jefferies' team. We believe this will yield a solid result for 2022, and set the stage for continued growth and success in 2023 and beyond." Richard Handler, CEO, and Brian Friedman, President Quarterly Cash Dividend The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on November 29, 2022 to record holders of Jefferies common shares on November 14, 2022. We continue to work diligently to effect the spin-off to shareholders of our holdings in Vitesse Energy by the end of our fiscal year, subject to necessary regulatory reviews and rulings. Financial Summary (Dollars in thousands, except per share amounts) Three Months Ended August 31, Nine Months Ended August 31, 2022 2021 (10) % Change 2022 2021 (10) % Change Net revenues: Investment Banking and Capital Markets $ 1,134,732 $ 1,672,943 (32)% $ 3,714,928 $ 5,259,301 (29)% Asset Management (13,803 ) 13,327 (204)% 77,300 293,204 (74)% Merchant Banking 397,847 248,690 60% 825,637 812,509 2% Corporate 6,192 955 548% 8,756 2,269 286% Consolidation Adjustments (78 ) 3,069 (103)% (734 ) 9,150 (108)% Net revenues $ 1,524,890 $ 1,938,984 (21)% $ 4,625,887 $ 6,376,433 (27)% Income before income taxes $ 301,850 $ 553,616 (45)% $ 860,723 $ 1,828,540 (53)% Net income attributable to common shareholders $ 195,459 $ 407,459 (52)% $ 636,920 $ 1,342,490 (53)% Diluted earnings per share $ 0.78 $ 1.50 (48)% $ 2.48 $ 4.93 (50)% Weighted average diluted shares 251,239 271,405 258,083 271,746 Annualized return on adjusted tangible equity2 10.0 % 21.4 % 11.0 % 26.1 % Adjusted annualized return on adjusted tangible equity3 14.0 % N/A 12.4 % N/A Highlights Three months ended August 31, 2022 Nine months ended August 31, 2022 Net income attributable to common shareholders of $195 million, or $0.78 per diluted share; adjusted net income attributable to common shareholders1 of $275 million, or $1.10 per diluted share, after removing $80 million of expense related to a regulatory settlement in the quarter. Repurchased 4.3 million shares of common stock for $134.1 million, or an average price of $31.39 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022. We had 228.8 million shares outstanding and 256.2 million shares outstanding on a fully diluted basis5 at August 31, 2022. Our book value per share was $44.98 and tangible book value per fully diluted share6 was $33.81 at August 31, 2022. Our Board of Directors has increased our share buyback authorization back to a total of $250 million. Effective tax rate of 35.1%, reflecting non-deductible $80 million regulatory settlement in the current quarter; adjusted effective tax rate11 of 27.7% without the cost of this settlement. Net income attributable to common shareholders of $637 million, or $2.48 per diluted share; adjusted net income attributable to common shareholders1 of $717 million, or $2.79 per diluted share, after removing $80 million of expense related to a regulatory settlement in the third quarter. Repurchased 22.3 million shares of common stock for $756.3 million, or an average price of $33.88 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022; repurchases include 18.9 million shares of common stock in the open market for $634.0 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 August 31, 2022 Nine months ended August 31, 2022 Investment Banking and Capital Markets Investment Banking and Capital Markets Investment Banking net revenues were $682 million, as our mergers and acquisitions net revenues remained strong. Our debt and equity underwriting net revenues were lower than the same quarter last year, consistent with a reduction in industry-wide deal activity. Combined Capital Markets net revenues of $452 million were slightly higher as compared to the prior year quarter. Equities net revenues benefited from higher commissions and trading revenues, as our business continues to expand within the context of a more normalized trading environment. Fixed Income net revenues reflect mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity as a result of continued uncertainty in respect of inflation and interest rates. Investment Banking net revenues of $2.37 billion were driven by record advisory net revenues, offset by lower net revenues in debt and equity underwriting. Combined Capital Markets net revenues of $1.35 billion were lower as compared to prior year period. Equities net revenues were impacted by market volatility and global instability, primarily in the first six months of the year. Fixed Income results were impacted by lower trading volumes, mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity in the face of inflation concerns and interest rate uncertainty. Asset Management Asset Management Asset Management net revenues reflect an increase in underlying fee revenue, offset by modest investment losses reflective of the difficult trading environment as compared to the profit realized in 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 the $139 million pre-tax gain on the sale of Idaho Timber and strong results at Vitesse, partially offset by a decline in the value of several of our investments in public companies. We continue to work toward the liquidation of our Merchant Banking portfolio. Merchant Banking results reflect strong results at Idaho Timber and Vitesse, as well as the gain on the sale of Idaho Timber, partially offset by a decline in the value of several of our investments in public companies. * * * * Amounts herein pertaining to August 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 nine months ended August 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 October 7, 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 Adjusted net income attributable to common shareholders (a non-GAAP financial measure) excludes the $80 million expense ($80 million, net of tax) related to a regulatory settlement in the current quarter. Refer to schedule on page 12 for reconciliation to U.S. GAAP amounts. 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. Adjusted return on adjusted tangible equity (a non-GAAP financial measure) is defined as Jefferies' annualized adjusted net income excluding the net income impact of the $80 million of expense ($80 million, net of tax) related to a regulatory settlement in the current quarter (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 13 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 14 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 14 for reconciliation to U.S. GAAP amounts. The 149.6 million common shares repurchased since January 2018 includes 145.5 million shares of common stock repurchased in the open market for $3.4 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 13 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. Adjusted effective tax rate (a non-GAAP financial measure) excludes the $80 million expense related to a regulatory settlement in the current quarter. Refer to schedule on page 14 for reconciliation to U.S. GAAP amounts. Summary (In thousands, except per share amounts) (Unaudited) Three Months Ended August 31, Nine Months Ended August 31, 2022 2021 2022 2021 Net revenues $ 1,524,890 $ 1,938,984 $ 4,625,887 $ 6,376,433 Income before income taxes and loss related to associated companies $ 306,677 $ 580,792 $ 917,235 $ 1,889,810 Loss related to associated companies (4,827 ) (27,176 ) (56,512 ) (61,270 ) Income before income taxes 301,850 553,616 860,723 1,828,540 Income tax provision 105,909 145,700 219,949 484,756 Net income 195,941 407,916 640,774 1,343,784 Net loss attributable to the noncontrolling interests 1,243 1,324 1,116 2,736 Net loss attributable to the redeemable noncontrolling interests 345 68 1,241 1,071 Preferred stock dividends (2,070 ) (1,849 ) (6,211 ) (5,101 ) Net income attributable to common shareholders $ 195,459 $ 407,459 $ 636,920 $ 1,342,490 Basic earnings per common share attributable to Jefferies common shareholders: Net income $ 0.80 $ 1.54 $ 2.54 $ 5.05 Basic: weighted average shares 243,853 263,087 250,168 264,248 Diluted earnings per common share attributable to Jefferies common shareholders: Net income $ 0.78 $ 1.50 $ 2.48 $ 4.93 Diluted: weighted average shares 251,239 271,405 258,083 271,746 A summary of results for the three months ended August 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 $ 1,134,732 $ (13,803 ) $ 397,847 $ 6,192 $ — $ (78 ) $ 1,524,890 Expenses: Cost of sales — — 123,436 — — — 123,436 Compensation and benefits 521,214 12,808 10,584 13,856 — — 558,462 Non-compensation expenses: Floor brokerage and clearing fees 79,727 4,959 — — — — 84,686 Selling, general and other expenses 343,648 11,662 37,651 5,339 — (78 ) 398,222 Interest expense — — 1,223 — 8,997 — 10,220 Depreciation and amortization 23,366 401 18,997 423 — — 43,187 Total non-compensation expenses 446,741 17,022 57,871 5,762 8,997 (78 ) 536,315 Total expenses 967,955 29,830 191,891 19,618 8,997 (78 ) 1,218,213 Income (loss) before income taxes and loss related to associated companies 166,777 (43,633 ) 205,956 (13,426 ) (8,997 ) — 306,677 Loss related to associated companies — — (4,827 ) — — — (4,827 ) Income (loss) before income taxes $ 166,777 $ (43,633 ) $ 201,129 $ (13,426 ) $ (8,997 ) $ — 301,850 Income tax provision 105,909 Net income $ 195,941 A summary of results for the three months ended August 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 $ 1,672,943 $ 13,327 $ 248,690 $ 955 $ — $ 3,069 $ 1,938,984 Expenses: Cost of sales — — 151,510 — — — 151,510 Compensation and benefits 762,725 15,468 17,584 6,466 — — 802,243 Non-compensation expenses: Floor brokerage and clearing fees 64,441 4,541 — — — — 68,982 Selling, general and other expenses 222,357 10,719 39,849 4,375 — (38 ) 277,262 Interest expense 4,982 — 762 — 13,774 — 19,518 Depreciation and amortization 21,065 494 16,554 564 — — 38,677 Total non-compensation expenses 312,845 15,754 57,165 4,939 13,774 (38 ) 404,439 Total expenses 1,075,570 31,222 226,259 11,405 13,774 (38 ) 1,358,192 Income (loss) before income taxes and loss related to associated companies 597,373 (17,895 ) 22,431 (10,450 ) (13,774 ) 3,107 580,792 Loss related to associated companies — — (27,176 ) — — — (27,176 ) Income (loss) before income taxes $ 597,373 $ (17,895 ) $ (4,745 ) $ (10,450 ) $ (13,774 ) $ 3,107 553,616 Income tax provision 145,700 Net income $ 407,916 (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 nine months ended August 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 $ 3,714,928 $ 77,300 $ 825,637 $ 8,756 $ — $ (734 ) $ 4,625,887 Expenses: Cost of sales — — 349,556 — — — 349,556 Compensation and benefits 1,768,350 43,560 89,226 25,487 — — 1,926,623 Non-compensation expenses: Floor brokerage and clearing fees 237,140 25,523 — — — — 262,663 Selling, general and other expenses 864,026 33,638 97,155 17,319 — (378 ) 1,011,760 Interest expense — — 2,846 — 25,773 — 28,619 Depreciation and amortization 69,687 1,230 57,248 1,266 — — 129,431 Total non-compensation expenses 1,170,853 60,391 157,249 18,585 25,773 (378 ) 1,432,473 Total expenses 2,939,203 103,951 596,031 44,072 25,773 (378 ) 3,708,652 Income (loss) before income taxes and loss related to associated companies 775,725 (26,651 ) 229,606 (35,316 ) (25,773 ) (356 ) 917,235 Loss related to associated companies — — (56,512 ) — — — (56,512 ) Income (loss) before income taxes $ 775,725 $ (26,651 ) $ 173,094 $ (35,316 ) $ (25,773 ) $ (356 ) 860,723 Income tax provision 219,949 Net income $ 640,774 A summary of results for the nine months ended August 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 $ 5,259,301 $ 293,204 $ 812,509 $ 2,269 $ — $ 9,150 $ 6,376,433 Expenses: Cost of sales — — 390,916 — — — 390,916 Compensation and benefits 2,650,704 59,924 66,365 29,035 — — 2,806,028 Non-compensation expenses: Floor brokerage and clearing fees 197,226 24,982 — — — — 222,208 Selling, general and other expenses 744,366 33,651 99,000 13,954 — (212 ) 890,759 Interest expense 15,806 — 2,517 — 41,505 — 59,828 Depreciation and amortization 62,580 1,462 50,536 2,306 — — 116,884 Total non-compensation expenses 1,019,978 60,095 152,053 16,260 41,505 (212 ) 1,289,679 Total expenses 3,670,682 120,019 609,334 45,295 41,505 (212 ) 4,486,623 Income (loss) before income taxes and loss related to associated companies 1,588,619 173,185 203,175 (43,026 ) (41,505 ) 9,362 1,889,810 Loss related to associated companies — — (61,270 ) — — — (61,270 ) Income (loss) before income taxes $ 1,588,619 $ 173,185 $ 141,905 $ (43,026 ) $ (41,505 ) $ 9,362 1,828,540 Income tax provision 484,756 Net income $ 1,343,784 (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 August 31, 2022 May 31, 2022 August 31 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 486,762 $ 371,760 $ 583,887 Equity underwriting 150,972 122,435 367,460 Debt underwriting 76,943 107,020 229,273 Total underwriting 227,915 229,455 596,733 Other investment banking (2) (32,877 ) 85,746 42,997 Total investment banking 681,800 686,961 1,223,617 Equities 277,448 254,807 236,532 Fixed income 174,618 161,478 205,795 Total capital markets 452,066 416,285 442,327 Other (2) 866 (4,868 ) 6,999 Total Investment Banking and Capital Markets Net Revenues (3) 1,134,732 1,098,378 1,672,943 Asset management fees and revenues (4) 17,069 14,116 18,869 Investment return (5) (19,671 ) 30,637 5,613 Allocated net interest (5) (11,201 ) (13,606 ) (11,155 ) Total Asset Management Net Revenues (13,803 ) 31,147 13,327 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 1,120,929 $ 1,129,525 $ 1,686,270 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 84,686 $ 94,016 $ 68,982 Underwriting costs 11,672 13,191 21,474 Technology and communications 108,256 108,630 93,808 Occupancy and equipment rental 24,944 24,561 24,961 Business development 36,658 47,880 24,380 Professional services 55,231 52,192 49,543 Depreciation and amortization 23,767 23,233 21,559 Other 118,549 43,110 23,892 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 463,763 $ 406,813 $ 328,599 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 534,022 $ 533,676 $ 778,193 Compensation and benefits expenses as a percentage of net revenues 47.6 % 47.2 % 46.1 % (Amounts in Thousands, Except Other Data) (Unaudited) Nine Months Ended May 31, 2022 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 1,402,291 $ 1,285,834 Equity underwriting 429,507 1,186,728 Debt underwriting 429,142 712,370 Total underwriting 858,649 1,899,098 Other investment banking (2) 111,003 208,480 Total investment banking 2,371,943 3,393,412 Equities 809,302 1,010,497 Fixed income 538,896 826,351 Total capital markets 1,348,198 1,836,848 Other (2) (5,213 ) 29,041 Total Investment Banking and Capital Markets Net Revenues (3) 3,714,928 5,259,301 Asset management fees and revenues (4) 75,687 107,668 Investment return (5) 40,496 218,529 Allocated net interest (5) (38,883 ) (32,993 ) Total Asset Management Net Revenues 77,300 293,204 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 3,792,228 $ 5,552,505 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 262,663 $ 222,208 Underwriting costs 32,991 90,641 Technology and communications 321,441 281,032 Occupancy and equipment rental 74,755 77,515 Business development 108,914 69,410 Professional services 158,541 142,419 Depreciation and amortization 70,917 64,042 Other 201,022 132,806 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 1,231,244 $ 1,080,073 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 1,811,910 $ 2,710,628 Compensation and benefits expenses as a percentage of net revenues 47.8 % 48.8 % (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended August 31, 2022 May 31, 2022 August 31 2021 (1) Other Data: Number of trading days 64 64 65 Number of trading loss days (6) 9 10 20 Average VaR (in millions) (7) $ 9.6 $ 11.84 $ 12.69 Nine Months Ended August 31, 2022 2021 (1) Other Data: Number of trading days 189 189 Number of trading loss days (6) 27 49 Average VaR (in millions) (7) $ 11.18 $ 14.79 (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 August 31, 2022 May 31, 2022 August 31 2021 (1) Financial position (1): Total assets $ 55,230 $ 57,214 $ 58,037 Total assets less goodwill and intangible assets for the period $ 53,355 $ 55,329 $ 56,132 Cash and cash equivalents $ 9,478 $ 8,523 $ 9,481 Financial instruments owned $ 20,249 $ 20,248 $ 19,735 Level 3 financial instruments owned (2) $ 764 $ 740 $ 671 Goodwill and intangible assets $ 1,874 $ 1,885 $ 1,905 Total equity $ 10,360 $ 10,368 $ 10,401 Total shareholders' equity $ 10,293 $ 10,300 $ 10,382 Tangible equity (3) $ 8,418 $ 8,415 $ 8,477 Other data and financial ratios: Leverage ratio (1) (4) 5.3 5.5 5.6 Tangible gross leverage ratio (1) (5) 6.3 6.6 6.6 Number of employees, at period end 5,347 5,619 5,493 (1) Amounts pertaining to August 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 nine months ended August 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. Components of Denominator for Earnings Per Share The denominators used to calculate basic and diluted earnings per share are as follows (in thousands): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Weighted average common shares outstanding 230,988 236,546 Weighted average shares of restricted stock with future service (710 ) (1,075 ) Weighted average restricted stock units outstanding with no future service 13,575 14,697 Denominator for basic earnings per share 243,853 250,168 Stock options and other share based awards 1,171 1,485 Senior executive compensation plan restricted stock unit awards 1,774 1,989 Mandatorily redeemable convertible preferred shares 4,441 4,441 Denominator for diluted earnings per share 251,239 258,083 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. Net Income Attributable to Common Shareholders and Earnings Per Share GAAP Reconciliation Reconciliation of Jefferies net income attributable to common shareholders to adjusted net income attributable to common shareholders and diluted earnings per share to adjusted diluted earnings per share (in thousands, except per share amounts): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Net income attributable to common shareholders (GAAP) $ 195,459 $ 636,920 Net income impact for regulatory settlement 80,000 80,000 Adjusted net income attributable to common shareholders (non-GAAP) $ 275,459 $ 716,920 Jefferies Financial Group diluted earnings per share (GAAP) $ 0.78 $ 2.48 Diluted earnings per share impact for regulatory settlement 0.32 0.31 Adjusted Jefferies Financial Group diluted earnings per share (non-GAAP) $ 1.10 $ 2.79 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 August 31, Nine Months Ended August 31, 2022 2021 2022 2021 Net income attributable to common shareholders (GAAP) $ 195,459 $ 407,459 $ 636,920 $ 1,342,490 Intangible amortization and impairment expense, net of tax 1,638 2,618 6,350 7,869 Adjusted net income (non-GAAP) $ 197,097 $ 410,077 $ 643,270 $ 1,350,359 Annualized adjusted net income (non-GAAP) $ 788,388 $ 1,640,308 $ 857,693 $ 1,800,479 May 31, November 30, 2022 2021 2021 2020 Shareholders' equity (GAAP) $ 10,300,177 $ 10,072,634 $ 10,553,755 $ 9,403,893 Less: Intangible assets, net and goodwill (1,885,043 ) (1,912,480 ) (1,897,500 ) (1,913,467 ) Less: Deferred tax asset (401,268 ) (452,467 ) (327,547 ) (393,687 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (93,106 ) (56,862 ) (539,674 ) (189,771 ) Adjusted tangible shareholders' equity (non-GAAP) $ 7,920,760 $ 7,650,825 $ 7,789,034 $ 6,906,968 Return on adjusted tangible equity 10.0 % 21.4 % 11.0 % 26.1 % Adjusted Return on Adjusted Tangible Equity Reconciliation The table below reconciles our Net income attributable to common shareholders to adjusted net income excluding regulatory settlement expense and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Net income attributable to common shareholders (GAAP) $ 195,459 $ 636,920 Intangible amortization and impairment expense, net of tax 1,638 6,350 Net income impact for regulatory settlement 80,000 80,000 Adjusted net income excluding regulatory settlement (non-GAAP) $ 277,097 $ 723,270 Annualized adjusted net income excluding regulatory settlement (non-GAAP) $ 1,108,388 $ 964,360 May 31, 2022 November 30, 2021 Shareholders' equity (GAAP) $ 10,300,177 $ 10,553,755 Less: Intangible assets, net and goodwill (1,885,043 ) (1,897,500 ) Less: Deferred tax asset (401,268 ) (327,547 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (93,106 ) (539,674 ) Adjusted tangible shareholders' equity (non-GAAP) $ 7,920,760 $ 7,789,034 Adjusted return on adjusted tangible equity 14.0 % 12.4 % Jefferies Shareholders' Equity GAAP Reconciliation At the beginning of the press release, we disclose how much we have returned to shareholders through buybacks and dividends since the beginning of 2018 and what percentage that is of shareholders' equity and tangible shareholders' equity at the beginning of 2018. The table below reconciles our shareholders' equity to tangible shareholders' equity at the beginning of 2018 (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): August 31, 2022 Book value (GAAP) $ 10,292,531 Redeemable convertible preferred shares convertible to common shares (1) 125,000 Stock options (2) 119,384 Intangible assets, net and goodwill (1,874,435 ) Adjusted tangible book value (non-GAAP) $ 8,662,480 Common shares outstanding (GAAP) 228,807 Restricted stock units ("RSUs") 16,792 Redeemable convertible preferred shares converted to common shares (1) 4,441 Stock options (2) 5,027 Other 1,155 Fully diluted shares outstanding (non-GAAP) (3) 256,222 Book value per share outstanding $ 44.98 Tangible book value per fully diluted share outstanding $ 33.81 (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 August 31, 2022 of 5,026,532 multiplied by the weighted average exercise price of $23.75 on August 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on August 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. Effective Tax Rate GAAP Reconciliation The table below reconciles our effective tax rate to adjusted effective tax rate: Three Months Ended August 31, 2022 Effective tax rate (GAAP) 35.1% Effective tax rate impact for regulatory settlement (7.4) % Adjusted effective tax rate (non-GAAP) 27.7% View source version on businesswire.com: https://www.businesswire.com/news/home/20220928005883/en/Contacts Jonathan Freedman 212.778.8913
Q3 Financial Highlights Net income attributable to common shareholders of $195 million, or $0.78 per diluted share; adjusted net income attributable to common shareholders1 of $275 million, or $1.10 per diluted share, after removing $80 million of expense related to a regulatory settlement in the quarter Annualized return on adjusted tangible equity of 10.0%2; adjusted annualized return on adjusted tangible equity of 14.0%3 Total Investment Banking and Capital Markets and Asset Management net revenues of $1.12 billion Investment Banking net revenues of $682 million Combined Capital Markets net revenues of $452 million Asset Management net loss (before allocated net interest4) of $3 million Pre-tax gain on sale of Idaho Timber of $139 million Repurchased 4.3 million shares of common stock for $134.1 million, or an average price of $31.39 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022; at August 31, 2022, we had 228.8 million shares outstanding and 256.2 million shares outstanding on a fully diluted basis5; our book value per share was $44.98 and tangible book value per fully diluted share6 was $33.81 Since January 2018, Jefferies has repurchased 149.6 million shares of common stock7 for $3.5 billion, or an average price of $23.39 per share; Jefferies has returned to shareholders $4.8 billion since January 2018, or 48% of shareholders' equity and 63% of tangible shareholders' equity8 at the beginning of this effort Our Board of Directors has increased our share buyback authorization back to a total of $250 million "Our third quarter results reflect the strength and momentum of our Firm, our team, our brand and our market position, despite the challenges of the current market environment. Investment Banking and Equities were very resilient, and we expect we have gained market share in those areas as we continue to support our clients through this volatile time. Moreover, we achieved solid Investment Banking and Capital Markets and Asset Management net revenues of over $1.12 billion despite unrealized markdowns in our mortgage inventory and leveraged finance commitments as the current environment has particularly impacted those asset classes. Our 14.0% adjusted annualized return on adjusted tangible equity3 is respectable and was achieved despite the significant dislocation in the new issue capital markets for much of this period. "We are working very closely with our clients, so that we are able to support them further when economic and market conditions improve, and new issue activity opens up. Our backlog9 is consistent with last quarter's levels, but realization remains dependent on market conditions. "2022 is feeling like a transitional year in our business, but one in which we are making good progress in enhancing our market share. We continue to invest toward further growth, most notably in Investment Banking, guard our balance sheet and capital against the risk of the increased volatility, and prioritize our clients and our Jefferies' team. We believe this will yield a solid result for 2022, and set the stage for continued growth and success in 2023 and beyond." Richard Handler, CEO, and Brian Friedman, President Quarterly Cash Dividend The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on November 29, 2022 to record holders of Jefferies common shares on November 14, 2022. We continue to work diligently to effect the spin-off to shareholders of our holdings in Vitesse Energy by the end of our fiscal year, subject to necessary regulatory reviews and rulings. Financial Summary (Dollars in thousands, except per share amounts) Three Months Ended August 31, Nine Months Ended August 31, 2022 2021 (10) % Change 2022 2021 (10) % Change Net revenues: Investment Banking and Capital Markets $ 1,134,732 $ 1,672,943 (32)% $ 3,714,928 $ 5,259,301 (29)% Asset Management (13,803 ) 13,327 (204)% 77,300 293,204 (74)% Merchant Banking 397,847 248,690 60% 825,637 812,509 2% Corporate 6,192 955 548% 8,756 2,269 286% Consolidation Adjustments (78 ) 3,069 (103)% (734 ) 9,150 (108)% Net revenues $ 1,524,890 $ 1,938,984 (21)% $ 4,625,887 $ 6,376,433 (27)% Income before income taxes $ 301,850 $ 553,616 (45)% $ 860,723 $ 1,828,540 (53)% Net income attributable to common shareholders $ 195,459 $ 407,459 (52)% $ 636,920 $ 1,342,490 (53)% Diluted earnings per share $ 0.78 $ 1.50 (48)% $ 2.48 $ 4.93 (50)% Weighted average diluted shares 251,239 271,405 258,083 271,746 Annualized return on adjusted tangible equity2 10.0 % 21.4 % 11.0 % 26.1 % Adjusted annualized return on adjusted tangible equity3 14.0 % N/A 12.4 % N/A Highlights Three months ended August 31, 2022 Nine months ended August 31, 2022 Net income attributable to common shareholders of $195 million, or $0.78 per diluted share; adjusted net income attributable to common shareholders1 of $275 million, or $1.10 per diluted share, after removing $80 million of expense related to a regulatory settlement in the quarter. Repurchased 4.3 million shares of common stock for $134.1 million, or an average price of $31.39 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022. We had 228.8 million shares outstanding and 256.2 million shares outstanding on a fully diluted basis5 at August 31, 2022. Our book value per share was $44.98 and tangible book value per fully diluted share6 was $33.81 at August 31, 2022. Our Board of Directors has increased our share buyback authorization back to a total of $250 million. Effective tax rate of 35.1%, reflecting non-deductible $80 million regulatory settlement in the current quarter; adjusted effective tax rate11 of 27.7% without the cost of this settlement. Net income attributable to common shareholders of $637 million, or $2.48 per diluted share; adjusted net income attributable to common shareholders1 of $717 million, or $2.79 per diluted share, after removing $80 million of expense related to a regulatory settlement in the third quarter. Repurchased 22.3 million shares of common stock for $756.3 million, or an average price of $33.88 per share, including 0.6 million shares repurchased after quarter end through September 27, 2022; repurchases include 18.9 million shares of common stock in the open market for $634.0 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 August 31, 2022 Nine months ended August 31, 2022 Investment Banking and Capital Markets Investment Banking and Capital Markets Investment Banking net revenues were $682 million, as our mergers and acquisitions net revenues remained strong. Our debt and equity underwriting net revenues were lower than the same quarter last year, consistent with a reduction in industry-wide deal activity. Combined Capital Markets net revenues of $452 million were slightly higher as compared to the prior year quarter. Equities net revenues benefited from higher commissions and trading revenues, as our business continues to expand within the context of a more normalized trading environment. Fixed Income net revenues reflect mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity as a result of continued uncertainty in respect of inflation and interest rates. Investment Banking net revenues of $2.37 billion were driven by record advisory net revenues, offset by lower net revenues in debt and equity underwriting. Combined Capital Markets net revenues of $1.35 billion were lower as compared to prior year period. Equities net revenues were impacted by market volatility and global instability, primarily in the first six months of the year. Fixed Income results were impacted by lower trading volumes, mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity in the face of inflation concerns and interest rate uncertainty. Asset Management Asset Management Asset Management net revenues reflect an increase in underlying fee revenue, offset by modest investment losses reflective of the difficult trading environment as compared to the profit realized in 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 the $139 million pre-tax gain on the sale of Idaho Timber and strong results at Vitesse, partially offset by a decline in the value of several of our investments in public companies. We continue to work toward the liquidation of our Merchant Banking portfolio. Merchant Banking results reflect strong results at Idaho Timber and Vitesse, as well as the gain on the sale of Idaho Timber, partially offset by a decline in the value of several of our investments in public companies. * * * * Amounts herein pertaining to August 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 nine months ended August 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 October 7, 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 Adjusted net income attributable to common shareholders (a non-GAAP financial measure) excludes the $80 million expense ($80 million, net of tax) related to a regulatory settlement in the current quarter. Refer to schedule on page 12 for reconciliation to U.S. GAAP amounts. 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. Adjusted return on adjusted tangible equity (a non-GAAP financial measure) is defined as Jefferies' annualized adjusted net income excluding the net income impact of the $80 million of expense ($80 million, net of tax) related to a regulatory settlement in the current quarter (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 13 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 14 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 14 for reconciliation to U.S. GAAP amounts. The 149.6 million common shares repurchased since January 2018 includes 145.5 million shares of common stock repurchased in the open market for $3.4 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 13 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. Adjusted effective tax rate (a non-GAAP financial measure) excludes the $80 million expense related to a regulatory settlement in the current quarter. Refer to schedule on page 14 for reconciliation to U.S. GAAP amounts. Summary (In thousands, except per share amounts) (Unaudited) Three Months Ended August 31, Nine Months Ended August 31, 2022 2021 2022 2021 Net revenues $ 1,524,890 $ 1,938,984 $ 4,625,887 $ 6,376,433 Income before income taxes and loss related to associated companies $ 306,677 $ 580,792 $ 917,235 $ 1,889,810 Loss related to associated companies (4,827 ) (27,176 ) (56,512 ) (61,270 ) Income before income taxes 301,850 553,616 860,723 1,828,540 Income tax provision 105,909 145,700 219,949 484,756 Net income 195,941 407,916 640,774 1,343,784 Net loss attributable to the noncontrolling interests 1,243 1,324 1,116 2,736 Net loss attributable to the redeemable noncontrolling interests 345 68 1,241 1,071 Preferred stock dividends (2,070 ) (1,849 ) (6,211 ) (5,101 ) Net income attributable to common shareholders $ 195,459 $ 407,459 $ 636,920 $ 1,342,490 Basic earnings per common share attributable to Jefferies common shareholders: Net income $ 0.80 $ 1.54 $ 2.54 $ 5.05 Basic: weighted average shares 243,853 263,087 250,168 264,248 Diluted earnings per common share attributable to Jefferies common shareholders: Net income $ 0.78 $ 1.50 $ 2.48 $ 4.93 Diluted: weighted average shares 251,239 271,405 258,083 271,746 A summary of results for the three months ended August 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 $ 1,134,732 $ (13,803 ) $ 397,847 $ 6,192 $ — $ (78 ) $ 1,524,890 Expenses: Cost of sales — — 123,436 — — — 123,436 Compensation and benefits 521,214 12,808 10,584 13,856 — — 558,462 Non-compensation expenses: Floor brokerage and clearing fees 79,727 4,959 — — — — 84,686 Selling, general and other expenses 343,648 11,662 37,651 5,339 — (78 ) 398,222 Interest expense — — 1,223 — 8,997 — 10,220 Depreciation and amortization 23,366 401 18,997 423 — — 43,187 Total non-compensation expenses 446,741 17,022 57,871 5,762 8,997 (78 ) 536,315 Total expenses 967,955 29,830 191,891 19,618 8,997 (78 ) 1,218,213 Income (loss) before income taxes and loss related to associated companies 166,777 (43,633 ) 205,956 (13,426 ) (8,997 ) — 306,677 Loss related to associated companies — — (4,827 ) — — — (4,827 ) Income (loss) before income taxes $ 166,777 $ (43,633 ) $ 201,129 $ (13,426 ) $ (8,997 ) $ — 301,850 Income tax provision 105,909 Net income $ 195,941 A summary of results for the three months ended August 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 $ 1,672,943 $ 13,327 $ 248,690 $ 955 $ — $ 3,069 $ 1,938,984 Expenses: Cost of sales — — 151,510 — — — 151,510 Compensation and benefits 762,725 15,468 17,584 6,466 — — 802,243 Non-compensation expenses: Floor brokerage and clearing fees 64,441 4,541 — — — — 68,982 Selling, general and other expenses 222,357 10,719 39,849 4,375 — (38 ) 277,262 Interest expense 4,982 — 762 — 13,774 — 19,518 Depreciation and amortization 21,065 494 16,554 564 — — 38,677 Total non-compensation expenses 312,845 15,754 57,165 4,939 13,774 (38 ) 404,439 Total expenses 1,075,570 31,222 226,259 11,405 13,774 (38 ) 1,358,192 Income (loss) before income taxes and loss related to associated companies 597,373 (17,895 ) 22,431 (10,450 ) (13,774 ) 3,107 580,792 Loss related to associated companies — — (27,176 ) — — — (27,176 ) Income (loss) before income taxes $ 597,373 $ (17,895 ) $ (4,745 ) $ (10,450 ) $ (13,774 ) $ 3,107 553,616 Income tax provision 145,700 Net income $ 407,916 (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 nine months ended August 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 $ 3,714,928 $ 77,300 $ 825,637 $ 8,756 $ — $ (734 ) $ 4,625,887 Expenses: Cost of sales — — 349,556 — — — 349,556 Compensation and benefits 1,768,350 43,560 89,226 25,487 — — 1,926,623 Non-compensation expenses: Floor brokerage and clearing fees 237,140 25,523 — — — — 262,663 Selling, general and other expenses 864,026 33,638 97,155 17,319 — (378 ) 1,011,760 Interest expense — — 2,846 — 25,773 — 28,619 Depreciation and amortization 69,687 1,230 57,248 1,266 — — 129,431 Total non-compensation expenses 1,170,853 60,391 157,249 18,585 25,773 (378 ) 1,432,473 Total expenses 2,939,203 103,951 596,031 44,072 25,773 (378 ) 3,708,652 Income (loss) before income taxes and loss related to associated companies 775,725 (26,651 ) 229,606 (35,316 ) (25,773 ) (356 ) 917,235 Loss related to associated companies — — (56,512 ) — — — (56,512 ) Income (loss) before income taxes $ 775,725 $ (26,651 ) $ 173,094 $ (35,316 ) $ (25,773 ) $ (356 ) 860,723 Income tax provision 219,949 Net income $ 640,774 A summary of results for the nine months ended August 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 $ 5,259,301 $ 293,204 $ 812,509 $ 2,269 $ — $ 9,150 $ 6,376,433 Expenses: Cost of sales — — 390,916 — — — 390,916 Compensation and benefits 2,650,704 59,924 66,365 29,035 — — 2,806,028 Non-compensation expenses: Floor brokerage and clearing fees 197,226 24,982 — — — — 222,208 Selling, general and other expenses 744,366 33,651 99,000 13,954 — (212 ) 890,759 Interest expense 15,806 — 2,517 — 41,505 — 59,828 Depreciation and amortization 62,580 1,462 50,536 2,306 — — 116,884 Total non-compensation expenses 1,019,978 60,095 152,053 16,260 41,505 (212 ) 1,289,679 Total expenses 3,670,682 120,019 609,334 45,295 41,505 (212 ) 4,486,623 Income (loss) before income taxes and loss related to associated companies 1,588,619 173,185 203,175 (43,026 ) (41,505 ) 9,362 1,889,810 Loss related to associated companies — — (61,270 ) — — — (61,270 ) Income (loss) before income taxes $ 1,588,619 $ 173,185 $ 141,905 $ (43,026 ) $ (41,505 ) $ 9,362 1,828,540 Income tax provision 484,756 Net income $ 1,343,784 (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 August 31, 2022 May 31, 2022 August 31 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 486,762 $ 371,760 $ 583,887 Equity underwriting 150,972 122,435 367,460 Debt underwriting 76,943 107,020 229,273 Total underwriting 227,915 229,455 596,733 Other investment banking (2) (32,877 ) 85,746 42,997 Total investment banking 681,800 686,961 1,223,617 Equities 277,448 254,807 236,532 Fixed income 174,618 161,478 205,795 Total capital markets 452,066 416,285 442,327 Other (2) 866 (4,868 ) 6,999 Total Investment Banking and Capital Markets Net Revenues (3) 1,134,732 1,098,378 1,672,943 Asset management fees and revenues (4) 17,069 14,116 18,869 Investment return (5) (19,671 ) 30,637 5,613 Allocated net interest (5) (11,201 ) (13,606 ) (11,155 ) Total Asset Management Net Revenues (13,803 ) 31,147 13,327 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 1,120,929 $ 1,129,525 $ 1,686,270 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 84,686 $ 94,016 $ 68,982 Underwriting costs 11,672 13,191 21,474 Technology and communications 108,256 108,630 93,808 Occupancy and equipment rental 24,944 24,561 24,961 Business development 36,658 47,880 24,380 Professional services 55,231 52,192 49,543 Depreciation and amortization 23,767 23,233 21,559 Other 118,549 43,110 23,892 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 463,763 $ 406,813 $ 328,599 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 534,022 $ 533,676 $ 778,193 Compensation and benefits expenses as a percentage of net revenues 47.6 % 47.2 % 46.1 % (Amounts in Thousands, Except Other Data) (Unaudited) Nine Months Ended May 31, 2022 2021 (1) Investment Banking, Capital Markets and Asset Management Net Revenues: Advisory $ 1,402,291 $ 1,285,834 Equity underwriting 429,507 1,186,728 Debt underwriting 429,142 712,370 Total underwriting 858,649 1,899,098 Other investment banking (2) 111,003 208,480 Total investment banking 2,371,943 3,393,412 Equities 809,302 1,010,497 Fixed income 538,896 826,351 Total capital markets 1,348,198 1,836,848 Other (2) (5,213 ) 29,041 Total Investment Banking and Capital Markets Net Revenues (3) 3,714,928 5,259,301 Asset management fees and revenues (4) 75,687 107,668 Investment return (5) 40,496 218,529 Allocated net interest (5) (38,883 ) (32,993 ) Total Asset Management Net Revenues 77,300 293,204 Total Investment Banking, Capital Markets and Asset Management Net Revenues $ 3,792,228 $ 5,552,505 Investment Banking, Capital Markets and Asset Management Non-compensation Expenses: Floor brokerage and clearing fees $ 262,663 $ 222,208 Underwriting costs 32,991 90,641 Technology and communications 321,441 281,032 Occupancy and equipment rental 74,755 77,515 Business development 108,914 69,410 Professional services 158,541 142,419 Depreciation and amortization 70,917 64,042 Other 201,022 132,806 Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses $ 1,231,244 $ 1,080,073 Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses: Compensation and benefits $ 1,811,910 $ 2,710,628 Compensation and benefits expenses as a percentage of net revenues 47.8 % 48.8 % (Amounts in Thousands, Except Other Data) (Unaudited) Quarter Ended August 31, 2022 May 31, 2022 August 31 2021 (1) Other Data: Number of trading days 64 64 65 Number of trading loss days (6) 9 10 20 Average VaR (in millions) (7) $ 9.6 $ 11.84 $ 12.69 Nine Months Ended August 31, 2022 2021 (1) Other Data: Number of trading days 189 189 Number of trading loss days (6) 27 49 Average VaR (in millions) (7) $ 11.18 $ 14.79 (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 August 31, 2022 May 31, 2022 August 31 2021 (1) Financial position (1): Total assets $ 55,230 $ 57,214 $ 58,037 Total assets less goodwill and intangible assets for the period $ 53,355 $ 55,329 $ 56,132 Cash and cash equivalents $ 9,478 $ 8,523 $ 9,481 Financial instruments owned $ 20,249 $ 20,248 $ 19,735 Level 3 financial instruments owned (2) $ 764 $ 740 $ 671 Goodwill and intangible assets $ 1,874 $ 1,885 $ 1,905 Total equity $ 10,360 $ 10,368 $ 10,401 Total shareholders' equity $ 10,293 $ 10,300 $ 10,382 Tangible equity (3) $ 8,418 $ 8,415 $ 8,477 Other data and financial ratios: Leverage ratio (1) (4) 5.3 5.5 5.6 Tangible gross leverage ratio (1) (5) 6.3 6.6 6.6 Number of employees, at period end 5,347 5,619 5,493 (1) Amounts pertaining to August 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 nine months ended August 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. Components of Denominator for Earnings Per Share The denominators used to calculate basic and diluted earnings per share are as follows (in thousands): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Weighted average common shares outstanding 230,988 236,546 Weighted average shares of restricted stock with future service (710 ) (1,075 ) Weighted average restricted stock units outstanding with no future service 13,575 14,697 Denominator for basic earnings per share 243,853 250,168 Stock options and other share based awards 1,171 1,485 Senior executive compensation plan restricted stock unit awards 1,774 1,989 Mandatorily redeemable convertible preferred shares 4,441 4,441 Denominator for diluted earnings per share 251,239 258,083 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. Net Income Attributable to Common Shareholders and Earnings Per Share GAAP Reconciliation Reconciliation of Jefferies net income attributable to common shareholders to adjusted net income attributable to common shareholders and diluted earnings per share to adjusted diluted earnings per share (in thousands, except per share amounts): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Net income attributable to common shareholders (GAAP) $ 195,459 $ 636,920 Net income impact for regulatory settlement 80,000 80,000 Adjusted net income attributable to common shareholders (non-GAAP) $ 275,459 $ 716,920 Jefferies Financial Group diluted earnings per share (GAAP) $ 0.78 $ 2.48 Diluted earnings per share impact for regulatory settlement 0.32 0.31 Adjusted Jefferies Financial Group diluted earnings per share (non-GAAP) $ 1.10 $ 2.79 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 August 31, Nine Months Ended August 31, 2022 2021 2022 2021 Net income attributable to common shareholders (GAAP) $ 195,459 $ 407,459 $ 636,920 $ 1,342,490 Intangible amortization and impairment expense, net of tax 1,638 2,618 6,350 7,869 Adjusted net income (non-GAAP) $ 197,097 $ 410,077 $ 643,270 $ 1,350,359 Annualized adjusted net income (non-GAAP) $ 788,388 $ 1,640,308 $ 857,693 $ 1,800,479 May 31, November 30, 2022 2021 2021 2020 Shareholders' equity (GAAP) $ 10,300,177 $ 10,072,634 $ 10,553,755 $ 9,403,893 Less: Intangible assets, net and goodwill (1,885,043 ) (1,912,480 ) (1,897,500 ) (1,913,467 ) Less: Deferred tax asset (401,268 ) (452,467 ) (327,547 ) (393,687 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (93,106 ) (56,862 ) (539,674 ) (189,771 ) Adjusted tangible shareholders' equity (non-GAAP) $ 7,920,760 $ 7,650,825 $ 7,789,034 $ 6,906,968 Return on adjusted tangible equity 10.0 % 21.4 % 11.0 % 26.1 % Adjusted Return on Adjusted Tangible Equity Reconciliation The table below reconciles our Net income attributable to common shareholders to adjusted net income excluding regulatory settlement expense and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands): Three Months Ended August 31, 2022 Nine Months Ended August 31, 2022 Net income attributable to common shareholders (GAAP) $ 195,459 $ 636,920 Intangible amortization and impairment expense, net of tax 1,638 6,350 Net income impact for regulatory settlement 80,000 80,000 Adjusted net income excluding regulatory settlement (non-GAAP) $ 277,097 $ 723,270 Annualized adjusted net income excluding regulatory settlement (non-GAAP) $ 1,108,388 $ 964,360 May 31, 2022 November 30, 2021 Shareholders' equity (GAAP) $ 10,300,177 $ 10,553,755 Less: Intangible assets, net and goodwill (1,885,043 ) (1,897,500 ) Less: Deferred tax asset (401,268 ) (327,547 ) Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases (93,106 ) (539,674 ) Adjusted tangible shareholders' equity (non-GAAP) $ 7,920,760 $ 7,789,034 Adjusted return on adjusted tangible equity 14.0 % 12.4 % Jefferies Shareholders' Equity GAAP Reconciliation At the beginning of the press release, we disclose how much we have returned to shareholders through buybacks and dividends since the beginning of 2018 and what percentage that is of shareholders' equity and tangible shareholders' equity at the beginning of 2018. The table below reconciles our shareholders' equity to tangible shareholders' equity at the beginning of 2018 (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): August 31, 2022 Book value (GAAP) $ 10,292,531 Redeemable convertible preferred shares convertible to common shares (1) 125,000 Stock options (2) 119,384 Intangible assets, net and goodwill (1,874,435 ) Adjusted tangible book value (non-GAAP) $ 8,662,480 Common shares outstanding (GAAP) 228,807 Restricted stock units ("RSUs") 16,792 Redeemable convertible preferred shares converted to common shares (1) 4,441 Stock options (2) 5,027 Other 1,155 Fully diluted shares outstanding (non-GAAP) (3) 256,222 Book value per share outstanding $ 44.98 Tangible book value per fully diluted share outstanding $ 33.81 (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 August 31, 2022 of 5,026,532 multiplied by the weighted average exercise price of $23.75 on August 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on August 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. Effective Tax Rate GAAP Reconciliation The table below reconciles our effective tax rate to adjusted effective tax rate: Three Months Ended August 31, 2022 Effective tax rate (GAAP) 35.1% Effective tax rate impact for regulatory settlement (7.4) % Adjusted effective tax rate (non-GAAP) 27.7% View source version on businesswire.com: https://www.businesswire.com/news/home/20220928005883/en/