Jefferies Financial Group Inc. · NYSE:JEF
Jefferies Financial — Investor Day (October 2019)
64 slides from Jefferies Financial's investor day presentation, Oct 16, 2019
Slide 1: Jefferies Financial Group Inc. 2019 Investor Meeting
Jefferies Financial Group Inc. 2019 Investor Meeting Wednesday, October 16, 2019 Presentations and Q&A
Slide 2: Note on Forward Looking Statements
Note on Forward Looking Statements Certain statements contained herein may constitute "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and/or the Private Securities Litigation Reform Act of 1995, regardi
Slide 3: 2019 Investor Meeting Agenda
2019 Investor Meeting Agenda Start Time Session Speaker(s) 9:00 AM Overview Rich Handler, CEO Brian Friedman, President 9:20 AM Financial Review Teri Gendron, CFO Peg Broadbent, CFO, Jefferies Group LLC 9:40 AM Investment Banking Ben Lorello, Global Head of Investment Banking 10:00 AM Equities Pete
Slide 4: Jefferies Financial Group – Cumulative Return of Capital
Jefferies Financial Group – Cumulative Return of Capital ($ Millions) $2,500 35% $2,312 30% $2,000 $1,723 25% $1,678 $1,491 $1,500 20% $1,259 15% $1,000 $707 $616 10% $500 5% - - Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Est. Cumulative Capital Returned (1) % of TBV at Launch(2) (1) Si
Slide 5: Jefferies Financial Group – Liquidity Strength Throughout Program
Jefferies Financial Group – Liquidity Strength Throughout Program ($ Millions) $2,000 $9,000 $1,800 $1,723 $1,678 $8,000 $1,600 $1,491 $1,400 $1,259 $7,000 $1,200 $1,000 $6,000 $800 $707 $616 $5,000 $600 $400 $4,000 $200 - $3,000 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Cumulative Capital Ret
Slide 6: Jefferies Financial Group – Growth of Consistent ROE Generating Assets
Jefferies Financial Group – Growth of Consistent ROE Generating Assets % of Book Value(1) 100% 4 Major Investments 80% 10 Major Investments 60% 40% 67% 55% 20% - At Launch of Program (2) PF Q3 2019 (3) Jefferies Group Merchant Banking (1) Excludes Corporate. (2) April 1, 2018. (3) Pro Forma Book Val
Slide 7: Jefferies Financial Group – Stock Price vs. TBV / Share
Jefferies Financial Group – Stock Price vs. TBV / Share Stock Price vs. TBV / Share $29.00 $27.42 $26.96 $27.01 $27.00 $26.33 $26.57 $25.91 $25.00 $23.00 $21.86 $21.00 $19.00 $17.00 $15.00 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 TBV / Share (1) Stock Price(2) (1) Tangible Book Value
Slide 8: Jefferies Financial Group – Stock Price vs. Adjusted TBV / Share
Jefferies Financial Group – Stock Price vs. Adjusted TBV / Share Stock Price vs. Adjusted TBV / Share $33.00 $30.94 $31.00 $30.41 $29.68 $29.21 $28.88 $29.00 $28.45 $27.00 $25.00 $23.00 $21.00 $19.00 $17.00 $15.00 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Adjusted TBV / Share (1) Stock Price(2
Slide 9: Jefferies Financial Group – Strategic Update
Jefferies Financial Group – Strategic Update ◼ We continue solid progress on our strategy of strengthening and expanding our core business of Investment Banking, Capital Markets and Asset Management, while continuing to simplify our structure, heighten our focus, return capital to our shareholders a
Slide 10: Jefferies Financial Group – Capital Returned to Shareholders
Jefferies Financial Group – Capital Returned to Shareholders ◼ Delivering shareholder return through continued share repurchases and distributions ─ Returned to shareholders $1.0 billion in 2019 to date through share repurchases (including $100 million in Q4), cash dividends and recent special divid
Slide 11: Fair Value of Remaining Merchant Banking Portfolio
Fair Value of Remaining Merchant Banking Portfolio As of May 31, 2019 ($ Millions) Pro Forma Estimated Fair Value (1) Investments in Public Companies Spectrum Brands - HomeFed 390 Other 259 Sub-Total $649 Investments in Private Companies National Beef $903 Linkem 600 Oil and Gas (Vitesse and JETX) 7
Slide 12: Jefferies Group – Global Full-Service Capabilities
Jefferies Group – Global Full-Service Capabilities Leucadia Asset Investment Banking Equities Fixed Income Management(1) Equity Cash Electronic Leveraged Investment Weiss Multi- Consumer Energy Capital quantPORT Equities Trading Credit Grade Strategy Markets Debt Capital Equity Prime Emerging Securi
Slide 13: Jefferies Group – Strategic Update
Jefferies Group – Strategic Update ◼ We continue to build a leading, client-focused global investment banking firm, seeking to provide clients with insight, expertise and execution ◼ Our competitive position has strengthened further, as several major competitors have experienced challenges and may f
Slide 14: Jefferies Group – Priorities
Jefferies Group – Priorities ◼ Our priorities are revenue growth and margin expansion, while maintaining our discipline around liquidity and risk management ─ Revenue growth expected to be led by Investment Banking maturation and new hires, as well as Equities and Fixed Income market share gains, as
Slide 15: Financial Review
Financial Review Jefferies
Slide 16: Jefferies Financial Group – Operating Results
Jefferies Financial Group – Operating Results ($ Millions) Jefferies Financial Group Inc. and Subsidiaries FYE Dec. 31, FYE Nov. 30, 9 Months Ended 2018 2016 2017 (11 Months) 9/30/2018 8/31/2019 Jefferies Group $2,415 $3,198 $3,183 $2,421 $2,365 Merchant Banking 622 876 572 530 399 Corporate and Oth
Slide 17: Jefferies Financial Group – Balance Sheet Overview
Jefferies Financial Group – Balance Sheet Overview ($ Millions) Jefferies Financial Group Inc. and Subsidiaries Balance Sheet as of 8/31/2019 Assets Liabilities and Equity Cash and Cash Equivalents $6,011 Short-Term Borrowings $519 Cash and Securities Segregated 658 Trading Liabilities, at Fair Valu
Slide 18: Jefferies Financial Group – Liquidity Metrics (as of 8/31/19)
Jefferies Financial Group – Liquidity Metrics (as of 8/31/19) ◼ Tangible Assets: $47.3 billion(1) Consolidated Balance ◼ Parent Company Debt-to-Equity Ratio: 0.10x Sheet and Leverage ◼ Target a parent-level liquidity reserve that provides 24 months of coverage for cash requirement Parent-Level Liqui
Slide 19: Jefferies Group – Operating Results
Jefferies Group – Operating Results ($ Millions) Jefferies Group LLC FYE Nov. 30, 9 Months Ended 2016 2017 2018 8/31/2018 8/31/2019 Equities $597 $674 $666 $501 $574 Fixed Income 654 618 560 473 518 Total Sales and Trading 1,252 1,293 1,225 974 1,092 Equity 235 345 455 327 257 Debt 305 649 636 483 3
Slide 20: Jefferies Group – Balance Sheet Overview
Jefferies Group – Balance Sheet Overview ($ Millions) Jefferies Group LLC Balance Sheet as of 8/31/2019 Assets Liabilities and Equity Cash & Cash Equivalents $4,665 Short-term Borrowings $519 Cash & Securities Segregated 658 Financial Instruments Sold, Not Yet Purchased 10,296 Financial Instruments
Slide 21: Jefferies Group – Liquidity and Risk Update (as of 8/31/19)
Jefferies Group – Liquidity and Risk Update (as of 8/31/19) ◼ Total Assets: $43.1 billion Low Leverage and ◼ Tangible Leverage: 9.4x(1) Liquid Inventory ◼ Level 3 Financial Instruments Owned as % of Total Inventory: 2.2% ◼ Level 3 Financial Instruments Owned as % of Tangible Equity: 8.3% ◼ Global Ex
Slide 22: Investment Banking
Investment Banking Jefferies
Slide 23: Investment Banking – Overview
Investment Banking – Overview ◼ Jefferies Investment Banking is a leading advisor and underwriter to our clients globally ◼ 943 investment bankers with deep sector expertise and extensive experience across major industry verticals ◼ On-the-ground presence in 13 countries across the world ◼ 71% of ou
Slide 24: Investment Banking – Sector, Product and Regional Expansion
Investment Banking – Sector, Product and Regional Expansion ◼ Since the beginning of fiscal 2018, we have expanded our Managing Director footprint across sectors, products and geographies MDs Hired During Last Two Years Coverage: Sector, Sponsor and Regions Sector Sponsor Regions US Europe Asia ◼ Ba
Slide 25: Investment Banking – Performance Update
Investment Banking – Performance Update ◼ Fiscal 2019 Investment Banking revenues have been impacted by a significant industry-wide decline in both equity and leveraged finance issuance across the U.S. and Europe ◼ Our Investment Banking revenues for the nine months ended August 31, 2019 declined by
Slide 26: Jefferies M&A Franchise Momentum
Jefferies M&A Franchise Momentum Reported Advisory Revenue ($ Millions) $1 Billion+ Completed M&A Transactions Advised by Jefferies 48 49 $820 $797 45 $770 $632 $654 $562 31 28 19 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 LTM Q3'19 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 LTM Q3'19 U.S. and Europe Spon
Slide 27: Technology Investment Banking
Technology Investment Banking Momentum in Technology ◼ Over the last three years, we have significantly increased the size of our Technology team, with a substantial build out of our West Coast Technology practice and subsequent expansion of our East Coast team and our team in Asia ◼ Over the same t
Slide 28: European Investment Banking
European Investment Banking Momentum in Europe ◼ Record results for European Investment Banking for the last 12 months ended August 31, 2019 ◼ Nine months ended August 31, 2019 revenues increased approximately 40% compared to the same period in 2018 ◼ Driven by record M&A revenues ─ Over 80% increas
Slide 29: Jefferies Finance – Overview
Jefferies Finance – Overview ◼ Jefferies Finance (“JFIN”), our corporate lending joint venture with Massachusetts Mutual Life Insurance Company, continues to grow steadily and prudently ─ Established in 2004, JFIN has demonstrated growth and resilience across multiple business cycles ◼ JFIN has buil
Slide 30: Investment Banking – Strategic Priorities
Investment Banking – Strategic Priorities ◼ Continue to increase the productivity of our sector MDs ◼ Capitalize on significant revenue opportunities from recently entered fee pools and from increased coverage footprint across sectors, sponsors, regions and products ◼ Monetize the large number of M&
Slide 31: Equities
Equities Jefferies
Slide 32: Equities – Overview
Equities – Overview ◼ Jefferies is a leading global institutional equities franchise ─ Sales and trading across North America, EMEA and Asia Pacific, with major trading hubs in New York, London, Hong Kong, and Tokyo ─ 300+ research professionals covering 2,000+ companies (2,800+ including co-branded
Slide 33: Equities – Performance and Market Share
Equities – Performance and Market Share Our global businesses continue to achieve growth in market share and competitive rank ◼ Our growth is largely driven by our client focus, enhanced global capabilities and the momentum of the overall Jefferies platform ◼ We have considerably improved our market
Slide 34: Equities – Our Revenue Growth and Diversification Strategy
Equities – Our Revenue Growth and Diversification Strategy Revenue Growth & Regional Diversification Product Diversification S&T Net Revenues YTD Q3 2019 S&T Revenue ~35% Revenue Growth in our S&T Business, Continued Double- YTD Q3’19 U.S. Driven by Global and Product Diversification Digit Growth in
Slide 35: Equities – Our Opportunity in Asia-Pacific
Equities – Our Opportunity in Asia-Pacific ◼ The Asia-Pacific market represents a significant opportunity for our Global Equities franchise to increase market share, improve our competitive positioning and grow revenues ◼ We are well positioned to continue benefiting from industry consolidation and
Slide 36: Equities – Our Growth Strategy and Focus Areas
Equities – Our Growth Strategy and Focus Areas High Touch Cash Non High-Touch Cash Select Focus Areas across the Equities Franchise Asia-Pacific Platform Capitalizing on competitor dislocation Electronic Trading Program Trading investment Prime Services made to address the global opportunity Continu
Slide 37: Equities – Strategic Priorities
Equities – Strategic Priorities Diversifying Products Globalization ROE & Businesses Grow non-cash businesses and Monetize investment made in Continue to build out financing focus on new product areas the Asia Platform capabilities Continue to build higher margin Capitalize on opportunities driven b
Slide 38: Fixed Income
Fixed Income Jefferies
Slide 39: Fixed Income – Overview
Fixed Income – Overview ◼ Jefferies serves clients across all major cash products in the U.S., Europe and Asia ─ 421 sales, trading, capital markets and strategy professionals globally ─ Primary Dealer or equivalent in U.S., UK, Germany, Netherlands, Portugal and Slovenia ─ Focused on providing best
Slide 40: Fixed Income – Positioned and Focused
Fixed Income – Positioned and Focused ◼ Improvements across our franchise are yielding consistent revenues and returns ◼ Focus on sales and trading of cash products across the fixed income landscape Stable revenues on lower cost, balance sheet, capital and risk Fixed Income Sales & Trading Revenues(
Slide 41: Fixed Income – Strong Client Franchise
Fixed Income – Strong Client Franchise Focus on quality share vs. market share Jefferies Fixed Income: Select Rankings from 2019 U.S. Secondary Cash Market Share Number 1 EM Credit 9.6% U.S. Emerging Markets Credit Service Quality #1 Dealer for Most Helpful Traders 9.2% 0.4% Top 3 Increase in Mark
Slide 42: Fixed Income – Strategic Priorities
Fixed Income – Strategic Priorities Drive consistent results by continuing to emphasize our long-standing client- centric strategy Client-Partner Global Alignment Culture ◼ Extend our core strengths into Europe: ◼ Quality share vs. market ─ High Yield and Distressed share ─ Investment Grade ◼ Buildi
Slide 43: Leucadia Asset Management
Leucadia Asset Management 41
Slide 44: Leucadia Asset Management – Overview
Leucadia Asset Management – Overview ◼ Diversified alternative asset management platform – supporting and developing focused funds and managed accounts managed by distinct management teams ─ Includes all asset management activities within Jefferies Financial Group, including investments and strategi
Slide 45: Leucadia Asset Management – Recent Developments
Leucadia Asset Management – Recent Developments ◼ January 2019: Folger Hill and Schonfeld Fundamental Equity combination ─ Closed transaction combining Folger Hill with Schonfeld’s Fundamental Equity business ─ The combination creates a global multi-manager platform with strong prospects for growth
Slide 46: Leucadia Asset Management – Recent Developments (Continued)
Leucadia Asset Management – Recent Developments (Continued) ◼ October 2019: Equity investment in Monashee Investment Management ─ Equity and debt capital markets investment strategy with a proven 8-year track record managing over $1 billion of AUM ─ Led by Jerry Coughlan and Tom Wynn, with a team of
Slide 47: Leucadia Asset Management – Select Platforms and Strategies
Leucadia Asset Management – Select Platforms and Strategies (as of 8/31/19) Asset Class NAV(1) Founded Description ($ Billions) (2) Multi $2.4 1978 ▪ Multi-strategy asset manager with 40 year track record Multi-Manager (2) ▪ Discretionary long/short equity hedge fund platform Equities $1.1 2014 ▪ Co
Slide 48: Leucadia Asset Management – Strategic Priorities
Leucadia Asset Management – Strategic Priorities ◼ Grow fee-generating third party assets; prospect of long-term stable cash flows ◼ Continue to add new platforms ◼ Earn reasonable risk-adjusted return on seed capital; recycle capital to continue to form new platforms ◼ Manage cost and mitigate risk
Slide 49: Merchant Banking
Merchant Banking Jefferies
Slide 50: National Beef – Overview
National Beef – Overview Overview Recent Developments ◼ National Beef is the fourth largest beef processor in the U.S., processing ~3 ◼ National Beef has generated record earnings each year over the last three years million fed cattle per year (~14% U.S. market share) ─ LTM 8/31/19 EBITDA(1) and Pre
Slide 51: Idaho Timber – Overview
Idaho Timber – Overview Overview Recent Developments ◼ Manufacturer and distributor of wood products ◼ Following a record first half in 2018, the lumber market has experienced a ─ Complementary Remanufacturing and Sawmill segments prolonged market correction that has impacted Idaho Timber sales and
Slide 52: Vitesse Energy Finance – Overview
Vitesse Energy Finance – Overview Company Overview Strategic Priorities ◼ Vitesse (“VE”) is a Denver based non-operating oil and gas company that ◼ Continue to participate in lower risk infill horizontal development drilling in acquires, develops and produces oil and gas from its leases in the core
Slide 53: HomeFed – Overview
HomeFed – Overview Company Overview Key Properties ◼ Developer/owner of residential and mixed-use real estate projects in ◼ Otay Ranch assets (Chula Vista, CA) California, New York, Florida, South Carolina and Virginia ─ ~4,450 acres of land entitled for 13,050 total units ─ Being developed in disti
Slide 54: Linkem – Overview
Linkem – Overview Overview Strategic Priorities ◼ Leading fixed wireless broadband provider in Italy ◼ Continue growing subscribers and the footprint of Linkem’s core consumer ─ Core consumer offering provides pre- and post-paid residential customers fixed wireless broadband service, while maintaini
Slide 55: Q & A – IRQuestions@Jefferies.com
Q & A – IRQuestions@Jefferies.com
Slide 56: Appendix
Appendix Jefferies
Slide 57: Jefferies Financial Group – Pro Forma Book Value
Jefferies Financial Group – Pro Forma Book Value Reconciliation of Merchant Banking Total Equity (Book Value) to Pro Forma Book Value (a Non-GAAP measure) ($ Millions) Total Merchant Banking Business May 31, 2019 Book Value (GAAP) $ 3,388 Pro Forma adjustments (1): Spectrum Brands (399) The We Compa
Slide 58: Jefferies Financial Group – NAV GAAP Reconciliation
Jefferies Financial Group – NAV GAAP Reconciliation Reconciliation of Merchant Banking Book Value to Pro Forma Fair Value (a Non-GAAP measure) ($ Millions) Estimated Pro Forma Fair Value Fair Value Book Value May 31, May 31, May 31, 2019 Fair Value 2019 (Non- Pro Forma 2019 (Non- (GAAP) Adjustments
Slide 59: Jefferies Financial Group – Tangible Equity GAAP Reconciliation
Jefferies Financial Group – Tangible Equity GAAP Reconciliation Reconciliation of Jefferies Financial Group Shareholders' Equity to Tangible Equity (a Non-GAAP measure) ($ Millions) 3/31/2018 Jefferies Financial Group Shareholders' Equity (GAAP) $ 10,259 Less: Intangible assets, net and goodwill (2,
Slide 60: National Beef – Reconciliation of Pre-Tax Income to EBITDA
National Beef – Reconciliation of Pre-Tax Income to EBITDA (a Non-GAAP measure) Reconciliation of Pre-Tax Income to EBITDA (a Non-GAAP measure) ($ Millions) LTM LTM 8/31/2018 8/31/2019 Pre-Tax Income (GAAP) $ 543 $ 639 Interest Expense/(Income), net 8 11 Depreciation & Amortization 102 117 EBITDA (N
Slide 61: Vitesse – Reconciliation of Pre-Tax Income to Adjusted EBITDA
Vitesse – Reconciliation of Pre-Tax Income to Adjusted EBITDA (a Non-GAAP measure) Reconciliation of Pre-Tax Income to Adjusted EBITDA (a Non-GAAP measure) ($ Millions) 3 Months Ended Projected 8/31/19 FY 2019 Pre-Tax Income (GAAP) $ 8 $ 41 Depletion, depreciation, amortization and accretion 15 61 I
Slide 62: Linkem – Reconciliation of Pre-tax Loss to Adjusted EBITDA
Linkem – Reconciliation of Pre-tax Loss to Adjusted EBITDA (a Non-GAAP measure) Reconciliation of Pre-tax Loss to Adjusted EBITDA (a Non-GAAP measure) ( € Millions) LTM 8/31/2019 Pre-tax Loss (GAAP) € (50) Interest expense 8 Depreciation & Amortization 65 Other (1) 9 Adjusted EBITDA (Non-GAAP) € 32
Slide 63: Jefferies Financial Group – Tangible Book Value GAAP Reconciliation
Jefferies Financial Group – Tangible Book Value GAAP Reconciliation Reconciliation of Jefferies Financial Group Shareholders' Equity to Tangible Book Value (a Non-GAAP measure) ($ Millions) 3/31/2018 Jefferies Financial Group Shareholders' Equity (GAAP) $ 10,259 Less: Intangible assets, net and good
Slide 64: Jefferies Financial Group – Tangible Book Value GAAP Reconciliation
Jefferies Financial Group – Tangible Book Value GAAP Reconciliation Reconciliation of Jefferies Financial Group Shareholders' Equity to Adjusted Tangible Book Value (a Non-GAAP measure) ($ Millions) 6/30/2018 9/30/2018 11/30/2018 2/28/2019 5/31/2019 8/31/2019 Jefferies Financial Group Shareholders'
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