Jefferies Group LLC today announced financial results for its
fiscal third quarter 2017.
Highlights for the three months ended August 31, 2017:
- Total Net Revenues of $801 million
- Investment Banking Net Record Revenues
of $476 million
- Total Equities and Fixed Income Net
Revenues of $320 million
- Earnings Before Income Taxes of $122
million
- Net Earnings of $84 million
Highlights for the nine months ended August 31, 2017:
- Total Net Revenues of $2,375
million
- Investment Banking Net Revenues of
$1,236 million
- Total Equities and Fixed Income Net
Revenues of $1,128 million
- Earnings Before Income Taxes of $363
million
- Net Earnings of $268 million
Rich Handler, Chairman and Chief Executive Officer, and Brian
Friedman, Chairman of the Executive Committee, commented: “Our
third quarter net revenues of more than $800 million represent our
best third quarter in Jefferies' history (excluding Bache), and are
significantly above the revenues of $654 million for the same
quarter last year and $683 million for the second quarter of this
year (excluding last quarter's $96 million gain on our KCG
position, which has now been sold).”
“Our third quarter performance was led by a quarterly record
$476 million in Investment Banking revenues. We have been focused
on building our Investment Banking business for many years, with
the last two years affording us yet another important opportunity
to recruit and expand upon our already broad footprint. The
continued successful development of our investment banking platform
should lead to greater stability in our results and compounding
benefits to our overall platform.”
“Jefferies' Investment Banking net revenues reflect record
quarterly debt capital markets net revenues, solid results in our
equity capital markets effort and a strong performance in mergers,
acquisitions and advisory, as well as broad participation across
our industry groups, including healthcare, energy, technology media
and telecommunications, financial services, industrials and
consumer. This third quarter alone, our 789 global investment
banking professionals completed 381 debt financings raising $91
billion of capital, 34 equity financings raising $16 billion of
capital and 50 merger and acquisitions transactions aggregating $29
billion in total deal size. Our Investment Banking backlog remains
robust.”
“Our Equities and Fixed Income results were solid, while volumes
and volatility were subdued for much of the quarter. We are driving
growth in market share in our core equities business, while our
fixed income efforts are much improved, with increased capital
efficiency and lower overall risk.”
“Our non-compensation costs include $4.4 million of the more
than $5.0 million we, our clients and our employees donated to
charities for Hurricane Harvey relief. We are proud Jefferies could
deliver our platform to support those in need in the aftermath of
this horrible disaster.”
The attached financial tables should be read in conjunction with
our Quarterly Report on Form 10-Q for the quarter ended
May 31, 2017, our Annual Report on Form 10-K for the year
ended November 30, 2016 and our amended Annual Report on Form
10-K/A for the year ended November 30, 2016. Amounts herein
pertaining to August 31, 2017 represent a preliminary estimate
as of the date of this earnings release and may be revised in our
Quarterly Report on Form 10-Q for the quarter ended August 31,
2017.
This 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 results and performance, including our future market
share and expected financial results. It is possible that the
actual results may differ materially from the anticipated results
indicated in these forward-looking statements. Please refer to our
most recent Annual Report on Form 10-K for a discussion of
important factors that could cause actual results to differ
materially from those projected in these forward-looking
statements.
Jefferies, the world's only independent full-service global
investment banking firm focused on serving clients for over 50
years, is a leader in providing insight, expertise and execution to
investors, companies and governments. Our firm provides a full
range of investment banking, sales, trading, research and strategy
across the spectrum of equities, fixed income and foreign exchange,
as well as wealth management, in the Americas, Europe and Asia.
Jefferies Group LLC is a wholly-owned subsidiary of Leucadia
National Corporation (NYSE: LUK), a diversified holding
company.
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF EARNINGS (Amounts in Thousands)
(Unaudited)
Quarter Ended August 31, 2017 May 31, 2017
August 31, 2016 Revenues: Commissions and other fees
$ 139,082 $ 152,643 $ 152,044 Principal transactions 185,215
287,070 167,483 Investment banking 475,702 351,863 294,930
Asset management fees and
investment income (loss) from managed funds
5,465 (2,697 ) 15,877 Interest 230,496 227,804 213,716 Other 12,371
22,272 19,791 Total revenues 1,048,331
1,038,955 863,841 Interest expense 247,639 259,661
209,391 Net revenues 800,692 779,294 654,450
Non-interest expenses: Compensation and benefits
462,933 450,522 376,438 Non-compensation expenses: Floor
brokerage and clearing fees 44,869 47,494 40,189 Technology and
communications 72,440 67,478 64,512 Occupancy and equipment rental
27,736 23,594 24,987 Business development 23,125 26,466 20,259
Professional services 25,007 26,413 29,761 Other 22,318
21,146 17,582 Total non-compensation expenses 215,495
212,591 197,290 Total non-interest expenses
678,428 663,113 573,728 Earnings before income
taxes 122,264 116,181 80,722 Income tax expense 38,439
46,391 39,564 Net earnings 83,825 69,790 41,158 Net
earnings (loss) attributable to noncontrolling interests 10
39 (11 ) Net earnings attributable to Jefferies Group LLC $
83,815 $ 69,751 $ 41,169 Pretax
operating margin 15.3 % 14.9 % 12.3 % Effective tax rate 31.4 %
39.9 % 49.0 %
JEFFERIES GROUP LLC AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands) (Unaudited)
Nine Months Ended August 31, 2017
August 31, 2016 Revenues: Commissions and other fees
$ 437,547 $ 454,025 Principal transactions 693,242 382,290
Investment banking 1,235,586 778,906
Asset management fees and
investment income from managed funds
11,694 29,743 Interest income 660,323 655,836 Other 58,691
(6,937 ) Total revenues 3,097,083 2,293,863 Interest expense
721,584 621,018 Net revenues 2,375,499
1,672,845 Non-interest expenses: Compensation and
benefits 1,373,627 1,141,497 Non-compensation expenses:
Floor brokerage and clearing fees 138,221 124,259 Technology and
communications 205,425 196,000 Occupancy and equipment rental
77,145 74,498 Business development 72,223 67,700 Professional
services 83,544 82,799 Other 62,670 52,649 Total
non-compensation expenses 639,228 597,905 Total
non-interest expenses 2,012,855 1,739,402 Earnings
(loss) before income taxes 362,644 (66,557 ) Income tax expense
95,009 5,112 Net earnings (loss) 267,635 (71,669 )
Net earnings attributable to noncontrolling interests 50 77
Net earnings (loss) attributable to Jefferies Group LLC $
267,585 $ (71,746 ) Pretax operating margin 15.3 %
(4.0 )% Effective tax rate 26.2 % (7.7 )%
JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED STATISTICAL
INFORMATION (Amounts in Thousands, Except Other Data)
(Unaudited)
Quarter Ended August 31, 2017 May 31, 2017
August 31, 2016
Revenues by
Source
Equities $ 176,789 $ 271,522 $ 148,308 Fixed income 142,736
158,606 195,335 Total Equities and Fixed income 319,525
430,128 343,643 Equity 86,081 74,902 68,218
Debt 186,261 125,847 72,473 Capital markets 272,342
200,749 140,691 Advisory 203,360 151,114 154,239
Total Investment banking 475,702 351,863 294,930
Asset management fees and investment
income (loss) from managed funds:
Asset management fees
4,272 4,115 7,610 Investment income (loss) from managed funds 1,193
(6,812 ) 8,267 Total 5,465 (2,697 ) 15,877
Net
revenues $ 800,692 $ 779,294
$ 654,450
Other
Data
Number of trading days 65 64 65 Number of trading loss days 3 3 8
Average firmwide VaR (in millions) (1) $ 6.51 $ 9.21 $ 6.62
(1) VaR estimates the potential loss in value of our
trading positions due to adverse market movements over a one-day
time horizon with a 95% confidence level. For a further discussion
of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7
"Management's Discussion and Analysis" in our Annual Report on Form
10-K for the year ended November 30, 2016.
JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED STATISTICAL
INFORMATION (Amounts in Thousands, Except Other Data)
(Unaudited) Nine
Months Ended August 31, 2017 August 31, 2016
Revenues by
Source
Equities $ 605,025 $ 373,593 Fixed income 523,194 490,603
Total Equities and Fixed income 1,128,219 864,196
Equity 222,549 173,122 Debt 474,736 175,870 Capital markets
697,285 348,992 Advisory 538,301 429,914 Total investment
banking 1,235,586 778,906
Asset management fees and investment
income (loss) from managed funds:
Asset management fees 16,368 25,779 Investment income (loss) from
managed funds (4,674 ) 3,964 Total 11,694 29,743
Net
revenues $ 2,375,499 $
1,672,845
Other
Data
Number of trading days 189 190 Number of trading loss days 9 27
Average firmwide VaR (in millions) (1) $ 8.63 $ 7.73
(1) VaR estimates the potential loss in value of our trading
positions due to adverse market movements over a one-day time
horizon with a 95% confidence level. For a further discussion of
the calculation of VaR, see "Value-at-Risk" in Part II, Item 7
"Management's Discussion and Analysis" in our Annual Report on Form
10-K for the year ended November 30, 2016.
JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL
HIGHLIGHTS (Amounts in Millions, Except Where Noted)
(Unaudited)
Quarter Ended August 31, 2017 May 31, 2017
August 31, 2016
Financial
position:
Total assets (1) $ 39,358 $ 40,079 $ 38,128 Average total assets
for the period (1) $ 45,311 $ 45,650 $ 42,270 Average total assets
less goodwill and intangible assets for the period (1) $ 43,467 $
43,806 $ 40,408 Cash and cash equivalents (1) $ 4,807 $
4,357 $ 3,159 Cash and cash equivalents and other sources of
liquidity (1) (2) $ 6,191 $ 5,817 $ 4,873 Cash and cash equivalents
and other sources of liquidity - % total assets (1) (2) 15.7 % 14.5
% 12.8 %
Cash and cash equivalents and other
sources of liquidity - % total assets less goodwill and
intangible assets (1) (2)
16.5 % 15.2 % 13.4 % Financial instruments owned (1) $
14,037 $ 13,881 $ 14,328 Goodwill and intangible assets (1) $ 1,841
$ 1,844 $ 1,856 Total equity (including noncontrolling
interests) (1) $ 5,655 $ 5,565 $ 5,327 Total Jefferies Group LLC
member's equity (1) $ 5,654 $ 5,565 $ 5,321 Tangible Jefferies
Group LLC member's equity (1) (3) $ 3,813 $ 3,721 $ 3,465
Level 3 financial
instruments:
Level 3 financial instruments owned (1) (4) $ 348 $ 310 $ 434 Level
3 financial instruments owned - % total assets 0.9 % 0.8 % 1.1 %
Level 3 financial instruments owned - % total financial instruments
(1) 2.5 % 2.2 % 3.0 %
Level 3 financial instruments owned - %
tangible Jefferies Group LLC member's equity
9.1 % 8.3 % 12.5 %
Other data and
financial ratios:
Total long-term capital (1) (5) $ 11,038 $ 10,762 $ 10,803 Leverage
ratio (1) (6) 7.0 7.2 7.2 Tangible gross leverage ratio (1) (7) 9.8
10.3 10.5 Number of trading days 65 64 65 Number of trading
loss days 3 3 8 Average firmwide VaR (8) $ 6.51 $ 9.21 $ 6.62
Number of employees, at period end 3,438 3,324 3,323
JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL
HIGHLIGHTS - FOOTNOTES (1) Amounts pertaining to August
31, 2017 represent a preliminary estimate as of the date of this
earnings release and may be revised in our Quarterly Report on Form
10-Q for the quarterly period ended August 31, 2017. (2) At
August 31, 2017, other sources of liquidity include high quality
sovereign government securities and reverse repurchase agreements
collateralized by U.S. government securities and other high quality
sovereign government securities of $1,083 million, in aggregate,
and $301 million, being the estimated amount of additional secured
financing that could be reasonably expected to be obtained from our
financial instruments that are currently not pledged after
considering reasonable financing haircuts. The corresponding
amounts included in other sources of liquidity at May 31, 2017 were
$1,149 million and $311 million, respectively, and at August 31,
2016, were $1,384 million and $330 million, respectively.
(3) Tangible Jefferies Group LLC member's equity (a non-GAAP
financial measure) represents total Jefferies Group LLC member's
equity less goodwill and identifiable intangible assets. We believe
that tangible Jefferies Group LLC member's equity is meaningful for
valuation purposes, as financial companies are often measured as a
multiple of tangible equity, making these ratios meaningful for
investors. (4) Level 3 financial instruments represent those
financial instruments classified as such under Accounting Standards
Codification 820, accounted for at fair value and included within
Financial instruments owned. (5) At August 31, 2017, May 31,
2017 and August 31, 2016, total long-term capital includes our
long-term debt of $5,383 million, $5,197 million and $5,476
million, respectively, and total equity. Long-term debt included in
total long-term capital is reduced by the amount of debt maturing
in less than one year, as applicable. (6) Leverage ratio
equals total assets divided by total equity. (7) Tangible
gross leverage ratio (a non-GAAP financial measure) equals total
assets less goodwill and identifiable intangible assets divided by
tangible Jefferies Group LLC member's equity. The tangible gross
leverage ratio is used by rating agencies in assessing our leverage
ratio. (8) VaR estimates the potential loss in value of our
trading positions due to adverse market movements over a one-day
time horizon with a 95% confidence level. For a further discussion
of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7
"Management's Discussion and Analysis" in our Annual Report on Form
10-K for the year ended November 30, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170919005540/en/
Jefferies Group LLCPeregrine C. Broadbent, 212-284-2338Chief
Financial Officer
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