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Jefferies Announces 2019 Financial Results

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Jefferies Financial Group Inc. (NYSE:JEF) today announced its financial results for the three and twelve month periods ended November 30, 2019.

Highlights for the three months ended November 30, 2019:

  • Net income attributable to Jefferies Financial Group common shareholders of $196 million, or $0.62 per diluted share, primarily reflecting the previously reported $205 million pre-tax gain from the sale of our remaining 31% interest in National Beef, partially offset by a non-cash fair value reduction of $69 million to our investment in The We Company. Results also reflect strong performance in Equities and Fixed Income sales and trading, solid Investment Banking advisory revenues, continued modest results in Leveraged Finance new issuance and solid results at certain of our merchant banking investments
  • Jefferies Group (Investment Banking, Capital Markets and Asset Management) pre-tax income of $24 million and net earnings of $23 million
    • Total Net Revenues of $748 million
    • Investment Banking Net Revenues of $393 million
    • Total Equities and Fixed Income Net Revenues of $363 million
    • Asset Management Revenues (before Allocated net interest1) of $(4) million
  • Merchant Banking pre-tax income of $238 million, reflecting strong performance by National Beef prior to the closing of the sale of our interest, the related pre-tax gain of $205 million, and solid results at certain of our merchant banking investments, offset by the $69 million fair value adjustment to reduce the value of our investment in We
  • Return of excess capital, including special dividend of Spectrum Brands Common Stock, share repurchases and cash dividends, totaling approximately $642 million
  • Jefferies Financial Group had parent company liquidity of $2.2 billion at November 30, 2019

Highlights for the twelve months ended November 30, 2019:

  • Net income attributable to Jefferies Financial Group common shareholders of $960 million, or $3.03 per diluted share, including the impact of a nonrecurring tax benefit of $545 million; adjusted net income of $415 million2, or $1.32 per diluted share2
  • Jefferies Group (Investment Banking, Capital Markets and Asset Management) pre-tax income of $325 million and net earnings of $244 million
    • Total Net Revenues of $3,113 million
    • Investment Banking Net Revenues of $1,522 million, down 20% from 2018 record of $1,914 million
    • Total Equities and Fixed Income Net Revenues of $1,455 million, up 19% from 2018
    • Asset Management Revenues (before Allocated net interest1) of $117 million
  • Merchant Banking pre-tax income of $267 million, reflecting strong operating performance from National Beef and Vitesse, the $205 million pre-tax gain related to the sale of our remaining 31% interest in National Beef and the $72 million gain related to the HomeFed transaction, offset by fair value adjustments to both our investment in We and some of our mark-to-market investments in public companies
  • Return of excess capital, including special dividend of Spectrum Brands common stock, share repurchases and cash dividends, totaling approximately $1.1 billion; share repurchases during the twelve months ended November 30, 2019 totaled 25.9 million shares for $506 million, or an average price of $19.52 per share

Please refer to the Jefferies Financial Group Annual Letter from our CEO and President for discussion of results and broader perspective on our strategy and outlook. We expect to file our Form 10-K on or about January 28, 2020.

Amounts herein pertaining to November 30, 2019 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, 2019 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).

1

Allocated net interest represents the allocation 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 its business lines. Refer to Jefferies Group LLC's summary of Net Revenues by Source on pages 8 and 9.

2

Jefferies Financial Group adjusted net income, a non-GAAP measure, is defined as Jefferies Financial Group's net income less accumulated other comprehensive income nonrecurring tax benefit. Jefferies Financial Group adjusted diluted earnings per share, a non-GAAP measure, is defined as Jefferies Financial Group's diluted earnings per share less accumulated other comprehensive income non-recurring tax benefit. Refer to schedule on page 12 for reconciliation to U.S. GAAP amounts.

Summary for Jefferies Financial Group Inc. and Subsidiaries

(In thousands, except per share amounts)

(Unaudited)

 

Three Months

Ended

November 30,

2019

 

Two Months

Ended

November 30,

2018

 

Twelve

Months

Ended

November 30,

2019

 

Eleven

Months

Ended

November 30,

2018

 

 

 

 

 

 

 

 

Net revenues

$

1,106,098

 

 

$

806,594

 

 

$

3,892,976

 

 

$

3,764,034

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes and income (loss) related to associated companies

$

151,320

 

 

$

(24,573

)

 

$

275,613

 

 

$

239,077

 

Income (loss) related to associated companies

81,229

 

 

(27,297

)

 

202,995

 

 

57,023

 

Income (loss) from continuing operations before income taxes

232,549

 

 

(51,870

)

 

478,608

 

 

296,100

 

Income tax provision (benefit)

38,671

 

 

(32,552

)

 

(483,955

)

 

19,008

 

Income (loss) from continuing operations

193,878

 

 

(19,318

)

 

962,563

 

 

277,092

 

Income from discontinued operations, net of income tax provision of $0, $0, $0 and $47,045

 

 

 

 

 

 

130,063

 

Gain on disposal of discontinued operations, net of income tax provision of $0, $0, $0 and $229,553

 

 

 

 

 

 

643,921

 

Net income (loss)

193,878

 

 

(19,318

)

 

962,563

 

 

1,051,076

 

Net (income) loss attributable to the noncontrolling interests

2,606

 

 

(233

)

 

1,847

 

 

12,975

 

Net (income) loss attributable to the redeemable noncontrolling interests

333

 

 

31

 

 

286

 

 

(37,263

)

Preferred stock dividends

(1,276

)

 

(851

)

 

(5,103

)

 

(4,470

)

Net income (loss) attributable to Jefferies Financial Group Inc. common shareholders

$

195,541

 

 

$

(20,371

)

 

$

959,593

 

 

$

1,022,318

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share attributable to Jefferies Financial Group Inc. common shareholders:

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.63

 

 

$

(0.06

)

 

$

3.07

 

 

$

0.82

 

Income from discontinued operations

 

 

 

 

 

 

0.27

 

Gain on disposal of discontinued operations

 

 

 

 

 

 

1.84

 

Net income (loss)

$

0.63

 

 

$

(0.06

)

 

$

3.07

 

 

$

2.93

 

 

 

 

 

 

 

 

 

Number of shares in calculation

310,266

 

 

329,101

 

 

310,694

 

 

347,261

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share attributable to Jefferies Financial Group Inc. common shareholders:

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.62

 

 

$

(0.06

)

 

$

3.03

 

 

$

0.81

 

Income from discontinued operations

 

 

 

 

 

 

0.26

 

Gain on disposal of discontinued operations

 

 

 

 

 

 

1.83

 

Net income (loss)

$

0.62

 

 

$

(0.06

)

 

$

3.03

 

 

$

2.90

 

 

 

 

 

 

 

 

 

Number of shares in calculation

316,566

 

 

329,101

 

 

317,032

 

 

351,275

 

A summary of results for the three months ended November 30, 2019 is as follows (in thousands):

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

747,802

 

 

$

347,210

 

 

$

10,699

 

 

$

 

 

$

387

 

 

$

1,106,098

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

422,548

 

 

19,036

 

 

16,273

 

 

 

 

 

 

457,857

 

Cost of sales

 

 

86,532

 

 

 

 

 

 

 

 

86,532

 

Floor brokerage and clearing fees

58,773

 

 

 

 

 

 

 

 

1,254

 

 

60,027

 

Interest expense

 

 

8,608

 

 

 

 

8,750

 

 

 

 

17,358

 

Depreciation and amortization

21,404

 

 

19,944

 

 

923

 

 

 

 

 

 

42,271

 

Selling, general and other expenses

221,206

 

 

55,783

 

 

14,963

 

 

 

 

(1,219

)

 

290,733

 

Total expenses

723,931

 

 

189,903

 

 

32,159

 

 

8,750

 

 

35

 

 

954,778

 

Income (loss) from continuing operations before income taxes and income related to associated companies

23,871

 

 

157,307

 

 

(21,460

)

 

(8,750

)

 

352

 

 

151,320

 

Income related to associated companies

 

 

81,161

 

 

 

 

 

 

68

 

 

81,229

 

Income (loss) from continuing operations before income taxes

$

23,871

 

 

$

238,468

 

 

$

(21,460

)

 

$

(8,750

)

 

$

420

 

 

232,549

 

Income tax provision from continuing operations

 

 

 

 

 

 

 

 

 

 

38,671

 

Net income

 

 

 

 

 

 

 

 

 

 

$

193,878

 

A summary of results for the two months ended November 30, 2018 is as follows (in thousands):

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

761,958

 

 

$

42,204

 

 

$

7,525

 

 

$

 

 

$

(5,093

)

 

$

806,594

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

408,504

 

 

17,662

 

 

7,177

 

 

 

 

 

 

433,343

 

Cost of sales

 

 

49,570

 

 

 

 

 

 

 

 

49,570

 

Floor brokerage and clearing fees

53,260

 

 

 

 

 

 

 

 

(842

)

 

52,418

 

Interest expense

 

 

4,796

 

 

 

 

9,839

 

 

 

 

14,635

 

Depreciation and amortization

17,467

 

 

9,920

 

 

570

 

 

 

 

 

 

27,957

 

Selling, general and other expenses

204,764

 

 

41,688

 

 

7,811

 

 

 

 

(1,019

)

 

253,244

 

Total expenses

683,995

 

 

123,636

 

 

15,558

 

 

9,839

 

 

(1,861

)

 

831,167

 

Income (loss) from continuing operations before income taxes and loss related to associated companies

77,963

 

 

(81,432

)

 

(8,033

)

 

(9,839

)

 

(3,232

)

 

(24,573

)

Loss related to associated companies

 

 

(27,297

)

 

 

 

 

 

 

 

(27,297

)

Income (loss) from continuing operations before income taxes

$

77,963

 

 

$

(108,729

)

 

$

(8,033

)

 

$

(9,839

)

 

$

(3,232

)

 

(51,870

)

Income tax benefit from continuing operations

 

 

 

 

 

 

 

 

 

 

(32,552

)

Net loss

 

 

 

 

 

 

 

 

 

 

$

(19,318

)

A summary of results for the twelve months ended November 30, 2019 is as follows (in thousands):

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

3,112,530

 

 

$

746,369

 

 

$

32,833

 

 

$

 

 

$

1,244

 

 

$

3,892,976

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,684,054

 

 

82,832

 

 

58,005

 

 

 

 

 

 

1,824,891

 

Cost of sales

 

 

319,641

 

 

 

 

 

 

 

 

319,641

 

Floor brokerage and clearing fees

227,471

 

 

 

 

 

 

 

 

(4,331

)

 

223,140

 

Interest expense

 

 

34,129

 

 

 

 

53,048

 

 

 

 

87,177

 

Depreciation and amortization

79,204

 

 

70,192

 

 

3,475

 

 

 

 

 

 

152,871

 

Selling, general and other expenses

797,132

 

 

175,650

 

 

39,820

 

 

 

 

(2,959

)

 

1,009,643

 

Total expenses

2,787,861

 

 

682,444

 

 

101,300

 

 

53,048

 

 

(7,290

)

 

3,617,363

 

Income (loss) from continuing operations before income taxes and income related to associated companies

324,669

 

 

63,925

 

 

(68,467

)

 

(53,048

)

 

8,534

 

 

275,613

 

Income related to associated companies

 

 

202,927

 

 

 

 

 

 

68

 

 

202,995

 

Income (loss) from continuing operations before income taxes

$

324,669

 

 

$

266,852

 

 

$

(68,467

)

 

$

(53,048

)

 

$

8,602

 

 

478,608

 

Income tax benefit from continuing operations

 

 

 

 

 

 

 

 

 

 

(483,955

)

Net income

 

 

 

 

 

 

 

 

 

 

$

962,563

 

A summary of results for the eleven months ended November 30, 2018 is as follows (in thousands):

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

3,183,376

 

 

$

571,831

 

 

$

22,300

 

 

$

 

 

$

(13,473

)

 

$

3,764,034

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,736,264

 

 

77,169

 

 

50,222

 

 

 

 

(873

)

 

1,862,782

 

Cost of sales

 

 

307,071

 

 

 

 

 

 

 

 

307,071

 

Floor brokerage and clearing fees

189,068

 

 

 

 

 

 

 

 

(4,858

)

 

184,210

 

Interest expense

 

 

35,159

 

 

 

 

54,090

 

 

 

 

89,249

 

Depreciation and amortization

68,296

 

 

48,852

 

 

3,169

 

 

 

 

 

 

120,317

 

Selling, general and other expenses

780,081

 

 

150,115

 

 

35,049

 

 

 

 

(3,917

)

 

961,328

 

Total expenses

2,773,709

 

 

618,366

 

 

88,440

 

 

54,090

 

 

(9,648

)

 

3,524,957

 

Income (loss) from continuing operations before income taxes and income related to associated companies

409,667

 

 

(46,535

)

 

(66,140

)

 

(54,090

)

 

(3,825

)

 

239,077

 

Income related to associated companies

 

 

57,023

 

 

 

 

 

 

 

 

57,023

 

Income (loss) from continuing operations before income taxes

$

409,667

 

 

$

10,488

 

 

$

(66,140

)

 

$

(54,090

)

 

$

(3,825

)

 

296,100

 

Income tax provision from continuing operations

 

 

 

 

 

 

 

 

 

 

19,008

 

Income from discontinued operations, net of income tax provision

 

 

 

 

 

 

 

 

 

 

130,063

 

Gain on disposal of discontinued operations, net of income tax provision

 

 

 

 

 

 

 

 

 

 

643,921

 

Net income

 

 

 

 

 

 

 

 

 

 

$

1,051,076

 

The following financial tables provide information for the results of Jefferies Group LLC and should be read in conjunction with Jefferies Group LLC's Quarterly Report on Form 10-Q for the quarter ended August 31, 2019 and Annual Report on Form 10-K for the year ended November 30, 2018. Amounts herein pertaining to November 30, 2019 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, 2019.

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

November 30, 2019

 

August 31, 2019

 

November 30, 2018

Revenues:

 

 

 

 

 

Commissions and other fees (1)

$

182,466

 

 

$

171,003

 

 

$

181,271

 

Principal transactions (2)

135,981

 

 

147,993

 

 

25,713

 

Investment banking

400,513

 

 

412,533

 

 

504,589

 

Asset management fees and revenues (2)

3,935

 

 

4,220

 

 

5,084

 

Interest

333,507

 

 

383,596

 

 

336,605

 

Other (1)

17,134

 

 

22,286

 

 

44,681

 

Total revenues

1,073,536

 

 

1,141,631

 

 

1,097,943

 

Interest expense

325,734

 

 

364,472

 

 

335,985

 

Net revenues

747,802

 

 

777,159

 

 

761,958

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

Compensation and benefits

422,548

 

 

411,936

 

 

408,504

 

 

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

 

 

Floor brokerage and clearing fees

58,773

 

 

54,247

 

 

53,260

 

Technology and communications

87,931

 

 

86,649

 

 

83,320

 

Occupancy and equipment rental

31,885

 

 

29,300

 

 

25,809

 

Business development

34,728

 

 

36,526

 

 

39,523

 

Professional services

45,296

 

 

42,379

 

 

38,170

 

Underwriting costs

14,617

 

 

14,647

 

 

16,485

 

Other

28,153

 

 

18,400

 

 

18,924

 

Total non-compensation expenses

301,383

 

 

282,148

 

 

275,491

 

Total non-interest expenses

723,931

 

 

694,084

 

 

683,995

 

Earnings before income taxes

23,871

 

 

83,075

 

 

77,963

 

Income tax expense

495

 

 

18,250

 

 

16,313

 

Net earnings

23,376

 

 

64,825

 

 

61,650

 

Net earnings (loss) attributable to noncontrolling interests

(1,784

)

 

(143

)

 

257

 

Net earnings attributable to Jefferies Group LLC

$

25,160

 

 

$

64,968

 

 

$

61,393

 

 

 

 

 

 

 

 

Pre-tax operating margin

3.2

%

 

10.7

%

 

10.2

%

Effective tax rate

2.1

%

 

22.0

%

 

20.9

%

(1)

 

In the third quarter of 2019, Jefferies Group LLC reorganized the presentation of certain other fees, primarily related to prime brokerage services offered to clients. Jefferies Group LLC's Consolidated Statement of Earnings reflects the reclassification of revenues of $7.6 million from Other revenues to Commissions and other fees for the three months ended November 30, 2018. There is no impact on Total revenues as a result of this change in presentation.

(2)

In the fourth quarter of 2019, Jefferies Group LLC reorganized the presentation of revenues from arrangements which entitle us to certain portions of revenues and/or profits of strategic asset management partners. Such arrangements did not exist prior to the first quarter of 2019 and Jefferies Group LLC's Consolidated Statement of Earnings reflects the reclassification of revenues of $0.9 million from Principal transactions revenues to Asset management fees and revenues for the three months ended August 31, 2019. There is no impact on Total revenues as a result of this change in presentation.

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

Twelve Months Ended

 

November 30,

2019

November 30,

2018

Revenues:

 

 

Commissions and other fees (1)

$

676,309

 

$

663,465

 

Principal transactions

766,192

 

524,296

 

Investment banking

1,528,729

 

1,910,203

 

Asset management fees and revenues

20,285

 

21,214

 

Interest

1,496,529

 

1,207,095

 

Other (1)

96,488

 

103,359

 

Total revenues

4,584,532

 

4,429,632

 

Interest expense

1,472,002

 

1,246,256

 

Net revenues

3,112,530

 

3,183,376

 

 

 

 

Non-interest expenses:

 

 

Compensation and benefits

1,684,054

 

1,736,264

 

 

 

 

Non-compensation expenses:

 

 

Floor brokerage and clearing fees

227,471

 

189,068

 

Technology and communications

335,395

 

305,655

 

Occupancy and equipment rental

119,472

 

100,952

 

Business development

138,158

 

163,756

 

Professional services

162,668

 

139,885

 

Underwriting costs

50,662

 

64,317

 

Other

69,981

 

73,812

 

Total non-compensation expenses

1,103,807

 

1,037,445

 

Total non-interest expenses

2,787,861

 

2,773,709

 

Earnings before income taxes

324,669

 

409,667

 

Income tax expense

80,284

 

250,650

 

Net earnings

244,385

 

159,017

 

Net earnings (loss) attributable to noncontrolling interests

(1,644

)

256

 

Net earnings attributable to Jefferies Group LLC

$

246,029

 

$

158,761

 

 

 

 

Pre-tax operating margin

10.4

%

12.9

%

Effective tax rate (2)

24.7

%

61.2

%

(1)

 

In the third quarter of 2019, Jefferies Group LLC reorganized the presentation of certain other fees, primarily related to prime brokerage services offered to clients. Jefferies Group LLC's Consolidated Statement of Earnings reflects the reclassification of revenues of $28.3 million from Other revenues to Commissions and other fees for the twelve months ended November 30, 2018. There is no impact on Total revenues as a result of this change in presentation.

(2)

 

The effective tax rate for the twelve months ended November 30, 2018 includes an estimated provisional tax charge of approximately $165 million as a result of the Tax Cuts and Jobs Act ("Tax Act").

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

November 30,

2019

 

August 31, 2019

 

November 30,

2018

Net Revenues by Source:

 

 

 

 

 

Equities

$

200,128

 

 

$

193,229

 

 

$

164,086

 

Fixed income

163,016

 

 

148,334

 

 

86,826

 

Total sales and trading

363,144

 

 

341,563

 

 

250,912

 

 

 

 

 

 

 

 

Equity

105,119

 

 

97,494

 

 

127,942

 

Debt

100,359

 

 

101,689

 

 

152,335

 

Capital markets

205,478

 

 

199,183

 

 

280,277

 

Advisory

195,035

 

 

213,350

 

 

224,312

 

Other investment banking

(7,501

)

 

(9,108

)

 

17,523

 

Total investment banking

393,012

 

 

403,425

 

 

522,112

 

 

 

 

 

 

 

 

Other

4,948

 

 

12,374

 

 

22,448

 

 

 

 

 

 

 

 

Total Capital Markets (1) (2)

761,104

 

 

757,362

 

 

795,472

 

 

 

 

 

 

 

 

Asset management fees and revenues (3)

3,935

 

 

4,220

 

 

5,084

 

Investment return (3) (4) (5)

(7,637

)

 

24,866

 

 

(23,783

)

Allocated net interest (4) (6)

(9,600

)

 

(9,289

)

 

(14,815

)

Total Asset Management

(13,302

)

 

19,797

 

 

(33,514

)

 

 

 

 

 

 

 

Net Revenues

$

747,802

 

 

$

777,159

 

 

$

761,958

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

Number of trading days

63

 

 

64

 

 

63

 

Number of trading loss days

10

 

 

10

 

 

18

 

 

 

 

 

 

 

 

Average firmwide VaR (in millions) (7)

$

7.70

 

 

$

9.71

 

 

$

9.59

 

(1)

 

Includes net interest revenue of $22.6 million, $30.4 million and $19.7 million for the quarters ended November 30, 2019, August 31, 2019, and November 30, 2018, respectively.

(2)

 

Allocated net interest is not separately disaggregated in presenting our Capital Markets reportable segment within Jefferies Group LLC's Net Revenues by Source. This presentation is aligned to our Capital Markets internal performance measurement.

(3)

 

In the fourth quarter of 2019, Jefferies Group LLC reorganized the presentation of revenues from arrangements which entitle us to certain portions of revenues and/or profits of strategic asset management partners. Such arrangements did not exist prior to the first quarter of 2019 and Jefferies Group LLC's Net Revenues by Source reflects the reclassification of revenues of $0.9 million from Investment return revenues to Asset management fees and revenues for the three months ended August 31, 2019. There is no impact on Total Asset Management revenues as a result of this change in presentation.

(4)

 

Beginning with the first quarter of 2019, Net revenues attributed to the Investment return in Jefferies Group LLC's Asset Management reportable segment have been disaggregated to separately present Investment return and Allocated net interest (see footnotes 5 and 6). This disaggregation is intended to increase transparency and to make clearer actual Investment return. We offer third-party investors the opportunity to co-invest in our asset management funds and separately managed accounts alongside Jefferies Group LLC. 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, none of which are pertinent to the Investment returns generated by the performance of the portfolio.

(5)

 

Includes net interest expense of $5.2 million, $2.0 million and $4.2 million for the quarters ended November 30, 2019, August 31, 2019, and November 30, 2018, respectively.

(6)

 

Allocated net interest represents the allocation 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 (refer to page 10).

(7)

 

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.

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

Twelve Months Ended

 

 

November 30,

2019

 

November 30,

2018

Net Revenues by Source:

 

 

 

Equities

$

773,979

 

 

$

665,557

 

Fixed income

681,362

 

 

559,712

 

Total sales and trading

1,455,341

 

 

1,225,269

 

 

 

 

 

 

Equity

361,972

 

 

454,555

 

Debt

407,336

 

 

635,606

 

Capital markets

769,308

 

 

1,090,161

 

Advisory

767,421

 

 

820,042

 

Other investment banking

(14,617

)

 

3,638

 

Total investment banking

1,522,112

 

 

1,913,841

 

 

 

 

 

 

Other

58,535

 

 

45,316

 

 

 

 

 

 

Total Capital Markets (1) (2)

3,035,988

 

 

3,184,426

 

 

 

 

 

 

Asset management fees and revenues

20,285

 

 

21,214

 

Investment return (3) (4)

96,805

 

 

16,971

 

Allocated net interest (3) (5)

(40,548

)

 

(39,235

)

Total Asset Management

76,542

 

 

(1,050

)

 

 

 

 

 

Net Revenues

$

3,112,530

 

 

$

3,183,376

 

 

 

 

 

 

Other Data:

 

 

 

Number of trading days

250

 

 

252

 

Number of trading loss days

33

 

 

45

 

 

 

 

 

 

Average firmwide VaR (in millions) (6)

$

8.79

 

 

$

7.56

 

(1)

Includes net interest revenue of $74.0 million and $8.5 million for the twelve months ended November 30, 2019 and 2018, respectively.

(2)

Allocated net interest is not separately disaggregated in presenting our Capital Markets reportable segment within Jefferies Group LLC's Net Revenues by Source. This presentation is aligned to our Capital Markets internal performance measurement.

(3)

Beginning with the first quarter of 2019, Net revenues attributed to the Investment return in Jefferies Group LLC's Asset Management reportable segment have been disaggregated to separately present Investment return and Allocated net interest (see footnotes 4 and 5). This disaggregation is intended to increase transparency and to make clearer actual Investment return. We offer third-party investors the opportunity to co-invest in our asset management funds and separately managed accounts alongside Jefferies Group LLC. 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, none of which are pertinent to the Investment returns generated by the performance of the portfolio.

(4)

Includes net interest expense of $8.9 million and $8.4 million for the twelve months ended November 30, 2019 and 2018, respectively.

(5)

Allocated net interest represents the allocation 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 (refer to page 10).

(6)

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.

Jefferies Group LLC and Subsidiaries

Financial Highlights

(Amounts in Millions, Except Where Noted)

(Unaudited)

 

 

 

 

 

 

 

Quarter Ended

 

November 30,

2019

 

August 31, 2019

 

November 30,

2018

Financial position:

 

 

 

 

 

Total assets (1)

$

43,516

 

 

$

43,094

 

 

$

41,169

 

Average total assets for the period (1)

$

52,539

 

 

$

53,097

 

 

$

49,427

 

Average total assets less goodwill and intangible assets for the period (1)

$

50,727

 

 

$

51,281

 

 

$

47,653

 

 

 

 

 

 

 

Cash and cash equivalents (1)

$

5,568

 

 

$

4,665

 

 

$

5,146

 

Cash and cash equivalents and other sources of liquidity (1) (2)

$

6,918

 

 

$

6,074

 

 

$

6,604

 

Cash and cash equivalents and other sources of liquidity - % total assets (1) (2)

15.9

%

 

14.1

%

 

16.0

%

Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1) (2)

16.6

%

 

14.7

%

 

16.8

%

 

 

 

 

 

 

Financial instruments owned (1)

$

16,363

 

 

$

16,371

 

 

$

16,400

 

Goodwill and intangible assets (1)

$

1,814

 

 

$

1,811

 

 

$

1,825

 

 

 

 

 

 

 

Total equity (including noncontrolling interests) (1)

$

6,130

 

 

$

6,190

 

 

$

6,182

 

Total Jefferies Group LLC member's equity (1)

$

6,125

 

 

$

6,183

 

 

$

6,180

 

Tangible Jefferies Group LLC member's equity (1) (3)

$

4,311

 

 

$

4,372

 

 

$

4,356

 

 

 

 

 

 

 

Level 3 financial instruments:

 

 

 

 

 

Level 3 financial instruments owned (1) (4)

$

307

 

 

$

363

 

 

$

337

 

Level 3 financial instruments owned - % total assets (1) (4)

0.7

%

 

0.8

%

 

0.8

%

Level 3 financial instruments owned - % total financial instruments (1) (4)

1.9

%

 

2.2

%

 

2.1

%

Level 3 financial instruments owned - % tangible Jefferies Group LLC member's equity (1) (4)

7.1

%

 

8.3

%

 

7.7

%

 

 

 

 

 

 

Other data and financial ratios:

 

 

 

 

 

Total long-term capital (1) (5)

$

12,343

 

 

$

12,219

 

 

$

11,840

 

Leverage ratio (1) (6)

7.1

 

 

7.0

 

 

6.7

 

Tangible gross leverage ratio (1) (7)

9.7

 

 

9.4

 

 

9.0

 

 

 

 

 

 

 

Number of trading days

63

 

 

64

 

 

63

 

Number of trading loss days

10

 

 

10

 

 

18

 

Average firmwide VaR (8)

$

7.70

 

 

$

9.71

 

 

$

9.59

 

 

 

 

 

 

 

Number of employees, at period end

3,815

 

 

3,776

 

 

3,596

 

Jefferies Group LLC and Subsidiaries

Financial Highlights - Footnotes

 

 

 

 

 

 

 

 

(1)

Amounts pertaining to November 30, 2019 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, 2019.

(2)

At November 30, 2019, 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 $973 million, in aggregate, and $377 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, 2019 were $1,063 million and $345 million, respectively, and at November 30, 2018, were $959 million and $499 million, respectively.

(3)

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.

(4)

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.

(5)

At November 30, 2019, August 31, 2019 and November 30, 2018, total long-term capital includes Jefferies Group LLC's long-term debt of $6,214 million, $6,030 million and $5,657 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.

(6)

Leverage ratio equals total assets divided by total equity.

(7)

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.

(8)

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.

Jefferies Financial Group Inc.

Non-GAAP Reconciliations

The following tables reconcile 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 Net Income and Earnings Per Share GAAP Reconciliation

Reconciliation of Jefferies Financial Group net income to adjusted net income (a non-GAAP measure) and diluted earnings per share to adjusted diluted earnings per share (a non-GAAP measure) (in thousands, except per share amounts):

 

 

Twelve months ended

November 30, 2019

 

 

 

Jefferies Financial Group net income (GAAP)

 

$

959,593

 

Accumulated other comprehensive income tax benefit (1)

 

(544,583

)

Jefferies Financial Group adjusted net income (non-GAAP)

 

$

415,010

 

 

 

 

Jefferies Financial Group diluted earnings per share (GAAP)

 

$

3.03

 

Accumulated other comprehensive income tax benefit (1)

 

(1.71

)

Jefferies Financial Group adjusted diluted earnings per share (non-GAAP)

 

$

1.32

 

 

 

 

(1)

During the second quarter of 2019, in connection with the closing of our corporate available for sale portfolio, we realized a non-cash tax benefit of $545 million. This tax benefit was generated primarily through activity during 2008 to 2010 and since then has remained an unrealized balance within equity until the liquidation of the portfolio. This realization did not impact total equity, as the increase in retained earnings was offset by a corresponding decrease in accumulated other comprehensive income.

 

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