Thank You Team Jefferies For An Outstanding First Quarter Of 2021

Dear Team Jefferies,

Below is a copy of our just released Q1 2021 results.  In one word, OUTSTANDING!!! In two more words, THANK YOU!!! It has been slightly over a year since we were all forced to deal with the global pandemic, and it is clear that Team Jefferies did not only rise to the challenge, but you have all consistently dedicated yourselves to performing at an incredible level as you protected each other, our firm and our clients.  We all know what we did together last year, but as each of you looks at the results below, it is clear that we have the opportunity to further raise the bar in 2021 by showing the world what this extraordinary team is truly capable of achieving. 

As we said in our recent notes to you, we believe the worst is hopefully behind us and the vaccines, therapeutics, improving weather and passage of time allow all of us to begin to get to the other (brighter) side.  We want to remind everyone that we will remain vigilant and nobody at Jefferies should prematurely celebrate the end of the pandemic until it is truly under control.  As of today, it is clearly not, and we have to fully embrace this reality. 

We also now have yet a further sense of the firm we are capable of being.  These results represent an across the board success, including virtually every sector, product, service, region and operating business.  They also reflect the quality of our global technology, operations, accounting, legal, marketing and every other support function that has allowed us to operate efficiently and safely at this incredible pace and scale.  We take enormous pride in this total team effort and every one of you should, as well. 

The world and markets are still volatile and highly unpredictable.  Past success, while exhilarating and highly motivating, does not itself predict our future outlook.  We know that each of you will remain on guard to protect each other and our firm, prioritize your mental and physical health, support our clients consistently and with focused dedication and energy, remain humble and not allow even a drop of arrogance to seep into our organization, help us recruit, retain, mentor and train our amazing and growing team, and focus on maintaining and building upon our considerable momentum that this strong first quarter has afforded us.

Thank you and let’s get to it, as we are in the first month of Q2 and hopefully a much more fun summer will be ahead for us all,

Rich and Brian

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FOR IMMEDIATE RELEASE

Jefferies Financial Group Announces First Quarter 2021 Financial Results

All-Time Record Quarterly Results at Jefferies Group
 

New York, New York — March 24, 2021 — Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three months ended February 28, 2021.  In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.20 per Jefferies common share payable on May 28, 2021 to record holders of Jefferies common shares on May 17, 2021.  We expect to file our Form 10-Q on or about April 8, 2021.

Highlights for the three months ended February 28, 2021:

• Jefferies Group LLC
  • Record quarterly net revenues of $2,129 million, up 82% over the prior year first quarter’s then all-time record quarterly net revenues
  • Record pre-tax income of $671 million, up 185% over the prior year quarter and further demonstrating the operating leverage inherent in our business model 
  • Record net earnings of $494 million, up 188% over the prior year quarter
  • Annualized return on tangible equity of 43.5%¹, compared with 16.1%² in the prior year quarter
  • Record quarterly Investment Banking net revenues of $1,033 million, up 79% over the prior year quarter, including record Equity Underwriting net revenues of $495 million, Advisory net revenues of $311 million and Debt Underwriting net revenues of $197 million
  • Record quarterly combined Capital Markets net revenues of $894 million, up 81% over the prior year quarter; record Equities net revenues of $531 million and Fixed Income net revenues of $363 million
  • Record quarterly Asset Management revenues (before allocated net interest³) of $180 million, up 454% over the prior year quarter, including $37 million in management and performance fees and similar revenues earned directly or through our strategic affiliates in the current year quarter; performance fees and similar revenues recorded in the first quarter of the current year are attributable to performance realized in respect of the twelve months ended December 31, 2020
  • Liquidity buffer of $8.1 billion of cash and unencumbered liquid collateral at February 28, 2021, which represented 16% of our total balance sheet
• Jefferies Financial Group
  • Net income attributable to common shareholders was $582 million, or $2.13 per diluted share, and annualized adjusted return on tangible equity was 33.3%⁴
  • Merchant Banking pre-tax income of $108 million, reflecting record quarterly results from Idaho Timber and mark-to-market increases in the value of several of our investments in public companies
  • We repurchased 5.0 million shares for $128 million, or an average price of $25.51 per share during the first quarter; over the last three years, Jefferies has repurchased 123 million shares for $2.6 billion in total, or an average price of $21.04 per share
  • Our Board of Directors has increased our share buyback authorization by $128 million back to a total of $250 million
  • At February 28. 2021, we had 247 million shares outstanding and 275 million shares were outstanding on a fully diluted basis⁵
  • Jefferies book value per share was $39.50 and tangible book value per fully diluted share⁶ was $29.20 at the end of the first quarter
  • Over the past three years, Jefferies has returned to shareholders $3.5 billion, or 34% of shareholders’ equity and 45% of tangible shareholders’ equity⁷ at the beginning of this effort.  Our shareholders’ equity today is $9.7 billion.  Even with our significant return of capital to our shareholders, Jefferies tangible shareholders’ equity⁷ today is $7.8 billion, which is the same level as three years ago

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

“Jefferies Group’s record results for the first quarter of 2021 reflect the continued momentum and market share gains we experienced throughout 2020, where the growth in our primary businesses can now be seen to have exceeded those of the broader industry.  The investment and foundation to achieve this success was made over many years and is delivering as we had planned.  Jefferies Group’s annualized ROTE of 43.5%¹ shows the operating leverage inherent within our core business, with a growing revenue base coupled with a prudently managed cost base.  Our clients have rewarded us consistently by trusting Jefferies with an ever increasing portion of their business, as we have worked hard to become one of a handful of truly global leaders in Investment Banking and Capital Markets.  Our people, culture, independence and integrated full service capabilities make us unique among our primary competitors and have helped drive our market share gains.

“Jefferies Financial Group’s first quarter annualized adjusted ROTE of 33.3%⁴ reflects the strong results at Jefferies Group, but also solid results in our reduced Merchant Banking portfolio.  As we said in our 2020 Shareholder Letter, we intend to complete the transformation of Jefferies into a pure financial services firm by smartly managing down our remaining Merchant Banking portfolio and we expect Jefferies Financial Group’s consolidated ROTE to converge over time with that of Jefferies Group.

“We continue to focus relentlessly on meeting the needs of our clients across the globe, as well as investing in and growing our underlying core businesses and technologies, and supporting the health, safety and well-being of our nearly 4,000 global colleagues.  Our Investment Banking backlog remains robust and diverse as our investment in this core business continues and our reach expands.

“During the quarter, our clients, employees and firm came together to proudly contribute $8.3 million to 129 amazing charities around our planet that promote diversity and inclusion, support COVID-19 relief efforts, help Texas relief and support, protect and sustain our environment and strive to help humanity in other meaningful ways.

“We are also pleased to announce that, for 2020, Jefferies energy consumption and greenhouse gas emissions from our global offices, data centers, aviation and vehicle fleet at Jefferies has achieved net zero carbon emissions.  This is outlined in our most recent ESG Report, which is available on our website.”

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Amounts herein pertaining to February 28, 2021 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 months ended February 28, 2021 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

Matt Larson
Chief Financial Officer
Jefferies Group LLC
Tel. (212) 284-2338

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Click here for the full earnings announcement

1. Return on tangible equity (a non-GAAP financial measure) equals our three months ended February 28, 2021 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member’s equity (a non-GAAP financial measure) of $4,543 million at November 30, 2020. Tangible Jefferies Group LLC member’s equity at November 30, 2020 equals Jefferies Group LLC member’s equity of $6,349 million less goodwill and identifiable intangibles assets of $1,805 million.
2. Return on tangible equity (a non-GAAP financial measure) equals our three months ended February 29, 2020 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member’s equity (a non-GAAP financial measure) of $4,311 million at November 30, 2019. Tangible Jefferies Group LLC member’s equity at November 30, 2019 equals Jefferies Group LLC member’s equity of $6,125 million less goodwill and identifiable intangibles assets of $1,814 million.
3. Allocated net interest represents the allocation of a ratable portion of Jefferies Group LLC’s long-term debt interest expense to Jefferies Group LLC’s Asset Management reportable segment, net of interest income on Jefferies Group LLC’s Cash and cash equivalents and other sources of liquidity, which allocation is consistent with Jefferies Group LLC’s policy of allocating such items to all its business lines. Refer to Jefferies Group LLC’s summary of Net Revenues by Source on page 7.
4. Adjusted return on tangible equity (a non-GAAP financial measure) is defined as Jefferies Financial Group’s three months ended February 28, 2021 annualized adjusted net income divided by our adjusted tangible shareholders’ equity at November 30, 2020.  Refer to schedule on page 10 for reconciliation to U.S. GAAP amounts.
5. Shares outstanding on a fully diluted basis (a non-GAAP financial measure) is defined as Jefferies Financial Group’s common shares outstanding plus restricted stock units, stock options, conversion of redeemable convertible preferred shares and other shares. Refer to schedule on page 11 for reconciliation to U.S. GAAP amounts.
6. Tangible book value per fully diluted share (a non-GAAP financial measure) is defined as adjusted tangible book value divided by shares outstanding on a fully diluted basis.  Refer to schedule on page 11 for reconciliation to U.S. GAAP amounts.
7. 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 11 for reconciliation to U.S. GAAP amounts.