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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231026184118/en/
Media: Judi Frost Mackey +1 212 632 1428
judi.mackey@lazard.com
Investor: Alexandra Deignan +1 212 632 6886
alexandra.deignan@lazard.com
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