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Jefferies Announces Second Quarter 2023 Financial Results

Jefferies Financial Group Inc. (NYSE: JEF):

Q2 Financial Highlights

  • Net earnings attributable to common shareholders of $12 million, or $0.05 per diluted share, including $72 million of pre-tax losses related to OpNet (formerly Linkem), a legacy merchant banking investment
  • Annualized return on adjusted tangible equity1 of 0.7%
  • Total net revenues of $1.04 billion, including $72 million of pre-tax losses related to OpNet
    • Investment Banking net revenues of $510 million
    • Capital Markets net revenues of $543 million
  • Repurchased 2.2 million shares of common stock for $67 million at an average price of $30.88 per share. At May 31, 2023, we had 231.4 million shares outstanding and 251.9 million shares outstanding on a fully diluted basis2. Our book value per share was $41.90 and tangible book value per fully diluted share3 was $31.51 at May 31, 2023
  • Our Board of Directors has increased our share buyback authorization back to a total of $250 million

"We believe our second quarter results reflect a cyclically low period and a particularly challenging environment. Jefferies generated net revenues of $1.1 billion from Investment Banking and Capital Markets. Our pre-tax income for the quarter of $18 million includes $72 million of pre-tax losses from our legacy merchant banking investment in OpNet. While we are disappointed with the OpNet results, we remain confident that we will ultimately realize value in excess of the book value of our residual merchant banking portfolio.

"Investment Banking net revenues for the quarter were $510 million, down 10% from the prior quarter and 26% from the same quarter last year, primarily due to subdued mergers and acquisitions activity. Capital Markets net revenues of $543 million were down 15% from the prior quarter and up 30% versus the same quarter last year.

"The challenges in the operating environment during our second quarter included the fallout from the regional banking crisis, the government-supported forced merger of Credit Suisse and UBS, and the tumultuous process of extending the U.S. debt ceiling. As a result, the uncharacteristically low volumes of capital markets issuances and mergers and acquisition activity that has followed the rapid increase in interest rates was even more evident during this three-month period. Our trading businesses navigated this challenging environment very well and we believe we have continued to increase market share in all of our businesses.

"The month of June has brought green shoots in our investment banking and capital markets business and we are growing increasingly optimistic about the return to a more normal environment. These developments include a more forward-looking attitude from our investor base and a stronger willingness from our corporate clients to engage in capital formation and other major strategic initiatives. While there is always the potential for further adverse developments, with several major impediments behind us and the approaching of a consensus and more stable interest rate environment, we believe the second half of the year could be more productive for Jefferies.

"There continue to be changes and developments at some of our primary competitors, which are creating further market opportunity for our Jefferies platform and allowing us to recruit talent that is incremental to our existing team. Within Investment Banking, we recruited 21 new Managing Directors since the beginning of fiscal 2023. We expect these Managing Directors to have a meaningful impact in advancing and growing our business, with the bulk of their client coverage being incremental to our existing coverage universe. We continue to recruit additional talent and plan to comfortably integrate these new joiners with our exceptional existing team. Our strong financial foundation and culture is allowing us to play prudent offense in this otherwise challenging environment.

"As previously announced, SMBC intends to increase its economic interest in Jefferies from approximately 4.5% today up to approximately 15% on an as-converted, fully-diluted basis via direct and indirect open-market purchases. A special meeting of our shareholders to approve the creation of nonvoting common shares will occur tomorrow, with a view to facilitating SMBC’s increased investment. We look forward to welcoming SMBC’s increased ownership and enhanced partnership, as we believe this strategic alliance will further strengthen each firm’s ability to support client needs."

Richard Handler, CEO, and Brian Friedman, President

Quarterly Cash Dividend

The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on August 25, 2023 to record holders of Jefferies common shares on August 14, 2023. We currently have a $250 million authorization for future share repurchases.

Financial Summary

(Dollars in thousands, except per share amounts)

Three Months Ended

May 31,

 

 

Six Months Ended

May 31,

 

 

2023

 

202214

%

Change

 

2023

 

202214

%

Change

Net revenues:

 

 

 

 

 

 

 

 

 

Investment Banking and Capital Markets

$

1,052,504

 

 

$

1,105,174

 

(5

)%

 

$

2,259,795

 

 

$

2,567,539

 

(12

)%

Asset Management

 

(22,384

)

 

 

233,977

 

N/M

 

 

 

55,912

 

 

 

460,809

 

(88

)%

Other

 

7,490

 

 

 

(1,081

)

N/M

 

 

 

5,395

 

 

 

2,564

 

110

%

Net revenues

 

1,037,610

 

 

 

1,338,070

 

(22

)%

 

 

2,321,102

 

 

 

3,030,912

 

(23

)%

Net earnings before income taxes

 

17,919

 

 

 

166,541

 

(89

)%

 

 

175,937

 

 

 

558,873

 

(69

)%

Income tax expense

 

9,235

 

 

 

49,683

 

(81

)%

 

 

37,929

 

 

 

114,040

 

(67

)%

Net earnings

 

8,684

 

 

 

116,858

 

(93

)%

 

 

138,008

 

 

 

444,833

 

(69

)%

Net earnings (losses) attributable to noncontrolling interests

 

(3,513

)

 

 

1,096

 

N/M

 

 

 

(9,568

)

 

 

127

 

N/M

 

Net losses attributable to redeemable noncontrolling interests

 

(198

)

 

 

(323

)

(39

)%

 

 

(454

)

 

 

(896

)

(49

)%

Preferred stock dividends

 

 

 

 

2,071

 

(100

)%

 

 

2,016

 

 

 

4,141

 

(51

)%

Net earnings attributable to Jefferies Financial Group Inc.

$

12,395

 

 

$

114,014

 

(89

)%

 

$

146,014

 

 

$

441,461

 

(67

)%

Net earnings attributable to Jefferies Financial Group Inc.

$

0.05

 

 

$

0.46

 

(89

)%

 

$

0.60

 

 

$

1.73

 

(65

)%

Weighted average shares

 

242,568

 

 

 

249,142

 

 

 

 

240,825

 

 

 

253,330

 

 

Diluted earnings per common share

$

0.05

 

 

$

0.45

 

(89

)%

 

$

0.60

 

 

$

1.70

 

(65

)%

Weighted average diluted shares

 

245,413

 

 

 

251,979

 

 

 

 

246,870

 

 

 

261,494

 

 

Annualized return on adjusted tangible equity1

 

0.7

%

 

 

5.8

%

 

 

 

3.8

%

 

 

11.2

%

 

N/M — Not Meaningful

Highlights

Three Months Ended May 31, 2023

 

Six Months Ended May 31, 2023

 

 

 

  • Net earnings attributable to common shareholders of $12 million, or $0.05 per diluted share, including $72 million of pre-tax losses related to OpNet.
  • Repurchased 2.2 million shares of common stock for $67 million, at an average price of $30.88 per share, including 2.0 million shares of common stock in the open market for $61 million under our current Board of Directors authorization and 0.2 million shares of common stock for $6 million in connection with net-share settlements related to our equity compensation plans.
  • We had 231.4 million shares outstanding and 251.9 million shares outstanding on a fully diluted basis2 at May 31, 2023. Our book value per share was $41.90 and tangible book value per fully diluted share3 was $31.51 at May 31, 2023.
  • Our Board of Directors has increased our share buyback authorization back to a total of $250 million.
  • Effective tax rate of 51.5%.

 

  • Net earnings attributable to common shareholders of $146 million, or $0.60 per diluted share, including $80 million of pre-tax losses related to OpNet.
  • Repurchased 4.7 million shares of common stock for $165 million, at an average price of $34.75 per share, including 2.0 million shares of common stock in the open market for $61 million under our current Board of Directors authorization and 2.7 million shares of common stock for $104 million in connection with net-share settlements related to our equity compensation plans.
  • Effective tax rate of 21.6%.

Investment Banking and Capital Markets

 

Investment Banking and Capital Markets

  • Investment Banking net revenues of $510 million with solid equity capital markets activity but lower advisory net revenues, consistent with a significant decline in global mergers and acquisitions volume. Equity and Debt underwriting net revenues were higher than the same quarter last year, with the increase in Equity underwriting net revenues, driven by a favorable equity market, being partially offset by a decrease in Debt underwriting net revenues, in line with dampened industry-wide deal activity.
  • Capital Markets net revenues of $543 million were higher compared to the prior year quarter, with Equities and Fixed Income net revenues increasing from the year-ago quarter primarily driven by improved market conditions.

 

  • Investment Banking net revenues were $1.08 billion as fewer merger and acquisition transactions were completed and lower average fees were earned per completed transaction. Equity and Debt underwriting net revenues of $444 million were in line with a decline in industry activity amid continued market volatility and uncertainty.
  • Capital Markets net revenues of $1.18 billion were primarily driven by favorable results with Fixed Income's improvement attributable to more stable market conditions.

Asset Management

 

Asset Management

  • Asset Management net revenues of negative $22 million were primarily due to losses from OpNet. Additionally, we sold our interests in Idaho Timber in the third quarter of 2022 and spun-off our interests in Vitesse Energy in the first quarter of 2023, and the results of those operations are no longer included in our results.

 

  • Asset Management net revenues were $56 million and reflects the spin-off of our interests in Vitesse Energy in January 2023.

* * * *

Amounts herein pertaining to May 31, 2023 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”). More information on our results of operations for the three and six months ended May 31, 2023 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC, which we expect to file on or about July 7, 2023.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect of the shareholder approval (the “Shareholder Approval”) of the amended and restated certificate of incorporation authorizing the creation of non-voting common stock. In connection with a special meeting of its shareholders for the Shareholder Approval, Jefferies Financial Group Inc. (the “Company”) has filed and intends to file relevant materials with the SEC, including the Company’s definitive proxy statement on Schedule 14A for its 2023 Special Meeting of Shareholders, which was filed with the SEC on May 25, 2023 (the “Special Meeting Proxy Statement”). Investors and shareholders of the Company are urged to read all relevant documents filed with the SEC, including the Special Meeting Proxy Statement, because they contain or will contain important information about the proposed amended and restated certificate of incorporation. Investors and security holders are or will be able to obtain the documents (if and when available) free of charge at the SEC’s website at www.sec.gov, or free of charge from the Company by directing a request to Laura Ulbrandt DiPierro, Corporate Secretary, 520 Madison Avenue, New York, NY 10022.

Participants in the Solicitation

The Company and its directors, executive officers and other members of management and employees, under SEC rules, may be deemed to be “participants” in the solicitation of proxies from shareholders of the Company in favor of the Shareholder Approval. Information about the Company’s directors and executive officers is set forth in the Company’s Proxy Statement on Schedule 14A for its 2023 Annual Meeting of Shareholders, which was filed with the SEC on February 17, 2023. To the extent holdings of the Company’s securities by its directors or executive officers have changed since the amounts set forth in such 2023 proxy statement, such changes have been or will be reflected on Initial Statements of Beneficial Ownership on Form 3 or Statements of Change in Ownership on Form 4 filed with the SEC. Additional information concerning the direct or indirect interests, by security holdings or otherwise, of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s shareholders generally, are set forth in the Special Meeting Proxy Statement.

Forward-Looking Statements

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, including the Company and SMBC’s strategic alliance. In particular, forward-looking statements include statements about the potential benefits of the collaboration with SMBC and SMBC’s intention to increase its equity investment in the Company, as SMBC is under no obligation to do so. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC. We undertake no obligation to update or revise any such forward-looking statement to reflect subsequent circumstances.

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s).

Selected Financial Information

(Amounts in Thousands) (Unaudited)

Quarter Ended

 

May 31,

2023

 

February 28,

2023

 

May 31,

202214

Net revenues by source:

 

 

 

 

 

Advisory

$

254,157

 

 

$

297,178

 

 

$

371,404

 

Equity underwriting

 

148,429

 

 

 

125,445

 

 

 

122,435

 

Debt underwriting

 

89,889

 

 

 

80,175

 

 

 

107,021

 

Total underwriting

 

238,318

 

 

 

205,620

 

 

 

229,456

 

Other investment banking

 

17,338

 

 

 

65,132

 

 

 

88,030

 

Total Investment Banking

 

509,813

 

 

 

567,930

 

 

 

688,890

 

Equities

 

283,316

 

 

 

308,661

 

 

 

254,807

 

Fixed income

 

259,375

 

 

 

330,700

 

 

 

161,477

 

Total Capital Markets

 

542,691

 

 

 

639,361

 

 

 

416,284

 

Total Investment Banking and Capital Markets Net revenues5

 

1,052,504

 

 

 

1,207,291

 

 

 

1,105,174

 

Asset management fees and revenues6

 

15,929

 

 

 

42,696

 

 

 

14,116

 

Investment return4

 

32,477

 

 

 

27,434

 

 

 

26,580

 

Merchant banking, inclusive of net interest

 

(62,558

)

 

 

11,608

 

 

 

205,425

 

Allocated net interest4

 

(8,232

)

 

 

(3,442

)

 

 

(12,144

)

Total Asset Management Net revenues

 

(22,384

)

 

 

78,296

 

 

 

233,977

 

Other

 

7,490

 

 

 

(2,095

)

 

 

(1,081

)

Total Net revenues by source

$

1,037,610

 

 

$

1,283,492

 

 

$

1,338,070

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

Compensation and benefits

$

575,868

 

 

$

703,058

 

 

$

579,578

 

Floor brokerage and clearing fees

 

96,592

 

 

 

80,474

 

 

 

94,016

 

Underwriting costs

 

13,169

 

 

 

13,207

 

 

 

13,191

 

Technology and communications

 

118,936

 

 

 

113,385

 

 

 

111,113

 

Occupancy and equipment rental

 

24,395

 

 

 

27,315

 

 

 

26,027

 

Business development

 

43,587

 

 

 

36,838

 

 

 

44,695

 

Professional services

 

68,514

 

 

 

62,161

 

 

 

55,766

 

Depreciation and amortization

 

25,310

 

 

 

33,292

 

 

 

40,307

 

Cost of sales

 

2,362

 

 

 

2,168

 

 

 

130,449

 

Other

 

50,958

 

 

 

53,576

 

 

 

76,387

 

Total Non-interest expenses

$

1,019,691

 

 

$

1,125,474

 

 

$

1,171,529

 

(Amounts in Thousands) (Unaudited)

Six Months Ended May 31,

 

2023

 

202214

Net revenues by source:

 

 

 

Advisory

$

551,335

 

 

$

915,173

 

Equity underwriting

 

273,874

 

 

 

278,535

 

Debt underwriting

 

170,064

 

 

 

352,199

 

Total underwriting

 

443,938

 

 

 

630,734

 

Other investment banking

 

82,470

 

 

 

125,500

 

Total Investment Banking

 

1,077,743

 

 

 

1,671,407

 

Equities

 

591,977

 

 

 

531,854

 

Fixed income

 

590,075

 

 

 

364,278

 

Total Capital Markets

 

1,182,052

 

 

 

896,132

 

Total Investment Banking and Capital Markets Net revenues5

 

2,259,795

 

 

 

2,567,539

 

Asset management fees and revenues6

 

58,625

 

 

 

58,618

 

Investment return4

 

59,911

 

 

 

35,469

 

Merchant banking

 

(50,950

)

 

 

391,216

 

Allocated net interest4

 

(11,674

)

 

 

(24,494

)

Total Asset Management Net revenues

 

55,912

 

 

 

460,809

 

Other

 

5,395

 

 

 

2,564

 

Total Net revenues by source

$

2,321,102

 

 

$

3,030,912

 

 

 

 

 

Non-interest expenses:

 

 

 

Compensation and benefits

$

1,278,926

 

 

$

1,370,330

 

Floor brokerage and clearing fees

 

177,066

 

 

 

177,977

 

Underwriting costs

 

26,376

 

 

 

21,319

 

Technology and communications

 

232,321

 

 

 

218,129

 

Occupancy and equipment rental

 

51,710

 

 

 

52,992

 

Business development

 

80,425

 

 

 

71,567

 

Professional services

 

130,675

 

 

 

108,508

 

Depreciation and amortization

 

58,602

 

 

 

86,244

 

Cost of sales

 

4,530

 

 

 

226,120

 

Other

 

104,534

 

 

 

138,853

 

Total Non-interest expenses

$

2,145,165

 

 

$

2,472,039

 

Financial Data and Metrics

(Unaudited)

Quarter Ended

 

May 31,

2023

 

February 28,

2023

 

May 31,

2022

Other Data:

 

 

 

 

 

Number of trading days

 

64

 

 

60

 

 

64

Number of trading loss days7

 

10

 

 

3

 

 

10

Average VaR (in millions)8

$

15.14

 

$

12.85

 

$

11.84

 

 

 

 

 

 

 

 

 

Six Months Ended May 31,

 

 

 

2023

 

2022

Other Data:

 

 

 

 

 

Number of trading days

 

 

 

124

 

 

125

Number of trading loss days7

 

 

 

13

 

 

18

Average VaR (in millions)8

 

 

$

14.03

 

$

11.98

(Amounts in Millions, Except Other Data) (Unaudited)

Quarter Ended

 

May 31,

2023

 

February 28,

2023

 

May 31,

202215

Financial position9:

 

 

 

 

 

Total assets

$

53,740

 

$

52,033

 

$

52,919

Total assets less goodwill and intangible assets for the period15

 

51,867

 

 

 

50,160

 

 

 

51,034

 

Cash and cash equivalents

 

8,005

 

 

 

7,509

 

 

 

8,523

 

Financial instruments owned15

 

21,002

 

 

 

21,083

 

 

 

18,493

 

Level 3 financial instruments owned10, 15

 

860

 

 

 

819

 

 

 

730

 

Goodwill and intangible assets

 

1,873

 

 

 

1,873

 

 

 

1,885

 

Total equity

 

9,765

 

 

 

9,811

 

 

 

10,368

 

Total shareholders' equity

 

9,696

 

 

 

9,755

 

 

 

10,300

 

Tangible shareholders' equity11

 

7,823

 

 

 

7,882

 

 

 

8,415

 

Other data and financial ratios:

 

 

 

 

 

Leverage ratio9, 12, 15

 

5.5

 

 

 

5.3

 

 

 

5.1

 

Tangible gross leverage ratio9, 13, 15

 

6.6

 

 

 

6.4

 

 

 

6.1

 

Number of employees, at period end

 

5,335

 

 

 

5,401

 

 

 

5,619

 

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

May 31, 2023

 

Six Months Ended

May 31, 2023

Weighted average common shares outstanding

 

232,842

 

 

230,193

 

Weighted average shares of restricted stock with future service

 

(1,853

)

 

(1,989

)

Weighted average restricted stock units outstanding with no future service

 

11,579

 

 

12,621

 

Denominator for basic earnings per share

 

242,568

 

 

240,825

 

Stock options and other share based awards

 

1,618

 

 

2,086

 

Senior executive compensation plan restricted stock unit awards

 

1,227

 

 

2,072

 

Mandatorily redeemable convertible preferred shares

 

 

 

1,887

 

Denominator for diluted earnings per share

 

245,413

 

 

246,870

 

Notes

  1. Annualized return on adjusted tangible equity (a non-GAAP financial measure) is defined as annualized adjusted net earnings (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 9 for a reconciliation to U.S. GAAP amounts.
  2. Shares outstanding on a fully diluted basis (a non-GAAP financial measure) is defined as common shares outstanding plus restricted stock units, stock options and other shares. Refer to schedule on page 10 for a reconciliation to U.S. GAAP amounts.
  3. 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 10 for a reconciliation to U.S. GAAP amounts.
  4. Allocated net interest represents an allocation to Asset Management of certain of our long-term debt interest expense, net of interest income on our Cash and cash equivalents and other sources of liquidity. Allocated net interest has been disaggregated to increase transparency and to present direct Asset Management revenues. We believe that aggregating Allocated net interest would obscure the revenue results by including an amount that is unique to our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods. Refer to Selected Financial Information on page 5.
  5. 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.
  6. Asset management fees and revenues include management and performance fees from funds and accounts managed by us as well as our share of fees received by affiliated asset management companies with which we have revenue and profit share arrangements, as well as earnings on our ownership interest in affiliated asset managers.
  7. Number of trading loss days is calculated based on trading activities in our Investment Banking and Capital Markets and Asset Management business segments.
  8. VaR estimates the potential loss in value of trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended November 30, 2022.
  9. Amounts pertaining to May 31, 2023 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 quarterly period ended May 31, 2023.
  10. 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.
  11. Tangible shareholders' equity (a non-GAAP financial measure), is defined as shareholders' equity less Intangible assets and goodwill. 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.
  12. Leverage ratio equals total assets divided by total equity.
  13. Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and intangible assets divided by tangible equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio.
  14. On November 1, 2022, we completed our merger with Jefferies Group LLC. In connection with the merger, we transferred our legacy merchant banking investments to our Investment Banking and Capital Markets or Asset Management segment and reorganized the presentation of our segments and Net revenues to align with the way we are now managing our business. In addition, we have reclassified the presentation of certain line items within our Net revenues by source to streamline our financial statements to better align the presentation of our firm with the strategy of building our investment banking and capital markets and asset management businesses as we continue to reduce our legacy merchant banking portfolio. Historical periods have been recast to conform to these reclassification and presentation changes.
  15. As of November 30, 2022, we have changed the accounting for our secondary trading activity related to the purchases and sales of corporate loans. Historically, we have accounted for purchases and sales of corporate loans on trade date recognizing the total amount of purchased loans within Financial instruments owned and a corresponding liability within Payables - brokers, dealers and clearing organizations and the total amount of loans sold within Financial instruments sold, not yet purchased and a corresponding asset within Receivables - brokers, dealers and clearing organizations on the Consolidated Statements of Financial Condition for the cash to be paid or received upon settlement. We have determined that it is more preferable to recognize this trading activity on a settlement date basis and recognize firm commitments to purchase and/or sell loans on the date of trade execution due to the extended settlement period for this trading activity. There was no impact to net earnings or total equity as a result of this change in accounting policy. Historical periods have been recast to conform to this change in accounting policy.

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.

Annualized Return on Adjusted Tangible Equity Reconciliation

The table below reconciles our Net earnings attributable to common shareholders to adjusted net earnings and our Shareholders' equity to adjusted tangible shareholders' equity (in thousands):

 

 

Three Months Ended

May 31,

 

Six Months Ended

May 31,

 

 

2023

 

2022

 

2023

 

2022

Net earnings attributable to Jefferies Financial Group Inc. (GAAP)

 

$

12,395

 

 

$

114,014

 

 

$

146,014

 

 

$

441,461

 

Intangible amortization and impairment expense, net of tax

 

 

1,193

 

 

 

1,739

 

 

 

3,220

 

 

 

4,781

 

Adjusted net earnings (non-GAAP)

 

$

13,588

 

 

$

115,753

 

 

$

149,234

 

 

$

446,242

 

Annualized adjusted net earnings (non-GAAP)

 

$

54,352

 

 

$

463,012

 

 

$

298,468

 

 

$

892,484

 

 

 

February 28,

 

November 30,

 

 

2023

 

2022

 

2022

 

2021

Shareholders' equity (GAAP)

 

$

9,755,243

 

 

$

10,490,300

 

 

$

10,232,845

 

 

$

10,553,755

 

Less: Intangible assets, net and goodwill

 

 

(1,872,850

)

 

 

(1,894,721

)

 

 

(1,875,576

)

 

 

(1,897,500

)

Less: Deferred tax asset

 

 

(486,012

)

 

 

(382,741

)

 

 

(387,862

)

 

 

(327,547

)

Less: Weighted average impact of dividends and share repurchases

 

 

(70,895

)

 

 

(162,339

)

 

 

(195,393

)

 

 

(378,907

)

Adjusted tangible shareholders' equity (non-GAAP)

 

$

7,325,486

 

 

$

8,050,499

 

 

$

7,774,014

 

 

$

7,949,801

 

Annualized return on adjusted tangible equity (non-GAAP)

 

 

0.7

%

 

 

5.8

%

 

 

3.8

%

 

 

11.2

%

Adjusted Tangible Book Value and Fully Diluted Shares Outstanding GAAP Reconciliation

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

 

May 31, 2023

Book value (GAAP)

$

9,695,654

 

Stock options(1)

 

115,161

 

Intangible assets, net and goodwill

 

(1,873,123

)

Adjusted tangible book value (non-GAAP)

$

7,937,692

 

Common shares outstanding (GAAP)

 

231,411

 

Restricted stock units ("RSUs")

 

14,068

 

Stock options(1)

 

5,075

 

Other

 

1,335

 

Fully diluted shares outstanding (non-GAAP)(2)

 

251,889

 

Book value per share outstanding

$

41.90

 

Tangible book value per fully diluted share outstanding (non-GAAP)

$

31.51

 

(1)

Stock options added to book value are equal to the total number of stock options outstanding as of May 31, 2023 of 5,074,740 multiplied by the weighted average exercise price of $22.69 on May 31, 2023. Stock options added to fully diluted shares are equal to the total stock options outstanding on May 31, 2023.

(2)

Fully diluted shares outstanding include vested and unvested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans until the performance period is complete. Fully diluted shares outstanding also include all stock options.

 

Contacts

Jonathan Freedman 212.778.8913

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