Jefferies Group Delivers Record Third Quarter and Nine Months Revenue and Net Income

Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and nine months ended August 31, 2021. For the third quarter, Net income attributable to common shareholders was $407 million, or $1.50 per diluted share, and annualized adjusted return on tangible equity was 21.4%¹. For the nine months ended August 31, 2021, Net income attributable to common shareholders was $1.34 billion, or $4.93 per diluted share, and annualized adjusted return on tangible equity was 26.1%².

In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.25 per Jefferies common share, payable on November 29, 2021 to record holders of Jefferies common shares on November 15, 2021. We expect to file our Form 10-Q on or about October 8, 2021.

Highlights for the three months ended August 31, 2021:

• Jefferies Group LLC
  • Net revenues of $1.65 billion, a record for a third quarter and up 19% over the prior year third quarter's then all-time record quarterly net revenues
  • Pre-tax income of $560 million, a record for a third quarter and up 54% over the prior year comparable quarter, and net earnings of $419 million, also a record for a third quarter and up 57% over the prior year quarter
  • Annualized return on tangible equity of 34.4%³, compared with 23.2%⁴ in the prior year quarter
  • All-time record quarterly Investment Banking net revenues of $1.18 billion, up 100% over the prior year quarter, including all-time record quarterly Advisory net revenues of $584 million, Equity Underwriting net revenues of $367 million and Debt Underwriting net revenues of $229 million, each a record for a third quarter,
  • Quarterly combined Capital Markets net revenues of $442 million, down 32.5% over the prior year quarter, including Equities net revenues of $237 million and Fixed Income net revenues of $206 million
  • Third quarter Asset Management net revenues (before allocated net interest⁵) of $10 million, down significantly from the robust prior year quarter
  • Record Liquidity buffer of $9.20 billion of cash and unencumbered liquid collateral at August 31, 2021, which represented 18% of Jefferies Group's total balance sheet

• Jefferies Financial Group
  • Net income attributable to common shareholders for the third quarter was $407 million, or $1.50 per diluted share, and annualized adjusted return on tangible equity was 21.4%¹
  • We repurchased 1.5 million shares for $52 million, or an average price of $34.51 per share, during the third quarter (Jefferies was precluded from purchasing shares until the July 14 announcement of our Strategic Alliance with SMBC Group⁶, which, as previously reported, includes credit facilities to Jefferies Group of $350 million and Jefferies Finance of $1.9 billion, and the purchase by SMBC Group⁶ of up to 4.9% of Jefferies common shares in the open market)
  • Our Board of Directors has increased our share buyback authorization by $52 million back to a total of $250 million.

Highlights for the nine months ended August 31, 2021:

• Jefferies Group LLC
  • Record nine months net revenues of $5.40 billion, up 50% over the prior year comparable period's then all-time record net revenues
  • Record nine months pre-tax income of $1.66 billion, up 115% over the prior year period, and record nine months net earnings of $1.23 billion, up 117% over the prior year period, demonstrating the operating leverage inherent in our business model
  • Annualized return on tangible equity of 36.2%⁷, compared with 17.7%⁸ in the prior year period
  • Record nine months Investment Banking net revenues of $3.25 billion, up 119% over the prior year period, including record Advisory net revenues of $1.29 billion, record Equity Underwriting net revenues of $1.19 billion and record Debt Underwriting net revenues of $712 million
  • Nine months combined Capital Markets net revenues of $1.84 billion, down 2% over the prior year period, including record Equities net revenues of $1.01 billion and Fixed Income net revenues of $826 million
  • Record nine months Asset Management revenues (before allocated net interest⁵) of $247 million, up 42% over the prior year period, including $62 million in management, performance and similar fees and revenues earned directly or through our strategic affiliates in the current year period; performance fees and similar revenues recorded in the first nine months of the current year are attributable to performance realized in respect of the twelve months ended December 31, 2020

• Jefferies Financial Group
  • For the nine months ended August 31, 2021, Net income attributable to common shareholders was $1.34 billion, or $4.93 per diluted share, and annualized adjusted return on tangible equity was 26.1%²
  • Merchant Banking pre-tax income of $170 million, reflecting record nine months results from Idaho Timber and mark-to-market increases in the value of several of our investments in public and private companies
  • We repurchased 6.5 million shares for $179 million, or an average price of $27.59 per share during the first nine months of 2021; at August 31, 2021, we had 246 million shares outstanding and 276 million shares were outstanding on a fully diluted basis⁹; Jefferies book value per share was $42.28 and tangible book value per fully diluted share¹⁰ was $31.58 at August 31, 2021
  • Since April 2018, Jefferies has repurchased 125 million shares for $2.64 billion in total, or an average price of $21.20 per share; our fully diluted shares outstanding⁹ have decreased by 27% over the same period
  • Jefferies has returned to shareholders $3.68 billion, or 36% of shareholders' equity and 47% of tangible shareholders' equity¹¹ since April 2018. Our shareholders' equity at August 31, 2021 is $10.38 billion. Even with our significant return of capital to our shareholders, Jefferies tangible shareholders' equity¹¹ at August 31, 2021 is $8.48 billion, which is over $650 million higher than at March 31, 2018

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

"We are humbled by and deeply grateful for the confidence and trust our clients have shown in us, not just this quarter, but over the years and decades we have worked to build the leading independent full-service global investment banking firm. Our results this quarter demonstrate that the relentless client focus of our amazing Jefferies team is the difference maker and our market position has reached a new level, particularly in Investment Banking. Net revenues in Investment Banking for the first nine months of the year were $3.25 billion and our backlog for the fourth quarter is at a new record level¹². In this most recent quarter, we completed more investment banking transactions (up 18% this quarter from Q3 2020), with more clients (up 19%), at a greater average value per transaction (up 48%) than ever before. To put this in perspective, our Investment Banking effort (supported by Equities, Fixed Income, research and our firmwide support team) arranged 424 separate transactions for 407 different clients with an aggregate deal value of $238 billion in the third quarter. Subject to market conditions, we believe we are well positioned for meaningful further growth, given our clear strategy, distinctively entrepreneurial and nimble culture, and the ongoing and consistent enhancements to our capabilities and talent. Today, we have more than 1,200 investment banking professionals, 237 of whom are Managing Directors, all dedicated to supporting our clients and their strategic and capital markets' needs.

"We are also pleased our Equities and Fixed Income results were resilient against a backdrop of reduced market volumes and a continued low interest rate environment. While our results in Asset Management were significantly impacted by a difficult environment for multi-strategy funds and lower performance by strategies that had very strong returns during the first half of the year, we remain pleased with our progress in attracting third-party investors to our platforms.

"As of our third quarter ending August 31, 2020, Jefferies Group had last twelve months ("LTM") net revenues, earnings before income taxes and net earnings of $4.34 billion, $796 million and $591 million, respectively. For our current LTM ending August 31, 2021, our comparable results are $7.01 billion, $2.07 billion and $1.54 billion, respectively. These significant increases of 62%, 160% and 160%, respectively, show the remarkable progress that we have achieved as a result of the investments in our business over many years and the operating leverage inherent in our business model.

"With an annualized adjusted return on tangible equity of 26.1%² at Jefferies Financial Group and an annualized return on tangible equity of 36.2%⁷ at Jefferies Group for the nine months ended August 31, 2021, Jefferies Financial Group's operating results are increasingly reflective of our core operating businesses at Jefferies Group. This has been a key stated goal for us, and we are extremely pleased with our progress.

“While there is always risk and uncertainty, we believe the global economy continues to be in a period of recovery and uptrend, and we therefore expect to see continued robust activity in mergers and acquisitions and capital markets – providing further opportunity for us to demonstrate the durability of our results and increased market share.

"We would like to thank our clients and employees who came together in August to proudly contribute approximately $6 million to 45 accredited charities around our planet that will use these funds to support critical needs for those in Afghanistan and Haiti, and to support our military veterans."

Amounts herein pertaining to August 31, 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 and nine months ended August 31, 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).

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

A summary of results for the three months ended August 31, 2020 is as follows (in thousands):

(1) Includes Floor brokerage and clearing fees.

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

A summary of results for the nine months ended August 31, 2020 is as follows (in thousands):

(1) Includes Floor brokerage and clearing fees.

The following financial tables provide information for the results of Jefferies Group LLC and should be read in conjunction with Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2020. Amounts herein pertaining to August 31, 2021 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC's Quarterly Report on Form 10-Q for the quarter ended August 31, 2021.

Jefferies Financial Group Inc.

Non-GAAP Reconciliation

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

Jefferies Financial Group Adjusted Return on Tangible Equity Reconciliation

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

Jefferies Financial Group 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):

Jefferies Financial Group Shareholders' Equity GAAP Reconciliation

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