Jefferies(US:JEF)2025-07-09 20:12Financial Information This section provides a comprehensive overview of the company's financial performance and position, including detailed statements, management's analysis, and risk disclosures Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended May 31, 2025, including statements of financial condition, earnings, comprehensive income, changes in equity, and cash flows, along with detailed notes Consolidated Financial Condition Highlights (Unaudited) | Indicator | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Total Assets | $67,285.3 million | $64,360.3 million | | Total Liabilities | $56,902.8 million | $54,134.9 million | | Total Equity | $10,382.2 million | $10,225.0 million | Consolidated Earnings Highlights (Unaudited) | Metric ($ in thousands, except per share) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Six Months Ended May 31, 2025 | Six Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $1,634,447 | $1,656,445 | $3,227,466 | $3,394,648 | | Net Earnings | $91,395 | $154,687 | $228,244 | $311,079 | | Net Earnings Attributable to Common Shareholders | $88,017 | $145,736 | $215,955 | $295,377 | | Diluted EPS | $0.40 | $0.64 | $0.97 | $1.31 | Consolidated Cash Flow Highlights (Unaudited, Six Months Ended May 31) | Cash Flow Activity ($ in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(3,643,497) | $(1,180,047) | | Net Cash Used in Investing Activities | $(157,144) | $(110,455) | | Net Cash Provided by Financing Activities | $2,885,268 | $3,499,293 | Notes to Consolidated Financial Statements The notes provide detailed disclosures on significant accounting policies, business activities, and specific financial statement items, including segments, fair value, derivatives, and joint ventures - The company operates in two reportable business segments: Investment Banking and Capital Markets and Asset Management25 - In February 2024, OpNet, a consolidated subsidiary, agreed to sell substantially all of its wholesale operating assets, with the sale closing in August 2024; the sale of Foursight Capital LLC closed in the second quarter of 2024264245 Level 3 Financial Instruments Roll-forward (Six Months Ended May 31, 2025, $ in thousands) | Category | Balance at Nov 30, 2024 | Net Gains/Losses | Purchases/Issuances | Sales/Settlements | Net Transfers | Balance at May 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Level 3 Assets | $734,225 | $2,503 | $218,344 | $(142,559) | $(57,200) | $763,039 | | Total Level 3 Liabilities | $866,006 | $(36,343) | $240,243 | $(164,225) | $(36,512) | $1,049,169 | - The company has significant equity method investments in Jefferies Finance (50/50 joint venture with MassMutual) and Berkadia (joint venture with Berkshire Hathaway), with investment balances of $663.5 million and $437.7 million respectively as of May 31, 2025151154157 Segment Performance (Six Months Ended May 31, $ in millions) | Segment | Net Revenues 2025 | Net Revenues 2024 | Pre-Tax Earnings 2025 | Pre-Tax Earnings 2024 | | :--- | :--- | :--- | :--- | :--- | | Investment Banking & Capital Markets | $2,869.4 | $2,945.7 | $355.1 | $406.3 | | Asset Management | $346.3 | $429.9 | $(80.9) | $22.6 | - The company maintains a strategic alliance with Sumitomo Mitsui Banking Corporation (SMBC), which owns approximately 15.7% of the company's common stock on an as-converted basis as of May 31, 2025220262 Management's Discussion and Analysis (MD&A) Management provides an analysis of the company's financial performance for the second quarter and first half of 2025, covering consolidated results, revenue and expense analysis, liquidity, capital resources, and risk management practices Consolidated Results of Operations For the six months ended May 31, 2025, net revenues decreased by 4.9% to $3.23 billion, and earnings from continuing operations before taxes fell 36.2% to $286.0 million, primarily due to lower Fixed Income and Asset Management results and higher non-compensation expenses Financial Performance vs. Prior Year | Metric ($ in thousands) | Six Months Ended May 31, 2025 | Six Months Ended May 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $3,227,466 | $3,394,648 | (4.9)% | | Earnings from Continuing Operations Before Income Taxes | $285,966 | $447,996 | (36.2)% | | Net Earnings Attributable to Common Shareholders | $215,955 | $295,377 | (26.9)% | - The decrease in profitability was attributed to market uncertainty from U.S. policy and geopolitical events, a decline in investment returns from the Asset Management business, reduced performance in the Fixed Income business, and higher non-compensation expenses280 Revenues by Source For the six months ended May 31, 2025, Investment Banking advisory revenues grew 37.5% and Equities revenues increased 17.7%, but these gains were offset by declines in Fixed Income and Asset Management revenues Net Revenues by Business Line (Six Months Ended May 31, $ in millions) | Business Line | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Investment Banking | $1,467.0 | $1,514.4 | (3.1)% | | Advisory | $855.6 | $622.5 | 37.5% | | Underwriting (Equity & Debt) | $655.6 | $793.2 | (17.3)% | | Equities | $935.3 | $794.7 | 17.7% | | Fixed Income | $467.1 | $636.7 | (26.6)% | | Asset Management | $346.3 | $429.9 | (19.4)% | - The investment banking backlog remains strong, but the timing of its realization is uncertain due to ongoing U.S. policy and geopolitical events295 - Aggregate net assets under management (AUM) increased to $31.4 billion as of May 31, 2025, from $28.0 billion at November 30, 2024317 Non-interest Expenses For the six months ended May 31, 2025, total non-interest expenses were flat at $2.94 billion, with compensation and benefits decreasing 5.2% while non-compensation expenses rose due to higher business development, brokerage fees, and technology costs Non-interest Expenses (Six Months Ended May 31, $ in thousands) | Expense Category | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $1,695,966 | $1,788,864 | (5.2)% | | Brokerage and clearing fees | $239,181 | $220,206 | 8.6% | | Business development | $152,361 | $126,281 | 20.7% | | Technology and communications | $285,673 | $272,750 | 4.7% | | Other | $157,034 | $125,417 | 25.2% | | Total non-interest expenses | $2,941,500 | $2,946,652 | (0.2)% | - The compensation and benefits expense as a percentage of net revenues was 52.5% for the first half of 2025, compared to 52.7% for the same period in 2024323 Liquidity, Financial Condition and Capital Resources The company maintains a robust liquidity and capital position, with total long-term capital of $21.8 billion and a leverage ratio of 6.5x as of May 31, 2025, returning $244.7 million to shareholders while increasing long-term debt Key Financial Ratios and Balances | Metric | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Total Assets | $67,285 million | $64,360 million | | Total Equity | $10,382 million | $10,225 million | | Tangible Shareholders' Equity | $8,245 million | $8,103 million | | Leverage Ratio | 6.5x | 6.3x | | Tangible Gross Leverage Ratio | 7.9x | 7.7x | - Total long-term capital stood at $21.76 billion at May 31, 2025, with a long-term debt to equity capital ratio of 1.10:1389390 - The company's liquidity management framework includes a Cash Capital Policy, a Modeled Liquidity Outflow (MLO) assessment, and a Contingency Funding Plan (CFP) to ensure sufficient liquidity in stressed conditions371 - During the six months ended May 31, 2025, the company returned $244.7 million to shareholders, consisting of $187.1 million in dividends and $57.6 million in share repurchases for tax withholding358 Risk Management The company employs a comprehensive risk management framework to address market, credit, operational, and other principal risks, with average daily firmwide VaR decreasing to $11.89 million in Q2 2025 - Principal risks are identified as market, credit, liquidity and capital, operational, model, strategic, legal, compliance, new business, and reputational risk418 Daily Firmwide VaR (95%, 1-day, for Q2 2025) | Metric ($ in millions) | Value | | :--- | :--- | | VaR at May 31, 2025 | $11.68 | | Average | $11.89 | | High | $15.39 | | Low | $8.96 | - Total counterparty credit exposure (excluding cash) was $2.70 billion at May 31, 2025, with the largest exposures to A-rated and BBB-rated counterparties460 - The top non-U.S. country risk exposures (net issuer and counterparty risk, excluding cash) as of May 31, 2025, were to the United Kingdom ($627.5M), Canada ($471.0M), and France ($142.9M)465 Quantitative and Qualitative Disclosures About Market Risk This section cross-references the market risk disclosures provided within the "Risk Management" section of Management's Discussion and Analysis (Item 2) - Quantitative and qualitative disclosures about market risk are set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations —Risk Management" in Part I, Item 2 of this Form 10-Q470 Controls and Procedures Based on an evaluation as of May 31, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, evaluated and concluded that the company's disclosure controls and procedures were effective as of May 31, 2025471476 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls477 Other Information This section provides additional information on legal proceedings, risk factors, and equity security transactions Legal Proceedings, Risk Factors, and Share Repurchases This section covers legal matters, risk factors, and equity security transactions, noting routine legal proceedings, a specific litigation loss, consistent risk factors, and share repurchases for tax liabilities - The company is involved in various legal and regulatory matters in the normal course of business, which are not expected to have a material adverse effect on its financial statements479 - A specific litigation against the former portfolio manager of 3|5|2 Capital ABS Master Fund LP resulted in a recognized loss of $17.2 million to date, with the outcome and potential recovery uncertain480484 - There are no new risk factors reported; the company refers to the disclosures in its Annual Report on Form 10-K for the year ended November 30, 2024485 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Publicly Announced Program Purchases | Remaining Authorization | | :--- | :--- | :--- | :--- | :--- | | Mar 2025 | 20,846 | $56.45 | — | $250.0M | | Apr 2025 | — | — | — | $250.0M | | May 2025 | 1,549 | $46.59 | — | $250.0M | | Total | 22,395 | $55.77 | — | $250.0M |