Jefferies Financial Group Inc
For the period ended May 31, 2024. Filed Jul 9, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
May 31, 2024 · Filed Jul 9, 2024
JEF$47.38-2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-02-29; filed 2024-04-05.
0000096223-24-000015
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-05-31; filed 2024-07-09.
0000096223-24-000024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 360 previous paragraphs and 361 current paragraphs.
229 unchanged; 84 reworded; 34 added; 45 removed; 2 previous and 14 current paragraphs rearranged.
Tables are not compared: 26 previous and 60 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (34)
Current report
•Net revenues were $1.66 billion, up 59.6% compared with $1.04 billion for the prior year comparable quarter, reflecting positive momentum in Investment Banking and continued strength in our Capital Markets businesses.
Current report
•Investment banking net revenues were $803.2 million, up 59.4% compared with $503.9 million in the prior year comparable quarter. Advisory revenues were $283.9 million, up 11.7% compared with $254.2 million for the prior year comparable quarter, attributable primarily to market share gains. Total underwriting net revenues of $454.7 million were 90.8% higher than the prior year comparable quarter of $238.3 million, due to increased equity and debt underwriting activity as a result of a more robust equity and general capital markets environment as well as market share gains from the expanded capabilities and reach of our larger investment banking team.
Current report
•Fixed income net revenues of $284.2 million remained essentially flat compared to $278.4 million for the prior year comparable quarter, as a more stable interest rate environment led to muted credit and interest rate volatility resulting in lower overall volumes.
Current report
•Asset management recognized net revenues were $156.5 million, compared with negative net revenues of $(30.9) million in the prior year comparable quarter. Other investments net revenues for the quarter meaningfully increased largely due to the inclusion of Stratos and Tessellis in our overall results as these entities became consolidated subsidiaries in the fourth quarter of 2023. Asset management fees and investment return revenues were largely flat compared to the prior year quarter.
Current report
Consolidated Results
Current report
•Net revenues were $3.39 billion, up 46.3% compared with $2.32 billion for the prior year comparable period, reflecting positive momentum in Investment Banking and continued strength in our Capital Markets businesses globally.
Current report
Business Results
Current report
•Investment banking net revenues were $1.54 billion, compared with $1.07 billion in the prior year comparable period. Advisory revenues were $622.5 million, up 12.9% compared with $551.3 million for the prior year comparable period, attributable primarily to market share gains. Total underwriting net revenues of $793.2 million were 78.7% higher than the prior year comparable period of $443.9 million, due to increased equity and debt underwriting activity as a result of more robust equity and general capital markets environment as well as market share gains from the expanded capabilities and reach of our larger investment banking team.
Current report
•Equities net revenues of $766.2 million were 31.2% higher compared to $584.0 million of the prior year comparable period, as increased volumes and more favorable trading opportunities drove strong results across most of our equities business lines.
Current report
•Fixed income net revenues of $636.7 million remained essentially flat compared to $627.4 million for the prior year comparable quarter, as opportunities from a stronger debt underwriting market were offset by lower trading volumes due to lower market volatility.
Current report
•Compensation and benefits expense was $1.79 billion, an increase of 39.9% compared with $1.28 billion for the prior year comparable period. Compensation and benefits expense as a percentage of Net revenues was 52.7%, compared with 55.1% for the prior year comparable period. The ratio for the current period was impacted by the consolidation of Stratos and Tessellis, which have lower compensation ratios.
Current report
Total underwriting revenues for the three months ended May 31, 2024 were $454.7 million, an increase of 90.8% from $238.3 million for the prior year comparable quarter, due to increased equity and debt underwriting activity as a result of a more robust equity and general capital markets environment as well as from the expanded capabilities and reach of our larger investment banking team resulting in market share gains.
Current report
Investment banking revenues were $1.54 billion, up 44.6% compared with $1.07 billion for the prior year comparable period. We have made extensive investments in our investment banking business, particularly enhancing our capabilities across sectors and regions which has led to market share gains.
Current report
Advisory revenues were $622.5 million, up 12.9% compared with $551.3 million for the prior year comparable period, as transaction levels increased across most sectors in the global mergers and acquisitions markets and we continue to experience market share gains.
Current report
Total underwriting revenues were $793.2 million, an increase of 78.7% from $443.9 million for the prior year comparable period, due to increased equity and debt underwriting activity as a result of a more robust equity and general capital markets environment as well as from the expanded capabilities and reach of our larger investment banking team.
Current report
•Equities net revenues were $407.1 million, up 46.1% from $278.7 million for the prior year comparable quarter, as increased volumes and more favorable trading opportunities, including those created from increased equity underwriting activity, drove strong results across most of all of our equities business lines with particular strong performance from our cash and electronic trading businesses, including a record quarter for Asia-Pacific.
Current report
•Equities net revenues were $766.2 million, up 31.2% from $584.0 million for the prior year comparable period, as increased volumes and more favorable trading opportunities drove strong results across most of all of our equities business lines with particular strong performance from our cash and electronic trading businesses.
Current report
•structuring and financing services.
Current report
•Fixed income net revenues were $284.2 million, compared to $278.4 million for the prior year quarter, as a more stable interest rate environment led to muted credit and interest rate volatility resulting in lower overall volumes. Revenues from our securitized markets business were particularly strong on an opening of the securitization market, partially offset by reduced activity in our global structured solutions business and less favorable results from our U.S. rates and credit trading businesses.
Current report
Asset management fees and revenues were $16.8 million, modestly higher from $15.9 million for the prior year comparable quarter, reflecting higher management fees on funds managed by us offset by lower revenue earned through our strategic affiliates.
Current report
Investment return was $32.9 million, flat compared with $32.5 million for the prior year comparable quarter, as a slight increase attributable to investment outperformance across multiple fund strategies was partially offset by losses in other strategies during the period.
Current report
Other investments net revenues were $122.8 million, compared with negative net revenues of $(66.2) million in the prior year comparable quarter, with the increase primarily driven by the consolidation of Stratos and Tessellis in the fourth quarter of 2023 as well as net gains from investment positions.
Current report
Asset management fees and revenues were $76.5 million, compared with $58.6 million for the prior year, reflecting higher management and performance fees on funds managed by us and an increase in performance and similar fees and revenues earned through our strategic affiliates, partially offset by lower management fees earned through our strategic affiliates.
Current report
•Brokerage and clearing fees were higher by $13.9 million due to increased trading volumes and increased fees paid to third party asset managers as a result of strong performance.
Current report
•Business development was higher by $25.0 million reflecting increased investment banking and capital markets deal activity.
Current report
•Business development was higher by $45.9 million reflecting increased investment banking and capital markets deal activity.
Current report
For the three months ended May 31, 2024 and 2023, the provision for income taxes was $73.1 million and $9.2 million, respectively, representing an effective tax rate of 32.1% and 51.5%, respectively. The lower rate for the three months ended May 31, 2024 is primarily due to the higher amount of pre-tax income in the current quarter compared to the prior year comparable quarter.
Current report
Level 3 assets:
Current report
Select information related to repurchase agreements:
Current report
During the six months ended May 31, 2024, long-term debt increased by $2.97 billion to $12.67 billion at May 31, 2024, primarily due toproceeds of $3.07 billion from the issuance of unsecured senior notes, $124.8 million from net issuances of structured notes and $79.2 million from increased subsidiaries secured borrowings, and valuation losses on structured notes of $45.2 million. These increases were partially offset by a $350.0 million paydown of a revolving credit facility.
Current report
Long-term debt ratings:
Current report
Dividends declared:
Current report
On June 26, 2024, our Board of Directors increased our quarterly dividend by 16.7% to $0.35 per common share, payable on August 30, 2024 to common shareholders of record at August 19, 2024. The payment of dividends is subject to the discretion of our Board of Directors and depends upon general business conditions and other factors that our Board of Directors may deem to be relevant.
Current report
During the three and six months ended May 31, 2024, we paid $6.3 million and $12.6 million, respectively, or $0.30 per share on an as-converted basis, of cash dividends in respect of the Series B Preferred Stock.
Removed paragraphs (45)
Previous report
The following table provides an overview of our consolidated results of operations (dollars in thousands):
Previous report
•Net revenues for the three months ended February 29, 2024 were $1.74 billion, up 35.4% compared with $1.28 billion for the prior year comparable quarter, reflecting strong performance across our businesses attributable to a strengthening investment banking and capital markets environment, and continued market share gains across multiple businesses and geographies.
Previous report
•Net losses from discontinued operations, net of income tax benefit were $(7.9) million related to OpNet (the sale of which is expected to close in the second or third quarter of 2024). Refer to Note 5, Assets Held for Sale and Discontinued Operations for further information.
Previous report
•Investment banking net revenues were $739.7 million for the three months ended February 29, 2024, compared with $562.8 million in the prior year comparable quarter. Advisory revenues were $338.6 million, up 13.9% compared with $297.2 million for the prior year comparable quarter, primarily attributable to increased mergers and acquisitions activity and continued market share gains. Total underwriting net revenues of $338.5 million were 64.6% higher than the prior year comparable quarter of $205.6 million, as equity underwriting activity increased with robust equity markets throughout the first quarter of 2024, as well as our expanded capabilities and enhanced market position. Debt underwriting activity improved as interest rates and inflationary concerns have stabilized.
Previous report
•Fixed income net revenues of $352.5 million remained fairly consistent compared to $349.0 million for the prior year comparable quarter, reflecting a more stable interest rate environment creating client demand for fixed income products. The current quarter also benefited from increased investment banking debt underwriting activity which increased secondary trading opportunities.
Previous report
Non-interest Expenses
Previous report
The following provides a summary of “Net Revenues by Source” (dollars in thousands):
Previous report
N/M — Not Meaningful
Previous report
The following table sets forth our investment banking revenues (dollars in thousands):
Previous report
The following table sets forth our investment banking activities (dollars in billions):
Previous report
Total underwriting revenues for the three months ended February 29, 2024 were $338.5 million, an increase of 64.6% from $205.6 million for the prior year comparable quarter, reflecting significantly higher equity underwriting net revenues of $209.3 million attributable to increased activity, as equity markets have remained robust, as well as our expanded capabilities and enhanced market position. Debt underwriting net revenues of $129.2 million were up 61.1% compared with $80.2 million for the prior year comparable quarter, as the stabilization of interest rates and inflationary concerns drove higher underwriting volumes across most sectors.
Previous report
•Equities net revenues were $359.1 million for the three months ended February 29, 2024, up 17.6% from $305.3 million for the prior year comparable quarter, as increased volumes and more favorable trading opportunities, including opportunities created by investment banking equity underwriting activity, drove stronger results across significantly all of our equities business lines.
Previous report
•financing services offered to clients.
Previous report
The following summarizes the results of our Asset Management businesses by asset class (dollars in thousands):
Previous report
Asset management fees and revenues for the three months ended February 29, 2024 were $59.7 million, up 39.7% compared with $42.7 million for the prior year comparable quarter, as strong performance across multiple managed funds and affiliate strategies resulted in higher performance fee income for calendar year 2023 versus calendar year 2022. (Performance fees are generally measured on a calendar year basis and recognized by us in our first fiscal quarter.)
Previous report
Period-end assets under management by predominant asset class were as follows (in millions):
Previous report
Change in assets under management were as follows (in millions):
Previous report
Non-interest Expenses
Previous report
Non-interest expenses were as follows (dollars in thousands):
Previous report
Refer to Note 15, Compensation Plans in our consolidated financial statements included in this Quarterly Report on Form 10-Q, for further details on compensation and benefits.
Previous report
Refer to Note 18, Income Taxes in our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details on income taxes.
Previous report
The following table provides detail on selected balance sheet items (dollars in millions):
Previous report
The following table summarizes Level 3 assets (in millions, except percentages):
Previous report
The following table presents our period end balance, average balance and maximum balance at any month end within the periods presented for Securities purchased under agreements to resell and Securities sold under agreements to repurchase (in millions):
Previous report
The following table presents total assets, total equity, total Jefferies Financial Group Inc. shareholders’ equity and tangible Jefferies Financial Group Inc. shareholders’ equity with the resulting leverage ratios (dollars in millions):
Previous report
For additional details on our repurchase agreement financing program, refer to Note 10, Variable Interest Entities in our consolidated financial statements included in this Quarterly Report on Form 10-Q.
Previous report
In March 2024, we issued a $600.0 million one-year callable note maturing in March 2025.
Previous report
For additional details on our short-term borrowings and on our repurchase financing program, refer to Note 16, Borrowings and Note 10. Variable Interest Entities, respectively, in our consolidated financial statements included in this Quarterly Report on Form 10-Q.
Previous report
During the three months ended February 29, 2024, long-term debt increased by $218.5 million to $9.92 billion at February 29, 2024, as presented in our Consolidated Statements of Financial Condition, primarily due to:
Previous report
•$206.3 million from the issuance of callable and structured notes;
Previous report
•$29.9 million increase in HomeFed debt;
Previous report
•$47.8 million of valuation losses on structured notes; partially offset by
Previous report
•$67.8 million of repayments on structured notes.
Previous report
In addition, one of our subsidiaries has a Loan and Security Agreement with a bank for a term loan (“Secured Bank Loan”). At February 29, 2024, borrowings under the Secured Bank Loan amounted to $100.0 million and are also classified within Long-term debt in our Consolidated Statements of Financial Condition. The Secured Bank Loan matures on September 13, 2024 and is collateralized by certain trading securities with an interest rate of SOFR plus 1.25%. The agreement contains certain covenants that, among other things, restricts lien or encumbrance upon any of the pledged collateral. At February 29, 2024, we were in compliance with all covenants under the Secured Bank Loan.
Previous report
HomeFed funds certain of its real estate projects in part by raising funds under the Immigrant Investor Program administered by the U.S. Citizenship and Immigration Services pursuant to the Immigration and Nationality Act (“EB-5 Program”). This debt is secured by certain real estate of HomeFed. At February 29, 2024, HomeFed was in compliance with all debt covenants which include, among other requirements, limitations on incurrence of debt, collateral requirements and restricted use of proceeds. Primarily all of HomeFed’s EB-5 Program debt matures in 2024 through 2028.
Previous report
At February 29, 2024, HomeFed has construction loans with an aggregate committed amount of$277.0 million. The proceeds are being used for construction at certain of its real estate projects. At February 29, 2024, the weighted average interest rate on these loans was 7.07%. The loans mature between December 2026 and February 2029 and are collateralized by the property underlying the related project with a guarantee by HomeFed. At February 29, 2024 and November 30, 2023, $67.7 million and$48.2 million, respectively, was outstanding under the construction loan agreements.
Previous report
For further information, refer to Note 16, Borrowings in our consolidated financial statements included in this Quarterly Report on Form 10-Q.
Previous report
At February 29, 2024, the long-term debt ratings on our principal subsidiaries, Jefferies LLC, Jefferies International Limited (a U.K. broker-dealer) and Jefferies GmbH are as follows:
Previous report
On January 8, 2024, the Board of Directors declared a dividend of $0.30 per common share which was paid on February 27, 2024 to common shareholders of record at February 16, 2024.
Previous report
At February 29, 2024, Jefferies LLC and JFSI’s net capital and excess net capital were as follows (in thousands):
Showing the first 40 of 45 passages. Open the source sections for the rest.
Reworded paragraphs (84)
Previous wording
•Earnings from continuing operations before income taxes were $220.2 million, up 39.4% compared with $158.0 million for the prior year comparable quarter.
Current wording
•Earnings from continuing operations before income taxes were $227.8 million, compared with $17.9 million for the prior year comparable quarter.
Previous wording
•Equities net revenues of $359.1 million for the three months ended February 29, 2024 were 17.6% higher compared to $305.3 million of the prior year comparable quarter, as increased volumes and more favorable trading opportunities, including opportunities created by investment banking equity underwriting activity, drove stronger results across most of our equities business lines.
Current wording
•Equities net revenues of $407.1 million were 46.1% higher compared to $278.7 million of the prior year comparable quarter, as increased volumes and more favorable trading opportunities drove strong results across most of our equities business lines.
Previous wording
•Compensation and benefits expense for the three months ended February 29, 2024 was $926.9 million, an increase of 31.8% compared with $703.1 million for the prior year comparable quarter. Compensation and benefits expense as a percentage of Net revenues was 53.3% for the three months ended February 29, 2024, compared with 54.8% for the prior year comparable quarter. The ratio for the current quarter was impacted by the consolidation of Stratos and Tessellis, which have lower compensation ratios.
Current wording
•Compensation and benefits expense was $862.0 million, an increase of 49.7% compared with $575.9 million for the prior year comparable quarter. Compensation and benefits expense as a percentage of Net revenues was 52.0%, compared with 55.5% for the prior year comparable quarter. The ratio for the current quarter was impacted by the consolidation of Stratos and Tessellis, which have lower compensation ratios.
Previous wording
•Our overall results were strong this quarter, although we were negatively impacted by losses associated with our investment in Weiss Multi-Strategy Advisers (“Weiss”) resulting in a pre-tax loss to us of $54.7 million, $30.0 million of which reduced our net revenues and $24.7 million of which increased our non-compensation expenses.
Current wording
•Our overall results were strong for the current period, although we were negatively impacted by losses associated with our investment in Weiss Multi-Strategy Advisers (“Weiss”) resulting in a pre-tax loss to us of $56.7 million, $30.7 million of which reduced our net revenues and $26.2 million of which increased our non-compensation expenses.
Previous wording
•Asset management recognized net revenues of $273.4 million for the three months ended February 29, 2024, compared with $68.5 million in the prior year comparable quarter. Investment return was significantly higher on improved performance across multiple investment strategies, partially offset by $30.0 million of losses associated with our investment in Weiss. Additionally, Other investments net revenues for the quarter were meaningfully higher than the prior year comparable quarter largely due to the inclusion of Stratos and Tessellis in our overall results as they became consolidated subsidiaries in the fourth quarter of 2023.
Current wording
•Asset management recognized net revenues were $429.9 million, compared with $37.6 million in the prior year comparable period. Investment return was significantly higher on improved performance across multiple investment strategies, partially offset by $30.7 million of revenue losses associated with our investment in Weiss. Other investments net revenues for the quarter were meaningfully higher than the prior year comparable quarter largely due to the inclusion of Stratos and Tessellis in our overall results as these entities became consolidated subsidiaries in the fourth quarter of 2023.
Previous wording
•Non-compensation expenses for the three months ended February 29, 2024 were $591.3 million, an increase of 40.0% compared with $422.4 million for the prior year comparable quarter. Non-compensation expenses for the three months ended February 29, 2024 are meaningfully higher due to the inclusion of Tessellis and Stratos as operating subsidiaries following the consolidation of these entities in the fourth quarter of 2023, offset by the impact of the spin-off of Vitesse Energy in January 2023. The increase in non-compensation expenses is also attributed to increased brokerage and clearing fees associated with increased trading volumes and increased technology and communication and business development expenses. Other expenses include bad debt expenses largely related to our losses associated with Weiss Strategy Advisers upon its shutdown.
Current wording
•Non-compensation expenses were $1.16 billion, an increase of 33.7% compared with $866.2 million for the prior year comparable period. Non-compensation expenses were higher due to the inclusion of Tessellis and Stratos as operating subsidiaries following the consolidation of these entities in the fourth quarter of 2023, offset by the impact of the spin-off of Vitesse Energy in January 2023. The increase in non-compensation expenses is also attributed to increased brokerage and clearing fees associated with increased trading volumes and increased technology and communication and business development expenses. Other expenses include bad debt expenses largely related to our losses associated with Weiss Strategy Advisers upon its shutdown in the first quarter of 2024.
Previous wording
•At February 29, 2024, we had 7,745 employees globally across all of our consolidated subsidiaries within our Investment Banking and Capital Markets and Asset Management reportable segments, an increase of 2,344 employees from our headcount of 5,401 at February 28, 2023. Included within our global headcount are 2,131 employees of our Stratos, Tessellis, HomeFed, Foursight Capital LLC and M Science subsidiaries. Of the 2,344 headcount increase, 1,720 relates to recognizing control of Stratos and Tessellis during the fourth quarter of 2023 as the employees of these subsidiaries are now included in our overall headcount. During the past year, 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.
Current wording
•At May 31, 2024, we had 7,611 employees globally across all of our consolidated subsidiaries within our Investment Banking and Capital Markets and Asset Management reportable segments, an increase of 2,276 employees from our headcount of 5,335 at May 31, 2023. Included within our global headcount are 2,176 employees of our Stratos, Tessellis, HomeFed, and M Science subsidiaries. Of the 2,276 headcount increase, 1,976 relates to recognizing control of Stratos and Tessellis since the fourth quarter of 2023 as the employees of these subsidiaries are now included in our overall headcount. During the past year, 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.
Previous wording
Net revenues presented for our Investment Banking and Capital Markets reportable segment include allocations of interest income and interest expense as we assess the profitability of these businesses inclusive of the net interest revenue or expense associated with the respective activities, including the net interest cost of allocated long-term debt, which is a function of the mix of each business’s associated assets and liabilities and the related funding costs. During 2023, we refined our allocated net interest methodology to better reflect net interest expense across our business units based on use of capital. Historical periods have been recast to conform with the revised methodology.
Current wording
Net revenues presented for our Investment Banking and Capital Markets reportable segment include allocations of interest income and interest expense as we assess the profitability of these businesses inclusive of the net interest revenue or expense associated with the respective activities, including the net interest cost of allocated short- and long-term debt, which is a function of the mix of each business’s associated assets and liabilities and the related funding costs. During 2023, we refined our allocated net interest methodology to better reflect net interest expense across our business units based on use of capital. Historical periods have been recast to conform with the revised methodology.
Previous wording
•Foursight, our wholly-owned subsidiary engaged in the lending and servicing of automobile loans (agreement reached in November 2023 to sell our interests, which has subsequently closed in April 2024); and
Current wording
•Foursight, our wholly-owned subsidiary engaged in the lending and servicing of automobile loans (until the sale of our interest in April 2024); and
Previous wording
Investment banking revenues for the three months ended February 29, 2024 were $739.7 million, up 31.4% compared with $562.8 million for the prior year comparable quarter. During the past year, we have made extensive investments in our investment banking business, enhancing our capabilities across products, sectors and geographies, which we believe will continue to create significant momentum for continued market share gains and strong investment banking results.
Current wording
Investment banking revenues were $803.2 million, up 59.4% compared with $503.9 million for the prior year comparable quarter. We have made extensive investments in our investment banking business, particularly enhancing our capabilities across sectors and regions which has led to market share gains.
Previous wording
Advisory revenues were $338.6 million, up 13.9% compared with $297.2 million for the prior year comparable quarter, as the transaction levels increased across most sectors in the global mergers and acquisitions markets and continued market share gains.
Current wording
Advisory revenues were $283.9 million, up 11.7% compared with $254.2 million for the prior year comparable quarter, as the transaction levels increased across most sectors in the global mergers and acquisitions markets and we continued to gain market share.
Previous wording
Other investment banking net revenues were $62.6 million for the three months ended February 29, 2024, slightly higher compared with net revenues of $60.0 million for the prior year comparable quarter. Results from our share of the net earnings of our Jefferies Finance joint venture slightly decreased from the prior year comparable quarter primarily driven by lower net interest income, partially offset by higher net fees revenue. Revenues from our share of the net earnings of our Berkadia joint venture remained consistent from the prior year comparable quarter as the decline in mortgage origination volumes were largely offset by higher interest income on a larger and growing loan servicing portfolio. In addition, during the three months ended February 29, 2024, we recognized gains on various equity derivative transactions related to our investment banking activities.
Current wording
Other investment banking net revenues were $64.6 million, notably higher compared with net revenues of $11.5 million for the prior year comparable quarter. Results from our share of the net earnings of our Jefferies Finance joint venture increased from the prior year comparable quarter primarily driven by higher net fee income, partially offset by lower net interest income. Additionally, overall expenses decreased primarily driven by lower provision for loan losses for the current quarter. Revenues from our share of the net earnings of our Berkadia joint venture increased from the prior year comparable quarter, primarily due to an increase in mortgage origination and sales volumes and higher interest income attributable to a larger and growing loan servicing portfolio. In addition, during the three months ended May 31, 2024, we recognized gains on various equity derivative transactions related to our investment banking activities, and a $24.8 million gain from the sale of our interests in Foursight in April 2024.
Previous wording
Our investment banking backlog continues to strengthen from the levels at year end. We continue to see encouraging signs of a further pickup in underwriting and mergers and acquisitions activity, although execution is always uncertain and dependent on market conditions. As an indicator of net revenues in a given future period, backlog snapshots are 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.
Current wording
Our investment banking backlog continues to strengthen and we continue to see encouraging signs of a further pickup in underwriting and mergers and acquisitions activity for the remainder of 2024 and 2025 based on current trends observed, although execution is always uncertain and dependent on market conditions. As an indicator of net revenues in a given future period, backlog snapshots are 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.
Previous wording
•executing transactions for clients and making markets in securitized products, investment grade, high-yield, distressed, emerging markets, municipal and sovereign securities and bank loans, as well as foreign exchange execution on behalf of clients;
Current wording
•executing transactions for clients and making markets in securitized products, investment grade, high-yield, distressed, emerging markets, municipal and sovereign securities, and bank loans;
Previous wording
•Fixed income net revenues were $352.5 million for the three months ended February 29, 2024, compared to $349.0 million for the prior year quarter, primarily reflecting a more stable interest rate environment creating client demand for fixed income products. Revenues from our distressed trading businesses generated particularly strong results offset by reduced activity in our global structured solutions business and a less favorable market for the emerging market businesses which was particularly strong in the prior year period.
Current wording
•Fixed income net revenues were $636.7 million, compared to $627.4 million for the prior year comparable period, as stronger debt underwriting activity offset less market volatility. Revenues from our securitized markets and distressed trading businesses generated particularly strong results offset by reduced activity in our global structured solutions business and less favorable results across our municipal securities and emerging markets businesses which were particularly strong in the prior year period.
Previous wording
We operate a diversified alternative asset management platform offering institutional clients a range of investment strategies directly and through our affiliated asset managers. We provide certain of our affiliated asset managers access to our fully integrated global operational infrastructure and support. This may include strategy and product development, daily operations and finance-related activities, compliance, legal and human resources support, as well as marketing and business development.
Current wording
We operate a diversified alternative asset management platform offering institutional clients a range of investment strategies directly and through our affiliated asset managers. We provide certain of our affiliated asset managers access to our global operational infrastructure and support. This may include strategy and product development, daily operations and finance-related activities, compliance, legal and human resources support, as well as marketing and business development.
Previous wording
(1) These amounts include 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.
Current wording
(1)Includes 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.
Previous wording
Our overall results were strong this quarter, although we were negatively impacted by losses associated with our investment in Weiss resulting in a pre-tax loss to us of $54.7 million, $30.0 million of which reduced our net revenues and $24.7 million of which increased our non-compensation expenses.
Current wording
Our overall results were strong for the current period, although we were negatively impacted by losses associated with our investment in Weiss resulting in a pre-tax loss to us of $56.7 million, $30.7 million of which reduced our net revenues and $26.2 million of which increased our non-compensation expenses.
Previous wording
Investment return for the three months ended February 29, 2024 was $117.6 million, compared with $27.4 million for the prior year comparable quarter, with the increase driven by improved returns generated across multiple fund strategies, partially offset by losses of $30.0 million associated with our investment in Weiss.
Current wording
Investment return was $150.6 million, compared with $59.9 million for the prior year comparable period, with the increase driven by improved returns generated across multiple fund strategies, partially offset by losses of $30.7 million associated with our investment in Weiss.
Previous wording
Other investments net revenues were $111.1 million, compared with $7.4 million in the prior year comparable quarter, with the increase primarily driven by the consolidation of Stratos and Tessellis in the fourth quarter of 2023, partially offset by the spin-off of Vitesse Energy in January 2023.
Current wording
Other investments net revenues were $233.9 million, compared with negative net revenues of $(58.8) million in the prior year comparable period, with the increase primarily driven by the consolidation of Stratos and Tessellis in the fourth quarter of 2023, partially offset by the spin-off of Vitesse Energy in January 2023 as well as net gains from investment positions.
Previous wording
We and our affiliated asset managers have aggregate net asset values or net asset value equivalent assets under management of $26.8 billion and $28.0 billion at February 29, 2024 and November 30, 2023, respectively. Net asset value or net asset value equivalent assets under management are composed of the fair value of the net assets of a fund or the net capital invested in a separately managed account. These include the following:
Current wording
We and our affiliated asset managers have aggregate net asset values or net asset value equivalent assets under management of $24.3 billion and $28.0 billion at May 31, 2024 and November 30, 2023, respectively. Net asset value or net asset value equivalent assets under management are composed of the fair value of the net assets of a fund or the net capital invested in a separately managed account. These include the following:
Previous wording
•Net asset values of investments made by us in funds or separately managed accounts were approximately $3.9 billion at February 29, 2024 and approximately $3.5 billion at November 30, 2023. We invest in certain strategies using our own capital, often before opening a strategy to outside capital. The net asset values include our capital of $1.8 billion at February 29, 2024 and $1.8 billion at November 30, 2023 plus amounts financed of $2.1 billion at February 29, 2024 and $1.8 billion at November 30, 2023. Revenues related to the investments made by us are presented in Investment return within the results of our asset management business.
Current wording
•Net asset values of investments made by us in funds or separately managed accounts were approximately $3.7 billion at May 31, 2024 and approximately $3.5 billion at November 30, 2023. We invest in certain strategies using our own capital, often before opening a strategy to outside capital. The net asset values include our capital of $1.7 billion at May 31, 2024 and $1.8 billion at November 30, 2023 plus amounts financed of $2.0 billion at May 31, 2024 and $1.8 billion at November 30, 2023. Revenues related to the investments made by us are presented in Investment return within the results of our asset management business.
Previous wording
•Assets under management by affiliated asset managers with whom we have an ongoing profit or revenue sharing arrangement were $20.7 billion at February 29, 2024 and $22.4 billion at November 30, 2023. Revenues from our share of fees received by affiliated asset managers are presented in Revenue from strategic affiliates within the results of our asset management businesses.
Current wording
•Assets under management by affiliated asset managers with whom we have an ongoing profit or revenue sharing arrangement were $18.2 billion at May 31, 2024 and $22.4 billion at November 30, 2023. Revenues from our share of fees received by affiliated asset managers are presented in Revenue from strategic affiliates within the results of our asset management businesses.
Previous wording
•Third-party investments actively managed by our wholly-owned managers were $2.2 billion at February 29, 2024 and $2.1 billion at November 30, 2023. We earn asset management fees as a result of the third-party investments, which are presented in Asset management fees and revenues within the results of our asset management businesses.
Current wording
•Third-party investments actively managed by our wholly-owned managers were $2.4 billion at May 31, 2024 and $2.1 billion at November 30, 2023. We earn asset management fees as a result of the third-party investments, which are presented in Asset management fees and revenues within the results of our asset management businesses.
Previous wording
Our asset management business makes seed and additional strategic investments directly in alternative asset management separately managed accounts and co-mingled funds where we act as the asset manager or in affiliated asset managers where we have strategic relationships and participate in the revenues or profits of the affiliated manager. The following table represents our investments by type of asset manager (in thousands):
Current wording
Our asset management business makes seed and additional strategic investments directly in alternative asset management separately managed accounts and co-mingled funds where we act as the asset manager or in affiliated asset managers where we have strategic relationships and participate in the revenues or profits of the affiliated manager. The following table represents our investments by type of asset manager:
Previous wording
(1)Due to the level or nature of an investment in a fund, we may consolidate that fund; and accordingly, the assets and liabilities of the fund are included in the representative line items in our consolidated financial statements. At February 29, 2024 and November 30, 2023, $14.8 million and $11.9 million, respectively, represent net investments in funds that have been consolidated in our financial statements.
Current wording
(1)Due to the level or nature of an investment in a fund, we may consolidate that fund; and accordingly, the assets and liabilities of the fund are included in the representative line items in our consolidated financial statements. At May 31, 2024 and November 30, 2023, $10.7 million and $11.9 million, respectively, represent net investments in funds that have been consolidated in our financial statements.
Previous wording
Non-interest expenses were $1.52 billion for the three months ended February 29, 2024, an increase of 34.9%, compared with $1.13 billion for the prior year comparable quarter. The increase is primarily due to an increase in overall business activity and compensation expense. Non-compensation expenses for the three months ended February 29, 2024 are impacted by the inclusion of Tessellis and Stratos as operating subsidiaries following the consolidation of these entities in the fourth quarter of 2023, offset by the impact of the spin-off of Vitesse Energy in January 2023.
Current wording
Non-interest expenses were $2.95 billion, an increase of 37.4%, compared with $2.15 billion for the prior year comparable period. The increase is primarily due to an increase in overall business activity and compensation expense. Non-compensation expenses are impacted by the inclusion of Tessellis and Stratos as operating subsidiaries following the consolidation of these entities in the fourth quarter of 2023, partially offset by the impact of the spin-off of Vitesse Energy in January 2023.
Previous wording
Compensation and benefits expense was $926.9 million for the three months ended February 29, 2024, compared with $703.1 million for the prior year comparable quarter. A significant portion of our compensation expense is highly variable with net revenues. Compensation and benefits expense as a percentage of Net revenues was 53.3% for the three months ended February 29, 2024 compared with 54.8% for the three months ended February 28, 2023. The ratio for the current quarter was impacted by the consolidation of Stratos and Tessellis, which have much lower compensation rates proportionate to net revenues.
Current wording
Compensation and benefits expense was $862.0 million and $1.79 billion for the three and six months ended May 31, 2024, respectively, compared with $575.9 million and $1.28 billion for the three and six months ended May 31, 2023, respectively. A significant portion of our compensation expense is highly variable with net revenues. Compensation and benefits expense as a percentage of Net revenues was 52.0% and 52.7% for the three and six months ended May 31, 2024, respectively, compared with 55.5% and 55.1% for the three and six months ended May 31, 2023, respectively. The ratio for the current period was impacted by the consolidation of Stratos and Tessellis, which have much lower compensation rates proportionate to net revenues.
Previous wording
Compensation expense related to the amortization of share- and cash-based awards was $128.1 million for the three months ended February 29, 2024 compared with $81.3 million for the prior year comparable quarter.
Current wording
Compensation expense related to the amortization of share- and cash-based awards was $118.6 million and $246.7 million for the three and six months ended May 31, 2024, respectively, compared with $65.4 million and $146.7 million for the three and six months ended May 31, 2023, respectively.
Previous wording
At February 29, 2024, we had 7,745 employees globally across all of our consolidated subsidiaries within our Investment Banking and Capital Markets and Asset Management reportable segments, an increase of 2,344 employees from our headcount of 5,401 at February 28, 2023. Included within our global headcount are 2,131 employees of our Stratos, Tessellis, HomeFed, Foursight Capital LLC and M Science subsidiaries. Of the 2,344 headcount increase, 1,720 relates to recognizing control of Stratros and Tessellis during the fourth quarter of 2023 as the employees of those subsidiaries are now included in our overall headcount. During the past year, 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.
Current wording
At May 31, 2024, we had 7,611 employees globally across all of our consolidated subsidiaries within our Investment Banking and Capital Markets and Asset Management reportable segments, an increase of 2,276 employees from our headcount of 5,335 at May 31, 2023. Included within our global headcount are 2,176 employees of our Stratos, Tessellis, HomeFed, and M Science subsidiaries. Of the 2,276 headcount increase, 1,976 relates to recognizing control of Stratros and Tessellis during the fourth quarter of 2023 as the employees of those subsidiaries are now included in our overall headcount. During the past year, 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.
Previous wording
Non-interest expenses, excluding Compensation and benefits, as a percentage of Net revenues was 34.0% and 32.9% for the three months ended February 29, 2024 and February 28, 2023, respectively, and was impacted by the following:
Current wording
Non-interest expenses, excluding Compensation and benefits, as a percentage of Net revenues was 34.2% and 42.8% for the three months ended May 31, 2024 and 2023, respectively, and was impacted by the following:
Previous wording
•Professional services expenses were higher by $15.7 million primarily on increased transaction related legal fees associated with capital markets transaction and litigation as well as consulting fees related to strategic technology investment initiatives.
Current wording
•Professional services expenses were higher by $7.0 million primarily on increased transaction related legal fees associated with capital markets transaction and litigation as well as consulting fees related to strategic technology investment initiatives.
Previous wording
•Brokerage and clearing fees were higher by $29.2 million due to increased trading volumes.
Current wording
•Brokerage and clearing fees were higher by $43.1 million due to increased trading volumes.
Previous wording
•Technology and communication were higher by $18.3 million related to the continued development of various trading and management systems and increased market data costs.
Current wording
•Technology and communication were higher by $40.5 million related to the continued development of various trading and management systems and increased market data costs.
Previous wording
•Cost of sales and depreciation and amortization expenses were higher by $42.4 million reflecting the consolidation of Stratos and Tessellis, partially offset by spin-off of Vitesse Energy in January 2023.
Current wording
•Cost of sales and depreciation and amortization expenses were higher by $102.1 million primarily reflecting the consolidation of Stratos and Tessellis, partially offset by spin-off of Vitesse Energy in January 2023.
Previous wording
•Other expenses were higher primarily due to bad debt expenses of $27.0 million associated with Weiss.
Current wording
•Other expenses were higher primarily due to bad debt expenses of $26.2 million associated with Weiss.
Previous wording
For the three months ended February 29, 2024 and February 28, 2023, the provision for income taxes was $56.0 million and $28.7 million, respectively, representing an effective tax rate of 25.4% and 18.2%, respectively. The higher rate for the current quarter reflects a lower excess tax benefit recognized on restricted stock units distributed in the first quarter of 2024 compared to the prior year comparable quarter.
Current wording
For the six months ended May 31, 2024 and 2023, the provision for income taxes was $129.1 million and $37.9 million, respectively, representing an effective tax rate of 28.8% and 21.6%, respectively. The higher rate for the six months ended May 31, 2024 is primarily due to the recognition of a smaller excess tax benefit on restricted stock distributed in the current year.
Previous wording
Financial instruments owned and Financial instruments sold, not yet purchased are recorded at fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Unrealized gains or losses are generally recognized in Principal transactions revenues in our Consolidated Statements of Earnings.
Current wording
Financial instruments owned and Financial instruments sold, not yet purchased are recorded at fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Unrealized gains or losses are generally recognized in Principal transactions revenues.
Previous wording
We evaluate equity method investments for impairment when operating losses or other factors may indicate a decrease in value which is other than temporary. We consider a variety of factors including economic conditions nationally and in their geographic areas of operation, adverse changes in the industry in which they operate, declines in business prospects, deterioration in earnings, increasing costs of operations and other relevant factors specific to the investee. Whenever we believe conditions or events indicate that one of these investments might be significantly impaired, we generally obtain from such investee updated cash flow projections and obtain other relevant information related to assessing the overall valuation of the investee. Utilizing this information, we assess whether the investment is considered to be other-than-temporarily impaired. To the extent an investment is deemed to be other-than-temporarily impaired, an impairment charge is recognized for the amount, if any, by which the investment’s book value exceeds our estimate of the investment’s fair value.
Current wording
We evaluate equity method investments for impairment when operating losses or other factors may indicate a decrease in value which is other than temporary. We consider a variety of factors including economic conditions nationally and in their geographic areas of operation, adverse changes in the industry in which they operate, declines in business prospects, deterioration in earnings, increasing costs of operations and other relevant factors specific to the investee. Whenever we believe conditions or events indicate that one of these investments might be significantly impaired, we generally obtain from such investee updated cash flow projections and obtain other relevant information related to assessing the overall valuation of the investee. Utilizing this information, we assess whether the investment is considered to be other-than-temporarily impaired. To the extent an investment is deemed to be other-than-temporarily impaired, an impairment charge is recognized for the
Previous wording
In the first quarter of 2023, we performed a valuation of our equity method investment in Golden Queen as forecasts of the expected future production of gold and silver from its mine had declined from previous periods. Our estimate of fair value was based on a discounted cash flow analysis, which included management’s projections of future Golden Queen cash flows and a discount rate of 11.0%. As a result of this valuation analysis, an impairment loss of $22.1 million was recorded in Other income in the Consolidated Statements of Earnings for the three months ended February 28, 2023. We sold Golden Queen in the fourth quarter of 2023 and recognized a gain of $1.7 million on the sale.
Current wording
In the first quarter of 2023, we performed a valuation of our equity method investment in Golden Queen as forecasts of the expected future production of gold and silver from its mine had declined from previous periods. Our estimate of fair value was based on a discounted cash flow analysis, which included management’s projections of future Golden Queen cash flows and a discount rate of 11.0%. As a result of this valuation analysis, an impairment loss of $22.1 million was recorded in Other income for the three months ended February 28, 2023. During the three months ended May 31, 2023, we recognized an additional impairment loss of $7.3 million primarily due to further declines in cash flows at Golden Queen. We sold Golden Queen in the fourth quarter of 2023 and recognized a gain of $1.7 million on the sale.
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Rearranged current paragraphs (14)
Current report — wording carried from elsewhere
•Non-compensation expenses were $566.7 million, an increase of 27.7% compared with $443.8 million for the prior year comparable quarter. Non-compensation expenses were higher due to the inclusion of Tessellis and Stratos as operating subsidiaries following the consolidation of these entities in the fourth quarter of 2023. The increase in non-compensation expenses is also attributed to increased brokerage and clearing fees associated with increased trading volumes and increased technology and communication and business development expenses.
Current report — wording carried from elsewhere
•Earnings from continuing operations before income taxes were $448.0 million, compared with $175.9 million for the prior year comparable period.
Current report — wording carried from elsewhere
(2)Allocated net interest represents an allocation to Asset Management of our interest expense on short- and long-term debt, 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.
Current report — wording carried from elsewhere
(1)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.
Current report — wording carried from elsewhere
Other investment banking net revenues were $127.2 million, meaningfully higher compared with net revenues of $71.5 million for the prior year comparable period. Results from our share of the net earnings of our Jefferies Finance joint venture increased from the prior year primarily driven by higher net fee income, partially offset by lower net interest income. Additionally, overall expenses decreased primarily driven by lower provision for loan losses for the current year. Revenues from our share of the net earnings of our Berkadia joint venture increased from the prior year comparable period driven by higher interest income on a larger and growing loan servicing portfolio, partially offset by lower loan sales volume. In addition, during the six months ended May 31, 2024, we recognized gains on various equity derivative transactions related to our investment banking activities, and a $24.8 million gain from the sale of our interests in Foursight in April 2024.
Current report — wording carried from elsewhere
Non-interest expenses were $1.43 billion, an increase of 40.1%, compared with $1.02 billion for the prior year comparable quarter. The increase is primarily due to an increase in overall business activity and compensation expense. Non-compensation expenses are higher due to the inclusion of Tessellis and Stratos as operating subsidiaries following the consolidation of these entities in the fourth quarter of 2023.
Current report — wording carried from elsewhere
•Technology and communication were higher by $16.3 million related to the continued development of various trading and management systems and increased market data costs and costs attributed to Stratos and Tessellis.
Current report — wording carried from elsewhere
•Cost of sales and depreciation and amortization expenses were higher by $59.7 million reflecting the consolidation of Stratos and Tessellis.
Current report — wording carried from elsewhere
Non-interest expenses, excluding Compensation and benefits, as a percentage of Net revenues was 34.1% and 37.3% for the six months ended May 31, 2024 and 2023, respectively, and was impacted by the following:
Current report — wording carried from elsewhere
•Professional services expenses were higher by $22.6 million primarily on increased transaction related legal fees associated with capital markets transaction and litigation as well as consulting fees related to strategic technology investment initiatives.
Current report — wording carried from elsewhere
amount, if any, by which the investment’s book value exceeds our estimate of the investment’s fair value.
Current report — wording carried from elsewhere
Access to external financing to finance our day to day operations, as well as the cost of that financing, is dependent upon various factors, including our debt ratings. Our current debt ratings are
Current report — wording carried from elsewhere
dealer and FCM is equal to the greater of the requirement under SEA Rule 15c3-1 or CFTC Regulation 1.17.
Current report — wording carried from elsewhere
as the breakdown in correlations, non-linear risks, tail risk and extreme events and capturing market moves beyond the confidence levels assumed in the VaR calculations.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Our long-term debt ratings at February 29, 2024 are as follows:
Previous report — wording carried elsewhere
The table below shows firmwide VaR for each component of market risk by interest rate and credit spreads, equity, currency and commodity products using the past 365 days of historical data (in millions):