Operating revenue momentum in Financial Advisory and Asset Management

M&A announcements accelerated in U.S. and Europe; global leader in restructuring

Average assets under management increased 8% from the second quarter

NEW YORK--(BUSINESS WIRE)--Oct. 29, 2020-- Lazard Ltd (NYSE: LAZ) today reported operating revenue¹ of $569 million for the quarter ended September 30, 2020. Net income, as adjusted², was $76 million, or $0.67 per share (diluted) for the quarter. On a U.S. GAAP basis, third-quarter 2020 net income was $75 million, or $0.66 per share (diluted).

For the first nine months of 2020, net income, as adjusted, was $218 million, or $1.92 per share (diluted). On a U.S. GAAP basis, net income for the first nine months was $213 million, or $1.88 per share (diluted).

“We are performing well in a volatile environment, with momentum across our businesses,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. “Our services are in demand around the world as our clients seek expert advice and solutions in a period of unprecedented change.”

OPERATING REVENUE

Operating revenue¹ was $569 million for the third quarter of 2020, and $1,675 million for the first nine months of 2020, down 3% and 9% from the respective 2019 periods.

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.

For the third quarter of 2020, Financial Advisory operating revenue was $307 million, 1% higher than the third quarter of 2019. These results reflected increasing M&A and Restructuring activity.

For the first nine months of 2020, Financial Advisory operating revenue was $895 million, 7% lower than the first nine months of 2019.

During and since the third quarter of 2020, Lazard has been engaged in significant and complex M&A transactions and other advisory assignments globally, including the following (clients are in italics): Altice Europe in the $45.1 billion take-private offer by Patrick Drahi; Gilead’s $21 billion acquisition of Immunomedics; Teladoc Health’s $18.5 billion merger with Livongo; AVEVA’s $5 billion acquisition of OSIsoft; El Paso Electric’s $4.3 billion sale to Infrastructure Investments Fund; Iliad’s $4.3 billion acquisition of Play; ENGIE’s €3.4 billion sale of a 29.9% stake in Suez to Veolia; MassMutual’s $3.4 billion sale of its retirement plan business to Empower Retirement; Aimmune’s $2.6 billion sale to Nestlé Health Science; ServiceMaster’s $1.6 billion sale of its ServiceMaster Brands franchise business to Roark Capital; Siemens on the spin-off of Siemens Energy; and IBM on the separation of its Managed Infrastructure Services unit.

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 third quarter of 2020, 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: 24 Hour Fitness; Abengoa; Diamond Offshore Drilling; FTS International; Gavilan Resources; Hi-Crush; J.C. Penney; J.Crew; Libbey; Neiman Marcus; NMC Health; Premier Oil; Pyxus International; Salt Creek Midstream; Seadrill Limited; Technicolor; Transocean; Ursa Piceance; and Valaris. Lazard was the global leader in completed restructurings for the first nine months of 2020 (Source: Refinitiv).

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 Lazard’s publicly announced Financial Advisory transactions, please visit our website at www.lazard.com/businesses/transactions.

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.

For the third quarter of 2020, Asset Management operating revenue was $261 million, 8% lower than the third quarter of 2019. For the first nine months of 2020, Asset Management operating revenue was $775 million, 10% lower than the first nine months of 2019.

For the third quarter of 2020, management fees and other revenue was $258 million, 8% lower than the third quarter of 2019, and 5% higher than the second quarter of 2020. For the first nine months of 2020, management fees and other revenue was $770 million, 9% lower than the first nine months of 2019.

Average assets under management (AUM) for the third quarter of 2020 was $226 billion, 3% lower than the third quarter of 2019, and 8% higher than the second quarter of 2020. Average AUM for the first nine months of 2020 was $219 billion, 6% lower than the first nine months of 2019.

AUM as of September 30, 2020, was $228 billion, down 1% from September 30, 2019, and up 6% from June 30, 2020. The sequential increase was driven primarily by market appreciation of $9.5 billion and foreign exchange appreciation of $3.7 billion, offset by net outflows of $0.2 billion.

For the third quarter of 2020, incentive fees were $3 million, compared to $1 million for the third quarter of 2019. For the first nine months of 2020, incentive fees were $6 million, compared to $7 million for the first nine months of 2019.

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 third quarter of 2020, we accrued adjusted compensation and benefits expense¹ at an adjusted compensation¹ ratio of 60%. This resulted in $341 million of adjusted compensation and benefits expense, compared to $338 million for the third quarter of 2019.

For the first nine months of 2020, adjusted compensation and benefits expense was $1,005 million, compared to $1,057 million for the first nine months of 2019.

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

Adjusted non-compensation expense¹ for the third quarter of 2020 was $103 million, 18% lower than the third quarter of 2019. The ratio of adjusted non-compensation expense to operating revenue¹ for the third quarter of 2020 was 18.1%, compared to 21.3% for the third quarter of 2019.

Adjusted non-compensation expense for the first nine months of 2020 was $315 million, 15% lower than the first nine months of 2019. The ratio of adjusted non-compensation expense to operating revenue for the first nine months of 2020 was 18.8%, compared to 20.1% for the first nine months of 2019.

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 $29 million for the third quarter of 2020 and $80 million for the first nine months of 2020. The effective tax rate on the same basis was 27.9% for the third quarter and 26.9% for the first nine months of 2020, compared to 16.6% and 21.7% for the respective 2019 periods.

CAPITAL MANAGEMENT AND BALANCE SHEET

Our primary capital management goals include managing debt and returning capital to shareholders through dividends and share repurchases.

For the third quarter of 2020, Lazard returned $50 million to shareholders, which included: $49 million in dividends and $1 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

For the first nine months of 2020, Lazard returned $314 million to shareholders, which included: $147 million in dividends; $95 million in share repurchases of our Class A common stock; and $72 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

During the first nine months of 2020, we repurchased 2.9 million shares at an average price of $32.70 per share. As of September 30, 2020, our remaining share repurchase authorization is $306 million.

On October 28, 2020, Lazard declared a quarterly dividend of $0.47 per share on its outstanding common stock. The dividend is payable on November 20, 2020, to stockholders of record on November 9, 2020.

Lazard’s financial position remains strong. As of September 30, 2020, our cash and cash equivalents were $1,110 million. Stockholders’ equity related to Lazard’s interests was $694 million.

COVID-19 ENVIRONMENT UPDATE

During the third quarter of 2020, the COVID-19 pandemic continued to have a negative impact on economic activity around the world. Governments and central banks have taken extraordinary measures to support local economies and capital markets, but the macroeconomic outlook remains uncertain while significant health risks persist.

Lazard’s offices around the world have continued to operate in the context of applicable local regulations and guidelines regarding business activity, and in the third quarter, the majority of our people worked remotely, employing virtual and secure cloud-based systems.

While the global M&A market strengthened in the third quarter, we continue to expect a challenging business environment in the near term due to elevated uncertainty and capital markets volatility. We believe that our strong financial position, the diversity of our business, and our consistent focus on cost discipline will enable us to weather the economic downturn.

CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. EDT on October 29, 2020, to discuss the company’s financial results for the third quarter and first nine months of 2020. 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) 289-0438 (toll-free, U.S. and Canada) or +1 (323) 794-2423 (outside of the U.S. and Canada), 15 minutes prior to the start of the call.

A replay of the conference call will be available by 10:00 a.m. EDT on October 29, 2020, via the Lazard Investor Relations website, www.lazard.com, or by dialing 1 (888) 203-1112 (toll-free, U.S. and Canada) or +1 (719) 457-0820 (outside of the U.S. and Canada). The replay access code is: 8159566.

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 North America, Europe, Asia, Australia, Central and South America. With origins dating to 1848, the firm provides advice on mergers and acquisitions, strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as 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 growth strategies, business plans and initiatives and anticipated trends in our business. These 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.

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.

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.

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 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 2020 adjusted results¹ exclude pre-tax charges of $2.3 million and $8.5 million, respectively, of costs relating to an office space reorganization. On a U.S. GAAP basis, these resulted in a net charge of $1 million, or $0.01 (diluted) per share, for the third quarter, and a net charge of $5.2 million, or $0.05 (diluted) per share, for the first nine months of 2020.

LAZ-EPE

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029005396/en/

Media Contact: Judi Frost Mackey +1 212 632 1428 judi.mackey@lazard.com
Investor Contact: Alexandra Deignan +1 212 632 6886 alexandra.deignan@lazard.com

Source: Lazard Ltd