Lazard Ltd Reports First-Quarter 2021 Results
Operating revenue up 15% with strong momentum across our businesses
Record quarter-end assets under management of
Returned
First-quarter 2021 net income on a
“We are well positioned for the year ahead with record assets under management and high levels of activity across Financial Advisory in a strengthening macroeconomic environment,” said
|
|||||||
($ in millions, except per share data and AUM) |
Quarter Ended |
||||||
2021 |
|
2020 |
|
%’21-’20 |
|||
Net Income |
|||||||
|
|
|
36% |
||||
Per share, diluted |
|
|
34% |
||||
Adjusted2 |
|
|
52% |
||||
Per share, diluted |
|
|
50% |
||||
Operating Revenue1 |
|||||||
Total operating revenue |
|
|
15% |
||||
Financial Advisory |
|
|
8% |
||||
Asset Management |
|
|
22% |
||||
AUM ($ in billions) |
|
|
|
||||
Period End |
|
|
37% |
||||
Average |
|
|
18% |
Note: Endnotes are on page 6 of this release. A reconciliation of adjusted GAAP to
OPERATING REVENUE
Operating revenue was
Financial Advisory
Our Financial Advisory results include M&A Advisory, Capital Advisory, Capital Raising, Restructuring, Shareholder Advisory, Sovereign Advisory, and other strategic advisory work for clients.
Financial Advisory operating revenue was
During and since the first quarter of 2021, Lazard has been engaged in significant and complex M&A transactions and other advisory assignments globally, including the following (clients are in italics):
Lazard has one of the world’s preeminent restructuring practices, with a long track record of successfully advising businesses and governments. During and since the first quarter of 2021, we have been engaged in a broad range of highly visible and complex restructuring and debt advisory assignments for debtors or creditors, including roles involving: Abengoa;
Our Capital and Shareholder Advisory practices remain active globally, advising on a broad range of public and private assignments. Our Sovereign Advisory practice continues to be active advising governments, sovereign and sub-sovereign entities across developed and emerging markets.
For a list of publicly announced Financial Advisory transactions on which Lazard advised in the first quarter of 2021, or continued to advise or completed since
Asset Management
In the text portion of this press release, we present our Asset Management results as 1) Management fees and other revenue, and 2) Incentive fees.
Asset Management operating revenue was
Management fees and other revenue was
Average AUM for the first quarter of 2021 was
AUM as of
Incentive fees during the period were
OPERATING EXPENSES
Compensation and Benefits
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). 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 with a consistent deferral policy, we can better manage our compensation costs, increase our flexibility in the future and build shareholder value over time.
For the first quarter of 2021, we accrued adjusted compensation and benefits expense1 at an adjusted compensation ratio of 59.5%, compared to the first-quarter 2020 ratio of 60.0%. This resulted in
We manage our compensation and benefits expense based on awarded compensation with a consistent deferral policy. We take a disciplined approach to compensation, and our goal is 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, with consistent deferral policies.
Non-Compensation Expense
For the first quarter of 2021, adjusted non-compensation expense1 was
The ratio of adjusted non-compensation expense to operating revenue was 15.8% for the first quarter of 2021, compared to 20.0% for the first quarter of 2020.
Our goal remains to achieve an adjusted non-compensation expense-to-operating revenue ratio over the cycle of 16% to 20%.
TAXES
The provision for taxes, on an adjusted basis1, was
CAPITAL MANAGEMENT AND BALANCE SHEET
Our primary capital management goals include managing debt and returning capital to shareholders through dividends and share repurchases.
In the first quarter of 2021, Lazard returned
As of
On
On
Lazard’s financial position remains strong. As of
***
CONFERENCE CALL
Lazard will host a conference call at
A replay of the conference call will be available by
ABOUT LAZARD
Lazard, one of the world's preeminent financial advisory and asset management firms, operates from more than 40 cities across 25 countries in
***
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 growth strategies, business plans and initiatives and anticipated trends in our business. These forward-looking statements, including with respect to the current COVID-19 pandemic, 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.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. 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.
***
ENDNOTES
1 A non-
2 First-quarter 2021 adjusted results1 exclude pre-tax charges of
LAZ-EPE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||
( |
||||||||||
Three Months Ended |
|
% Change From |
||||||||
|
|
|
|
|
|
|
|
|
||
($ in thousands, except per share data) |
2021 |
|
2020 |
|
2020 |
|
2020 |
|
2020 |
|
Total revenue |
|
|
|
(24%) |
22% |
|||||
Interest expense |
(19,797) |
(20,172) |
(20,143) |
|||||||
Net revenue |
660,107 |
878,154 |
538,014 |
(25%) |
23% |
|||||
Operating expenses: | ||||||||||
Compensation and benefits |
401,546 |
524,736 |
319,755 |
(23%) |
26% |
|||||
Occupancy and equipment |
34,748 |
33,592 |
32,198 |
|||||||
Marketing and business development |
6,651 |
8,161 |
20,186 |
|||||||
Technology and information services |
33,670 |
36,100 |
31,358 |
|||||||
Professional services |
14,948 |
20,330 |
14,545 |
|||||||
Fund administration and outsourced services |
29,279 |
26,431 |
26,390 |
|||||||
Amortization of intangible assets related to acquisitions |
15 |
436 |
446 |
|||||||
Other |
4,960 |
11,308 |
9,039 |
|||||||
Subtotal |
124,271 |
136,358 |
134,162 |
(9%) |
(7%) |
|||||
Benefit pursuant to tax receivable agreement |
- |
(439) |
- |
|||||||
Operating expenses |
525,817 |
660,655 |
453,917 |
(20%) |
16% |
|||||
Operating income |
134,290 |
217,499 |
84,097 |
(38%) |
60% |
|||||
Provision for income taxes |
43,464 |
22,729 |
25,766 |
91% |
69% |
|||||
Net income |
90,826 |
194,770 |
58,331 |
(53%) |
56% |
|||||
Net income (loss) attributable to noncontrolling interests |
3,526 |
4,881 |
(5,691) |
|||||||
Net income attributable to |
|
|
|
(54%) |
36% |
|||||
Attributable to Lazard Ltd Common Stockholders: | ||||||||||
Weighted average shares outstanding: | ||||||||||
Basic |
107,291,560 |
107,316,315 |
106,303,962 |
0% |
1% |
|||||
Diluted |
115,822,294 |
115,144,030 |
114,120,179 |
1% |
1% |
|||||
Net income per share: | ||||||||||
Basic |
|
|
|
(54%) |
36% |
|||||
Diluted |
|
|
|
(54%) |
34% |
UNAUDITED CONDENSED CONSOLIDATED | |||||||
STATEMENT OF FINANCIAL CONDITION | |||||||
( |
|||||||
|
|
|
|||||
($ in thousands) |
2021 |
|
2020 |
||||
ASSETS | |||||||
Cash and cash equivalents |
|
|
|
||||
Deposits with banks and short-term investments |
1,014,145 |
|
1,134,463 |
||||
Restricted cash |
615,090 |
|
44,488 |
||||
Receivables |
739,615 |
|
743,141 |
||||
Investments |
782,351 |
|
658,532 |
||||
381,947 |
|
384,071 |
|||||
Operating lease right-of-use assets |
492,089 |
|
513,923 |
||||
Deferred tax assets |
506,836 |
|
538,448 |
||||
Other assets |
702,790 |
|
564,919 |
||||
Total Assets |
|
|
|
||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY | |||||||
Liabilities | |||||||
Deposits and other customer payables |
|
|
|
||||
Accrued compensation and benefits |
485,739 |
|
734,544 |
||||
Operating lease liabilities |
582,178 |
|
606,963 |
||||
Tax receivable agreement obligation |
211,236 |
|
221,451 |
||||
Senior debt |
1,683,362 |
|
1,682,741 |
||||
Other liabilities |
565,629 |
|
525,579 |
||||
Total liabilities |
4,767,860 |
|
4,972,428 |
||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interests |
575,000 |
|
- |
||||
Stockholders' equity | |||||||
Preferred stock, par value |
- |
|
- |
||||
Common stock, par value |
1,128 |
|
1,128 |
||||
Additional paid-in capital |
- |
|
135,439 |
||||
Retained earnings |
1,278,907 |
|
1,295,386 |
||||
Accumulated other comprehensive loss, net of tax |
(255,711 |
) |
(238,368) |
||||
Subtotal |
1,024,324 |
|
1,193,585 |
||||
Class A common stock held by subsidiaries, at cost |
(259,319 |
) |
(281,813) |
||||
765,005 |
|
911,772 |
|||||
Noncontrolling interests |
101,694 |
|
87,661 |
||||
Total stockholders' equity |
866,699 |
|
999,433 |
||||
Total liabilities, redeemable noncontrolling interests and stockholders' equity |
|
|
|
SELECTED SUMMARY FINANCIAL INFORMATION (a) | |||||||||||||
(Non-GAAP - unaudited) | |||||||||||||
Three Months Ended | % Change From | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||
($ in thousands, except per share data) |
2021 |
|
2020 |
|
2020 |
|
2020 |
|
2020 |
||||
Revenues: | |||||||||||||
Financial Advisory |
|
|
|
(38%) |
8% |
||||||||
Asset Management |
327,914 |
336,152 |
268,953 |
(2%) |
22% |
||||||||
Corporate |
2,648 |
3,990 |
(915) |
(34%) |
NM |
||||||||
Operating revenue (b) |
|
|
|
(24%) |
15% |
||||||||
Expenses: | |||||||||||||
Adjusted compensation and benefits expense (c) |
|
|
|
(22%) |
14% |
||||||||
Ratio of adjusted compensation to operating revenue |
59.5% |
58.6% |
60.0% |
||||||||||
Non-compensation expense (d) |
|
|
|
(12%) |
(9%) |
||||||||
Ratio of non-compensation to operating revenue |
15.8% |
13.7% |
20.0% |
||||||||||
Earnings: | |||||||||||||
Earnings from operations (e) |
|
|
|
(32%) |
42% |
||||||||
Operating margin (f) |
24.7% |
27.7% |
20.0% |
||||||||||
Adjusted net income (g) |
|
|
|
(47%) |
52% |
||||||||
Diluted adjusted net income per share |
|
|
|
(48%) |
50% |
||||||||
Diluted weighted average shares (h) |
115,857,922 |
115,831,033 |
114,160,044 |
0% |
1% |
||||||||
Effective tax rate (i) |
28.6% |
11.1% |
28.8% |
||||||||||
This presentation includes non- |
ASSETS UNDER MANAGEMENT ("AUM") | ||||||||||
(unaudited) | ||||||||||
($ in millions) | ||||||||||
As of |
|
Variance |
||||||||
|
|
|
|
|
|
|
|
1Q 2021 vs |
||
2021 |
|
2020 |
|
2020 |
|
Qtr to Qtr |
|
1Q 2020 |
||
Equity: | ||||||||||
Emerging Markets |
|
|
|
(1.7%) |
18.0% |
|||||
Global |
58,560 |
56,246 |
39,094 |
4.1% |
49.8% |
|||||
Local |
51,246 |
48,672 |
37,496 |
5.3% |
36.7% |
|||||
Multi-Regional |
72,953 |
71,560 |
50,335 |
1.9% |
44.9% |
|||||
Total Equity |
215,459 |
209,732 |
154,641 |
2.7% |
39.3% |
|||||
Fixed Income: | ||||||||||
Emerging Markets |
12,708 |
13,651 |
11,424 |
(6.9%) |
11.2% |
|||||
Global |
14,177 |
11,962 |
9,100 |
18.5% |
55.8% |
|||||
Local |
5,556 |
5,600 |
5,421 |
(0.8%) |
2.5% |
|||||
Multi-Regional |
11,808 |
12,571 |
8,376 |
(6.1%) |
41.0% |
|||||
Total Fixed Income |
44,249 |
43,784 |
34,321 |
1.1% |
28.9% |
|||||
Alternative Investments |
3,141 |
2,748 |
1,902 |
14.3% |
65.1% |
|||||
Private Equity |
1,324 |
1,420 |
1,406 |
(6.8%) |
(5.8%) |
|||||
Cash Management |
679 |
958 |
778 |
(29.1%) |
(12.7%) |
|||||
Total AUM |
|
|
|
2.4% |
37.2% |
|||||
Year Ended |
||||||||||
Three Months Ended |
|
|||||||||
2021 |
|
2020 |
2020 |
|||||||
AUM - Beginning of Period |
|
|
|
|||||||
Net Flows |
(1,679) |
(4,913) |
(11,368) |
|||||||
Market and foreign exchange appreciation (depreciation) |
7,889 |
(50,278) |
21,771 |
|||||||
AUM - End of Period |
|
|
|
|||||||
Average AUM |
|
|
|
|||||||
% Change in average AUM |
18.0% |
Note: Average AUM generally represents the average of the monthly ending AUM balances for the period. |
RECONCILIATION OF |
||||||||
(unaudited) | ||||||||
Three Months Ended |
||||||||
|
|
|
|
|
||||
($ in thousands, except per share data) |
2021 |
|
2020 |
|
2020 |
|||
Operating Revenue | ||||||||
Net revenue - |
|
|
|
|||||
Adjustments: | ||||||||
(Revenue) loss related to noncontrolling interests (j) |
(6,361) |
(8,054) |
2,772 |
|||||
(Gains) losses related to Lazard Fund Interests ("LFI") and other similar arrangements |
(7,487) |
(25,207) |
19,637 |
|||||
Distribution fees, reimbursable deal costs, bad debt expense and other (k) |
(16,710) |
(14,647) |
(16,384) |
|||||
Interest expense |
18,313 |
18,522 |
18,772 |
|||||
Operating revenue, as adjusted (b) |
|
|
|
|||||
Compensation and Benefits Expense | ||||||||
Compensation and benefits expense - |
|
|
|
|||||
Adjustments: | ||||||||
(Charges) credits pertaining to LFI and other similar arrangements |
(7,487) |
(25,207) |
19,637 |
|||||
Expenses associated with restructuring and closing of certain offices (l) |
(6,623) |
- |
- |
|||||
Compensation related to noncontrolling interests (j) |
(1,958) |
(2,269) |
(1,706) |
|||||
Compensation and benefits expense, as adjusted (c) |
|
|
|
|||||
Non-Compensation Expense | ||||||||
Non-compensation expense - Subtotal - |
|
|
|
|||||
Adjustments: | ||||||||
Expenses related to office space reorganization (m) |
(1,416) |
(4,184) |
(3,664) |
|||||
Distribution fees, reimbursable deal costs, bad debt expense and other (k) |
(16,710) |
(14,647) |
(16,384) |
|||||
Amortization of intangible assets related to acquisitions |
(15) |
(436) |
(446) |
|||||
Expenses associated with restructuring and closing of certain offices (l) |
(2,971) |
- |
- |
|||||
Non-compensation expense related to noncontrolling interests (j) |
(679) |
(523) |
(1,036) |
|||||
Non-compensation expense, as adjusted (d) |
|
|
|
|||||
Pre-Tax Income and Earnings From Operations | ||||||||
Operating Income - |
|
|
|
|||||
Adjustments: | ||||||||
Reduction of tax receivable agreement obligation ("TRA") |
- |
(439) |
- |
|||||
Expenses related to office space reorganization (m) |
1,416 |
4,184 |
3,664 |
|||||
Expenses associated with restructuring and closing of certain offices (l) |
9,594 |
- |
- |
|||||
Net (income) loss related to noncontrolling interests (j) |
(3,526) |
(4,881) |
5,691 |
|||||
Pre-tax income, as adjusted |
141,774 |
216,363 |
93,452 |
|||||
Interest expense |
18,313 |
18,522 |
18,772 |
|||||
Expenses associated with |
(183) |
55 |
269 |
|||||
Earnings from operations, as adjusted (e) |
|
|
|
|||||
Net Income attributable to |
||||||||
Net income attributable to |
|
|
|
|||||
Adjustments: | ||||||||
Reduction of tax receivable agreement obligation ("TRA") |
- |
(439) |
- |
|||||
Expenses related to office space reorganization (m) |
1,416 |
4,184 |
3,664 |
|||||
Expenses associated with restructuring and closing of certain offices (l) |
9,594 |
- |
- |
|||||
Tax expense (benefit) allocated to adjustments |
2,911 |
(1,190) |
(1,134) |
|||||
Net income, as adjusted (g) |
|
|
|
|||||
Diluted Weighted Average Shares Outstanding | ||||||||
Diluted Weighted Average Shares Outstanding - |
115,822,294 |
115,144,030 |
114,120,179 |
|||||
Adjustment: participating securities including profits interest participation rights |
35,628 |
687,003 |
39,865 |
|||||
Diluted Weighted Average Shares Outstanding, as adjusted (h) |
115,857,922 |
115,831,033 |
114,160,044 |
|||||
Diluted net income per share: | ||||||||
|
|
|
||||||
Non-GAAP Basis, as adjusted |
|
|
|
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable |
See Notes to Financial Schedules |
RECONCILIATION OF NON-COMPENSATION |
|||||||
(unaudited) | |||||||
Three Months Ended |
|||||||
|
|
|
|
|
|||
($ in thousands) |
2021 |
|
2020 |
|
2020 |
||
Non-compensation expense - |
|||||||
Occupancy and equipment |
|
|
|
||||
Marketing and business development |
6,651 |
8,161 |
20,186 |
||||
Technology and information services |
33,670 |
36,100 |
31,358 |
||||
Professional services |
14,948 |
20,330 |
14,545 |
||||
Fund administration and outsourced services |
29,279 |
26,431 |
26,390 |
||||
Amortization of intangible assets related to acquisitions |
15 |
436 |
446 |
||||
Other |
4,960 |
11,308 |
9,039 |
||||
Non-compensation expense - Subtotal - |
|
|
|
||||
Non-compensation expense - Adjustments: | |||||||
Occupancy and equipment (j) (l) (m) |
( |
( |
( |
||||
Marketing and business development (j) (k) (l) |
(205) |
(383) |
(2,691) |
||||
Technology and information services (j) (k) (l) |
(14) |
155 |
(435) |
||||
Professional services (j) (k) (l) (m) |
(1,461) |
(4,101) |
(1,778) |
||||
Fund administration and outsourced services (j) (k) |
(15,270) |
(12,114) |
(12,120) |
||||
Amortization of intangible assets related to acquisitions |
(15) |
(436) |
(446) |
||||
Other (j) (k) (m) |
(641) |
508 |
(327) |
||||
Subtotal Non-compensation adjustments |
( |
( |
( |
||||
Non-compensation expense, as adjusted: | |||||||
Occupancy and equipment |
|
|
|
||||
Marketing and business development |
6,446 |
7,778 |
17,495 |
||||
Technology and information services |
33,656 |
36,255 |
30,923 |
||||
Professional services |
13,487 |
16,229 |
12,767 |
||||
Fund administration and outsourced services |
14,009 |
14,317 |
14,270 |
||||
Amortization of intangible assets related to acquisitions |
- |
- |
- |
||||
Other |
4,319 |
11,816 |
8,712 |
||||
Non-compensation expense, as adjusted (d) |
|
|
|
||||
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable |
See Notes to Financial Schedules |
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