Outstanding First Half…Let’s Pace Ourselves

We just released our Second Quarter results below and we want to thank each of you for your amazing hard work and dedication to Jefferies and our clients. We are now one month past halfway through our fiscal year and, while nobody knows what the future will hold, it should be obvious to all of you that we are in the best position possible to continue our 2020 journey towards an extremely successful collective achievement.

We would like to leave you with two thoughts. First, we must keep our focus, intelligence, guarded paranoia, empathy and humility intact as we navigate the remainder of the year. We have each other, our clients and our firm to protect, and it is up to each one of us to give it our all in doing so.

Secondly and even more importantly, we need you as our partners to take breaks, vacations, and quality time away from your Jefferies commitments. We realize that for most of us there is no place to really go and it is easy on a day off to just “check in for a moment” and then get fully connected into all of our problems, issues, challenges and opportunities. Don’t do it. We all need to pace ourselves. We all need days (weeks) when we are fully off the grid and able to recharge our batteries and souls. We are asking each of you to make the decision for yourselves when you need time off. We are asking each of you to point out to your co-workers when you think they need time off. We are asking each of you to volunteer to carry the burden for each other when someone is unplugged. We are asking every manager to not just encourage, but to force this to happen. Zero guilt. The world will keep turning and Jefferies will be here for you when you are ready to return. We will not make it together to our destiny if we start to burn out along the way, so we owe it to each other to take the time to breathe, enjoy our families, and do whatever it is that is possible in the world we live in today that doesn’t have to do with Jefferies.

Thank you all again. Our firm is made up of superstars and we could not be more proud. As we have done for the first half of the year, we are committed to continuing to: 

1. Take it one day at a time
2. Communicate often, honestly and transparently
3. Be available at a moment’s notice (at least one of us will be when the other is on a break)
4. Do our best to make sure each of you and our clients have everything possible to succeed, despite the vast uncertainty and volatility we may encounter each day. 

Enjoy the Summer, 

Rich and Brian

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For Immediate Release

Jefferies Financial Group Announces Second Quarter 2020 Financial Results —
Jefferies Group LLC Records Record Six Months Revenues
and Net Income for First Half 2020

New York, New York — June 29, 2020 — Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and six month periods ended May 31, 2020.  In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.15 per Jefferies common share payable on August 28, 2020 to record holders of Jefferies common shares on August 17, 2020.  The Jefferies Board of Directors also increased the Company’s stock buyback authorization by $177 million to a total of $250 million.  We expect to file our Form 10-Q on or about July 9, 2020.

Highlights for the three months ended May 31, 2020:

• Jefferies Group LLC recorded quarterly net revenues of $1,034 million, pre-tax income of $173 million, net earnings of $129 million and return on tangible equity of 11.6%1
  • Record quarterly combined Capital Markets net revenues of $730 million; Equities net revenues of $237 million and record Fixed Income net revenues of $493 million
  • Investment Banking net revenues of $316 million, including Advisory net revenues of $182 million
  • Asset Management revenues (before allocated net interest2) of $19 million
• Merchant Banking recorded a pre-tax loss of $75 million, reflecting the positive impact of hedging gains at Vitesse, solid results at Idaho Timber and a record quarter for FXCM, that were more than offset by a $44 million non-cash charge to write-down the value of our investment in the We Company in light of Softbank’s withdrawal of its $3 billion tender offer and We’s current performance outlook, a total of $12 million in write-downs of HomeFed’s interests in a hotel and a retail center significantly impacted by the external events of the second quarter and a continued operating loss at Linkem, which experienced increased subscriber growth and network usage
• Net income attributable to Jefferies Financial Group common shareholders was $45 million, or $0.16 per diluted share
• We repurchased 10.1 million shares for $166 million, or an average price of $16.42 per share, including the 8.0 million shares repurchased early in March and previously disclosed; a further $250 million now authorized for repurchase; 267.1 million shares outstanding and 290.7 million shares outstanding on a fully diluted basis3 at May 31, 2020; Jefferies book value per share was $34.92 and tangible book value per fully diluted share4  was $25.51 at the end of the second quarter
• Jefferies Financial Group had parent company liquidity of $1.6 billion at May 31, 2020.  Jefferies Group had a liquidity buffer of $6.5 billion of cash and unencumbered liquid collateral at May 31, 2020, which represented 15% of its total balance sheet.

Highlights for the six months ended May 31, 2020:

• Jefferies Group recorded record six months net revenues of $2,205 million, record pre-tax income of $408 million, record net earnings of $300 million and return on tangible equity of 14.1%5
  • Investment Banking net revenues of $894 million, including record six months Advisory net revenues of $525 million
  • Record combined six months Capital Markets net revenues of $1,224 million, including record Equities net revenues of $483 million and record Fixed Income net revenues of $741 million
  • Asset Management revenues (before allocated net interest2) of $51 million
• Merchant Banking pre-tax loss of $128 million, reflecting positive contributions from Vitesse, Idaho Timber and FXCM, and a gain of about $60 million from effective short-term hedges against mark-to-market and fair value decreases, more than offset by a $44 million non-cash charge to write-down our investment in We, $45 million in non-cash charges to mark-to-market investments in public companies, $68 million in non-cash write-downs related to real estate investments at HomeFed, and a $33 million non-cash charge to write-down our investment in JETX
• Net income attributable to Jefferies Financial Group common shareholders of $158 million, or $0.53 per diluted share
• Repurchases of 24.8 million shares for $492 million, or an average price of $19.85 per share

Rich Handler, our CEO, and Brian Friedman, our President, said:

“From the very start of our second fiscal quarter on March 1st and for the duration of our second quarter, all of us at Jefferies Group endured a surreal environment unlike anything we could ever have imagined.  The most challenging health crisis to overtake the world in over a century caused a shutdown of a large portion of the global economy.  We at Jefferies immediately pivoted to operate from nearly 4,000 different home offices across the globe, as we worked tirelessly to keep our team safe, do our best to help our clients navigate unprecedented volatility and opacity, and protect Jefferies from the incredible financial storm.  Peg Broadbent, our longstanding esteemed Jefferies Group CFO tragically died from complications of the Coronavirus in March.  We lost an incredible individual whom we all cherished and miss dearly.  In Peg’s memory, our clients, employees and firm came together to contribute $9.25 million to over 85 front line charities aiding those most affected by COVID-19 and in greatest need.

“Despite the incredibly challenging, volatile and sad environment, our Jefferies team not only survived the quarter, but truly achieved remarkable results and continued momentum across our products, services and geographies.  We collectively demonstrated the distinct value to our clients and our shareholders of a diversified and integrated investment banking and capital markets platform with a true global reach.  Without hyperbole, the Jefferies team operated at peak performance and the two of us are in awe of our team that was remarkably resilient, passionately dedicated and impeccably skilled in serving our clients exactly when they needed Jefferies most.  We have been through many challenging periods in our combined 50 years at Jefferies, and all we can say at this time to everyone at Jefferies is ‘thank you for being truly the best.’

“Our second quarter ended with the world beginning to come to grips with the racism, hatred, bigotry and unfairness that sadly still grips much of our nation and world today.  As we move forward in our second half of 2020, we at Jefferies will be working to fully acknowledge and attempt to do our part to help eradicate the pain of racism so many African Americans (and others) have been living with for too long.  We will listen intently and with open eyes, ears and hearts to learn how we can best be part of the solution.  We are committed to action and results that will help make the world a better and more equal place for all people, and fully recognize that this likely will be an ongoing battle that will require long-term commitment and relentless dedication and passion, traits we have honed together in building Jefferies.

“Finally, we implore everyone to wear a mask when out in public.  When you wear a mask, you do it out of respect for your fellow humans and we believe masks (and testing) will be critical to allowing all of us to protect those most at risk as our medical experts work tirelessly to develop the needed therapeutics, vaccines and methods of delivering them in mass quantities.  Working together will allow us all to best navigate this incredibly difficult period and bridge our path to a more normal way of life that we will never take for granted.”

*    *    *    *

Amounts herein pertaining to May 31, 2020 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 month periods ended May 31, 2020 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC.

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include statements about our future and statements that are not historical facts.  These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” or similar expressions.  Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives.  Forward-looking statements also include statements pertaining to our strategies for future development of our businesses and products.  Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain.  It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements.  Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC.  You should read and interpret any forward-looking statement together with reports we file with the SEC.

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

For further information, please contact:

Teresa S. Gendron
Chief Financial Officer
Jefferies Financial Group Inc.
Tel. (212) 460-1932

Click here for the full earnings announcement.