The following excerpt is from the company's SEC filing.
All-Time Record Quarterly and Annual Results at Jefferies Group
Quarterly Cash Dividend Increase of 33% to $0.20 per Jefferies Common Share
Share Repurchase Authorization Increased to $250 million
New York, New York — January 4, 2021 — Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and twelve month periods ended November 30, 2020. In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.20 per Jefferies common share payable on February 26, 2021 to record holders of Jefferies common shares on February 12, 2021. Th
e Jefferies Board of Directors also increased the Company's stock buyback authorization by $193 million to a total of $250 million. We expect to file our Form 10-K on or about January 28, 2021.
Highlights for the three months ended November 30, 2020:
Jefferies Group LLC recorded record quarterly net revenues of $1,609 million, record pre-tax income of $406 million, record net earnings of $307 million and return on tangible equity of 26.2%
Record quarterly Investment Banking net revenues of $916 million, including record Equity Underwriting net revenues of $341 million, record Advisory net revenues of $357 million, and record Debt Underwriting net revenues of $209 million
Combined Capital Markets net revenues of $590 million; record quarterly Equities net revenues of $327 million and Fixed Income net revenues of $263 million
Asset Management revenues (before allocated net interest
) of $83 million
Merchant Banking recorded pre-tax income of $33 million, reflecting record quarterly results from Idaho Timber and mark-to-market increases in the value of several of our investments in public companies
Net income attributable to Jefferies Financial Group common shareholders was $307 million, or $1.11 per diluted share
We repurchased 9.5 million shares for $193 million, or an average price of $20.34 per share; 249.8 million shares were outstanding and 273.6 million shares were outstanding on a fully diluted basis
at November 30, 2020; Jefferies book value per share was $37.65 and tangible book value per fully diluted share
was $27.38 at the end of the fourth quarter
Jefferies Financial Group had parent company liquidity of $1.9 billion at November 30, 2020. Jefferies Group had a record liquidity buffer of $8.6 billion of cash and unencumbered liquid collateral at November 30, 2020, which represented 18% of its total balance sheet.
Highlights for the twelve months ended November 30, 2020:
Jefferies Group LLC recorded record twelve months net revenues of $5,197 million, record pre-tax income of $1,177 million, record net earnings of $875 million and return on tangible equity of 20.4%
Record twelve months Investment Banking net revenues of $2,398 million, including record Advisory net revenues of $1,054 million, record Equity Underwriting net revenues of $902 million and Debt Underwriting net revenues of $546 million
Record combined twelve months Capital Markets net revenues of $2,470 million, including record Equities net revenues of $1,129 million and record Fixed Income net revenues of $1,341 million
Record Asset Management revenues (before allocated net interest
) of $257 million
Merchant Banking pre-tax loss of $25 million, reflecting record performance from Idaho Timber, a positive contribution from Vitesse, and the previously reported gain of about $60 million from effective short-term hedges in the first quarter, more than offset by $145 million in previously reported non-cash charges in the first half of 2020 related to write-downs of our investments in WeWork, JETX and some of the real estate assets of HomeFed
Net income attributable to Jefferies Financial Group common shareholders of $770 million, or $2.65 per diluted share
Repurchases of 42.1 million shares for $813 million, or an average price of $19.29 per share; together with $161 million in dividends, an aggregate of $974 million was returned to shareholders in 2020; over the past three fiscal years, Jefferies has returned to shareholders nearly $3.4 billion
Rich Handler, our CEO, and Brian Friedman, our President, said:
"The results for our fourth quarter and full year 2020 are outstanding and testament to the relentless dedication and tireless effort of the entire Jefferies team. We gained market share and have established Jefferies at yet another higher level of achievement and potential. We are optimistic that our momentum and strength will be sustained in 2021."
Please refer to the Jefferies Financial Group Annual Letter from our CEO and President for broader perspective on 2020, as well as our strategy and outlook.
Amounts herein pertaining to November 30, 2020 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Annual Report on Form 10-K with the Securities and Exchange Commission ("SEC"). More information on our results of operations for the three and twelve month periods ended November 30, 2020 will be provided upon filing our Annual Report on Form 10-K with the SEC.
This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements 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," 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 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.
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).
For further information, please contact:
Teresa S. Gendron
Chief Financial Officer
Tel. (212) 460-1932
Matt Larson
Tel. (212) 284-2338
Return on tangible equity (a non-GAAP financial measure) equals our three months ended November 30, 2020 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) of $4,682 million at August 31, 2020. Tangible Jefferies Group LLC member's equity at August 31, 2020 equals Jefferies Group LLC member's equity of $6,488 million less goodwill and identifiable intangibles assets of $1,806 million.
Allocated net interest represents the allocation of a ratable portion of Jefferies Group LLC's long-term debt interest expense to Jefferies Group LLC's Asset Management reportable segment, net of interest income on Jefferies Group LLC's Cash and cash equivalents and other sources of liquidity, which allocation is consistent with Jefferies Group LLC's policy of allocating such items to all its business lines. Refer to Jefferies Group LLC's summary of Net Revenues by Source on pages 9 and 10.
Shares outstanding on a fully diluted basis, a non-GAAP measure, is defined as Jefferies Financial Group's common shares outstanding plus restricted stock units 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 measure, is defined as Tangible book value divided by shares outstanding on a fully diluted basis. Tangible book value, a non-GAAP measure, is defined as Jefferies Financial Group shareholders' equity (book value) less Intangible assets, net and goodwill. Shares outstanding on a fully diluted basis, a non-GAAP measure, is defined as Jefferies Financial Group's common shares outstanding plus restricted stock units and other shares. Refer to schedule on page 14 for reconciliation to U.S. GAAP amounts.
Return on tangible equity (a non-GAAP financial measure) equals our twelve months ended November 30, 2020 net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) of $4,311 million at November 30, 2019. Tangible Jefferies Group LLC member's equity at November 30, 2019 equals Jefferies Group LLC member's equity of $6,125 million less goodwill and identifiable intangibles assets of $1,814 million.
Summary for Jefferies Financial Group Inc. and Subsidiaries
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
Twelve Months Ended
Net revenues
1,860,787
1,106,098
6,010,874
3,892,976
Income before income taxes and income (loss) related to associated companies
427,500
151,320
1,142,566
275,613
Income (loss) related to associated companies
(5,960)
81,229
(75,483)
202,995
421,540
232,549
1,067,083
478,608
Income tax provision (benefit)
113,535
38,671
298,673
(483,955)
308,005
193,878
768,410
962,563
Net loss attributable to the noncontrolling interests
2,606
5,271
1,847
Net loss attributable to the redeemable noncontrolling interests
1,558
Preferred stock dividends
(1,404)
(1,276)
(5,634)
(5,103)
Net income attributable to Jefferies Financial Group Inc. common shareholders
307,267
195,541
769,605
959,593
Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
Number of shares in calculation
272,901
310,266
285,693
310,694
Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
277,342
316,566
290,490
317,032
A summary of results for the three months ended November 30, 2020 is as follows (in thousands):
Investment Banking and Capital Markets (1)
Asset Management (1)
Merchant Banking (1)
Corporate
Parent Company Interest
Consolidation Adjustments
1,537,362
88,977
231,852
1,350
1,246
Expenses:
Compensation and benefits
842,513
30,152
25,336
13,365
911,366
Cost of sales (2)
59,968
5,221
102,717
167,906
Interest expense
6,972
13,672
20,644
Depreciation and amortization
21,012
16,735
39,083
Selling, general and other expenses
239,795
9,328
41,138
6,513
(2,486)
294,288
Total expenses
1,163,288
45,172
192,898
20,743
1,433,287
Income (loss) before income taxes and loss related to associated companies
374,074
43,805
38,954
(19,393)
(13,672)
3,732
Loss related to associated companies
32,994
A summary of results for the three months ended November 30, 2019 is as follows (in thousands):
761,104
(10,554)
343,388
10,699
1,461
409,899
14,556
17,129
16,273
457,857
53,713
6,314
86,532
146,559
8,750
17,358
20,877
19,901
42,271
213,457
11,010
51,557
14,963
290,733
697,946
32,450
183,727
32,159
954,778
Income (loss) before income taxes and income (loss) related to associated companies
63,158
(43,004)
159,661
(21,460)
(8,750)
1,715
81,294
(43,137)
240,955
1,783
(1) We now present Asset Management as a separate reporting segment. Prior year amounts have been reclassified to conform to current segment disclosure.
(2) Includes Floor brokerage and clearing fees.
A summary of results for the twelve months ended November 30, 2020 is as follows (in thousands):
4,989,138
235,255
764,460
13,258
8,763
2,735,080
89,527
77,072
39,184
2,940,863
241,083
25,509
338,588
605,180
31,425
53,445
84,870
82,334
5,247
67,362
3,496
158,439
810,753
46,045
199,128
26,197
(3,167)
1,078,956
3,869,250
166,328
713,575
68,877
4,868,308
1,119,888
68,927
50,885
(55,619)
(53,445)
11,930
(24,598)
A summary of results for the twelve months ended November 30, 2019 is as follows (in thousands):
3,035,988
84,894
735,213
32,833
4,048
1,641,814
63,305
61,767
58,005
1,824,891
202,425
20,715
319,641
542,781
34,129
53,048
87,177
77,549
2,042
69,805
3,475
152,871
767,150
40,432
162,832
39,820
1,009,643
2,688,938
126,494
648,174
101,300
3,617,363
Income (loss) before income taxes and income related to associated companies
347,050
(41,600)
87,039
(68,467)
(53,048)
4,639
Income related to associated companies
202,453
(41,126)
289,492
4,707
Income tax benefit
The following financial tables provide information for the results of Jefferies Group LLC and should be read in conjunction with Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2019. Amounts herein pertaining to November 30, 2020 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2020.
Jefferies Group LLC and Subsidiaries
Consolidated Statements of Earnings
(Amounts in Thousands)
Quarter Ended
Revenues:
Commissions and other fees
196,143
204,313
182,466
Principal transactions
467,163
560,665
137,256
Investment banking
906,164
615,837
400,513
Asset management fees and revenues
5,626
6,772
3,935
191,646
195,960
333,507
Other
43,652
11,526
15,859
Total revenues
1,810,394
1,595,073
1,073,536
201,424
211,629
325,734
1,608,970
1,383,444
747,802
Non-interest expenses:
860,243
725,555
422,548
Non-compensation expenses:
65,189
66,744
58,773
Technology and communications
99,417
102,635
87,931
Occupancy and equipment rental
28,229
27,053
31,885
Business development
21,650
7,637
34,728
Professional services
52,056
41,173
45,296
Underwriting costs
36,551
29,071
14,617
39,828
20,175
28,153
Total non-compensation expenses
342,920
294,488
301,383
Total non-interest expenses
1,203,163
1,020,043
723,931
Earnings before income taxes
405,807
363,401
23,871
Income tax expense
98,893
95,870
Net earnings
306,914
267,531
23,376
Net loss attributable to noncontrolling interests
(1,784)
Net earnings attributable to Jefferies Group LLC
307,114
268,062
25,160
Pre-tax operating margin
Effective tax rate
823,258
676,309
1,867,013
769,258
2,501,494
1,528,729
28,694
20,285
894,215
1,496,529
37,632
93,422
6,152,306
4,584,532
954,829
1,472,002
5,197,477
3,112,530
2,792,575
1,684,054
270,132
227,471
386,830
335,395
107,180
119,472
67,603
138,158
179,888
162,668
95,636
50,662
120,179
69,981
1,227,448
1,103,807
4,020,023
2,787,861
1,177,454
324,669
302,748
80,284
874,706
244,385
(4,597)
(1,644)
879,303
246,029
Selected Statistical Information
(Amounts in Thousands, Except Other Data)
Net Revenues by Source:
356,823
171,438
195,035
Equity underwriting
340,561
305,380
105,119
Debt underwriting
208,780
139,019
100,359
Total underwriting
549,341
444,399
205,478
Other investment banking
9,446
(27,013)
(7,501)
Total investment banking
915,610
588,824
393,012
327,314
318,824
200,128
Fixed income
263,119
336,347
163,016
Total capital markets
590,433
655,171
363,144
31,319
30,120
4,948
Total Investment Banking and Capital Markets (1) (2)
1,274,115
Investment return (3) (4)
77,790
115,556
(7,637)
Allocated net interest (3) (5)
(11,808)
(12,999)
(9,600)
Total Asset Management
71,608
109,329
(13,302)
Other Data:
Number of trading days
Number of trading loss days
Average firmwide VaR (in millions) (6)
14.92
10.46
Includes net interest revenues of $6.9 million, $3.3 million and $22.6 million for the quarters ended November 30, 2020, August 31, 2020 and November 30, 2019, respectively.
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.
Net revenues attributed to the Investment return in Jefferies Group LLC Asset Management have been disaggregated to separately present Investment return and Allocated net interest (see footnote 5 below). This disaggregation is intended 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 Jefferies Group LLC's credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods.
Includes net interest expense of $4.9 million, $6.0 million and $5.2 million for the quarters ended November 30, 2020, August 31, 2020 and November 30, 2019, respectively.
Allocated net interest represents the allocation of Jefferies Group LLC's long-term debt interest expense to Jefferies Group LLC's Asset Management, net of interest income on Jefferies Group LLC's Cash and cash equivalents and other sources of liquidity (refer to page 11).
VaR estimates the potential loss in value of Jefferies Group LLC's 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 7 "Management's Discussion and Analysis" in Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2019.
1,053,500
767,421
902,016
361,972
545,978
407,336
1,447,994
769,308
(103,330)
(14,617)
2,398,164
1,522,112
1,128,910
773,979
1,340,792
681,362
2,469,702
1,455,341
121,272
58,535
228,129
96,805
(48,484)
(40,548)
208,339
76,542
10.51
Includes net interest revenues of $12.3 million and $74.0 million for the twelve months ended November 30, 2020 and 2019, respectively.
Includes net interest expenses of $24.5 million and $8.9 million for the twelve months ended November 30, 2020 and 2019, respectively.
Financial Highlights
(Amounts in Millions, Except Where Noted)
Financial position:
Total assets (1)
47,752
46,660
43,516
Average total assets for the period (1)
56,503
54,654
52,539
Average total assets less goodwill and intangible assets for the period (1)
54,807
52,965
50,727
Cash and cash equivalents (1)
7,112
6,750
5,568
Cash and cash equivalents and other sources of liquidity (1) (2)
8,605
8,089
6,918
Cash and cash equivalents and other sources of liquidity - % total assets (1) (2)
Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1) (2)
Financial instruments owned (1)
17,686
17,556
16,363
Goodwill and intangible assets (1)
1,805
Right-of-use assets (1) (3)
Total equity (including noncontrolling interests) (1)
6,366
6,504
6,130
Total Jefferies Group LLC member's equity (1)
6,349
6,125
Tangible Jefferies Group LLC member's equity (1) (4)
4,543
4,311
Level 3 financial instruments:
Level 3 financial instruments owned (1) (5)
Level 3 financial instruments owned - % total assets (1) (5)
Level 3 financial instruments owned - % total financial instruments (1) (5)
Level 3 financial instruments owned - % tangible Jefferies Group LLC member's equity (1) (5)
Other data and financial ratios:
Total long-term capital (1) (6)
13,022
12,492
12,343
Leverage ratio (1) (7)
Tangible gross leverage ratio (1) (8)
Adjusted tangible gross leverage ratio (1) (3) (9)
Number of trading loss days
Average firmwide VaR (10)
Number of employees, at period end
3,922
3,893
3,815
N/A — Not Applicable
Financial Highlights - Footnotes
Amounts pertaining to November 30, 2020 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC's Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
At November 30, 2020, other sources of liquidity include high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities of $1,180 million, in aggregate, and $313 million, being the estimated amount of additional secured financing that could be reasonably expected to be obtained from Jefferies Group LLC's financial instruments that are currently not pledged after considering reasonable financing haircuts. The corresponding amounts included in other sources of liquidity at August 31, 2020 were $1,123 million and $216 million, respectively, and at November 30, 2019, were $973 million and $377 million, respectively.
Jefferies Group LLC adopted the new lease standard on December 1, 2019 using a modified retrospective transition approach. Accordingly, reported financial information for historical comparable periods is not revised and continues to be reported under the accounting standards in effect during those historical periods. We elected not to reassess whether existing contracts are or contain leases, or the lease classification and initial direct costs of existing leases upon transition. At transition on December 1, 2019, the adoption of this standard resulted in the recognition of right-of-use assets of $520 million, reflected in Premises and equipment in Jefferies Group LLC's Consolidated Statement of Financial Condition.
Tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) represents total Jefferies Group LLC member's equity less goodwill and identifiable intangible assets. We believe that tangible Jefferies Group LLC member's equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible equity, making these ratios meaningful for investors.
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.
At November 30, 2020, August 31, 2020 and November 30, 2019, total long-term capital includes Jefferies Group LLC's long-term debt of $6,656 million, $5,987 million and $6,214 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by amounts outstanding under the revolving credit facility, amounts from secured term loans and the amount of debt maturing in less than one year, as applicable.
Leverage ratio equals total assets divided by total equity.
Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible Jefferies Group LLC member's equity. The tangible gross leverage ratio is used by rating agencies in assessing Jefferies Group LLC's leverage ratio.
Adjusted tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets and right-of-use assets divided by tangible Jefferies Group LLC member's equity less right-of-use assets.
Merchant Banking Net Asset Overview
The table below presents estimated fair values of our largest Merchant Banking investments. We anticipate discontinuing this disclosure going forward as we believe the wind down of the portfolio diminishes the value of this information, which requires meaningful management time and expenditure to produce. We will continue to discuss developments at the portfolio companies as they arise.
As of November 30, 2020
($ Millions)
(Unaudited) Book Value
Estimated Fair Value (2)
Basis for Fair Value Estimate
Linkem
Income approach and market comparable method
Real estate assets (1)
Various
Oil and Gas (Vitesse and JETX)
Income approach, market comparable and market
transaction method
Investments in Public Companies
Mark-to-market (same for GAAP book value)
Total Portfolio
1,940
2,659
(1) Primarily HomeFed
(2) The following table reconciles financial results reported in accordance with U.S. GAAP to non-GAAP financial results. The table above contains non-GAAP financial information to aid investors in viewing our businesses and investments through the eyes of management while facilitating a comparison across historical periods. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, reported results prepared in accordance with U.S. GAAP.
Reconciliation of Book Value of Merchant Banking Investments to Estimated Fair Value
Fair Value Adjustments
(GAAP)
(Non-GAAP)
Non-GAAP Reconciliation
The following table reconciles Jefferies Financial Group 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.
Jefferies Financial Group Book Value and Shares Outstanding GAAP Reconciliation
The table below reconciles our book value to tangible book value and our common shares outstanding to fully diluted shares outstanding (in thousands, except per share amounts):
As Reported, November 30, 2020
Book value (GAAP)
9,403,893
Less: Intangibles assets, net and goodwill
(1,913,467)
Tangible book value (non-GAAP)
7,490,426
Common shares outstanding (GAAP)
249,751
Restricted stock units ("RSUs")
22,753
1,115
Fully diluted shares outstanding (non-GAAP) (1)
273,619
Book value per share outstanding
37.65
Tangible book value per fully diluted share outstanding
27.38
(1) Fully diluted shares outstanding exclude preferred shares as they are antidilutive. Fully diluted shares outstanding include vested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans.
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