Jefferies Financial Group Inc

Consolidated Results

•Net revenues were $4.70 billion for 2023, down 21.4% compared with $5.98 billion for 2022, substantially as a result of reduced merchant banking net revenues within our asset management segment, which is largely attributable to divestitures made in 2022 and 2023. In addition, Investment banking net revenues were lower compared to the prior year, reflecting reduced industry-wide mergers and acquisitions, equity capital markets and leveraged finance activity. These decreases were partially offset by favorable net revenues from our equities and fixed income capital market businesses.

•Earnings before income taxes of $354.3 million for 2023 were 66.4% lower than that of the prior year, with a large portion of the decline attributable to a reduction in investment banking activity as well as the reduction in merchant banking net revenues. Net earnings attributable to Jefferies Financial Group Inc. of $263.1 million for 2023 were lower than that of the prior year by a similar percentage.

Business Results

•Investment banking net revenues were $2.29 billion for 2023, compared to $2.89 billion for 2022. Advisory revenues were $1.20 billion, compared to $1.78 billion for 2022, driven by fewer mergers and acquisitions completed during the year and lower average fees per transaction. Industry-wide deal activity was reduced as compared to the prior year. Underwriting net revenues of $970.5 million were down 5.8% from the prior year of $1.03 billion, due to reduced industry-wide leveraged finance activity, while equity underwriting net revenues were slightly higher compared to the prior year period.

•Equities net revenues were $1.12 billion for 2023, up 6.6% compared with $1.05 billion for 2022, on stronger results in our U.S. cash equity, convertibles and equity ETF businesses, partially offset by lower securities finance net revenues.

•Fixed income net revenues were $1,092.7 million, up 36.5% compared with $800.5 million for 2022, reflecting strong results across a number of our businesses attributable to more stable market conditions. In addition, losses in our CMBS business were substantially reduced from the prior year primarily due to a more stable interest rate environment and overall lower risk profile.

•Asset management net revenues were $188.3 million, compared with $1.24 billion in 2022 with substantially all of the decline attributable to the decline in our merchant banking revenues due to divestitures made in 2022 and 2023. Investment return net revenues for 2023 were solid driven by improved performance across multiple investment strategies and funds, favorably comparing to net revenues for the prior year which include a gain of $175.1 million related to the sale of our interests in Oak Hill. In addition, merchant banking revenues for the prior year included a gain of $122.0 million associated with the sale of a completed HomeFed multi-family real estate project.

Non-interest Expenses

•Non-interest expenses were $4.35 billion for 2023, a decrease of $577.1 million, or 11.7%, compared with $4.92 billion for 2022. The decrease is primarily due to lower cost of sales and depreciation expense related to our significantly reduced merchant banking portfolio primarily as a result of divestitures made within the last two years including the sale of Idaho Timber in August 2022 and spin-off of Vitesse Energy in January 2023.

•Compensation and benefits expense was $2.54 billion for 2023, a decrease of $53.8 million, or 2.1%, compared with $2.59 billion for 2022. Compensation and benefits expense as a percentage of Net revenues was 53.9% for 2023, compared with 43.3% for 2022, reflecting a much higher proportion of merchant banking revenues during 2022 within our asset management segment, which have much lower compensation rates. Refer to Note 15, Compensation Plans included in this Annual Report on Form 10-K for further details.

•Non-compensation expenses for 2023 were $1.81 billion, a decrease of $523.4 million, or 22.4%, compared with $2.33 billion for 2022, as a result of decreases in costs of sales and depreciation expense primarily attributable to divestitures within our merchant banking portfolio made within the last two years. In addition, non-compensation expenses for 2022 included an $80.0 million combined regulatory settlement with the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission. These decreases were partially offset by higher technology, communications and business development expenses; professional fees, largely related to an increase in legal costs associated with capital markets transactions and litigation; bad debt expenses and loss reserves.

Headcount

•At November 30, 2023, we had 7,564 employees globally across all of our consolidated subsidiaries within our Investment Banking and Capital Markets and Asset Management reportable segments, an increase of 2,183 employees from our headcount of 5,381 at November 30, 2022. Included within our global headcount, in addition to our broker-dealer subsidiaries through which we conduct our Investment Banking advisory and underwriting businesses and Fixed Income and Equities capital markets businesses, are 2,296 employees of our Stratos, OpNet, HomeFed, Foursight Capital LLC and M Science subsidiaries.

•Of the headcount increase, 1,903 relates to obtaining control of Stratos and OpNet as the employees of those subsidiaries are now included in our overall headcount. Our headcount was also impacted slightly as employees of Vitesse Energy are no longer part of our headcount upon the spin-off of Vitesse Energy in January 2023. During 2023, we have increased the number of our Investment Banking Managing Directors and related staff along with additional technology and corporate staff to support our growth and strategic priorities.