Jefferies Financial Group, a global investment banking firm, has released its 2023 shareholder letter, providing an overview of its performance and strategic outlook. The company's stock price experienced a -2.8% movement and is currently trading at $39.56 per share.
In the letter, the company's management reflected on the challenges faced in 2023, citing it as a transition year in the economy, capital markets, and the industry. Despite geopolitical turmoil, Jefferies managed to deliver a modest return on equity during what they perceive to be the bottom of the current cycle.
Richard B. Handler, Chief Executive Officer, and Brian P. Friedman, President, emphasized the company's resilience and strategic positioning, stating, "It is one thing to make it through a transition year(s) intact. It is entirely another to come through such a period with a significantly enhanced market position, broader geographic reach, a credit rating upgrade, enhanced human capital, and an even stronger brand—all of which Jefferies achieved in 2023."
The company highlighted its efforts in talent acquisition, with a focus on expanding its capabilities globally. Over the last three years, Jefferies added 182 investment banking managing directors, marking a 61% increase in its senior team.
Additionally, the letter outlined the company's financial performance. Jefferies reported total net revenues of $4.7 billion and net income attributable to common shareholders of $263 million, equivalent to a 3.7% return on tangible equity. The company acknowledged the challenges posed by the transition year but expressed optimism about the future.
Regarding its capital management strategy, Jefferies highlighted its commitment to returning capital to shareholders. The company returned an aggregate of $986 million to common shareholders in the form of cash dividends and share repurchases.
The letter also provided updates on specific business segments, including investment banking, Jefferies Finance, and Berkadia, a commercial real estate finance and investment sales joint venture with Berkshire Hathaway.
Looking ahead, Jefferies expressed a keen sense of urgency while maintaining a focus on the long term. The company emphasized its broader societal purpose and commitment to giving back to society, aiming to build a premier and trusted global investment banking and capital markets firm.
The company's full 8-K submission is available here: Jefferies Financial Group 8-K submission.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $5,010 | $5,359 | $6,880 | $8,945 | $7,149 | $7,281 |
| Revenue Growth | n/a | 6.97% | 28.4% | 30.01% | -20.08% | 1.84% |
| Interest Income (MM) | $89 | $87 | $1,030 | $932 | $1,170 | $2,339 |
| Net Margins | 21% | 18% | 11% | 19% | 11% | 5% |
| Net Income (MM) | $1,051 | $960 | $770 | $1,677 | $782 | $333 |
| Depreciation & Amort. (MM) | $105 | $153 | $158 | $157 | $173 | $127 |
| Diluted Shares (MM) | 329 | 317 | 277 | 272 | 256 | 232 |
| Capital Expenditures (MM) | $32 | $1,707 | $186 | $166 | $224 | $173 |
| Current Ratio | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| Total Debt (MM) | $7,618 | $8,337 | $8,352 | $9,126 | $8,774 | $9,462 |
Jefferies Financial has low leverage, growing revenues and decreasing reinvestment in the business, and irregular cash flows. However, the firm has weak operating margins with a unknown rate of growth. Finally, we note that Jefferies Financial has positive expected EPS Growth.
