Financial Advisory record operating revenue year to date, driven by strength in Europe

Asset Management resilient performance amid challenging market and foreign exchange headwinds

Returned $812 million in capital to shareholders, including a record 17 million shares repurchased year to date

NEW YORK--(BUSINESS WIRE)--Oct. 27, 2022-- Lazard Ltd (NYSE: LAZ) today reported operating revenue¹ of $724 million for the quarter ended September 30, 2022. Net income, as adjusted², was $106 million, or $1.05 per share (diluted) for the quarter. On a U.S. GAAP basis, third-quarter 2022 net income was $106 million, or $1.06 per share (diluted).

For the first nine months of 2022, net income, as adjusted, was $317 million, or $3.02 per share (diluted). On a U.S. GAAP basis, net income for the first nine months was $315 million, or $3.03 per share (diluted).

“Our record third-quarter revenue reflects the strength of our diversified business model and our commitment to providing innovative client solutions during challenging market conditions,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. “We remain focused on helping our clients navigate the uncertainty of the global macroenvironment, while we continue to invest in our business through the cycle, exercise cost discipline and deliver long-term value for shareholders."

Note: Endnotes are on page 7 of this release. A reconciliation of adjusted GAAP to U.S. GAAP is on pages 14-15.

OPERATING REVENUE

Operating revenue¹ was a third-quarter record $724 million for the third quarter of 2022, up 3% from the third quarter of 2021, and $2,098 million for the first nine months of 2022, down 3% from the first nine months of 2021.

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 2022, Financial Advisory operating revenue was a third-quarter record $454 million, 19% higher than the third quarter of 2021.

For the first nine months of 2022, Financial Advisory operating revenue was a record $1,249 million, an increase of 7% from the first nine months of 2021.

During and since the third quarter of 2022, Lazard has been engaged in significant and complex M&A transactions and other strategic advisory assignments globally, including the following (clients are in italics): Intel’s joint $30 billion investment with Brookfield in U.S.-based chip factories; Orange’s combination with Masmovil in Spain, for a combined value of €18.6 billion; AVEVA Group’s $11.6 billion recommended offer from Schneider Electric; Continental Grain (CGC) and its subsidiary Wayne Farms, in CGC’s and Cargill's $4.5 billion acquisition of Sanderson Farms; Bungie’s $3.6 billion sale to Sony Interactive Entertainment; Saint-Gobain’s $2.3 billion acquisition of GCP Applied Technologies; Rolls-Royce's €1.7 billion sale of ITP Aero to a Bain Capital-led consortium; Brewin Dolphins’ £1.6 billion sale to Royal Bank of Canada; Obagi’s $1.2 billion combination with Waldencast and Milk Makeup; Infrastructure & Energy Alternatives’ $1.1 billion sale to MasTec; Aqua Finance’s majority sale to Athene and Apollo at a valuation of approximately $1 billion; Investindustrial’s $950 million acquisition of a significant portion of TreeHouse Food’s Meal Preparation business; Institut Mérieux's partnership with and investment of €833 million in the company by Exor; Germany’s Federal Ministry for Economic Affairs and Climate Action on the Federal Republic of Germany’s acquisition of a 99% stake in Uniper; KIRKBI’s acquisition of BrainPOP; and Kofax's sale to Clearlake Capital Group and TA Associates.

Lazard has one of the world’s preeminent restructuring practices. During and since the third quarter of 2022, we have been engaged in a broad range of visible and complex restructuring and debt advisory assignments for debtors or creditors, including roles involving: Bed Bath & Beyond; Brazos Electric Power Cooperative; Corp Group Banking S.A.; Endo; GenapSys and Rockall Energy.

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 third quarter of 2022, or continued to advise or completed since September 30, 2022, 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 2022, Asset Management operating revenue was $263 million, 15% lower than the third quarter of 2021. For the first nine months of 2022, Asset Management operating revenue was $840 million, 14% lower than the first nine months of 2021.

For the third quarter of 2022, management fees and other revenue was $241 million, 20% lower than the third quarter of 2021, and 7% lower than the second quarter of 2022. For the first nine months of 2022, management fees and other revenue was $786 million, 13% lower than the first nine months of 2021.

Average assets under management (AUM) for the third quarter of 2022 was $212 billion, 24% lower than the third quarter of 2021, and 8% lower than the second quarter of 2022. Average AUM for the first nine months of 2022 was $233 billion, 14% lower than the first nine months of 2021.

AUM as of September 30, 2022, was $198 billion, down 9% from June 30, 2022, and down 27% from September 30, 2021. The sequential decrease from June 30, 2022 was driven by market depreciation of $10.3 billion, foreign exchange depreciation of $6.6 billion and net outflows of $2.0 billion.

For the third quarter of 2022, incentive fees were $22 million, compared to $7 million for the third quarter of 2021. For the first nine months of 2022, incentive fees were $54 million, compared to $75 million for the first nine months of 2021.

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), 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 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 2022, we accrued compensation and benefits expense at an adjusted compensation¹ ratio of 60.0%, compared to the third-quarter 2021 ratio of 59.5%. This resulted in $434 million of compensation and benefits expense, compared to $417 million for the third quarter of 2021.

For the first nine months of 2022, adjusted compensation and benefits expense was $1,238 million, compared to $1,292 million for the first nine months of 2021.

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 2022, was $128 million, 10% higher than the third quarter of 2021. The increase primarily reflects higher marketing and business development expenses and technology investments. The ratio of adjusted non-compensation expense to operating revenue for the third quarter of 2022 was 17.7%, compared to 16.6% for the third quarter of 2021.

Adjusted non-compensation expense for the first nine months of 2022 was $376 million, 11% higher than the first nine months of 2021. The adjusted non-compensation ratio¹ for the first nine months of 2022 was 17.9%, compared to 15.6% for the first nine months of 2021.

Our goal remains to maintain 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 $36 million for the third quarter and $109 million for the first nine months of 2022. The effective tax rate on the same basis was 25.1% for the third quarter and 25.6% for the first nine months of 2022, compared to 25.1% and 26.2% for the respective 2021 periods.

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 third quarter of 2022, Lazard returned $286 million to shareholders, which included: $46 million in dividends; $237 million in share repurchases of our common stock; and $3 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

In the first nine months of 2022, Lazard returned $812 million to shareholders, which included: $139 million in dividends; $612 million in share repurchases of our common stock; and $61 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

During the first nine months of 2022, we repurchased a record 17.2 million shares, which included 6.7 million shares repurchased in the third quarter. As of September 30, 2022, our remaining share repurchase authorization was $382 million.

On October 26, 2022, Lazard declared a quarterly dividend of $0.50 per share on its outstanding common stock. The dividend is payable on November 18, 2022, to stockholders of record on November 7, 2022.

Lazard’s financial position remains strong. As of September 30, 2022, our cash and cash equivalents were $1 billion. Stockholders’ equity related to Lazard’s interests was $561 million.

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CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. EDT on October 27, 2022, to discuss the company’s financial results for the third quarter and first nine months of 2022. 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 1 866-831-8711 (toll-free, U.S. and Canada) or +1 203-518-9865 (outside of the U.S. and Canada), 15 minutes prior to the start of the call. Conference ID: 69483

A replay of the conference call will be available by 10:00 a.m. EDT, October 27, 2022, via the Lazard Investor Relations website at www.lazard.com, or by dialing 1 800-839-5676 (toll-free, U.S. and Canada) or +1 402-220-2565 (outside of the U.S. and Canada).

ABOUT LAZARD

Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 41 cities across 26 countries in North, Central and South America, Europe, Asia and Australia. 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.

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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.

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.

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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 2022 adjusted results¹ exclude pre-tax charges of $0.9 million and $2.9 million, respectively, relating to office space reorganization. On a U.S. GAAP basis, these resulted in a net charge of $0.7 million, or $0.01 (diluted) per share, for the third quarter, and a net charge of $2.1 million, or $0.02 (diluted) per share, for the first nine months of 2022.

LAZ-EPE