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Jefferies Announces Second Quarter 2022 Financial Results

JEF

Q2 Financial Highlights

  • Net income attributable to common shareholders of $114 million, or $0.45 per diluted share
  • Annualized return on adjusted tangible equity of 5.8%1
  • Total Investment Banking and Capital Markets and Asset Management Net Revenues of $1.13 billion
  • Investment Banking net revenues of $687 million
  • Combined Capital Markets net revenues of $416 million
  • Asset Management net revenues (before allocated net interest2) of $45 million
  • Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share; at May 31, 2022, we had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3; our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36 at May 31, 2022
  • Since January 2018, Jefferies has repurchased 145.3 million shares of common stock5 for $3.4 billion, or an average price of $23.16 per share; Jefferies has returned to shareholders $4.6 billion, or 46% of shareholders' equity and 61% of tangible shareholders' equity6 at January 1, 2018
  • Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock

"Our second quarter results are reasonable in the face of an extremely challenging capital markets environment, with some markets being all but shut to new issues. We achieved Investment Banking and Capital Markets and Asset Management net revenues of over $1.1 billion despite the limited new issue market, as well as some unrealized markdowns in our mortgage inventory and leveraged finance commitments. Similarly, we incurred increased expenses for conferences, travel and other marketing, which will primarily benefit future periods, as well as our $14 million charitable contributions to support Ukraine.

"Our Investment Banking advisory activity remains strong as our clients continue to look to Jefferies to support them through this transition in economic and market conditions. We believe our market position continues to strengthen and we will reap the benefit of this as conditions normalize and the new issue market picks up. Our backlog7 is consistent with last quarter's strong levels but execution remains dependent on market conditions. Based on our ongoing dialogues with our clients, we believe that M&A and capital markets activity will pick up when stability and visibility improve.

"We are deeply appreciative of our entire team that is persevering through this period of instability, working tirelessly to add to our significant pipeline of future deals while we wait for the market to open. We have invested heavily in human capital throughout Jefferies over the past decade, and in particular these past two years. We remain optimistic of our long-term growth and trajectory and look forward to continued success serving our ever increasing and incredibly loyal client base."

Richard Handler, CEO, and Brian Friedman, President

Quarterly Cash Dividend

The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on August 26, 2022 to record holders of Jefferies common shares on August 15, 2022.

Financial Summary

(Dollars in thousands, except per share amounts)

Three Months Ended

May 31,

Six Months Ended

May 31,

2022

2021 (8)

% Change

2022

2021 (8)

% Change

Net revenues:

Investment Banking and Capital Markets

$

1,098,378

$

1,598,862

(31

)%

$

2,580,196

$

3,586,358

(28

)%

Asset Management

31,147

50,675

(39

)%

91,103

279,877

(67

)%

Merchant Banking

238,255

296,815

(20

)%

427,790

563,819

(24

)%

Corporate

1,818

724

151

%

2,564

1,314

95

%

Consolidation Adjustments

(516

)

3,431

(115

)%

(656

)

6,081

(111

)%

Net revenues

$

1,369,082

$

1,950,507

(30

)%

$

3,100,997

$

4,437,449

(30

)%

Income before income taxes

$

166,541

$

474,139

(65

)%

$

558,873

$

1,274,924

(56

)%

Net income attributable to common shareholders

$

114,014

$

352,596

(68

)%

$

441,461

$

935,031

(53

)%

Diluted earnings per share

$

0.45

$

1.30

(65

)%

$

1.70

$

3.43

(50

)%

Weighted average diluted shares

251,979

271,092

261,494

271,948

Annualized return on adjusted tangible equity1

5.8

%

19.2

%

11.2

%

27.0

%

Highlights

Three months ended May 31, 2022

Six months ended May 31, 2022

  • Net income attributable to common shareholders of $114 million, or $0.45 per diluted share.
  • Repurchased 8.0 million shares of common stock for $258.0 million, or an average price of $32.20 per share, including 7.8 million shares of common stock in the open market for $250.0 million under our current Board of Directors authorization and 0.2 million shares of common stock for $8.1 million in connection with net-share settlements under our equity compensation plan.
  • We had 232.3 million shares outstanding and 259.6 million shares outstanding on a fully diluted basis3 at May 31, 2022. Our book value per share was $44.34 and tangible book value per fully diluted share4 was $33.36at May 31, 2022.
  • Our Board of Directors has authorized the repurchase in the future of an additional up to $250 million of our common stock.

  • Net income attributable to common shareholders of $441 million, or $1.70 per diluted share.
  • Repurchased 18.1 million shares of common stock for $622.2 million, or an average price of $34.47 per share, including 14.6 million shares of common stock in the open market for $500.0 million under our Board of Directors authorizations and 3.4 million shares of common stock for $122.2 million in connection with net-share settlements under our equity compensation plan.

Three months ended May 31, 2022

Six months ended May 31, 2022

Investment Banking and Capital Markets

Investment Banking and Capital Markets

  • Investment Banking net revenues were $687 million, as our advisory activity remained strong, while our debt and equity underwriting net revenues were lower than the same period last year, consistent with a reduction in industry-wide deal activity.
  • Combined Capital Markets net revenues of $416 million were lower as compared to prior year quarter. Equities net revenues benefited from record high commissions, partially offset by a challenging environment for risk assets, as our results were impacted by market volatility and global instability. Fixed Income net revenues reflect lower trading volumes, unrealized mark to market losses on certain mortgage inventory positions and a slowdown in securitization activity as a result of increased uncertainty in respect of inflation and interest rates.

  • Investment Banking net revenues of $1.69 billion were driven by significantly higher advisory net revenues, offset by lower net revenues in debt and equity underwriting.
  • Combined Capital Markets net revenues of $896 million were lower as compared to prior year period. Equities net revenues were significantly impacted by market volatility and global instability. Fixed Income results were impacted by lower trading volumes in the face of inflation concerns and interest rate uncertainty.

Asset Management

Asset Management

  • Asset Management net revenues reflects a difficult trading environment as compared to the prior year quarter.

  • Asset Management net revenues reflect higher asset management fees, offset by lower investment returns and lower revenues from strategic affiliates as compared to the prior year period.

Legacy Merchant Banking

Legacy Merchant Banking

  • Merchant Banking results reflect strong results at Idaho Timber, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies. We continue to work toward the realization of the Merchant Banking portfolio.

  • Merchant Banking results reflect strong results at Idaho Timber as favorable pricing that began in 2020 has continued for much of the second quarter, offset by mark-to-market hedging losses at Vitesse and a decline in the value of several of our investments in public companies.

* * * *

Amounts herein pertaining to May 31, 2022 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”). More information on our results of operations for the three and six months ended May 31, 2022 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC, which we expect to file on or about July 8, 2022.

This press release contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current views and include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” "would," or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward-looking statements may also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC. We undertake no obligation to update or revise any such forward-looking statement to reflect subsequent circumstances.

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

Notes

  1. Return on adjusted tangible equity (a non-GAAP financial measure) is defined as Jefferies' annualized adjusted net income (a non-GAAP financial measure) divided by our beginning of period adjusted tangible shareholders' equity (a non-GAAP financial measure). Refer to schedule on page 12 for reconciliation to U.S. GAAP amounts.
  2. Allocated net interest represents an allocation to Asset Management of certain of our long-term debt interest expense, net of interest income on our Cash and cash equivalents and other sources of liquidity. Allocated net interest has been disaggregated to increase transparency and to make clearer actual Investment return. Refer to Selected Financial and Statistical Information on pages 8 to 10.
  3. Shares outstanding on a fully diluted basis (a non-GAAP financial measure) is defined as Jefferies common shares outstanding plus restricted stock units, stock options, conversion of redeemable convertible preferred shares and other shares. Refer to schedule on page 13 for reconciliation to U.S. GAAP amounts.
  4. Tangible book value per fully diluted share (a non-GAAP financial measure) is defined as adjusted tangible book value (a non-GAAP financial measure) divided by shares outstanding on a fully diluted basis (a non-GAAP financial measure). Refer to schedule on page 13 for reconciliation to U.S. GAAP amounts.
  5. The 145.3 million common shares repurchased since January 2018 includes 141.2 million shares of common stock repurchased in the open market for $3.2 billion under our Board of Director authorizations and 4.1 million shares of common stock for $136.6 million repurchased in connection with net-share settlements under our equity compensation plan.
  6. Tangible shareholders' equity (a non-GAAP financial measure), is defined as Jefferies Financial Group shareholders' equity less Intangible assets, net and goodwill. Refer to schedule on page 12 for reconciliation to U.S. GAAP amounts.
  7. Backlog represents an estimate of our net revenues from expected future transactions. As an indicator of net revenues in a given period, it is subject to limitations. The time frame for the realization of revenues from these expected transactions varies and is influenced by factors we do not control. Transactions not included in the estimate may occur, and expected transactions may also be modified or cancelled.
  8. In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure.

Summary

(In thousands, except per share amounts) (Unaudited)

Three Months Ended

May 31,

Six Months Ended

May 31,

2022

2021

2022

2021

Net revenues

$

1,369,082

$

1,950,507

$

3,100,997

$

4,437,449

Income before income taxes and loss related to associated companies

$

188,241

$

497,665

$

610,558

$

1,309,018

Loss related to associated companies

(21,700

)

(23,526

)

(51,685

)

(34,094

)

Income before income taxes

166,541

474,139

558,873

1,274,924

Income tax provision

49,683

120,820

114,040

339,056

Net income

116,858

353,319

444,833

935,868

Net (income) loss attributable to the noncontrolling interests

(1,096

)

669

(127

)

1,412

Net loss attributable to the redeemable noncontrolling interests

323

234

896

1,003

Preferred stock dividends

(2,071

)

(1,626

)

(4,141

)

(3,252

)

Net income attributable to common shareholders

$

114,014

$

352,596

$

441,461

$

935,031

Basic earnings per common share attributable to Jefferies common shareholders:

Net income

$

0.46

$

1.33

$

1.73

$

3.51

Basic: weighted average shares

249,142

263,280

253,330

264,829

Diluted earnings per common share attributable to Jefferies common shareholders:

Net income

$

0.45

$

1.30

$

1.70

$

3.43

Diluted: weighted average shares

251,979

271,092

261,494

271,948

A summary of results for the three months ended May 31, 2022 is as follows (in thousands):

Investment

Banking and

Capital

Markets

Asset

Management

Merchant

Banking

Corporate

Parent

Company

Interest

Consolidation

Adjustments

Total

Net revenues

$

1,098,378

$

31,147

$

238,255

$

1,818

$

$

(516

)

$

1,369,082

Expenses:

Cost of sales

130,449

130,449

Compensation and benefits

522,860

10,816

39,319

5,482

578,477

Non-compensation expenses:

Floor brokerage and clearing fees

85,247

8,769

94,016

Selling, general and other expenses

279,442

10,122

32,834

6,043

(160

)

328,281

Interest expense

926

8,385

9,311

Depreciation and amortization

22,766

467

16,655

419

40,307

Total non-compensation expenses

387,455

19,358

50,415

6,462

8,385

(160

)

471,915

Total expenses

910,315

30,174

220,183

11,944

8,385

(160

)

1,180,841

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

188,063

973

18,072

(10,126

)

(8,385

)

(356

)

188,241

Loss related to associated companies

(21,700

)

(21,700

)

Income (loss) before income taxes

$

188,063

$

973

$

(3,628

)

$

(10,126

)

$

(8,385

)

$

(356

)

166,541

Income tax provision

49,683

Net income

$

116,858

A summary of results for the three months ended May 31, 2021 is as follows (in thousands):

Investment

Banking and

Capital

Markets (1)

Asset

Management (1)

Merchant

Banking (1)

Corporate

Parent

Company

Interest

Consolidation

Adjustments (1)

Total

Net revenues

$

1,598,862

$

50,675

$

296,815

$

724

$

$

3,431

$

1,950,507

Expenses:

Cost of sales

143,847

143,847

Compensation and benefits

778,284

21,671

24,252

7,035

831,242

Non-compensation expenses:

Floor brokerage and clearing fees

66,211

10,599

76,810

Selling, general and other expenses

293,276

10,768

32,631

4,910

(25

)

341,560

Interest expense

5,271

843

13,829

19,943

Depreciation and amortization

20,805

489

17,268

878

39,440

Total non-compensation expenses

385,563

21,856

50,742

5,788

13,829

(25

)

477,753

Total expenses

1,163,847

43,527

218,841

12,823

13,829

(25

)

1,452,842

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

435,015

7,148

77,974

(12,099

)

(13,829

)

3,456

497,665

Loss related to associated companies

(23,526

)

(23,526

)

Income (loss) before income taxes

$

435,015

$

7,148

$

54,448

$

(12,099

)

$

(13,829

)

$

3,456

474,139

Income tax provision

120,820

Net income

$

353,319

(1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure.

A summary of results for the six months ended May 31, 2022 is as follows (in thousands):

Investment

Banking and

Capital

Markets

Asset

Management

Merchant

Banking

Corporate

Parent

Company

Interest

Consolidation

Adjustments

Total

Net revenues

$

2,580,196

$

91,103

$

427,790

$

2,564

$

$

(656

)

$

3,100,997

Expenses:

Cost of sales

226,120

226,120

Compensation and benefits

1,247,136

30,752

78,642

11,631

1,368,161

Non-compensation expenses:

Floor brokerage and clearing fees

157,413

20,564

177,977

Selling, general and other expenses

520,378

21,976

59,504

11,980

(300

)

613,538

Interest expense

1,623

16,776

18,399

Depreciation and amortization

46,321

829

38,251

843

86,244

Total non-compensation expenses

724,112

43,369

99,378

12,823

16,776

(300

)

896,158

Total expenses

1,971,248

74,121

404,140

24,454

16,776

(300

)

2,490,439

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

608,948

16,982

23,650

(21,890

)

(16,776

)

(356

)

610,558

Loss related to associated companies

(51,685

)

(51,685

)

Income (loss) before income taxes

$

608,948

$

16,982

$

(28,035

)

$

(21,890

)

$

(16,776

)

$

(356

)

558,873

Income tax provision

114,040

Net income

$

444,833

A summary of results for the six months ended May 31, 2021 is as follows (in thousands):

Investment

Banking and

Capital

Markets (1)

Asset

Management (1)

Merchant

Banking (1)

Corporate

Parent

Company

Interest

Consolidation

Adjustments (1)

Total

Net revenues

$

3,586,358

$

279,877

$

563,819

$

1,314

$

$

6,081

$

4,437,449

Expenses:

Cost of sales

239,406

239,406

Compensation and benefits

1,887,979

44,456

48,781

22,569

2,003,785

Non-compensation expenses:

Floor brokerage and clearing fees

132,785

20,441

153,226

Selling, general and other expenses

522,009

22,932

59,151

9,579

(174

)

613,497

Interest expense

10,824

1,755

27,731

40,310

Depreciation and amortization

41,515

968

33,982

1,742

78,207

Total non-compensation expenses

707,133

44,341

94,888

11,321

27,731

(174

)

885,240

Total expenses

2,595,112

88,797

383,075

33,890

27,731

(174

)

3,128,431

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

991,246

191,080

180,744

(32,576

)

(27,731

)

6,255

1,309,018

Loss related to associated companies

(34,094

)

(34,094

)

Income (loss) before income taxes

$

991,246

$

191,080

$

146,650

$

(32,576

)

$

(27,731

)

$

6,255

1,274,924

Income tax provision

339,056

Net income

$

935,868

(1) In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Prior year amounts have been reclassified to conform to current segment disclosure.

Selected Financial and Statistical Information

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

Quarter Ended

May 31,

2022

February 28,

2022

May 31

2021 (1)

Investment Banking, Capital Markets and Asset Management Net Revenues:

Advisory

$

371,760

$

543,769

$

390,508

Equity underwriting

122,435

156,100

324,462

Debt underwriting

107,020

245,179

285,730

Total underwriting

229,455

401,279

610,192

Other investment banking (2)

85,746

58,134

82,461

Total investment banking

686,961

1,003,182

1,083,161

Equities

254,807

277,047

242,949

Fixed income

161,478

202,800

257,197

Total capital markets

416,285

479,847

500,146

Other (2)

(4,868

)

(1,211

)

15,555

Total Investment Banking and Capital Markets Net Revenues (3)

1,098,378

1,481,818

1,598,862

Asset management fees and revenues (4)

14,116

44,502

22,490

Investment return (5)

30,637

29,530

39,624

Allocated net interest (5)

(13,606

)

(14,076

)

(11,439

)

Total Asset Management Net Revenues

31,147

59,956

50,675

Total Investment Banking, Capital Markets and Asset Management Net Revenues

$

1,129,525

$

1,541,774

$

1,649,537

Investment Banking, Capital Markets and Asset Management Non-compensation Expenses:

Floor brokerage and clearing fees

$

94,016

$

83,961

$

76,810

Underwriting costs

13,191

8,128

33,031

Technology and communications

108,630

104,555

95,285

Occupancy and equipment rental

24,561

25,250

28,771

Business development

47,880

24,376

27,039

Professional services

52,192

51,118

54,240

Depreciation and amortization

23,233

23,917

21,294

Other

43,110

39,363

70,949

Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses

$

406,813

$

360,668

$

407,419

Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses:

Compensation and benefits

$

533,676

$

744,212

$

799,955

Compensation and benefits expenses as a percentage of net revenues

47.2

%

48.3

%

48.5

%

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

Six Months Ended May 31,

2022

2021 (1)

Investment Banking, Capital Markets and Asset Management Net Revenues:

Advisory

$

915,529

$

701,947

Equity underwriting

278,535

819,268

Debt underwriting

352,199

483,097

Total underwriting

630,734

1,302,365

Other investment banking (2)

143,880

165,483

Total investment banking

1,690,143

2,169,795

Equities

531,854

773,965

Fixed income

364,278

620,556

Total capital markets

896,132

1,394,521

Other (2)

(6,079

)

22,042

Total Investment Banking and Capital Markets Net Revenues (3)

2,580,196

3,586,358

Asset management fees and revenues (4)

58,618

88,799

Investment return (5)

60,167

212,916

Allocated net interest (5)

(27,682

)

(21,838

)

Total Asset Management Net Revenues

91,103

279,877

Total Investment Banking, Capital Markets and Asset Management Net Revenues

$

2,671,299

$

3,866,235

Investment Banking, Capital Markets and Asset Management Non-compensation Expenses:

Floor brokerage and clearing fees

$

177,977

$

153,226

Underwriting costs

21,319

69,167

Technology and communications

213,185

187,224

Occupancy and equipment rental

49,811

52,554

Business development

72,256

45,030

Professional services

103,310

92,876

Depreciation and amortization

47,150

42,483

Other

82,473

108,914

Total Investment Banking, Capital Markets and Asset Management Non-compensation Expenses

$

767,481

$

751,474

Investment Banking, Capital Markets and Asset Management Compensation and Benefits Expenses:

Compensation and benefits

$

1,277,888

$

1,932,435

Compensation and benefits expenses as a percentage of net revenues

47.8

%

50.0

%

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

Quarter Ended

May 31,

2022

February 28,

2022

May 31

2021 (1)

Other Data:

Number of trading days

64

61

64

Number of trading loss days (6)

10

8

20

Average VaR (in millions) (7)

$

11.84

$

12.12

$

15.77

Six Months Ended May 31,

2022

2021 (1)

Other Data:

Number of trading days

125

124

Number of trading loss days (6)

18

29

Average VaR (in millions) (7)

$

11.98

$

15.89

(1)

In the first quarter of 2022, we transferred certain Merchant Banking net assets to our Investment Banking and Capital Markets and Asset Management segments. Previously reported results are presented on a comparable basis.

(2)

In the first quarter of 2022, we also made a change to present our share of the net earnings of Berkadia Commercial Mortgage Holding LLC within Investment banking net revenues, which was previously presented within our Other business category. Previously reported results are presented on a comparable basis.

(3)

Allocated net interest is not separately disaggregated for Investment Banking and Capital Markets. This presentation is aligned to our Investment Banking and Capital Markets internal performance measurement.

(4)

Includes management and performance fees from funds and accounts managed by us as well as our share of fees received by affiliated asset management companies with which we have revenue and profit share arrangements, as well as earnings on our ownership interest in affiliated asset managers.

(5)

Allocated net interest represents an allocation to Asset Management of certain of our long-term debt interest expense, net of interest income on our Cash and cash equivalents and other sources of liquidity. Allocated net interest has been disaggregated to increase transparency and to make clearer actual Investment return. We believe that aggregating Investment return and Allocated net interest would obscure the Investment return by including an amount that is unique to our credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods.

(6)

Number of trading loss days is calculated based on trading activities in our Investment Banking and Capital Markets and Asset Management business segments.

(7)

VaR estimates the potential loss in value of trading positions in our Investment Banking and Capital Markets and Asset Management business segments due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended November 30, 2021.

Financial Data and Metrics

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

Quarter Ended

May 31,

2022

February 28,

2022

May 31

2021 (1)

Financial position (1):

Total assets

$

57,214

$

60,036

$

57,979

Total assets less goodwill and intangible assets for the period

$

55,329

$

58,142

$

56,066

Cash and cash equivalents

$

8,523

$

8,501

$

8,443

Financial instruments owned

$

20,248

$

21,633

$

19,938

Level 3 financial instruments owned (2)

$

740

$

640

$

735

Goodwill and intangible assets

$

1,885

$

1,895

$

1,912

Total equity

$

10,368

$

10,549

$

10,095

Total shareholders' equity

$

10,300

$

10,490

$

10,073

Tangible equity (3)

$

8,415

$

8,596

$

8,160

Other data and financial ratios:

Leverage ratio (1) (4)

5.5

5.7

5.7

Tangible gross leverage ratio (1) (5)

6.6

6.8

6.9

Number of employees, at period end

5,619

5,625

5,151

(1)

Amounts pertaining to May 31, 2022 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three and six months ended May 31, 2022.

(2)

Level 3 financial instruments represent those financial instruments classified as such under Accounting Standards Codification 820, accounted for at fair value and included within Financial instruments owned.

(3)

Tangible equity (a non-GAAP financial measure) represents total Jefferies shareholders' equity less goodwill and identifiable intangible assets. We believe that tangible equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible equity, making these ratios meaningful for investors.

(4)

Leverage ratio equals total assets divided by total equity.

(5)

Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio.

Non-GAAP Reconciliations

The following tables reconcile our non-GAAP measures to their respective U.S. GAAP measures. Management believes such non-GAAP measures are useful to investors as they allow them to view our results through the eyes of management, while facilitating a comparison across historical periods. These measures should not be considered a substitute for, or superior to, measures prepared in accordance with U.S. GAAP.

Return on Adjusted Tangible Equity Reconciliation

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

Three Months Ended May 31,

Six Months Ended May 31,

2022

2021

2022

2021

Net income attributable to common shareholders (GAAP)

$

114,014

$

352,596

$

441,461

$

935,031

Intangible amortization and impairment expense, net of tax

1,739

2,664

4,781

5,251

Adjusted net income (non-GAAP)

$

115,753

$

355,260

$

446,242

$

940,282

Annualized adjusted net income (non-GAAP)

$

463,012

$

1,421,040

$

892,484

$

1,880,564

February 28,

November 30,

2022

2021

2021

2020

Shareholders' equity (GAAP)

$

10,490,300

$

9,745,862

$

10,553,755

$

9,403,893

Less: Intangible assets, net and goodwill

(1,894,721

)

(1,914,322

)

(1,897,500

)

(1,913,467

)

Less: Deferred tax asset

(382,741

)

(410,420

)

(327,547

)

(393,687

)

Less: Weighted average quarter-to-date or year-to-date impact of cash dividends and share repurchases

(162,339

)

(36,759

)

(378,907

)

(142,189

)

Adjusted tangible shareholders' equity (non-GAAP)

$

8,050,499

$

7,384,361

$

7,949,801

$

6,954,550

Return on adjusted tangible equity

5.8

%

19.2

%

11.2

%

27.0

%

Jefferies Shareholders' Equity GAAP Reconciliation

The table below reconciles our shareholders' equity to tangible shareholders' equity (in thousands):

December 31, 2017

Shareholders' equity (GAAP)

$

10,105,957

Intangible assets, net and goodwill

(2,463,180

)

Tangible shareholders' equity (non-GAAP)

$

7,642,777

Jefferies Book Value and Shares Outstanding GAAP Reconciliation

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

May 31, 2022

Book value (GAAP)

$

10,300,177

Redeemable convertible preferred shares convertible to common shares (1)

125,000

Stock options (2)

120,089

Intangible assets, net and goodwill

(1,885,043

)

Adjusted tangible book value (non-GAAP)

$

8,660,223

Common shares outstanding (GAAP)

232,321

Restricted stock units ("RSUs")

16,629

Redeemable convertible preferred shares converted to common shares (1)

4,441

Stock options (2)

5,061

Other

1,141

Fully diluted shares outstanding (non-GAAP) (3)

259,593

Book value per share outstanding

$

44.34

Tangible book value per fully diluted share outstanding

$

33.36

(1)

Redeemable convertible preferred shares added to book value and fully diluted shares assume that the redeemable convertible preferred shares are converted to common shares.

(2)

Stock options added to book value are equal to the total number of stock options outstanding as of May 31, 2022 of 5,061,000 multiplied by the weighted average exercise price of $23.73 on May 31, 2022. Stock options added to fully diluted shares are equal to the total stock options outstanding on May 31, 2022.

(3)

Fully diluted shares outstanding include vested and unvested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans. Fully diluted shares outstanding also include all stock options and the additional common shares if our redeemable convertible preferred shares were converted to common shares.



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