Jefferies Financial Group Inc. (JEF) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to our 2025 Jefferies Investor Day. My name is Rich Handler, the CEO of Jefferies, and I'm happy to be here. The first thing I'd like to say is give a little perspective on where we're coming from. Between myself; my partner, Brian; our Chairman, Joe Steinberg; the senior management team and leadership at Jefferies, the Board; and our joint venture partners, we basically collectively own roughly 35% of the company. And it's a big deal to us. But more importantly than that, so everyone understands, and those of you who know me know pretty well, I've been here for 36 years. My partner has been here for 26 years. Our leadership team has been here for a long time. This is personal. We care and we own this company with you. And everything we do is beyond money, it's personal. And I can speak for the other 6,000 people in this company, we all feel the same way. I've also been through times of adversity, as have all of us, in our career, and challenges. And I'll tell you, every time we have, it's been -- we've come out stronger on the other side. And there's a reason for that, with our people and our company. Our people, our culture, our Board, the bond we have with our clients, the tenacity and the experience, we've come through many, many, many things, always better. And I can always reflect on the people, and they are the ones who get us there internally. Now I'm going to keep my intro short, our presentation relatively brief. The main point I'm going to get to in a second is going to be exactly where we are as an organization, which is absolutely a spectacular spot. And you'll hear it from a lot of people today and you'll understand exactly why we're so excited about this organization. Before I get to that, I think I have to talk about First Brands just for a moment. Stating the obvious, we are incredibly disappointed that we have to bring this up at this meeting today. We try to do our best on Sunday to address the specifics of what we knew, as is our way, in a direct and transparent manner, and we put that out for everyone to see. We framed our direct exposure and we gave the details of our relationship with the company. But it's very clear, and we're as frustrated as anybody else, we don't know exactly what happened with First Brands, and the details will come out as the bankruptcy process unfolds. What I will tell you is we're going to work around the clock to get the money that we believe we are owed based on purchasing good receivables, paying for them and owning them on behalf of our stakeholders. And we're going to work around the clock to do that. As Brian said on -- as Brian and I said on the weekend, we basically said that these losses are absorbable. That word is a word that doesn't give us comfort because we take this very seriously. And even though it's absorbable, it doesn't negate the fact that we're going to be relentless in our pursuit of what we know is our money. We're going to allow everybody to ask questions at the end of this presentation regarding anything they want to ask. We'll do our best to answer them. The reality is a lot of those answers, we can't -- we don't know the answers to. So it might be frustrating, but please understand there's not one question you all can't ask -- that one question you all want to ask that we're not asking ourselves in terms of getting our money back. Okay. So that might have been the worst segue in the history of segues. Let me tell you what's really going on at our firm, okay? Our company is operating spectacularly well. You saw our recent results. The fact is record revenues last quarter. Our banking business, our trading businesses, our research, our technology, our global footprint, our relationship with clients, the brand that we've built, the global footprint that is this organization, it's palpable how exciting it is. We have critical mass finally after 36 years in literally every single thing we try to touch. We're incredibly tied to the most prestigious clients in all aspects: on the corporate side, on the private equity side, on the hedge fund side, on the asset management side, our electronics, our prime brokerage, our research. I can go on and on, and you're going to hear it in detail today. And the fact of the matter is with the consolidation in this industry and what's happened throughout the course of the last couple of decades, we find ourselves at Jefferies right at the forefront of being a critical partner to just about every client we would want on a global basis. We're also doing it at a time where you can feel it, and you can see it from recent results yesterday, but you can see it from our results and you can see how we've been performing, the environment is really, really conducive to us monetizing these relationships and monetize these capabilities. And you can see it across the board and you can see it from all the rest of the team as we go through it today. Our joint venture partnerships are really important, historically with Berkshire Hathaway, with MassMutual. But quite honestly, our partnership with SMBC, we believe, will be a game changer for our organization. Brian and I just came from a meeting 8:00 this morning with senior leadership of SMBC Nikko, we are working, there are hundreds of people right now working globally to figure out how we can actually partner together formally, informally to really deliver the best of both organizations to our clients. Our clients are incredibly receptive, and our capabilities together are complementary. And the fact of the matter is I think it will be a game changer for our company going forward as we go and do increasingly broader and better business on a global basis. Before I turn it over to Brian, I just want to comment on one last thing, the culture of our company. I don't think anyone should ever -- it's hard for me to convey the depth of how much people at this company care for each other, for our clients, for our brand, for our reputation and for who we are. And quite frankly, I've never been in a position where I was part of a company that had as much potential as we have to unleash with our team on a global basis. We own 35%, soon to go to 40% with SMBC's next 5% purchase, you all own 60%. Together, I think we're going to have a great opportunity ahead of us, and I really could not be more excited about it. And I can't wait for you to hear the rest of the team because the team has a lot of great stuff to say. So thank you.

I'm Brian Friedman, President of Jefferies. I'll just add one thought to everything Rich said, which I more than agree with, which is that after writing the note and sharing the note that we sent out on Sunday, I'm really happy we're here today. The opportunity to give perspective and, hopefully, for all who are interested in Jefferies, which is I assume why you're here, to understand exactly what's going on at Jefferies, the scale of Jefferies, the breadth and the depth of Jefferies, the momentum we have, the opportunity that's ahead, the current trajectory of the environment, when you put all of that together, the disappointment we feel to be in the headlines the last week or 2 and all of this is it's at a time where this firm is in an incredible position. And we don't believe, and that was -- again, we have to choose our words carefully in the world that we live in, and there are things we can't say until facts are known and the facts that we don't know are known to us, but the bottom line is this has to be put in perspective. And we're going to try to give you the perspective to put it in. This is the sum of what we're going to share with you today. We have a truly global, deeply integrated investment banking and capital markets firm, that is unique where our overriding competition are complex, multifaceted organizations where what we do, which is incredibly important to our clients, is only a small part or a part of what they do. Or in the cases of some of the smaller competitors we face, they can only address a portion of what our clients need. So we think of ourselves as occupying a very distinct position where truly around the world, we can provide our clients with the breadth and depth of what they seek and what they deserve. We can do it on a comprehensive and integrated basis, and that distinguishes us and it's what's propelling us. After a lot of years of investment, and I'll come back to this with some numbers in a few minutes, we are very much in a realization mode. I'm sure we're going to get a question about how many MDs you're going to hire in investment banking. For me, personally, I'll tell you, it's not something I'm thinking about. Is it something we thought about for a bunch of years? Yes. Are we thinking about it today? No. And take that as the priority. The priority today is to execute and realize, okay? I'm not going to say we may not someday open another office in another country. Right now, I couldn't think of what that country is and no one has raised it for a long time, okay? We are moving ahead with a breadth and depth of capability that is more than what we need to serve our clients as we want to do it, to broaden and deepen our business and to grow considerably. If we're fortunate, and we believe we may be, the wind has shifted to our backs. It's been in our face at different times, it's been in our sides at different points. In the history of investment banking, and we showed a slide last year at this event, which I almost wish we had updated and shown again, which was the entire history of Dealogic market size since -- I think it goes back to 1996, this industry pre-'08 enjoyed typically multiple year runs of growth and opportunity. We'll see where we are, but we believe that we are in a favorable environment that will enlarge the market opportunity while, at the same time, we continue to gain share. Lastly, there are a number of specific initiatives that are already in the ground at Jefferies, much of the cost of which has already been borne, that are going to drive our growth for years to come. And we'll go through those. Hopefully, you'll appreciate it. And you'll see what the potential for Jefferies over the next 1 year, 3 years, 5 years, 10 years truly is. I'll summarize the greater number of words on this page by saying what Rich says: culture matters. Culture distinguishes. We have a differentiated approach, and it comes from our culture. We have a depth and a breadth that very, very few can truly compete with. As I mentioned before, we are truly global. We are doing business in over 60 countries from today, [ '23. ] And we reach everyone, we can reach everyone, we can deliver for our clients wherever, whenever. And most importantly, we can deliver to them the knowledge and experience that they deserve. Some time ago, we started running our numbers on a 10-year basis. Just take the decades and look at them. And Rich mentioned that we think long term, we've always tried to get people to realize we are the people with the greatest sense of urgency and the greatest ability to have patience and perseverance. And when you look at Jefferies on a 10-year basis, what do you see? And I remember actually, we were discussing this at the beginning of 2020, and I looked around at our group and I said, we can't be happy if the number at the end of 10 years, at the end of the 2020s, begins with a 4, okay? Based on where we are now, you could guess what I might not be happy with, that is more than 4, okay? We have really an epic opportunity. And it didn't start last week, it didn't start a year ago or 5 years ago. It's been running for a long time. We think and we deliver in decades. Interesting little math, which I actually just did last night, this is the mathematical adding up of our reported numbers. If you look at the bars on the right and you look at the slope, it's kind of a slow starter in the 2000s, and then it's pretty sharp. And what's interesting is just taking the right bars and dividing them by the left bars, okay? And what I think it tells us is that the 2000s, because of '01 and '02 and because of '08, wasn't actually one of the greatest decades ever, and '09 was somewhat held back by '08. And we were in the early stage of investing in our growth. And so when you're investing against a smaller base, you're going to have a bigger impact. So the math is that if you take the black bar on the right by the black bar on the left, it's 9.8%. The next one goes down to 5.6%, the next one goes up to 8.8%, and the next one goes up to 13.2%. So if you think about it, that is our net income margin decade by decade. The direction, I think, is pretty clear. As I said before, the focus now is on bringing it home. And the tale of 2025 is going to be most likely -- it's not over yet, although we're whatever we are, we're 2.5 -- 1.5 months from the end of our fiscal year, this is going to be a year of 2 halves, one that was marked by pause, concern, whatever you want to say, whether it was right or wrong, and one that was the year we expected, which materialized in the second half, which was a period of real momentum and a period of opening up and people embracing opportunity. We're going to keep driving our opportunity and our position. We have a maturation that still has years to go. We're going to continue, in our view, to gain market share. And as a result of both the gain in market share and potentially enhanced by a greater market opportunity, what I showed on that last slide about continually enhancing margins, you're going to see that. Matt is going to go into a little more detail on how that happens from the non-comp side. We'll take your questions later about comp. It's all going to come our way if we are right. I mentioned before what I think of as sort of a latent opportunity, like what didn't happen in the third quarter. The third quarter was incredibly solid. Multiply it by 4, it's a very solid annual performance. We see momentum for that to continue. Proof will be in the pudding. We have and will continue to have the opportunity to add great talent. Jefferies platform is incredibly attractive to people coming out of school, to people that are unnecessarily displaced, to people who are simply questioning whether there's a better, bigger opportunity for them and a place that they will enjoy more. And that part, as much as I said, I don't think about recruiting, we are always recruiting and we always will be recruiting. The second thing, and I'm probably -- oh, I didn't pick the slide. I'm going counterclockwise. We have a lot of adjacencies. We have a lot of opportunity to cross-sell. We have a lot of opportunity to add half step and full step, next products, next opportunities. Some of it is already in process, some of it will come. And you'll hear about it from our business leaders and how it's playing out in each of our businesses. Particularly -- with technology broadly, particularly with AI, we have the ability to run our business moment to moment with ever better intelligence, ever better speed, ever better harnessing of all of our resources. Secondly, and maybe equally, we're going to have the opportunity to drive our operating margins. We're going to be able to build technology faster and better. We're going to be able to change processes that they run ever more smoothly and ever more readily. We are absolutely focused on that. We're not going to make it a unique part of what we're doing; it is part of what we're doing. It is an everyday exercise at Jefferies. It's been going on for years. Somewhere in the last 1 to 2 years, we've crossed the line on AI where it's coming of age and coming of scale, and we're very much focused. As far as expanding who we do business with, we're growing into our global platform, we're growing into the breadth of the coverage we have, we're growing into what we can offer our clients. We'll talk in a minute about what we're going to be doing in Japan. There is so much more that Jefferies can provide, and there are so many more clients that we can provide more to. Rich mentioned our partnerships, and whether it's Berkadia with Berkshire Hathaway, Jefferies Finance with MassMutual or our broad and deep relationship with SMBC, we are, in each case, working on initiatives to grow together, to leverage each other's strengths and to continue to build the opportunity from our perspective that is Jefferies. Although the alliance with SMBC began officially in 2021, that was us barely getting on the field. In 2023, we started to come out of the dugout. I hope actually a baseball metaphor is to carry here across the world, wherever people are listening, but if not, check your dictionary. With the latest announcement, we're starting to play in the first inning. And I say that with a strong belief that what we will accomplish together is immense. The opportunity it opens up for Jefferies, but also opens up for SMBC is broad, deep, endless. And we're going to talk about this more when we review what we're doing in equities, what we're doing in investment banking. We'll elaborate on some of the deal examples and exactly what happened and why they were opportunities and they were realizations that we wouldn't have otherwise. The important thing about the little graphs on the right is the slope. It is upward, and it's upward with real momentum. Pete Forlenza on the equity side is going to go into detail on what we're doing with the Japanese joint venture, but it's a hand-in-glove fit of one of the 2 largest banks, securities and investment banking operations, SMBC Nikko, and some of you may have seen in Bloomberg yesterday, the CEO of SMBC Nikko talking about our partnership, the likely potential and trajectory of the partnership, we agree emphatically. When you combine the strength of 1 of the 2 leaders in Japan with one of the leaders globally, when you bring together their depth, their brand, their relationships, our depth, our brand, our relationships, our joint technology, bringing it into a global network, on every level, we will see growth and expansion. We've seen it with a group of sponsors that for the last 2 years, we designated as joint sponsors. Again, you'll hear specifics on the investment banking presentation. But this began over somewhere between 5 and 15 years and the, sadly, late CEO of SMBC, Jun Ohta, he would speak about our opportunity always with the word incremental. How can the 2 companies come together and do what they're not doing apart? This isn't about, how can I have your business or you can have our business? This was always about how the 2 becomes 3 and becomes 4 and does more. And Nakashima-san, the CEO of Jefferies -- of SMBC today, of SMFG today, is deeply committed to our strategy, deeply committed to the expansion if you think about the significance of SMBC, taking its domestic equities and ECM business and putting it in a joint venture with us, for me, the 15% to 20%, what we're doing in Europe, the credit, all the other things are interesting, and it shows the depth of relationship, but that joint venture shows the depth of trust and the depth of commitment to each other because of what effort we're going to make and what we think we're going to add and we think we're going to build. Our asset management business is, for better or worse, a little bit in the spotlight. In the presentation today, we're not going to talk about the spotlight. The spotlight, if anyone wants to ask a question, we'll take it later, but we will talk about the fact that in platform strategies and multi-manager strategies and other broad strategies, we've built a meaningful business. And despite the recent news in the broad credit space, we continue to build. I'll end where we began. There is incredibly low likelihood that someone is going to build another meaningful Wall Street organization, okay? It hasn't happened in a long time, what it takes for it to happen is epic. We've been fortunate that in the past 63 years, for Rich, 35-plus years, for the 2 of us together, 25-plus years, we were given the opportunity, partly by the strength of Jefferies as it was built over the years, partly by the environment which cleared out opportunity and allowed us to seize it, that we were able to get to where Jefferies is today. That is a position we will build on. I don't think it's a position that will be lightly threatened. And our ability to take this firm much, much further is right in front of us. We know what we can do. We're going to be clear and show everyone day by day, month by month, and we'll be reporting it by quarters or 6 monthlies, whatever people require. And for guys who think in 10 years, 6 months will be nothing. We know what we're going to do. You will see it. You've seen it in recent times. You've seen it even from what we said last year. The environment, as much as there's concerns, as much as there are issues, as much as there are divides, there's pretty clear momentum. There's a pretty clear willingness to take risk. There's a willingness to lean into strategy and to lean into growth. And when all of that is happening, a leading firm that intermediates in the capital markets and investment banking has a growing opportunity. We have the initiatives, we have the adjacencies, we have the synergies, we have the partners. Beyond our current momentum, there should be increased opportunity. So I look at the current momentum, I look at our opportunity to increase that momentum, and I look at an environment that potentially favors us. With all of that, that's the big story of Jefferies. That's the optimism we have. And increasingly, it's like the reveal, we will give you more and more of the facts. So I'm going to turn it over to Matt Larson, who will give you a small chapter and small verse on the numbers and what they're showing us.

Okay. Thank you, Brian. At the close of last year's Investor Day, and of course, in Rich and Brian's introductions today, our theme has been around execution and realization, having heavily invested in our business, particularly in the last few years. With that in mind, it's easy to see that we're very well on our way based on our growth in net revenues of 86% since fiscal 2019. For those of you that know us well, you'll know that we operate with a daily sense of urgency. But as Rich and Brian both mentioned today, certainly with the long term in mind. As such, we think it's good to use 2019 as an anchor year of what normal looked like before we undertook our large push forward in our growth initiatives, and also excluding all of the noise of the pandemic in 2020 and '21. Revenues in 2019 were $3.9 billion, compared to $7.2 billion on an LTM basis for 2025. And as mentioned before, we're aware that, that includes a slower-than-expected market opportunity for the first half of this year. We're happy with our top line revenue growth. I think that there's much more that we can do, and you'll hear about all of that from our business leaders about our plans to do so. Our 86% revenue growth compares to noncompensation expense growth of just 42% during the same period, resulting in meaningful noncompensation expense-related operating margin even in light of significant investments we've made and continue to make in our business and in the face of fairly steep inflationary pressures. That's translated to 440 basis points increase in RoTE over the period from 5.9% to 10.3%. And as you saw just a few weeks ago, our standalone RoTE for the third quarter of '25 was 13.6%. If you look closer at that net revenue growth I just mentioned, 82% of it comes from investment banking fees, from commissions, largely stemming from the significant growth of our global equities business, and from growth in our asset management fees. The mix of our businesses and momentum across all of them translate into a firm that generates a substantial and increasing operating income and free cash flow. I was looking back at some of our disclosed metrics for Jefferies Group in 2019 Q3, I thought was interesting. At that time, we had pretax operating margin of 10.7%, versus 16.2% and growing today. Our VAR in Q3 of 2019 was $9.7 million, versus $10.4 million today on a much larger business. And our tangible leverage at that time was 9.4x, versus 8x today. I mention these few metrics to further highlight that our growth is coming from scalable, lower-risk activities in which we have strong momentum. While our balance sheet has grown, and we expect it may continue to grow in line with the overall growth of our business aspirations, it's largely due to the slow and steady expansion of our prime brokerage business, which you'll hear more about from Pete in just a few minutes. And facilitation of client business has become an ever more meaningful and growing number of -- ever more meaningful to a growing number of clients who rely on Jefferies as a market maker and liquidity provider. Our growth is global and is spread across a diversified set of businesses, geographies and products. As demonstrated here though, our relentless focus on ensuring our balance sheet is liquid and easy to understand, albeit larger, still results in Level 3 assets at comparatively low levels at just 3.1% of inventory. At this time last year, I discussed how we had invested meaningfully in technology modernization to support growth and resiliency, that we were investing for longer-term efficiencies from emerging workflows and AI capabilities, and that industry consolidation in tech and data sectors had put pressure on costs. We've experienced that over the last couple of years and feel that we're turning a corner and expect to realize -- that we'll realize widening operating margins as our revenue base grows. That's beginning to play out now, with overall non-comp costs continuing to grow, the largest component being a direct function of our equities growth. You see our brokerage and clearing costs up 111%, compared to revenue growth in equities of 137%. We're reaching more normalized levels across most of the other areas of non-compensation costs as we focus on the execution and realization phase of our business. While continued investments will always be required, today we're built for scale and we're beginning to realize the efficiency and benefits of today's technology such as IT coding accelerators, embedded AI capabilities throughout our firm and a cloud-hosted infrastructure adding to our resiliency. To conclude, I would just reemphasize our capital and liquidity position is strong. We're well positioned to support the next leg of growth and opportunity and to gain market share and grow our global capabilities. Now I'll turn it over to my partners from Investment Banking. First, Raph Bejarano, Co-Head of Investment Banking.

Thank you, Matt. As Matt mentioned, I'm Raphael Bejarano. I lead the Investment Bank with my partners, John Miller and Andrea Lee, who will follow me on screen on the dais in a few minutes. As you can see on the screen, our competitive position today has really never been better, as Rich and Brian both alluded to earlier. This is after several decades of relentless investment, some of which you can see on the screen in front of you, where Jefferies has established itself as a leader globally in investment banking. Why is that? We have a unique offering for clients: best-in-class talent, global reach across every market that matters and deep expertise across all products. Uniquely, and again, this is something that Rich and Brian alluded to earlier, I think it will be a consistent theme throughout this morning, uniquely, this is delivered in the client-centric, nimble, entrepreneurial manner that defines our culture. These ingredients are what make Jefferies so special for our team and for our clients. What truly excites us is what's possible over the next decade, building from our foundation today where we have increasingly become a magnet for both the best talent and for the world's most significant clients, which I'll touch on further in a moment. We've deployed the same strategy consistently over decades. This has driven long-term growth in market share and revenues. And as you can see here, market share tends not to grow in a linear fashion, but tends to build over time and then grow in an exponential fashion as we leap further in our competitive position. Near-term growth will, in some measure, be driven by the ongoing maturation of our team and franchise, which have, of course, grown rapidly again over the last several years, as well as the potential expansion in the global fee pool. Longer term, as Brian alluded to earlier, we have continued to sow the seeds of growth through further investment, elevation and expansion that should drive ongoing market share growth. John will momentarily touch on our ranking relative to our various competitors and how that continues to evolve. Before we turn to that, we also want to contextualize our franchise relative to the clients that we serve. Over the last several years, we have had a deliberate strategy of elevating our franchise to serve the world's most sophisticated, oftentimes highest-profile clients on their most important transactions. While the mid-market continues to be the cornerstone of our business, opportunity and strategy, a leading position in large global corporate M&A, lead book runner IPOs and large-scale financings has been both a critical source of growth as well as a source of franchise enhancement and elevation. That strategy has worked as positions as adviser to AT&T on their $22 billion EchoStar deal on, or Monte Dei Paschi di Siena on their EUR 13.5 billion, if I got that right, acquisition of Mediobanca, or as joint lead book runner on the eToro, Bullish and Figure IPOs indicate. Each of those is an example of massive elevation of our firm, and there are many, many more both on this page and, of course, many that did not make this page today. We believe that this successful strategy has further solidified the foundation on which we're building, underlining the quality of our offering to clients and to talented prospective new joiners worldwide. Now I'll pass it on to John, who will touch on what's happening on the people and our relative standing in the industry.

Good morning. Good morning, everyone. As Rich and Brian like to say to all of us inside, as much as we've accomplished together as a team, and it's truly inspiring what we've accomplished as a team, in many ways, it feels like we're just getting started. So I'm going to spend just a minute or 2 talking about the market, as Rob said, and our relative place in it. It's hard to believe it's been a year that we stood here where, at the time, we believed that 2025 would evidence a sustained recovery in the global IB TAM, where fiscal 2024 annualized fee pools were trending to be up 14% year-over-year. That's for the market. We entered 2025 fiscal year feeling confident that our vision was in hand. 2024 wallet concluded up 29% year-over-year, with the month of December up 42% alone. Continued strength in the IB activity for the industry drove a Q1 lift in the wallet of 25%, that was followed, unfortunately, by tariff-induced softness that actually resulted in a 3% drop or a pullback in the Q2 wallet, all of which amalgamated into the delivery of a first half wallet performance for the industry that was up only 10%. As Brian highlighted in his slide earlier, the 33% market lift that we experienced in our fiscal third quarter is a leading indicator, we believe, for the resilience that we expect to ensue and is masked by the overall year-to-date annualized wallet lift of 11% that's showcased on this slide. Noteworthy is the activity that underpins this resilience, which has been driven disproportionately by a 15% annualized lift in corporate activity, while sponsor fees are up only modestly year-to-date. Jefferies' historic outperformance, we believe, with the PE asset class inevitably will drive further accretion in our share performance as sponsor activity resumes. Next slide. There we go. Our methodical investment in best-in-class talent that's been referenced thus far, coupled with intense strategic client planning that we've been focused on as a team, has continued to drive our outsized performance. On a GAAP basis , our reported advisory ECM -- if I got that right. It sounds like there's some magic going on in the room. Yes. I think we're on the right slide. On a GAAP basis, our reported advisory ECM and DCM results evidenced relative outperformance through our fiscal third quarter. As examples, looking at BofA and Citi, in 2019, our benchmark year, BofA was 3.8x our size. Today, they're 1.7x. Similarly, Citi was 3.4x our size in 2019. Today they're 1.2x as we approach parity with them. Okay. In the back. Please don't touch the slide. Narrowing the lens and looking specifically at our advisory franchise alone, Jefferies ranks fifth in global publicly reported advisory revenues, having moved the ball materially down the field where, in 2019, Morgan Stanley garnered advisory revenues that were 2.8x our size. Today, on an LTM basis, as of yesterday, they're 1.1x our size. Similarly, both BofA and Citi were ahead of Jefferies 5 years ago at 1.9 and 1.6x our reported advisory revenues and scale, respectively. Noteworthy, today, they're both behind us at about 80% of our LTM revenue performance. As we continue to deliver truly best-in-class advice and execution to our advisory clients and set our sights on overtaking our global competitors, as a team, we're inspired to have narrowed the gap so materially, where today, Morgan Stanley is only 10% larger than Jefferies in reported advisory revenues, where they sit in a fourth ranked global position, compared to having been almost 3x our size back in 2019. Noteworthy where they ranked third, again, relative to the fourth ranked position they have today. I think of note also, we've tightened our spread to Morgan Stanley by over 0.5 turn, 0.6 of a turn to be precise, from where we stood at the time of this meeting last year. So too through the lens of Dealogic fee share. Our performance in M&A has been noteworthy as we've gained in rank and share globally and in each of our core markets of the Americas, EMEA and Asia Pac. Today, per Dealogic, Jefferies holds a sixth ranked position in global M&A and sits fifth in the Americas; seventh in EMEA, up 2 notches and 140 basis points in share year-over-year; and eighth in APAC, up 3 notches and 210 basis points in share year-over-year. Very importantly, coupled with our historic strength and outperformance in the sponsor M&A business, where we ranked second year-to-date, we've gained material ground in accreting share in our corporate advisory activity, which has been an intense area of focus for our strategic client planning exercise given that corporates garner 74% of today's M&A wallet. Today, we rank seventh in corporate activity, up from a 12th ranked position 2 years ago, having gained 130 basis points in corporate advisory share during that time. Though it's clear that much remains to be done as a team to further our advisory position across the GDP of the banking opportunity set, we're proud as a team and we're inspired by what we've accomplished to date, and we have a very clear vision for our path ahead. Now I'm going to turn it over to Andrea, who's going to share perspective on our SMBC partnership and our vision for continued outsized growth.

Thank you, John. As you just heard from Raph and John, Jefferies now has a truly distinct offering as the world's leading pure-play investment banking firm. Our growing partnership with SMBC is solidifying that position and unlocking new opportunities for us and our clients. Through SMBC, we're complementing Jefferies' offering with corporate lending to investment-grade clients, balance sheet capacity to underwrite the largest acquisition financings globally, pre-IPO, and fund financings. And we now also have access to one of the largest corporate and investment banking footprints in Japan. This enables us to really offer the best of both worlds to our clients. Jefferies Global Investment Banking Services delivered seamlessly and immediately combined with SMBC's best-in-class global lending capabilities. We are still really in the very early stages of our partnership. As Brian Friedman said, it's really still in the first inning, but we are already beginning to unlock opportunities to serve clients alongside SMBC that previously were less easily in reach for Jefferies. A few recent examples include Jefferies serving as a lead book runner on the eToro, Flowco and Aspen Insurance IPOs. Those roles, as is common in the IPO ecosystem, included credit commitments from the book runners that we partnered with SMBC on. Similarly, SMBC has had a longstanding relationship as a core lender to Brookfield. In combination with Jefferies' market-leading energy and infrastructure advisory practices, this has created a greater opportunity for us to serve as an adviser to Brookfield, including in large-scale transactions such as the acquisition of Colonial Enterprises or the recent Alterra disposals. Lastly, SMBC's position as a top-tier corporate lender has been a meaningful complement to our corporate advisory practice. As you can see in examples for transactions that we completed for AT&T and Virgin Media O2. Over time, as we have more and more experience working together and clients increasingly see us in action together, we expect these benefits to compound. Next slide. Jefferies has spent decades building a flat entrepreneurial culture that attracts the very best talent. Now this differentiated approach operating at scale offers the potential for outsized growth. Over the past decade, we have significantly taken market share across each region globally, and our momentum has accelerated even more over the last 3 years. To cite just a few examples. Our corporate M&A share is up 110 basis points. Share among top 25 sponsors is up 440 basis points. And our share in EMEA and APAC ECM is up over 200 basis points across both regions. Our momentum and positioning have never been stronger, yet plenty of upside still exists. As we serve larger companies and bigger sponsors, this will strengthen the appeal of our platform to clients and to top-tier talent. This virtuous cycle combined with our unique culture should continue to drive long-term growth. Thank you. And now I'd like to hand the presentation over to Pete Forlenza, our Global Head of Equities.

Good morning, everyone. As Andrea said, I run the equity division globally. I just want to say I'm proud to state that I've been a part of this team and this company for 12 years running the equity business. Before I begin to the slides, I just wanted to talk a little bit about the equity division's philosophy here. One, the first thing I would say, I want you to know, is that the equity division is deeply aligned with the firm's overall investment banking and capital markets strategy. That's the first thing. The second thing, and you'll see the evidence of this as we go forward through the slides, there's 3 basic pillars of our equity division. The first one is we believe in advisory. And you'll see the investment we have made in research over the last decade and the results we have in that. The second thing is we believe in having both broad and deep sales teams globally to service both our investor and our issuer clients. And thirdly, on the execution side, you'll see that we philosophically believe in both high touch and high tech. A couple of points to make on this page. You'll see, and Brian had mentioned it, that we're on pace to achieve record results in equities for the second consecutive year. Revenues have more than doubled over the last 6 years and have grown by 71% since 2022. But what I find most interesting on this page, I'd like to highlight the growth of our international revenues. If you look at the left side, you'll see that our overall equity revenues in 2019 were $774 million. The last 12 months, our international or non-Americas revenues have been $772 million. Now interestingly, a few years ago, when I was on this dais talking about the opportunity that we had globally, I was asked the question if I ever foresaw that we would exceed 30% of revenues in equities would come from outside the U.S. And you can see we've exceeded that and are heading towards 50%. I'm not going to go through an entire commercial on this page, but I do want to take you a couple of things that highlight how this strategy is working. I'd highlight that our global cash market shares are at an all-time high. Hopefully not for all time, but they're at a record high at 5%. But as I was talking about our international growth, I would highlight that our market shares are actually higher in both India and the U.K. than they are in the U.S. We've become quite meaningful in these markets and continue to be meaningful across all global markets. The middle of the page, I talked earlier about our strategy of having both broad and deep relationships. We continue to expand the number of clients we touch every day in equities, which is important when you're thinking about it from an issuer standpoint. We touch many potential investors. But we've also been deepening our relationships with the largest clients, which is evidenced by the growth of our revenues with our top 25 clients. So think both broad and both deep, and we're doing it globally. On the right side, you'll see that I'm highlighting our equity research. Again, importantly, we believe we now cover more stocks than anyone else in the industry. So a very broad footprint. And we're doing it with quality. You can see our II rankings, it's now called Extel, how those have progressed over the years. You can see we're #5 in the U.S. last year, 5 in Europe, 6 in Asia. And those results in the U.S. will be published shortly, and we're hopeful that we'll continue our ranking increase. So how are we going to continue to grow? Because we've been on this trajectory. The first thing we're going to do is continue to grow and globalize our business. And you'll see that there are businesses that we're significant players on here in the U.S. that we're now becoming a meaningful player globally. So continue on that path. The second thing we're going to do, and I think this is probably the most important piece to go through, is we're now expanding the total addressable market that we're getting into. So if you look at the kind of lower -- the lighter shade blue, that's kind of the current significant Jefferies TAM, particularly in the cash markets, both high and low touch, and we've got very large market shares there. The larger blue TAM shows the opportunity that we have globally across prime services, derivatives and program trading. And I'm going to speak to each one of these briefly and why it fits us. So on the prime services side, Jefferies has been a prime broker for many years. But if I think back to 5 or 6 years ago, our focus was primarily on emerging hedge funds, and we were quite good at it. And some of the larger prime brokers would naturally go after the larger hedge funds. Over the last 5 years, we have made significant investments in technology to service the more complex clients. And we are now at a point where things are kind of coinciding, if you will, where when our technology is now amongst the leaders in this is at a time that Jefferies has grown to be a more significant partner across advisory and across sales and trading for many of the larger hedge funds, they're now, and I'm going to use this phrase, inviting us in to be a financing partner for them. And it's something we're just scratching. And we're doing it where it fits us with the clients that align for us. In derivatives, going back to my initial comment that we are aligned with our overall investment banking and capital market strategy, we have continued to grow our investment banking footprint, we've gone up in market cap and who we're servicing. Providing derivative solutions to our investment banking clients has been a big opportunity for us, and it's a business we have continued to build. We started one 18 months ago in Europe. That's been quite successful for us. There is a big opportunity for us there. In program trading, passive investing continues to grow throughout the global markets, be it through index funds or ETFs. Rebalancing these portfolios in a real-time global basis is very complex. It's very technologically difficult. There are 6 or 7 players that can do it globally, Jefferies is one of them. So that continues to be a big opportunity for us. And then I would just highlight this. You'll see our market share momentum. We still have market share to gain. It is in front of us. That is what we're going to continue to do. Brian mentioned, and others, our exciting announcement that we made a couple of weeks ago to integrate our equity business in Japan with the equity business of SMBC Nikko. And I want to take you through what you would call the industrial logic of this and the opportunity that we have. So start with the fact that SMBC Nikko is one of the 2 largest financial institutions in Japan, point one. The second thing, and if you look at this slide, SMBC Nikko's equity business naturally has a very strong domestic client footprint, right? Jefferies has a very strong global client footprint. There is some overlap, but not as much as you may think. When you put the 2 of us together, we will immediately move to a top 3 market share potential. So think domestic clients, international clients. Jefferies has a very strong global client base. SMBC is highly ranked, I believe, top 2 over the last few years in Japanese equity capital markets, and is 1 or 2 in research. Jefferies, and you saw it from our global footprint and our rankings, has a very strong global research footprint and expertise. We will bring these teams together and have more collaborative research to provide even more in-depth research to our local Japanese clients. Jefferies, as is evidenced by our investment in technology on the trading side, has very sophisticated trading technology globally that we will be bringing to this market and bring to the domestic equity flow that SMBC Nikko has today. SMBC Nikko has very strong domestic corporate relationships. Jefferies will be bringing advisory solutions, but within equities, also derivative solutions to that. So you can see bringing these 2 businesses together, the logic behind it and the excitement that we have. So in conclusion, I would say this. Jefferies is one of the few remaining truly global equity businesses that can serve clients in everything they need to do in equities. We continue to see the opportunity in front of us to gain market share, and we are right now in the execution and realization phase. With that, I'll turn it over to my partner, Fred Orlan.

Thanks, Pete, and good morning, everyone. For those of you who are long-term veterans of the Jefferies Investor Days, will remember the commitment that we made 10 years ago to increase the stability and the consistency of the revenues and returns of our fixed income franchise across varying market conditions. We set out then and continue today to stay true to our core strategy that starts with a relentless commitment to deliver value to our clients every day. And we do this by prioritizing quality share over simple market share, delivering idea-driven, solution-oriented strategies that add value and cement long-term client partnerships. And we leverage our daily flow trading relevance to zero in on the trades that matter most to our clients, helping them achieve their performance goals. And we do this with insights from 65 global desk strategists, collaboration across our fixed income business and with our investment banking partners with top-tier voice and e-trading capabilities and discipline around risk management and resource utilization. So this combination enables us to deliver seamless execution and liquidity across both primary and secondary markets, driving higher-margin repeat business. So looking at the numbers for 2025, it's been a softer year on the secondary trading side with revenues down 19%, driven by historically tight spreads and low volatility across the credit markets, which compressed trading margins in generic day-to-day flow trading. Q2 was particularly slow, but you can see we rebounded nicely in Q3, up 33% quarter-over-quarter. So now I'm going to focus on the 3 themes that support the consistency of our performance and are the key drivers of further growth in our business, which are noted here on the bottom right-hand side of the slide. Geographic diversification, higher-margin solution-oriented trades and products, and our alignment with investment banking. So in the first theme, the growth in our international business, both from a revenue perspective and the distribution of global products, continues to add diversity to our business. And you can see because of our investments abroad, our international business continues to become a larger percentage of our overall revenues, which is diversifying our business and is now 27% of our fixed income trading revenues. And leveraging the growth of our European business, where we've more than doubled our revenues over the time period, we're adding to our global distribution capabilities in the Middle East where our client revenues have grown significantly since we opened an office there in that region 2 years ago; and also in Asia, where our client revenues have grown by 72% as we've added talent and leadership in the region also over the past 2 years. And our incremental fixed income presence in Asia is synergistic with our investment banking build-out across the region as we've leveraged this to originate debt transactions with our investment banking partners, which is also adding relevance to our investing clients as well. So turning to Slide 42 and getting to the second theme, a core principle of our business is leveraging our day-to-day trading relevance to build inner circle relationships that enable us to provide our clients with more solution-oriented trades that either optimize their portfolios or help them source unique assets that enhance their returns. So this strategy directly aligns with our clients, many of whom are focused on expanding their alternatives platforms. And because of this, they're broadening their strategies to include more off-the-run assets. And our ability to deliver this is a result of our flat structure, our focus on collaboration, which enables us to source and execute more unique trades for our clients. And some of these opportunities are sourced with the help of our investment banking partners, which gives us access to a broader opportunity set, and I'll talk a little bit more about that later on. But the key point here is that because of this capability, more clients turn to us for help in sourcing these opportunities to drive better returns for their funds. And this is a big part of why we are a partner of choice across the credit markets. And you can really see the impact here on Slide 43 with the results from the Greenwich -- Coalition Greenwich survey, which really speaks to how strongly our approach resonates in the market. So first, more and more clients rank Jefferies as a top 3 relationship, as you can see in the top left box. And these inner circle relationships are built on trust. And on the bottom right, you can see an example of this. We are recognized as a first call for confidential trades. And as for insight, we're noted by our clients as a top provider of trade ideas, which is also a good measure of how we're adding value. And our clients consistently cite Jefferies as having some of the most helpful traders in the market. So our trading, sales, strategy and capital markets teams work in close partnership, delivering ideas, market intelligence and tailored solutions that help our clients realize their performance goals. And bringing this all together, you can see the stat at the bottom, which speaks to our momentum. Hang on just 1 sec. In the Greenwich survey, our clients have ranked us as the firm that they are most likely to do more business with over the next 6 months than any other firm across global credit for 5 out of the past 6 years. So on Slide 43, we can really see how the growth in our client rankings has implemented -- has impacted our client revenues. First, we've increased the breadth of our market penetration. And you can see here on the left, the growth in revenues across all cohorts of our client size, ranging from 81% for the largest 70 clients to 60% -- roughly 60% for the smallest. And this diversity of penetration provides us more liquidity and differentiated flow as we're trading across a broader spectrum of clients with different needs and strategies. And it's also reflected in the depth of our penetration as we've grown the number of clients that we generate over $1 million of sales revenue with by 1.6x since 2019. Now if you look at the last column, it's clear how our strategy really sets us apart. Over the past 6 years, our client revenues have grown by 72%, more than 5x the 14% growth experienced by our competitors. And I think this is a true reflection of the momentum that we've built and the trust that our clients continue to place in us. Now you've all heard Rich and Brian consistently emphasize that our people and our culture are the foundation of Jefferies' success. And what really sets our culture apart is the way we collaborate, not just within fixed income, but also across equities and investment banking. And this cross-divisional teamwork gives us real commercial leverage. It enables us to operate in the white spaces and helps us to deliver timely solutions for our clients when they need it the most. So here are some examples of that. An important focus of our international build-out is to better align our business with the global setup of our clients. The realized benefit is being able to deliver more insight and better execution across our businesses. And you can see that 40% of our revenues are now derived from businesses where we have global integrated leadership. And also sharing information and insight across businesses is an important driver of revenues as well. And we've doubled the volume of cross-selling or trades that occur outside of a specific sales team that are dedicated to a particular business. And as I mentioned before, leveraging our day-to-day flow is key to identifying opportunities in the market and executing the trades that matter most to our clients. So seamless integration between our low-touch electronic trading and our high-touch voice desks is essential to making this happen. Growth in our e-trading volumes is having a big impact on our high-yield business, not only driving increased flow and market share, but it's also enabled us to streamline workflows across our voice and e-platforms. In high yield, we're now ranked #2 in portfolio trading and #2 for integration across electronic, portfolio and voice trading. And you can see we've increased our high-yield volumes by 5x over the time period, driven, of course, by our e-build, which has in turn helped us double our voice volumes over the same period, demonstrating that this collaborative strategy really drives growth in the business. And the third pillar of our fixed income strategy is the strong synergy that we've built with our investment banking partners. A more robust new issue pipeline naturally drives increased secondary trading volumes and gives us an edge in trading these credits. And the benefit is evident in the volume growth in 2 of our most important new issue markets, leveraged loans and municipal bonds, where our secondary trading activity continues to expand on the back of our investment banking growth in these areas. So this alignment between origination and trading is increasing our relevance to a wider set of opportunities. And here, we've listed examples where this collaboration has translated into top-tier rankings across several key new issue markets. And a great example of this is in our consumer ABS business, where we currently hold the #1 league table position and have transacted 22 deals over the last 12 months. And this is the direct result of a coordinated coverage model that brings together our ABS Capital Markets team in fixed income with our specialty finance sector team in Investment Banking, which is run by Andrea Lee, who you just heard from. And this partnership has enabled us to leverage our ABS success to win both equity capital markets and M&A assignments from these companies. We've also built the #1 CLO underwriter. We've been the #1 CLO underwriter in Europe since 2022, thanks to the strong partnerships that we have built with leading global issuers there. And by extending these trusted relationships to the U.S., we've significantly approved our global ranking, now #6 year-to-date. And this is also important because increased CLO issuance drive secondary loan trading activity and many of the top CLO issuers are also investment banking clients. So we talked about municipals and leveraged finance on the last slide and the growth that that's having on our secondary volumes as well. So just to sum it all up, 10 years ago, we made a clear commitment to increase the stability and consistency of our fixed income revenues and returns. And that journey grounded in being relentlessly focused on adding value to our clients continues to be the foundation of our strategy. We built a franchise that leverages market share to deliver quality share, executing differentiated, solution-oriented trades that cement long-term partnerships by helping our clients drive excess returns. And we've expanded our global reach. We've deepened our alignment with investment banking and enhanced our execution capabilities across both primary and secondary markets, driven by collaboration and the seamless integration of voice and electronic trading. So as a result -- and our progress has also -- the trust that we've earned is also reflected in the Coalition Greenwich survey where clients consistently recognize us as the firm that they expect to do more business with in the future. So as a result, I'm confident that as market conditions normalize, we'll continue to drive growth in revenues and profitability in our fixed income business. So now I'll turn it over to Nick and Sol in Asset Management.

All right. So I'm going to give you just a quick overview of our business today. We currently have 19 partnerships across a variety of strategies. We're typically looking to do seed or accelerator capital type deals with either new firms or seeding a new product at an existing firm. We make multiyear commitments and provide marketing and distribution for our economic share in the business. Sometimes we own the entire business and the portfolio manager has a direct payout. Sometimes it's a joint venture that we own 50-50 with the manager. And in most cases, it's a revenue share that we take off the top. We're looking for quality managers and resilient business models, unique strategies that can generate returns over different market cycles. We look for managers that can build businesses over time and have the potential to scale. We focus on growing our fee revenue while being efficient with our capital. The 2 buckets that we spend most of our time focused on are the multi-manager and platform bucket and then the alternative credit bucket. We can provide managers with operational support, legal and compliance support as well as bringing our 27-person marketing team around the globe to help them raise capital.

As Sol mentioned, we provide these different types of capital, seeded acceleration and other strategic in exchange for participation in the fees generated by these asset managers. While the form is typically a revenue share, and that's the majority of our partnerships, we also have these other structures as Sol mentioned. The key point here is that as we have added these relationships over time and helped them grow AUM, we've seen an increase in our revenue. This slide highlights that dynamic -- sorry, this actually shows how we focused our platforms into the alternative credit or multi-manager and multi-strat categories. From a fairly opportunistic program early on to this more coordinated effort to have strategies that we believe have both stability and capacity to grow over time. This is a slide that shows the growth in our business. On the left, you see the overall returns on investment. And on the right, the total asset management revenue, we break the total asset management revenue down to also show our management fee and performance fee. You can see over the last few years, this has grown pretty dramatically. And the key here with the next slide is that we've been able to achieve this growth disproportion to the capital that we've been using from the firm.

So on the capital raising side, we continue to add to our team. We're up to 27 people today, which has doubled in the last 5 years. We made 3 important adds this year, one in the U.S., one in Asia and then someone on the ground in the Middle East. We've raised just now close to $5 billion of fresh capital this year. And what's been nice to see is it's been spread out between many of the funds. The pipeline here remains strong. Schonfeld and Dymon are two, in particular, that have had very good pipelines and have really started to raise some capital. Most of our credit businesses have raised some substantial capital this year and we're excited to get on our way with Pacific Way, which I'll talk about in a second. The other thing that's worth adding on this slide is just how closely we work with the Jefferies Finance platform, and we've been successful raising capital with them together. So this is just a snapshot of all of our strategies. And as I mentioned before, we break them down into platforms, alternative credit and other. On the platform side, it's worth highlighting Dymon Asia, which has had excellent performance for the last 3 years and has started to raise a lot of capital, has a pipeline to basically double their capital base over the next 12 months. They've been really smart about taking it in slowly and efficiently. Schonfeld, again, as I mentioned, an important partner to us continues to grow their business. And the last one here is Pacific Way. This is a multi-manager business that sits within partners' capital that we've just partnered with them. It's our most recent partnership and they've not raised institutional capital in the past. So we are excited about getting them going, and we'll be taking them on the road starting in the next few weeks. On the credit side, a few words worth highlighting. FourSixThree Capital has gone from basically $1 billion to $2 billion over the last year. Also very good performance and a really good pipeline. And then Hildene Capital has been another great partnership with us, and we've been looking for ways to continue that partnership. The last one to highlight here is in the other category, which is GREYKITE, which is a European private equity real estate funds that we partnered with last year. They're getting close to closing Fund 1. They built a really interesting diversified portfolio and have raised capital from a really blue-chip group. We're excited about their prospects going forward. Thank you very much for your time.

Thank you for listening to that. With that, we're going to open up the room and the calls for Q&A. Can we get a microphone over here, please?

James Yaro, Goldman Sachs. Thanks for doing this, Rich and Brian. I want to start first with the growth of the MD headcount. It was quoted a bit consolidated after some rapid growth in the past few years. Maybe you could just talk about your aspirations for hiring and investment banking headcount, specifically, but maybe also just broader in senior talent?

On the investment banking side, the focus right now is really pinpoint fill-ins to sectors, products and probably even less so geography in terms of regional coverage. I'll use as an example, in the last -- less than 2 years, we brought in a new Head of Global Real Estate Investment Banking based in New York. We've hired on several additional managing directors to support. In the last literally about 14 days, we hired a first-time pan-Asian Head of Real Estate and we've strengthened ourselves with a new head of Real Estate in Europe. So it's an example where this has been a relatively modest subsector for Jefferies and the potency of the team will have as we enter 2026 will be substantial. So I use it just as an anecdote to appreciate that we're down to that level of fine-tuning. If you want to turn it into numbers, if we sit today somewhere in the 370 or so you could see that number between promotions that will come at year-end and promotions in the last couple of years have been, call it, in the low 20s. So think about just simple math, add on to that some continual onesies, 1 or 2 departures, we probably grow our MD count in the next year readily by 10%. Do we grow it by a lot more? That will just depend. I will emphasize that is no longer a top 2 or 3 defining theme for us for now. I would have said the same thing 5 years ago.

Let me clarify this a little bit. He says that, I've said that, the fact of the matter is our platform has never been more attractive to super high-quality bankers. And so our phone rings a lot. And you'd be surprised how many incremental pieces of white space you actually find, when you talk to more and more high-quality bankers from very prestigious firms who really don't want to work there anymore, they want to work at a company as entrepreneurial as Jefferies. And the fact that so many of their friends have come here and have done so well so quickly, that creates a lot of excitement and the phone rings a lot and great bankers, we still want to hear from you. The door is not closed, but Brian is right, we have so much to execute. If we just execute, the team that we have right now, the scale of what we have and the margin capabilities is really right in front of us.

And our capacity. Again, if you take the third quarter, multiply it by 4, that shows that last year with a modestly smaller team, our revenue was $3 billion in investment banking. And the third quarter ran at closer to -- excuse me, the third quarter ran well north of $4 billion. That shows you the elasticity and the opportunity that we have.

And also -- I sit back and watch these slides. It's hard for me to really fathom. We're approaching Morgan Stanley, and we're a huge chunk of Goldman Sachs, okay? And they're both great companies with $1 trillion balance sheets and we now have a joint venture partnership with a $2 trillion bank. Not that our market share gain is going to come necessarily from those people. There's a lot of other places to gain market share. But if you step back and look at the power of the platform on a global basis, on an industry basis, on a product basis, on a service basis and how it leverages off of each other, we have to just execute, but we have a hard time saying no to great bankers. So please keep sending your resumes in.

And just in the recently reported this week numbers, if you take the 5 large U.S. bank holding companies and our advisory revenue for both the 3 months and for the 9 months, if you stack them up, we're #4.

Do you want to do one last one, then Kurt has his hand up over there?

Yes. Sorry. Just quickly, I think I've asked you this -- almost every one of the past 5 years, but how are you thinking about the return profile? Obviously, the business has changed, you're a lot stronger in investment banking. You've built a lot of new things. So I think in the past, you've talked about low teens ROTCEs is something that you could achieve, but how should we think about that going forward?

I think there's couple of things we've said that are relevant. One is the focus on realization, okay? Even if we get lucky and there's 70 bankers, MDs added in the next year. That's no longer as relatively material. And the second point is -- well, 2 real sub-points, one for Matt, which is the leverage on our noncomp expense is getting meaningful; and secondly, the overall sort of marginal profitability. The third quarter is not a fluke in ROTE. And I'll keep saying this, and I won't be able to maybe prove it for 10 more years, but 2008 to 2023, I think someday will be viewed as an incredibly aberrational period. And we showed it last year in that slide of 2 years up, 1 year down, 1 year up, 1 year down, the addressable market issue. That's a real compounder. If you go back before '08 and you go back from 2000 to '08, we were hitting really good ROEs. And that is, to me, what this third quarter, the fourth quarter of last year, now it kind of stinks to have to pick a quarter in a quarter, but we had a little 6 months in between that went a little sideways. But if we're right, you will see it. And you'll see it not at low double digits.

Yes. I guess what I'll elaborate on this because it's an important point and Brian mentioned, we think in decades, the fact of the matter is we spent from 2011 to the rest of that decade, effectively integrating in 2012 with Leucadia, cleaning up a lot of mess, not generating good ROE, but having the opportunity to buy back 175 million shares of our stock and reposition the company and reinvest in it. Then we basically had COVID, okay? And we basically dealt with COVID and came out of it as a stronger organization. Interest rates go up and then all of a sudden, capital markets activity go down. So we wind up playing offense and really make the big investment in the head count. And we were all dressed up ready to go from an ROE perspective, literally in December, January of last year and then this thing called tariffs hit. This is not a sad story of what we always have an excuse, this is just the reality of the world. We spent the next 6 months powering through it having a modest but not stellar ROE. And the third quarter was the first quarter you got a taste of the scale of our company, the breadth of our company, the beginning of operating leverage as these revenues go up, money pours down to the bottom line. And I feel like we're finally at a point after a lot of investment and lots of challenges. We see a huge opportunity ahead of us just to execute, and we have all the pieces in place right now, plus SMBC, plus our technology, plus the brand awareness. I mean that's what I see right now. Kurt? Try it again?

Kurt Feuerman, AllianceBernstein. I'm a happy shareholder and very impressed with the presentation today. I look forward to earnings per share starting with a $5 or $6 or $7 in coming years. But I want to talk about the elephant in the room. Your stock today is down 7%, and it's obviously been -- I think the trigger today might be Zion Bank, so it brought up a new credit issue. So the banks are weak. Your stock is down 33% this year. Admittedly, it was an amazing year last year. Thank you. And Goldman Sachs is up 33%. The big banks are having a great year. You made a fantastic decision years ago to not become a bank, but the banks now, because of dereg, have this -- I think, are the most aggressive share repurchasers in the S&P. So they're getting improvements in capital. I guess my question is, I know you don't want -- you've been aggressive in all aspects of running the company to the benefit of shareholders, including share repurchase. But now with your stock about 1.5x tangible book, JPMorgan around 3x, it's probably never -- you probably never had a wider spread. I know you have a lot of uses for capital, but could you talk about the value you see in the shares now and what we might expect on the share repurchase capital return front?

Okay. So first off, I think I might have mentioned this to you at one point. You probably don't have a management team that's more engage in terms of ownership of their company than the people here at Jefferies. So we are aligned, as I say, at the earlier part of my comments. And we've also not been shy about buying our shares. We tend to not advertise it to the world. We tend to just do it and then tell people what we've done. We clearly do have a buyback program. We've clearly had quiet periods or restrictions because there's a lot that's been going on with ourselves regarding SMBC and other things. So you can assume that there are issues on that side as well. I think the best thing for me to say is, I think there's a dichotomy -- a big dichotomy in terms of what you see before you in terms of the value of this company and where the shares are trading right now. And our job as managers is to try to help figure that out. I'm not saying we're going to do something dramatic and launch something. I'm just going to tell you, we are keenly aware of it. We're focused on it. We're incented to do it -- to do what's right by shareholders. And we also do it for the long term, and we also pay attention to the rating agencies, and we are very prudent. But I agree with you, our stock -- and I guess everyone at the Investor Day says their stock is cheap. You've never heard me say that before, but kind of cheap.

I would just amplify one point because it's probably the first time in a long time, I can even say this, particularly because of the alliance with SMBC and the activity around creating the joint venture and announcing it and the other announcements that we made a few weeks ago, we, over the last several years, have had disproportionately long blackout periods. You're not aware of them. We can't tell you about it. But it's one of those toughest things where people say, they only bought 7 shares in the quarter. And those were typically surrenders from one of our insiders. So frankly, that's a good thing for us because we can actually do that in a blackout. But that's really an explanation of a lot of the absence of buyback over the last frankly, 2 to 4 years after a massive period of buyback. The second thing I would say is implicit in what you're saying is sort of how we get valued. And I think in fits and starts this last 1.5 years, 2 years, I don't know what the right starting point would be, I think people are starting to appreciate our earning power, as you alluded to it, and I think a multiple on that earning power is becoming a more available way to measure our performance. And I think the truth will be in the next quarters. Today's action, the recent action, we've been very clear, we think it's overdone.

And look, you can't really be more specific. But when we finished the third quarter, if we didn't -- if we weren't in the news right now for something that we clearly are in the news for, I think our stock would be at a very different price. And I think investors have to look at is that -- is the magnitude of that makes sense relative to where the rest of the company is actually were today. And that's for the investors to decide. We have our own opinions. Hopefully, you'll come to the similar conclusions.

Ian Lapey, Gabelli Funds, also a long-term shareholder. Some questions on risk management. I guess a surprise to me was that 24% of Point Bonita's assets were invested with one issuer. That would seem to be a risk management 101 failure. Just first, how did that happen? Second question, do any of Leucadia Asset Management's other managers have similar outsized exposures? And third question is, are you doing anything differently or you plan to on the risk management side for the asset management business? Last year, I think you talked about George Weiss and the Water Station 352 is sort of idiosyncratic, I think it's getting harder to say that today.

To separate those and as you might expect, there's only so much we're going to be able to say today. But on the question of concentration, I think the most insignificant point is that we purchased Point Bonita on behalf of the fund purchased receivables that had investment-grade obligors. And I'm going to get there. I'm going to get there. That aspect is a meaningful risk mitigant. Ultimately, it is with one issuer. You can go into other aspects of this. With hindsight, obviously, it's a different view than with foresight. I'm not going to be able to say a lot more than that other than to also say, and then I'm going to come to your question of what's the coincidence and what isn't. Fraud is fraud, if this was fraud, and we don't know, there's been suggestions, there's going to be a knockdown process of a bankruptcy court, and we're going to see what's learned and we're going to see what the resolution is going to be. I wish -- for my taste, I wish it could happen in 3 days and we can move on and not talk about this and know what the outcome is. But fraud is conventionally not detectable in the real world. I've detected fraud or thought I saw fraud. I've had people cry and confess and I've also been the victim and we've been the victim. And I can't tell you there's anything to that other than most people try to avoid when they think there's an issue, can protect themselves in different ways. We had a lot of protections here. We're going to find out the outcome. It troubles up the coincidence of several of these. It's causing us to ask questions. It's causing us to scrutinize. We're not aware that we have any other comparable narrow concentration or illiquid concentration. Most of the strategies in asset management are liquid. Our own balance sheet is dramatically liquid other than our longer-term commitments. So again, it will be easier when we have all the facts and we have the outcome, but we still like to believe that these are unfortunate coincidence of narrow facts, but we're looking at it much more seriously.

And we will do a complete and thorough reevaluation of it. We take this seriously. This is not just, oh, by the way, this happened. We take this drop dead seriously.

Brennan Hawken, Bank of Montreal. I'd like to follow up on that. The asset management business, many investors view as kind of a side hustle. You guys talk about being the pure-play Investment Bank, the last sort of OG of investment banking. And I think that's why folks own Jefferies. So yet, we've had some struggles and setbacks here from the asset management business. Have you wondered whether or not this is worth staying in this business or whether or not there are sufficient controls and whatnot around all the different potential complex?

Lots of wonders. As explained by Nick and Sol, we have driven the focus of the Asset Management business toward the diversified multi-manager and other platforms and toward credit. Credit particularly is ultimately strategic to us. We are a significant originator of credit. Credit is a opportunity and an element of our overall investment banking and trading strategy. And to extend that through the asset management side, you saw, I think, $29 billion that sit at Jefferies Finance, that's in private credit and in CLOs. That is something that is integrated and ultimately fairly important to us and creates further compounding opportunity. On the multi manager, we have X, this is a big X, but X the George Weiss story, which we think is a very narrow and distinct story and somewhat of a story of an individual. The net of it is that we've had very little challenge in the last several years. We're massively diversified and the returns -- both the returns have been good and the fee and other opportunity has been good. So we think we're bringing it to the right place. Sadly, I would have said that 3 weeks ago, so I don't have the conviction I had 3 weeks ago. We've got work to do.

Great. And then just one more, if I may. Some investors are asking some questions about the extent of the relationship in between Jefferies and First Brands. You guys did a lot of their acquisition finance and so. And then the level of concentration to the prior question in Point Bonita leads some to wonder about whether or not there might have been some conflict of interest or checks and balances. Could you walk through maybe some of those processes that you have and hopefully address some of those issues?

I'm going to answer on a couple of levels. Number one, the Point Bonita fund in Asset Management sits absolutely separate, distinct and apart from whatever happens in investment banking kind of Chinese Wall 101, nothing more to be said. The 2 have absolutely no relationship. And in fact, the decision in 2019 of the Asset Management Point Bonita team to engage with First Brands was absolutely away from independent and disconnected from anything on the investment banking side. As far as our investment banking relationship, facts that are getting lost in all of the innuendo and all of the headlines and all of, whatever, we did not do a deal for First Brands in 2025. We, over the years, arranged some number of financings. Some number of financings were arranged by us with others involved. Some numbers were arranged by others without our involvement. The company arranged some financings directly. We did not close a deal with them in 2025. The record is that the company entered 2025 with audited financials with a range of banks involved with the paper generally trading, give or take, at par with the facts of all of their acquisitions, the facts around factoring in their financial statements and footnotes. There was not a lot of what is known today that wasn't on paper and known. We, as we do, entered into an engagement to help them refinance what was a, at the time, more than a year out maturity, normal natural. I think that I'm going to be wrong on the number, $1 billion is coming due in 16 months, time to take a look. And the thought was that the most efficient way to do this is a comprehensive package re-fi. That effort ended when the company did not produce a quality of earnings. I mean there's something to be said that the effort around that refinancing led to the request for a quality of earnings, which ended up, whether this is causal, we don't know. But days after they didn't provide it or acknowledge that it wasn't going to be forthcoming, they went into a bunker and filed Chapter 11. Again, I said earlier, I've seen frauds, I've seen whatever, I've seen companies collapse that didn't have a fraud. Sadly with highly levered companies, which, again, no one entered 2025 not aware, okay? Lawyers, accountants, rating agencies, investment bankers, commercial bankers, the whole world know everything in concept. Again, if there's a fraud and something we didn't know, we all didn't know. But a highly levered company has a higher level of risk and it came home. That's the only thing we can say now, but this was separate. This was understood. Again, fair questions that we're not answering, but I think we're answering in a way that you should see it's not an outlier, it's not a -- and again, there are companies where investment bankers are the house banker and intimate. I will tell you that same minority, okay? A majority, the relationship is real, but it is episodic. You're called in, you call with an idea. They have a need, they call you. You have a thought, you call them. And this company was much more in the latter category than in the former category, and we know the difference.

And I would just add, most of our major interactions was us, because we have a strong banking team in the automotive space selling them assets that they paid for in cash. So we were representing someone against them in terms of maximizing the price. So it wasn't like we were in cahoots with them. As they were accumulating this, we were actually helping clients sell their companies, and they were the buyer.

Yes. Yes. If you don't mind, just maybe one more because this is important, and I think this is -- have you seen -- it's very early days, and we know this stuff can take time to play out, but within your client franchise. Have you seen any concern around counterparties, whether they be issuers or trading counterparties or other parts of your business, a call into express concern? Have you seen any of that?

I think what you'd expect is people like always, in this room and ourselves, ask questions, the support has been remarkable. We have not had any issues. Our clients are with us. Our counterparties are with us. Our statistics are the same they were at quarter end, and we basically having a good -- I said we're having a good quarter -- can I say we are having a good quarter? If I am allowed -- can I say that? And business is good, okay? And our backlogs are building each week, and it's -- that's why my segue was so wacky, okay? It's like we have to acknowledge it, but we actually are in a great spot.

We have a basis in our daily, weekly, monthly backlog, et cetera to have the confidence and enthusiasm we have.

You're giving my General Counsel a heart attack by the way.

Ryan Kenny of Morgan Stanley. So clearly, credit is a big theme that's impacting not just Jefferies stock with this one issue, but a variety of stocks in the financial services industry right now. So there have been a few bankruptcies. They seem idiosyncratic. You have a unique view into credit given, you're advising high-yield clients, you're trading high-yield securities. So what are you seeing in your client base? Are you seeing any other signs of cracks? And then if you could give us just an overview of if we do see more events, how would Jefferies business react? Is it a headwind to trading? Is it opportunities in restructuring?

So I'll just say, this is us personally, we believe we were defrauded, okay, from a company. I personally talked to a lot of investors, a lot of CEOs, a lot of operating businesses. I think the environment is generally pretty darn good. I don't see this as the canary in the coal mine. I'm not saying there aren't other issues like this. There was one yesterday that one of our competitors had to deal with. I think these things happen. But I don't see the -- I think there's a fight going on right now between the banks and direct lenders who each want to point fingers at each other and say, it's your fault, no it's your fault. The fact of the matter is, the economy is generally good. Interest rates are probably coming down, unemployment is relatively low. There's definitely volatility, but there's the geopolitical volatility has been handled remarkably well, all things considered. And it doesn't feel like we're on the edge of a default cycle. Quite frankly, I mean I've been on the edge of default cycles before. I think that's one of the reasons why our business is doing so well right now. Private equity is flushed with capital and they have to basically sell companies, corporates feel pretty strong, so they're actually being acquisitive. And there's a functioning liquid and equity market right now and certain parts of the world are better than other parts of the world, but it doesn't feel like 2007 when the world is going to -- about to come to an end. Look at the financial sector. The financial sector across the board is usually the canary in the coal mine, okay? And across the board, the financial sector for the most part, is doing incredibly well right now as are we. So I don't see it as the beginning of the end. Clearly, there will be episodic situations. Yes, we have a restructuring business. By the way, our restructuring business this year is doing great. So this is all happening in scale, and I don't feel like we're about to jump off the cliff.

No, not at all. I mean there's a little bit of what's in the air creeping into spreads. That's going to happen from moment to moment. But we've actually gone longer than people appreciate without having a really difficult corporate credit cycle. You've tended to have subsector problems. You've tended to have 3 random things in a short period. But even if you -- and you have to go back a long way, even if you go back to '01, '02, spreads blew out and paper that was issued in par, traded at 60 and the bulk of it ended up paying off at 100. I mean there's a lot backing this, particularly private equity supported companies. There's a lot more to this. Again, that's not to say that everyone is buying pieces of paper they understand. It's not saying that they're pricing correctly. They may be -- that will be seen in time. But in terms of credit cycle, no.

All right. And then shifting gears a bit to a more positive question. So if we don't get a credit cycle and investment thinking keeps picking up, can you give us a little bit more color on the operating leverage that you would expect? Is it a 2026 story where we might see some comp ratio improvement? Is that a 4Q story?

With your assumptions? Yes. Okay. With your assumptions, again, the easiest thing to do, okay, my partner just gave it away, right? We feel pretty good about the fourth quarter, interpret that whatever you want to interpret it, but take the third quarter, multiply it by 4, assumes some progress. What does that tell you is reasonably possible that's about as far as we'll go in a prognostication in 2026. Matt gave you a commitment on operating leverage. It's all here. It's real. It came through. No reason it doesn't continue to come through. I'm going to stop there because we don't predict but you're going in the right direction.

Chris in the back. I am sorry [indiscernible].