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Lazard LTD Reports Third-Quarter and Nine-Month 2023 Results

Lazard Ltd Announces Conversion to C-Corporation

Financial Advisory momentum in Private Capital Advisory and Restructuring

Asset Management AUM of $228 billion increased 15% since third quarter 2022

Returned $285 million in capital to shareholders year to date

Lazard Ltd (NYSE: LAZ) today reported operating revenue1 of $532 million for the quarter ended September 30, 2023. Net income, as adjusted2, was $10 million, or $0.10 per share, diluted, for the quarter. On a U.S. GAAP basis, third-quarter 2023 net income was $7 million, or $0.06 per share, diluted.

For the first nine months of 2023 net income, as adjusted, was $10 million, or $0.10 per share, diluted. On a U.S. GAAP basis, net loss for the first nine months of 2023 was $139 million, or $1.60 per share, diluted.

"While our third-quarter results reflect challenging conditions for M&A, we view the market as poised for a recovery in the quarters ahead. In addition, we see continued solid performance in Asset Management and we expect changes made in that business to contribute to future growth," said Peter R. Orszag, Chief Executive Officer, Lazard. “Today's announcement of our conversion to a C-Corporation positions us to attract a broader base of investors, enhances liquidity and reflects our focus on delivering long-term value for shareholders.”

($ in millions, except

Quarter Ended

 

 

Nine Months Ended

per share data and AUM)

September 30,

 

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

2022

 

%'23-'22

 

 

2023

 

2022

 

%'23-'22

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

U.S. GAAP

$7

 

$106

 

(93%)

 

 

($139)

 

$315

 

NM

Per share, diluted

$0.06

 

$1.06

 

(94%)

 

 

($1.60)

 

$3.03

 

NM

Adjusted2

$10

 

$106

 

(90%)

 

 

$10

 

$317

 

(97%)

Per share, diluted

$0.10

 

$1.05

 

(90%)

 

 

$0.10

 

$3.02

 

(97%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenue1

 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenue

$532

 

$724

 

(27%)

 

 

$1,679

 

$2,098

 

(20%)

Financial Advisory

$261

 

$454

 

(42%)

 

 

$879

 

$1,249

 

(30%)

Asset Management

$262

 

$263

 

–%

 

 

$794

 

$840

 

(5%)

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM ($ in billions)

 

 

 

 

 

 

 

 

 

 

 

 

Period end

$228

 

$198

 

15%

 

 

 

 

 

 

 

Average

$236

 

$212

 

11%

 

 

$233

 

$233

 

–%

Note: Endnotes are on page 5 of this release. A reconciliation of adjusted GAAP to U.S. GAAP is on pages 13-14.

OPERATING REVENUE

Operating revenue was $532 million for the third quarter of 2023, and $1,679 million for the first nine months of 2023, 27% and 20% lower, respectively, from the comparable 2022 periods.

Financial Advisory

For the third quarter of 2023, Financial Advisory operating revenue was $261 million, 42% lower than the third quarter of 2022.

For the first nine months of 2023, Financial Advisory operating revenue was $879 million, 30% lower than the first nine months of 2022.

During and since the third quarter of 2023, Lazard has been engaged in significant and complex M&A transactions globally, including the following (clients are in italics): Westrock’s $33.5 billion combination with Smurfit Kappa Group; Biogen’s $7.3 billion acquisition of Reata Pharmaceuticals; HEICO’s $2.05 billion acquisition of Wencor; RPT’s $2 billion acquisition by Kimco Realty; Tawal’s €1.2 billion acquisition of mobile tower infrastructure assets from BC Partners-backed United Group; SAES Getters’ $900 million divestiture of its nitinol business to Resonetics; STERIS’ $540 million acquisition of surgical instrumentation assets from Becton, Dickinson and Company; Anthesis’ sale of a majority stake of the company to Carlyle; The Ferrero Group on Ferrara Candy’s acquisition of Dori Alimentos S.A.; IBM’s sale of The Weather Company assets to Francisco Partners and Mitsui’s acquisition of a 70% Stake in Nutrinova from Celanese.

Lazard's preeminent restructuring and liability management practices have been engaged in a broad range of visible and complex restructuring and debt advisory assignments, including debtor roles involving Air Methods, Bed Bath & Beyond, Inversiones Latin America Power, IKKS, Latécoère, National CineMedia, SiO2 Medical Products, and creditor and/or related party roles involving Endo Pharmaceuticals, Hilding Anders, Orpea, Party City, SVB Financial Group, Telegraph Media Group and Venator.

Our Private Capital Advisory practice remains active and engaged in assignments, including BPEA EQT's $6.5 billion merger of and cross-fund investment in Vistra and Tricor, Paine Schwartz Partners' raise of $1.7 billion for Paine Schwartz Food Chain Fund VI, L.P. and Wells Fargo’s $2 billion sale of private equity fund investments. Our Sovereign Advisory practice continues to be active in advising governments, sovereign and sub-sovereign entities across developed and emerging markets, including assignments for the governments of Sri Lanka and Greece.

For a list of publicly announced Financial Advisory transactions on which Lazard advised in the third quarter of 2023, or continued to advise or completed since September 30, 2023, please visit our website at www.lazard.com/financial-advisory/transactions/.

Asset Management

For the third quarter of 2023, Asset Management operating revenue was $262 million, flat compared to the third quarter of 2022. For the first nine months of 2023, Asset Management operating revenue was $794 million, 5% lower than the first nine months of 2022.

For the third quarter of 2023, management fees and other revenue was $260 million, 8% higher than the third quarter of 2022, and in line with the second quarter of 2023. For the first nine months of 2023, management fees and other revenue was $780 million, 1% lower than the first nine months of 2022.

Average assets under management (AUM) for the third quarter of 2023 was $236 billion, 11% higher than the third quarter of 2022, and level with the second quarter of 2023. Average AUM for the first nine months of 2023 was $233 billion, level with the first nine months of 2022.

AUM as of September 30, 2023, was $228 billion, 5% lower than June 30, 2023, and 15% higher than September 30, 2022. The sequential change from June 30, 2023 was driven by market depreciation of $5.8 billion, foreign exchange depreciation of $3.3 billion and net outflows of $2.0 billion.

For the third quarter of 2023, incentive fees were $2 million, compared to $22 million for the third quarter of 2022. For the first nine months of 2023, incentive fees were $14 million, compared to $54 million for the first nine months of 2022.

OPERATING EXPENSES

Compensation and Benefits3

For the third quarter of 2023, adjusted compensation and benefits expense1 was $364 million, compared to $434 million for the third quarter of 2022. The adjusted compensation ratio for the third quarter of 2023 was 68.4%, compared to the third-quarter 2022 ratio of 60.0%.

For the first nine months of 2023, adjusted compensation and benefits expense was $1,187 million, compared to $1,238 million for the first nine months of 2022.

Our goal remains to maintain a compensation-to-operating revenue ratio over the cycle in the mid- to high-50s percentage range on both an awarded and adjusted basis, while targeting a consistent deferral policy.

Non-Compensation Expense

For the third quarter of 2023, adjusted non-compensation expense1 was $137 million, 7% higher than the third quarter of 2022, primarily reflecting increased occupancy costs as well as higher technology and professional services expenses.

The ratio of adjusted non-compensation expense to operating revenue was 25.9% for the third quarter of 2023, compared to 17.7% for the third quarter of 2022.

Adjusted non-compensation expense for the first nine months of 2023 was $423 million, 13% higher than the first nine months of 2022. The ratio of adjusted non-compensation expense to operating revenue for the first nine months of 2023 was 25.2%, compared to 17.9% for the first nine months of 2022.

Our goal remains to maintain an adjusted non-compensation expense-to-operating revenue ratio over the cycle of 16% to 20%.

TAXES

The effective tax rate on an adjusted basis1 was 8.4% for the third quarter of 2023 and 3.9% for the first nine months of 2023, compared to 25.1% and 25.6% for the respective 2022 periods.

LAZARD LTD CONVERSION TO U.S. C-CORPORATION

Lazard Ltd announced today its intention to convert to a U.S. C-Corporation effective January 1, 2024. The conversion is expected to be non-taxable to Lazard and its shareholders and timing is subject to compliance with global regulatory requirements. As we build on our foundation for earnings growth across our businesses, we believe the conversion to a corporation will simplify shareholders' tax reporting, may act as a catalyst for enhanced shareholder ownership and potentially provides increased liquidity benefits for our stock. Conversion to a C-Corporation is expected to result in a low single-digit increase to our effective tax rate, subject to a normalized level of earnings.

CAPITAL MANAGEMENT AND BALANCE SHEET

In the third quarter of 2023, Lazard returned $52 million to shareholders, which included: $43 million in dividends; $3 million in repurchases of our common stock; and $5 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

In the first nine months of 2023, Lazard returned $285 million to shareholders, which included: $129 million in dividends; $102 million in repurchases of our common stock; and $54 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

During the first nine months of 2023, we repurchased 2.8 million shares. As of September 30, 2023, our remaining share repurchase authorization was $200 million.

On October 25, 2023, Lazard declared a quarterly dividend of $0.50 per share on its outstanding common stock. The dividend is payable on November 17, 2023, to stockholders of record on November 6, 2023.

Lazard’s financial position remains strong. As of September 30, 2023, our cash and cash equivalents were $653 million. Stockholders’ equity related to Lazard’s interests was $361 million.

ENDNOTES

1

A non-U.S. GAAP measure. See attached financial schedules and related notes for a detailed explanation of adjustments to corresponding U.S. GAAP results. We believe that presenting our results on an adjusted basis, in addition to the U.S. GAAP results, is the most meaningful and useful way to compare our operating results across periods.

2

Third-quarter and first-nine-months 2023 adjusted results1 exclude $4.6 million, relating to losses associated with cost-saving initiatives; pre-tax charges of $11.1 million and $178.5 million, respectively, relating to expenses associated with cost-saving initiatives; first-nine-months pre-tax charges of $10.7 million relating to expenses associated with senior management transition, a benefit pursuant to tax receivable agreement obligation (“TRA”) of $40.4 million, and $19.1 million relating to certain asset impairment charges. On a U.S. GAAP basis, these resulted in a net charge of $3.1 million, or $0.03, per share, diluted, for the third quarter, and a net charge of $149.1 million, or $1.68, per share, diluted, for the first nine months of 2023.

3

In managing compensation and benefits expense, we focus on annual awarded compensation (cash compensation and benefits plus deferred incentive compensation with respect to the applicable year, net of estimated future forfeitures and excluding charges), a non-GAAP measure. We believe annual awarded compensation reflects the actual annual compensation cost more accurately than the GAAP measure of compensation cost, which includes applicable-year cash compensation and the amortization of deferred incentive compensation principally attributable to previous years’ deferred compensation. We believe that by managing our business using awarded compensation while targeting a consistent deferral policy, we can better manage our compensation costs, increase our flexibility in the future and build shareholder value over time.

CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. ET on October 26, 2023, to discuss the company’s financial results for the third quarter and first nine months of 2023. The conference call can be accessed via a live audio webcast available through Lazard’s Investor Relations website at www.lazard.com, or by dialing 1 800-245-3047 (toll-free, U.S. and Canada) or +1 203-518-9765 (outside of the U.S. and Canada), 15 minutes prior to the start of the call. Conference ID: LAZQ323.

A replay of the conference call will be available by 10:00 a.m. ET, October 26, 2023, via the Lazard Investor Relations website at www.lazard.com, or by dialing +1 800-839-3012 (toll-free, U.S. and Canada) or +1 402-220-7232 (outside of the U.S. and Canada).

ABOUT LAZARD

Lazard, one of the world's preeminent financial advisory and asset management firms, operates in North and South America, Europe, Asia and Australia. Celebrating its 175th year, the firm provides advice on mergers and acquisitions, capital markets and other strategic matters, restructuring and liability management, and asset management services to corporations, partnerships, institutions, governments and individuals. For more information on Lazard, please visit www.lazard.com. Follow Lazard at @Lazard.

Cautionary Note Regarding Forward-Looking Statements:

This press release contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target,” “goal,” or “continue,” and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our strategies, business plans and initiatives and anticipated trends in our business. These forward-looking statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements.

These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and also discussed from time to time in our reports on Forms 10-Q and 8-K, including the following:

  • A decline in general economic conditions or the global or regional financial markets;
  • A decline in our revenues, for example due to a decline in overall mergers and acquisitions (M&A) activity, our share of the M&A market or our assets under management (AUM);
  • Losses caused by financial or other problems experienced by third parties;
  • Losses due to unidentified or unanticipated risks;
  • A lack of liquidity, i.e., ready access to funds, for use in our businesses; and
  • Competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels
  • In the event of a change or adverse interpretation of relevant income tax law, regulation or treaty, or a failure to qualify for treaty benefits, or in the event tax authorities challenge our tax computations or classifications.

Although we believe the statements reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, achievements or events. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this release to conform our prior statements to actual results or revised expectations and we do not intend to do so.

Lazard Ltd is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, Lazard and its operating companies use their websites, Lazard’s Twitter account (twitter.com/Lazard) and other social media sites to convey information about their businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of assets under management in various mutual funds, hedge funds and other investment products managed by Lazard Asset Management LLC and Lazard Frères Gestion SAS. Investors can link to Lazard and its operating company websites through www.lazard.com.

***

LAZ-EPE

LAZARD LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(U.S. GAAP)

 

 

Three Months Ended

 

% Change From

 

September 30,

 

June 30,

 

September 30,

 

June 30,

 

September 30,

($ in thousands, except per share data)

2023

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

Total revenue

$543,170

 

$662,318

 

$746,431

 

(18%)

 

(27%)

Interest expense

(19,252)

 

(19,204)

 

(19,687)

 

 

 

 

Net revenue

523,918

 

643,114

 

726,744

 

(19%)

 

(28%)

Operating expenses:

 

 

 

 

 

 

 

 

 

Compensation and benefits

364,605

 

572,231

 

420,937

 

(36%)

 

(13%)

 

 

 

 

 

 

 

 

 

 

Occupancy and equipment

33,108

 

32,800

 

30,696

 

 

 

 

Marketing and business development

20,754

 

28,582

 

19,633

 

 

 

 

Technology and information services

46,897

 

51,370

 

44,579

 

 

 

 

Professional services

20,451

 

21,402

 

15,665

 

 

 

 

Fund administration and outsourced services

27,884

 

28,968

 

27,110

 

 

 

 

Amortization and other acquisition-related costs

96

 

95

 

15

 

 

 

 

Other

14,980

 

17,739

 

9,967

 

 

 

 

Subtotal

164,170

 

180,956

 

147,665

 

(9%)

 

11%

Operating expenses

528,775

 

753,187

 

568,602

 

(30%)

 

(7%)

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

(4,857)

 

(110,073)

 

158,142

 

96%

 

NM

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

(11,631)

 

10,303

 

35,350

 

NM

 

NM

Net income (loss)

6,774

 

(120,376)

 

122,792

 

NM

 

(94%)

Net income (loss) attributable to noncontrolling interests

(365)

 

3,637

 

16,995

 

 

 

 

Net income (loss) attributable to Lazard Ltd

$7,139

 

($124,013)

 

$105,797

 

NM

 

(93%)

 

 

 

 

 

 

 

 

 

 

Attributable to Lazard Ltd Common Stockholders:

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

89,425,900

 

88,729,654

 

93,275,631

 

1%

 

(4%)

Diluted

94,309,224

 

88,729,654

 

98,865,156

 

6%

 

(5%)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

$0.07

 

($1.41)

 

$1.11

 

NM

 

(94%)

Diluted

$0.06

 

($1.41)

 

$1.06

 

NM

 

(94%)

LAZARD LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(U.S. GAAP)

 

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

($ in thousands, except per share data)

2023

 

2022

 

% Change

 

 

 

 

 

 

Total revenue

$1,767,399

 

$2,123,233

 

(17%)

Interest expense

(57,931)

 

(62,051)

 

 

Net revenue

1,709,468

 

2,061,182

 

(17%)

Operating expenses:

 

 

 

 

 

Compensation and benefits

1,386,803

 

1,181,608

 

17%

 

 

 

 

 

 

Occupancy and equipment

97,681

 

91,344

 

 

Marketing and business development

72,098

 

56,429

 

 

Technology and information services

142,307

 

124,577

 

 

Professional services

66,179

 

48,243

 

 

Fund administration and outsourced services

83,428

 

85,364

 

 

Amortization and other acquisition-related costs

239

 

45

 

 

Other

53,022

 

29,864

 

 

Subtotal

514,954

 

435,866

 

18%

Benefit pursuant to tax receivable agreement

(40,435)

 

 

 

Operating expenses

1,861,322

 

1,617,474

 

15%

 

 

 

 

 

 

Operating income (loss)

(151,854)

 

443,708

 

NM

 

 

 

 

 

 

Provision (benefit) for income taxes

(23,053)

 

108,290

 

NM

Net income (loss)

(128,801)

 

335,418

 

NM

Net income attributable to noncontrolling interests

10,245

 

20,265

 

 

Net income (loss) attributable to Lazard Ltd

($139,046)

 

$315,153

 

NM

 

 

 

 

 

 

Attributable to Lazard Ltd Common Stockholders:

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

88,582,468

 

98,161,027

 

(10%)

Diluted

88,582,468

 

103,268,378

 

(14%)

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

Basic

($1.60)

 

$3.16

 

NM

Diluted

($1.60)

 

$3.03

 

NM

LAZARD LTD

UNAUDITED CONDENSED CONSOLIDATED

STATEMENT OF FINANCIAL CONDITION

(U.S. GAAP)

 

 

September 30,

 

December 31,

($ in thousands)

2023

 

2022

 

 

 

 

ASSETS

 

 

 

 

Cash and cash equivalents

$653,355

 

$1,234,773

Deposits with banks and short-term investments

319,382

 

779,246

Restricted cash

34,038

 

625,381

Receivables

632,133

 

652,758

Investments

657,880

 

698,977

Property

229,626

 

250,073

Goodwill and other intangible assets

394,094

 

377,330

Operating lease right-of-use assets

413,172

 

431,608

Deferred tax assets

507,952

 

407,657

Other assets

453,874

 

394,758

 

 

 

 

Total Assets

$4,295,506

 

$5,852,561

 

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Deposits and other customer payables

$462,841

 

$921,834

Accrued compensation and benefits

496,711

 

735,576

Operating lease liabilities

492,036

 

513,688

Tax receivable agreement obligation

118,546

 

191,189

Senior debt

1,689,579

 

1,687,714

Other liabilities

534,451

 

543,690

Total liabilities

3,794,164

 

4,593,691

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Redeemable noncontrolling interests

81,781

 

583,471

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Preferred stock, par value $.01 per share

 

Common stock, par value $.01 per share

1,128

 

1,128

Additional paid-in capital

202,617

 

167,890

Retained earnings

1,388,508

 

1,676,713

Accumulated other comprehensive loss, net of tax

(293,059)

 

(295,854)

Subtotal

1,299,194

 

1,549,877

Class A common stock held by subsidiaries, at cost

(937,876)

 

(993,414)

Total Lazard Ltd stockholders' equity

361,318

 

556,463

Noncontrolling interests

58,243

 

118,936

Total stockholders' equity

419,561

 

675,399

 

 

 

 

Total liabilities, redeemable noncontrolling interests and stockholders' equity

$4,295,506

 

$5,852,561

LAZARD LTD

SELECTED SUMMARY FINANCIAL INFORMATION (a)

(Non-GAAP - unaudited)

 

 

Three Months Ended

 

% Change From

 

September 30,

 

June 30,

 

September 30,

 

June 30,

 

September 30,

($ in thousands, except per share data)

2023

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Advisory

$261,441

 

$344,167

 

$453,664

 

(24%)

 

(42%)

Asset Management

262,162

 

267,058

 

262,559

 

(2%)

 

–%

Corporate

8,014

 

8,801

 

7,328

 

(9%)

 

9%

 

 

 

 

 

 

 

 

 

 

Operating revenue (b)

$531,617

 

$620,026

 

$723,551

 

(14%)

 

(27%)

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted compensation and benefits expense (c)

$363,626

 

$424,097

 

$434,131

 

(14%)

 

(16%)

Ratio of adjusted compensation to operating revenue

68.4 %

 

68.4%

 

60.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-compensation expense (d)

$137,450

 

$143,677

 

$128,263

 

(4%)

 

7%

Ratio of non-compensation to operating revenue

25.9 %

 

23.2%

 

17.7%

 

 

 

 

 

Earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations (e)

$30,541

 

$52,252

 

$161,157

 

(42%)

 

(81%)

Operating margin (f)

5.7%

 

8.4%

 

22.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (g)

$10,268

 

$22,692

 

$106,472

 

(55%)

 

(90%)

 

 

 

 

 

 

 

 

 

 

Diluted adjusted net income per share

$0.10

 

$0.24

 

$1.05

 

(58%)

 

(90%)

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares (h)

98,282,239

 

95,620,902

 

101,603,367

 

3%

 

(3%)

 

 

 

 

 

 

 

 

 

 

Effective tax rate (i)

8.4 %

 

31.2 %

 

25.1 %

 

 

 

 

This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules.

LAZARD LTD

SELECTED SUMMARY FINANCIAL INFORMATION (a)

(Non-GAAP - unaudited)

 

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

($ in thousands, except per share data)

2023

 

2022

 

% Change

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Financial Advisory

$879,469

 

$1,248,586

 

(30%)

Asset Management

793,865

 

840,047

 

(5%)

Corporate

5,327

 

9,464

 

(44%)

 

 

 

 

 

 

Operating revenue (b)

$1,678,661

 

$2,098,097

 

(20%)

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Adjusted compensation and benefits expense (c)

$1,186,813

 

$1,238,240

 

(4%)

Ratio of adjusted compensation to operating revenue

70.7%

 

59.0%

 

 

 

 

 

 

 

 

Non-compensation expense (d)

$423,385

 

$376,330

 

13%

Ratio of non-compensation to operating revenue

25.2%

 

17.9%

 

 

 

Earnings:

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations (e)

$68,463

 

$483,527

 

(86%)

Operating margin (f)

4.1%

 

23.1%

 

 

 

 

 

 

 

 

Adjusted net income (g)

$10,012

 

$317,272

 

(97%)

 

 

 

 

 

 

Diluted adjusted net income per share

$0.10

 

$3.02

 

(97%)

 

 

 

 

 

 

Diluted weighted average shares (h)

96,882,516

 

105,183,136

 

(8%)

 

 

 

 

 

 

Effective tax rate (i)

3.9%

 

25.6 %

 

 

This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules.

LAZARD LTD

ASSETS UNDER MANAGEMENT ("AUM")

(unaudited)

($ in millions)

 

 

As of

 

Variance

 

September 30,

 

June 30,

 

December 31,

 

 

 

 

 

2023

 

2023

 

2022

 

Qtr to Qtr

 

YTD

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

Emerging Markets

$23,606

 

$24,554

 

$21,557

 

(3.9%)

 

9.5%

Global

49,709

 

51,602

 

46,861

 

(3.7%)

 

6.1%

Local

48,016

 

51,223

 

47,504

 

(6.3%)

 

1.1%

Multi-Regional

53,417

 

57,346

 

51,473

 

(6.9%)

 

3.8%

Total Equity

174,748

 

184,725

 

167,395

 

(5.4%)

 

4.4%

Fixed Income:

 

 

 

 

 

 

 

 

 

Emerging Markets

9,069

 

9,196

 

8,944

 

(1.4%)

 

1.4%

Global

10,924

 

11,347

 

11,029

 

(3.7%)

 

(1.0%)

Local

5,868

 

6,008

 

5,352

 

(2.3%)

 

9.6%

Multi-Regional

19,317

 

19,300

 

18,061

 

0.1%

 

7.0%

Total Fixed Income

45,178

 

45,851

 

43,386

 

(1.5%)

 

4.1%

Alternative Investments

3,593

 

3,959

 

3,812

 

(9.3%)

 

(5.7%)

Other Alternative Investments

2,799

 

2,713

 

 

3.2%

 

NM

Private Equity

1,298

 

1,387

 

1,038

 

(6.4%)

 

25.0%

Cash Management

648

 

705

 

494

 

(8.1%)

 

31.2%

Total AUM

$228,264

 

$239,340

 

$216,125

 

(4.6%)

 

5.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

Nine Months Ended September 30,

 

2023

 

2022

 

 

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

AUM - Beginning of Period

$239,340

 

$216,626

 

 

 

$216,125

 

$273,739

 

 

 

 

 

 

 

 

 

 

Net Flows (j)

(1,994)

 

(2,006)

 

 

 

8

 

(13,180)

Market and foreign exchange

 

 

 

 

 

 

 

 

 

appreciation (depreciation)

(9,082)

 

(16,854)

 

 

 

12,131

 

(62,793)

 

 

 

 

 

 

 

 

 

 

AUM - End of Period

$228,264

 

$197,766

 

 

 

$228,264

 

$197,766

 

 

 

 

 

 

 

 

 

 

Average AUM

$236,298

 

$212,259

 

 

 

$232,817

 

$232,839

 

 

 

 

 

 

 

 

 

 

% Change in average AUM

11.3 %

 

 

 

 

 

–%

 

 

Note: Average AUM generally represents the average of the monthly ending AUM balances for the period.

LAZARD LTD

RECONCILIATION OF U.S. GAAP TO SELECTED SUMMARY FINANCIAL INFORMATION (a)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

($ in thousands, except per share data)

2023

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

Operating Revenue

Net revenue - U.S. GAAP Basis

$523,918

 

$643,114

 

$726,744

 

$1,709,468

 

$2,061,182

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

Revenue related to noncontrolling interests (k)

(2,895)

 

(6,237)

 

(20,847)

 

(19,955)

 

(32,302)

(Gains) losses related to Lazard Fund Interests ("LFI") and other similar arrangements

10,598

 

(9,675)

 

16,180

 

(15,530)

 

65,601

Distribution fees, reimbursable deal costs, bad debt expense and other (l)

(23,880)

 

(26,338)

 

(17,588)

 

(76,899)

 

(53,493)

Asset impairment charges (m)

 

 

 

19,129

 

Losses associated with cost-saving initiatives (n)

4,647

 

 

 

4,647

 

Interest expense

19,229

 

19,162

 

19,062

 

57,801

 

57,109

 

 

 

 

 

 

 

 

 

 

Operating revenue, as adjusted (b)

$531,617

 

$620,026

 

$723,551

 

$1,678,661

 

$2,098,097

 

 

 

 

 

 

 

 

 

 

Compensation and Benefits Expense

Compensation and benefits expense - U.S. GAAP Basis

$364,605

 

$572,231

 

$420,937

 

$1,386,803

 

$1,181,608

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

(Charges) credits pertaining to LFI and other similar arrangements

10,598

 

(9,675)

 

16,180

 

(15,530)

 

65,601

Expenses associated with cost-saving initiatives (o)

(8,941)

 

(136,608)

 

 

(166,289)

 

Expenses associated with senior management transition (p)

 

 

 

(10,674)

 

Compensation related to noncontrolling interests (k)

(2,636)

 

(1,851)

 

(2,986)

 

(7,497)

 

(8,969)

 

 

 

 

 

 

 

 

 

 

Compensation and benefits expense, as adjusted (c)

$363,626

 

$424,097

 

$434,131

 

$1,186,813

 

$1,238,240

 

 

 

 

 

 

 

 

 

 

Non-Compensation Expense

Non-compensation expense - Subtotal - U.S. GAAP Basis

$164,170

 

$180,956

 

$147,665

 

$514,954

 

$435,866

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

Expenses associated with cost-saving initiatives (o)

(2,119)

 

(10,097)

 

 

(12,216)

 

Expenses related to office space reorganization (q)

 

 

(933)

 

 

(2,928)

Distribution fees, reimbursable deal costs, bad debt expense and other (l)

(23,880)

 

(26,338)

 

(17,588)

 

(76,899)

 

(53,493)

Amortization and other acquisition-related costs

(96)

 

(95)

 

(15)

 

(239)

 

(45)

Non-compensation expense related to noncontrolling interests (k)

(625)

 

(749)

 

(866)

 

(2,215)

 

(3,070)

 

 

 

 

 

 

 

 

 

 

Non-compensation expense, as adjusted (d)

$137,450

 

$143,677

 

$128,263

 

$423,385

 

$376,330

 

 

 

 

 

 

 

 

 

 

Pre-Tax Income and Earnings From Operations

Operating Income (Loss) - U.S. GAAP Basis

($4,857)

 

($110,073)

 

$158,142

 

($151,854)

 

$443,708

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

Benefit pursuant to tax receivable agreement obligation ("TRA") (r)

 

 

 

(40,435)

 

Asset impairment charges (m)

 

 

 

19,129

 

Losses associated with cost-saving initiatives (n)

4,647

 

 

 

4,647

 

Expenses associated with cost-saving initiatives (o)

11,060

 

146,705

 

 

178,505

 

Expenses associated with senior management transition (p)

 

 

 

10,674

 

Expenses related to office space reorganization (q)

 

 

933

 

 

2,928

Net income (loss) related to noncontrolling interests (k)

364

 

(3,637)

 

(16,995)

 

(10,246)

 

(20,265)

Pre-tax income, as adjusted

11,214

 

32,995

 

142,080

 

10,420

 

426,371

Interest expense

19,229

 

19,162

 

19,062

 

57,801

 

57,109

Amortization and other acquisition-related costs

98

 

95

 

15

 

242

 

47

Earnings from operations, as adjusted (e)

$30,541

 

$52,252

 

$161,157

 

$68,463

 

$483,527

 

 

 

 

 

 

 

 

 

 

Net Income attributable to Lazard Ltd

Net income (loss) attributable to Lazard Ltd - U.S. GAAP Basis

$7,139

 

($124,013)

 

$105,797

 

($139,046)

 

$315,153

Adjustments:

 

 

 

 

 

 

 

 

 

Benefit pursuant to tax receivable agreement obligation ("TRA") (r)

 

 

 

(40,435)

 

Asset impairment charges (m)

 

 

 

19,129

 

Losses associated with cost-saving initiatives (n)

4,647

 

 

 

4,647

 

Expenses associated with cost-saving initiatives (o)

11,060

 

146,705

 

 

178,505

 

Expenses associated with senior management transition (p)

 

 

 

10,674

 

Expenses related to office space reorganization (q)

 

 

933

 

 

2,928

Tax benefit allocated to adjustments

(12,578)

 

 

(258)

 

(23,462)

 

(809)

 

 

 

 

 

 

 

 

 

 

Net income, as adjusted (g)

$10,268

 

$22,692

 

$106,472

 

$10,012

 

$317,272

 

 

 

 

 

 

 

 

 

 

Diluted Weighted Average Shares Outstanding

Diluted Weighted Average Shares Outstanding - U.S. GAAP Basis

94,309,224

 

88,729,654

 

98,865,156

 

88,582,468

 

103,268,378

Adjustment: participating securities including profits interest participation rights and other

3,973,015

 

6,891,248

 

2,738,211

 

8,300,048

 

1,914,758

 

 

 

 

 

 

 

 

 

 

Diluted Weighted Average Shares Outstanding, as adjusted (h)

98,282,239

 

95,620,902

 

101,603,367

 

96,882,516

 

105,183,136

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share:

 

 

 

 

 

 

 

 

 

U.S. GAAP Basis

$0.06

 

($1.41)

 

$1.06

 

($1.60)

 

$3.03

Non-GAAP Basis, as adjusted

$0.10

 

$0.24

 

$1.05

 

$0.10

 

$3.02

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Notes to Financial Schedules.

See Notes to Financial Schedules

LAZARD LTD

RECONCILIATION OF NON-COMPENSATION U.S. GAAP TO ADJUSTED (a)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

($ in thousands)

2023

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

Non-compensation expense - U.S. GAAP Basis:

 

 

 

 

 

 

 

 

 

Occupancy and equipment

$33,108

 

$32,800

 

$30,696

 

$97,681

 

$91,344

Marketing and business development

20,754

 

28,582

 

19,633

 

72,098

 

56,429

Technology and information services

46,897

 

51,370

 

44,579

 

142,307

 

124,577

Professional services

20,451

 

21,402

 

15,665

 

66,179

 

48,243

Fund administration and outsourced services

27,884

 

28,968

 

27,110

 

83,428

 

85,364

Amortization and other acquisition-related costs

96

 

95

 

15

 

239

 

45

Other

14,980

 

17,739

 

9,967

 

53,022

 

29,864

Non-compensation expense - Subtotal - U.S. GAAP Basis

$164,170

 

$180,956

 

$147,665

 

$514,954

 

$435,866

 

 

 

 

 

 

 

 

 

 

Non-compensation expense - Adjustments:

 

 

 

 

 

 

 

 

 

Occupancy and equipment (k) (o) (q)

($762)

 

($878)

 

($944)

 

($1,701)

 

($3,059)

Marketing and business development (k) (l) (o)

(3,659)

 

(5,164)

 

(2,516)

 

(11,551)

 

(5,784)

Technology and information services (k) (l) (o)

(612)

 

(7,436)

 

(23)

 

(8,121)

 

(114)

Professional services (k) (l) (o) (q)

(1,711)

 

(1,989)

 

(510)

 

(5,102)

 

(1,651)

Fund administration and outsourced services (k) (l)

(16,432)

 

(17,282)

 

(14,362)

 

(48,693)

 

(46,554)

Amortization and other acquisition-related costs

(96)

 

(95)

 

(15)

 

(239)

 

(45)

Other (k) (l) (o) (q)

(3,448)

 

(4,435)

 

(1,032)

 

(16,162)

 

(2,329)

Subtotal Non-compensation adjustments

($26,720)

 

($37,279)

 

($19,402)

 

($91,569)

 

($59,536)

 

 

 

 

 

 

 

 

 

 

Non-compensation expense, as adjusted:

 

 

 

 

 

 

 

 

 

Occupancy and equipment

$32,346

 

$31,922

 

$29,752

 

$95,980

 

$88,285

Marketing and business development

17,095

 

23,418

 

17,117

 

60,547

 

50,645

Technology and information services

46,285

 

43,934

 

44,556

 

134,186

 

124,463

Professional services

18,740

 

19,413

 

15,155

 

61,077

 

46,592

Fund administration and outsourced services

11,452

 

11,686

 

12,748

 

34,735

 

38,810

Amortization and other acquisition-related costs

 

 

 

 

Other

11,532

 

13,304

 

8,935

 

36,860

 

27,535

Non-compensation expense, as adjusted (d)

$137,450

 

$143,677

 

$128,263

 

$423,385

 

$376,330

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Notes to Financial Schedules.

See Notes to Financial Schedules

LAZARD LTD

 

Notes to Financial Schedules

 

(a)

Selected Summary Financial Information are non-GAAP measures. Lazard believes that presenting results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides a meaningful and useful basis for comparison of its operating results across periods.

 

 

 

 

 

 

 

(b)

A non-GAAP measure which excludes (i) revenue related to noncontrolling interests (see (k) below), (ii) (gains) losses related to the changes in the fair value of investments held in connection with Lazard Fund Interests and other similar deferred compensation arrangements for which a corresponding equal amount is excluded from compensation & benefits expense, (iii) revenue related to distribution fees, reimbursable deal costs in accordance with the revenue recognition guidance, bad debt expense, and other (see (l) below), (iv) for the nine month period ended September 30, 2023, asset impairment charges (see (m) below), (v) for the three and nine month periods ended September 30, 2023, losses associated with cost-saving initiatives (see (n) below), and (vi) interest expense primarily related to corporate financing activities.

 

 

 

 

 

 

 

(c)

A non-GAAP measure which excludes (i) (charges) credits related to the changes in the fair value of the compensation liability recorded in connection with Lazard Fund Interests and other similar deferred compensation arrangements, (ii) for the three and nine month periods ended September 30, 2023 and for the three month period ended June 30, 2023, expenses associated with cost-saving initiatives (see (o) below), (iii) for the nine month period ended September 30, 2023, expenses associated with senior management transition (see (p) below), and (iv) compensation and benefits related to noncontrolling interests (see (k) below).

 

 

 

 

 

 

 

(d)

A non-GAAP measure which excludes (i) for the three and nine month periods ended September 30, 2023 and for the three month period ended June 30, 2023, expenses associated with cost-saving initiatives (see (o) below), (ii) for the three and nine month periods ended September 30, 2022, expenses related to office space reorganization (see (q) below), (iii) expenses related to distribution fees, reimbursable deal costs in accordance with the revenue recognition guidance, bad debt expense, and other (see (l) below), (iv) amortization and other acquisition-related costs, and (v) expenses related to noncontrolling interests (see (k) below).

 

 

 

 

 

 

 

(e)

A non-GAAP measure which excludes (i) for the nine month period ended September 30, 2023, a benefit pursuant to tax receivable agreement obligation ("TRA") (see (r) below), (ii) for the nine month period ended September 30, 2023, asset impairment charges (see (m) below), (iii) for the three and nine month periods ended September 30, 2023 and for the three month period ended June 30, 2023, losses and expenses associated with cost-saving initiatives (see (n) and (o) below), (iv) for the nine month period ended September 30, 2023, expenses associated with senior management transition (see (p) below), (v) for the three month and nine month periods ended September 30, 2022, expenses related to office space reorganization (see (q) below), (vi) net revenue and expenses related to noncontrolling interests (see (k) below), (vii) interest expense primarily related to corporate financing activities, and (viii) amortization and other acquisition-related costs.

 

 

 

 

 

 

 

(f)

Represents earnings from operations as a percentage of operating revenue, and is a non-GAAP measure.

 

 

 

 

 

 

 

(g)

A non-GAAP measure which excludes (i) for the nine month period ended September 30, 2023, a benefit pursuant to tax receivable agreement obligation (see (r) below), (ii) for the nine month period ended September 30, 2023, asset impairment charges (see (m) below), (iii) for the three and nine month periods ended September 30, 2023 and for the three month period ended June 30, 2023, losses and expenses associated with cost-saving initiatives (see (n) and (o) below), (iv) for the nine month period ended September 30, 2023, expenses associated with senior management transition (see (p) below), and (v) for the three and nine month periods ended September 30, 2022, expenses related to office space reorganization (see (q) below), net of tax benefits.

 

 

 

 

 

 

 

(h)

A non-GAAP measure which includes units of the long-term incentive compensation program consisting of profits interest participation rights, which are equity incentive awards that, subject to certain conditions, may be exchanged for shares of our common stock. Certain profits interest participation rights and other participating securities may be excluded from the computation of outstanding stock equivalents for U.S. GAAP net income per share. In addition, for the three month period ended June 30, 2023 and for the nine month period ended September 30, 2023, includes dilutive effect of weighted average number of incremental shares of common stock issuable from share-based incentive compensation.

 

 

 

 

 

 

 

(i)

Effective tax rate is a non-GAAP measure based upon the U.S. GAAP rate with adjustments for the tax applicable to the non-GAAP adjustments to operating income, generally based upon the effective marginal tax rate in the applicable jurisdiction of the adjustments. The computation is based on a quotient, the numerator of which is the provision for income taxes of $946, $10,303, and $35,608 for the three month periods ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively, $408 and $109,099 for the nine month periods ended September 30, 2023 and 2022 and the denominator of which is pre-tax income of $11,214, $32,995, and $142,080 for the three month periods ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively, $10,420 and $426,371 for the nine month periods ended September 30, 2023 and 2022.

 

 

 

 

 

 

 

(j)

For the nine month period ended September 30, 2023, includes approximately $3.9 billion of net flows related to a wealth management acquisition.

 

 

 

 

 

 

 

(k)

Noncontrolling interests include revenue and expenses principally related to Edgewater, ESC Funds and a Special Purpose Acquisition Company.

 

 

 

 

 

 

 

(l)

Represents certain distribution, introducer and management fees paid to third parties and reimbursable deal costs for which an equal amount is excluded from both non-GAAP operating revenue and non-compensation expense, respectively, and excludes bad debt expense, which represents fees and other receivables that are deemed uncollectible.

 

 

 

 

 

 

 

(m)

Represents certain asset impairment charges.

 

 

 

 

 

 

 

(n)

Represents losses associated with the closing of certain offices as part of the cost-saving initiatives including the reclassification of currency translation adjustments to earnings from accumulated other comprehensive loss and transactions related to foreign currency exchange.

 

 

 

 

 

 

 

(o)

Represents expenses associated with cost-saving initiatives including closing certain offices over the course of 2023.

 

 

 

 

 

 

 

(p)

Represents expenses associated with senior management transition reflecting the departure of certain executive officers.

 

 

 

 

 

 

 

(q)

Represents building depreciation and other costs related to office space reorganization.

 

 

 

 

 

 

 

(r)

Pursuant to the periodic revaluation of the TRA liability and the assumptions reflected in the estimate, the revaluation had the effect of reducing the estimated liability under the TRA. As a result, the Company recorded a “benefit pursuant to tax receivable agreement” of $40,435 for the nine month period ended September 30, 2023.

 

 

 

 

 

 

 

NM

Not meaningful

 

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