Jefferies Announces Second Quarter 2022 Financial Results

Rhea-AI Summary

Jefferies reported Q2 net income of $114 million, or $0.45 per diluted share, marking a 68% decline year-over-year. Net revenues reached $1.13 billion, down 30% from the previous year, primarily driven by lower Investment Banking and Asset Management revenues. The company repurchased 8 million shares for $258 million, maintaining a book value per share of $44.34. Despite a challenging capital market, Jefferies aims for growth, maintaining a robust backlog and planning future buybacks of up to $250 million.

Positive

• Investment Banking advisory activity remains strong, supporting future growth.
• Share repurchase program authorized for an additional $250 million.

Negative

• Net income fell by 68% year-over-year.
• Total revenues declined 30% from the previous year.

NEW YORK--(BUSINESS WIRE)-- 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 $33.36 at 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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Jonathan Freedman 212.778.8913

Source: Care of Jefferies Financial Group Inc. and Jefferies Group LLC

FAQ

What were Jefferies' Q2 earnings results for 2022?

Jefferies reported a net income of $114 million, or $0.45 per diluted share, for Q2 2022.

How much did Jefferies repurchase in stock during Q2 2022?

Jefferies repurchased 8 million shares for $258 million at an average price of $32.20 per share.

What was the total revenue for Jefferies in Q2 2022?

Jefferies reported total net revenues of $1.13 billion for Q2 2022.

What is Jefferies' outlook for future capital markets activity?

Jefferies expects M&A and capital markets activity to pick up as market conditions stabilize.

What challenges did Jefferies face in Q2 2022?

Jefferies faced a challenging capital market environment, resulting in a significant decline in revenues and net income.