DEF 14A: Jefferies Financial Group Reports Strong 2024 Performance Driven by Strategic Investments

Jefferies Financial Group's fiscal year 2024 saw significant revenue and earnings growth, fueled by strategic hiring and a strengthened alliance with SMBC Group.

Summary

• Jefferies Financial Group's 2024 performance benefited from strategic hiring, the SMBC alliance, and a focus on being a pure-play Wall Street firm.
• The company added 118 Investment Banking Managing Directors over the last three years, bringing the total to 386 as of today, a 47% increase overall.
• Investment Banking net revenues reached $3.44 billion in 2024, a 52% increase from the prior year and the second-highest on record.
• Jefferies increased its global Investment Banking market share by 110 basis points, surpassing peers.
• Capital Markets net revenues increased by 24% to $2.76 billion, driven by a 40% increase in Equities and a 7% increase in Fixed Income.
• Firm-wide net revenues for 2024 were $7.03 billion, with pre-tax earnings from continuing operations of $1.01 billion and diluted earnings per share of $2.96, representing year-on-year increases of 50%, 184%, and 169%, respectively.
• The SMBC Group increased its financial interest in Jefferies to 14.5% on an as-converted, fully diluted basis and nominated Toru Nakashima to Jefferies' Board of Directors.
• The company's Total Shareholder Return (TSR) was 128.9% for 2024, ranking #1 among peers on a one-year basis.
• The cash dividend was increased to $1.60 per share per annum, up from $1.20, a 33.3% increase.

Sentiment

Score: 9

Explanation: The document expresses a highly positive sentiment due to the exceptional financial results, strategic achievements, and optimistic future outlook. The significant growth in revenue, earnings, and market share, coupled with the increased dividend and strengthened SMBC alliance, contribute to this positive assessment.

Positives

• Significant growth in Investment Banking net revenues and market share.
• Strong performance in Capital Markets, particularly in Equities.
• Substantial increases in firm-wide net revenues, pre-tax earnings, and diluted earnings per share.
• Top-ranking Total Shareholder Return (TSR) compared to peers.
• Increased dividend payout to shareholders.
• Strengthened strategic alliance with SMBC Group.

Future Outlook

Jefferies believes it is uniquely positioned to capitalize on the anticipated improved market opportunity and is in a strong position to continue its forward momentum.

Management Comments

• Jefferies is uniquely positioned to capitalize on the anticipated improved market opportunity.
• Jefferies is in as strong a position as it has ever been to continue its forward momentum.

Industry Context

Jefferies' expansion in Investment Banking during a year when Wall Street experienced reductions in force highlights its counter-cyclical strategy and ability to attract top talent.

Comparison to Industry Standards

• Jefferies increased its global Investment Banking market share by 110 basis points, exceeding the progress of its peers.
• Jefferies increased its standing in the Investment Banking league-table rankings to #6, up from #8 last year.
• Jefferies' TSR ranked #1 on a one-year basis among its peers.

Management Changes

Related Party Transactions

• Prior to the combination of Jefferies and Jefferies Group in 2013, Jefferies Group invested in certain private equity funds (Private Equity Funds) managed by companies controlled by Mr. Friedman and the management companies of the Private Equity Funds (Fund Managers).
• We employ two former employees of the Fund Managers who continue to partially work for the Fund Managers under an arrangement Jefferies Group originally entered into with Mr. Friedman and a Fund Manager in 2005 and a related agreement we entered into during 2014.
• We have employed Thomas E. Tarrant, the brother-in-law of our Chief Executive Officer, as Managing Director, Marketing since 1997, three years before Mr. Handler was appointed CEO of the predecessor entity Jefferies Group.
• We have also employed Michael Cagno, the brother of our Controller and Principal Accounting Officer, as Senior Vice President, Information Technology since 2011.
• Messrs. Steinberg and Friedman invested in January 2022 $1.1 million and $1.0 million, respectively, in a syndication offered by our wholly owned subsidiary HomeFed Corporation for a multi-family residential development at one of its real estate sites.
• In June 2024, Mr. Friedman purchased $5 million in principal amount of the subordinated notes tranche of JCP Direct Lending CLO 2024-1 Ltd., a direct lending focused CLO managed by Jefferies Credit Partners.
• The SMBC-Jefferies Strategic Alliance commenced in 2021, focused on U.S. leveraged finance and Japan cross-border M&A.

Stakeholder Impact

• Shareholders benefited from a 128.9% Total Shareholder Return and a 33.3% increase in the annual cash dividend.
• Employees benefited from strategic investments in human capital and a focus on creating an inclusive and diverse culture.
• Clients benefited from Jefferies' expanded Investment Banking capabilities and global reach.
• The SMBC Group strengthened its strategic alliance with Jefferies, increasing its financial interest and board representation.

Next Steps

• Shareholders are encouraged to participate in the Annual Meeting of Shareholders.
• Shareholders are asked to vote by proxy in support of the Board's recommendations.

Key Dates

Keywords

Investment Banking, Capital Markets, Strategic Alliance, SMBC Group, Shareholder Return, Financial Performance, Net Revenues, Earnings, Market Share, Jefferies