$630 million operating revenue for second
quarter
$237 billion in average assets under
management, up 4% from first quarter
$603 million of capital returned to
shareholders in first half of 2019
Lazard Ltd (NYSE:LAZ) today reported operating revenue1 of $630
million for the quarter ended June 30, 2019. Net income, as
adjusted2, was $86 million, or $0.73 per share (diluted) for the
quarter. On a U.S. GAAP basis, second-quarter 2019 net income was
$66 million, or $0.55 per share (diluted).
First-half 2019 net income, as adjusted, was $191 million, or
$1.61 per share (diluted). On a U.S. GAAP basis, first-half net
income was $163 million, or $1.36 per share (diluted).
“With growing momentum in Financial Advisory and increased
average assets under management, we are well positioned for the
second half of the year,” said Kenneth M. Jacobs, Chairman and
Chief Executive Officer of Lazard. “We are making significant
investments in our technology infrastructure to create new and
differentiated capabilities and insights for our clients, building
a foundation for enhanced growth.”
($ in millions, except per share data and
AUM)
Quarter Ended June 30,
Six Months Ended June
30,
2019
2018
%’19-’18
2019
2018
%’19-’18
Net
Income
U.S. GAAP
$66
$147
(55)%
$163
$307
(47)%
Per share, diluted
$0.55
$1.13
(51)%
$1.36
$2.34
(42)%
Adjusted2
$86
$143
(40)%
$191
$309
(38)%
Per share, diluted
$0.73
$1.10
(34)%
$1.61
$2.35
(31)%
Operating
Revenue1
Total operating revenue
$630
$741
(15)%
$1,250
$1,465
(15)%
Financial Advisory
$329
$415
(21)%
$659
$804
(18)%
Asset Management
$291
$329
(12)%
$575
$659
(13)%
AUM ($ in
billions)
Period End
$237
$238
- %
Average
$237
$245
(3)%
$233
$251
(7)%
Note: Endnotes are on page 6 of this
release. A reconciliation of adjusted GAAP to U.S. GAAP begins on
page 13.
OPERATING REVENUE
Operating revenue1 was $630 million for the second quarter of
2019, and $1,250 million for the first half of 2019, down 15% and
15% for both periods from the respective 2018 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 second quarter of 2019, Financial Advisory operating
revenue was $329 million, 21% lower than the second quarter of
2018. The decrease reflected softness in European M&A and
global Restructurings.
For the first half of 2019, Financial Advisory operating revenue
was $659 million, 18% lower than the first half of 2018.
During and since the second quarter of 2019, Lazard has been
engaged in significant and complex M&A transactions and other
advisory assignments globally, including: IBM’s $34 billion
acquisition of Red Hat; Ingersoll-Rand in the $15 billion
combination of its Industrial segment with Gardner Denver;
Anheuser-Busch InBev’s AUD 16 billion sale of Carlton & United
Breweries to Asahi Group Holdings; a consortium consisting of
KIRKBI, Blackstone and CPPIB, in its recommended acquisition of
Merlin Entertainments, valuing Merlin at £5.9 billion; MassMutual
in the $5.7 billion strategic combination of Invesco and
OppenheimerFunds; Capgemini’s €5.0 billion acquisition of Altran;
Gilead’s R&D collaboration with Galapagos, including $5.1
billion in an upfront payment and an equity investment; El Paso
Electric’s $4.3 billion sale to Infrastructure Investments Fund;
and Carrefour’s sale of an 80% interest in Carrefour China to
Suning.com, based on an enterprise value of €1.4 billion.
During and since the second quarter of 2019 we have been engaged
in a broad range of highly visible and complex restructuring and
debt advisory assignments for debtors and creditors, including
roles involving: Abengoa; Debenhams; FirstEnergy Solutions; Insys
Therapeutics; Neiman Marcus; PG&E; Sears Holdings; Westmoreland
Resource Partners; and Weatherford International.
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 second quarter of 2019, or continued
to advise or completed since June 30, 2019, 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 second quarter of 2019, Asset Management operating
revenue was $291 million, 12% lower than the second quarter of
2018. For the first half of 2019, Asset Management operating
revenue was $575 million, 13% lower than the first half of
2018.
For the second quarter of 2019, management fees and other
revenue was $286 million, 10% lower than the second quarter of
2018, and 1% higher than the first quarter of 2019. For the first
half of 2019, management fees and other revenue was $569 million,
11% lower than the first half of 2018.
Average assets under management (AUM) for the second quarter of
2019 was $237 billion, 3% lower than the second quarter of 2018,
and 4% higher than the first quarter of 2019. Average AUM for the
first half of 2019 was $233 billion, 7% lower than the first half
of 2018.
AUM as of June 30, 2019, was $237 billion, approximately even
with June 30, 2018, and up 1% from March 31, 2019. The sequential
increase was primarily driven by market appreciation and foreign
exchange movement, offset by net outflows of $5.2 billion.
For the second quarter of 2019, incentive fees were $5 million,
compared to $12 million for the second quarter of 2018. For the
first half of 2019, incentive fees were $6 million, compared to $18
million for the first half of 2018.
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 second quarter of 2019, we accrued compensation and
benefits expense1 at an adjusted compensation1 ratio of 57.5%. This
resulted in $362 million of adjusted compensation and benefits
expense, compared to $413 million for the second quarter of
2018.
For the first half of 2019, adjusted compensation and benefits
expense1 was $719 million, compared to $817 million for the first
half of 2018.
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 second quarter of
2019 was $128 million, 8% higher than the second quarter of 2018.
The increase includes our accelerating investments in technology
infrastructure. The ratio of adjusted non-compensation expense to
operating revenue for the second quarter of 2019 was 20.3%,
compared to 16.0% for the second quarter of 2018.
Adjusted non-compensation expense1 for the first half of 2019
was $244 million, 5% higher than the first half of 2018. The ratio
of adjusted non-compensation expense to operating revenue for the
first half of 2019 was 19.5%, compared to 15.9% for the first half
of 2018.
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 $35 million
for the second quarter of 2019 and $60 million for the first half
of 2019. The effective tax rate on the same basis was 28.8% for the
second quarter and 23.9% for the first half of 2019, compared to
26.9% and 20.4% for the respective 2018 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 second quarter of 2019, Lazard returned $217 million to
shareholders, which included: $52 million in dividends; $160
million in share repurchases of our Class A common stock; and $5
million in satisfaction of employee tax obligations in lieu of
share issuances upon vesting of equity grants.
For the first half of 2019, Lazard returned $603 million to
shareholders, which included: $155 million in dividends; $352
million in share repurchases of our Class A common stock; and $96
million in satisfaction of employee tax obligations in lieu of
share issuances upon vesting of equity grants.
During the first half of 2019, we repurchased 9.7 million shares
at an average price of $36.20 per share, which included 4.5 million
shares repurchased in the second quarter at an average price of
$35.18 per share. In line with our objectives, these repurchases
have more than offset the potential dilution from our 2018 year-end
equity-based compensation awards (net of estimated forfeitures and
tax withholding to be paid in cash in lieu of share issuances),
which were granted at an average price of $37.69 per share. As of
June 30, 2019, our remaining share repurchase authorization was
$244 million.
On July 24, 2019, Lazard declared a quarterly dividend of $0.47
per share on its outstanding common stock. The dividend is payable
on August 16, 2019, to stockholders of record on August 5,
2019.
Lazard’s financial position remains strong. As of June 30, 2019,
our cash and cash equivalents were $919 million, and stockholders’
equity related to Lazard’s interests was $619 million.
CONFERENCE CALL
Lazard will host a conference call at 8:00 a.m. EDT on July 25,
2019, to discuss the company’s financial results for the second
quarter and first half of 2019. 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 (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 July 25, 2019, via the Lazard Investor Relations website, or
by dialing 1 (888) 203-1112 (U.S. and Canada) or +1 (719) 457-0820
(outside of the U.S. and Canada). The replay access code is
7242427.
ABOUT LAZARD
Lazard, one of the world's preeminent financial advisory and
asset management firms, operates from 43 cities across 27 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 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 the
U.S. GAAP results, is the most meaningful and useful way to compare
our operating results across periods.
2 Second-quarter and first-half 2019
adjusted results1 exclude pre-tax charges of (i) $7.6 million and
$10.8 million, respectively, of costs associated with the
implementation of a new Enterprise Resource Planning (ERP) system,
(ii) $2.3 million and $6.8 million, respectively, relating to a
first quarter debt refinancing by Lazard Ltd’s subsidiary Lazard
Group LLC; (iii) $4.6 million and $7.7 million, respectively, of
acquisition-related costs, primarily reflecting changes in fair
value of contingent consideration associated with certain business
acquisitions; and (iv) $11.9 million of private equity investment
adjustments in the second quarter. On a U.S. GAAP basis, these
items resulted in a net charge of $20 million, or $0.17 (diluted)
per share, for the second quarter, and a net charge of $28 million,
or $0.24 (diluted) per share, for the first half of 2019.
LAZ-EPE
LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS (U.S. GAAP) Three Months Ended %
Change From June 30, March 31, June 30, March 31, June 30, ($ in
thousands, except per share data)
2019
2019
2018
2019
2018
Total revenue
$650,801
$661,678
$771,528
(2%)
(16%)
Interest expense
(20,111)
(18,004)
(13,590)
Net revenue
630,690
643,674
757,938
(2%)
(17%)
Operating expenses: Compensation and benefits
372,470
372,254
416,159
0%
(10%)
Occupancy and equipment
30,953
28,295
29,240
Marketing and business development
28,784
27,984
28,228
Technology and information services
38,825
32,055
32,527
Professional services
19,144
14,217
16,714
Fund administration and outsourced services
28,493
28,930
33,227
Amortization and other acquisition-related (benefits) costs
5,042
3,470
(8,483)
Other
5,294
16,806
10,386
Subtotal
156,535
151,757
141,839
3%
10%
Operating expenses
529,005
524,011
557,998
1%
(5%)
Operating income
101,685
119,663
199,940
(15%)
(49%)
Provision for income taxes
28,172
23,187
51,561
21%
(45%)
Net income
73,513
96,476
148,379
(24%)
(50%)
Net income (loss) attributable to noncontrolling interests
7,736
(566)
1,416
Net income attributable to Lazard Ltd
$65,777
$97,042
$146,963
(32%)
(55%)
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding: Basic
111,981,204
111,944,255
120,306,257
0%
(7%)
Diluted
116,175,349
120,820,084
130,249,054
(4%)
(11%)
Net income per share: Basic
$0.57
$0.87
$1.22
(34%)
(53%)
Diluted
$0.55
$0.80
$1.13
(31%)
(51%)
LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS (U.S. GAAP) Six Months Ended June 30,
June 30, ($ in thousands, except per share data)
2019
2018
% Change
Total revenue
$1,312,479
$1,539,733
(15%)
Interest expense
(38,115)
(27,097)
Net revenue
1,274,364
1,512,636
(16%)
Operating expenses: Compensation and benefits
744,724
821,206
(9%)
Occupancy and equipment
59,248
59,478
Marketing and business development
56,768
53,887
Technology and information services
70,880
65,779
Professional services
33,361
29,145
Fund administration and outsourced services
57,423
68,411
Amortization and other acquisition-related (benefits) costs
8,512
(7,617)
Other
22,100
36,579
Subtotal
308,292
305,662
1%
Operating expenses
1,053,016
1,126,868
(7%)
Operating income
221,348
385,768
(43%)
Provision for income taxes
51,359
75,728
(32%)
Net income
169,989
310,040
(45%)
Net income attributable to noncontrolling interests
7,170
3,385
Net income attributable to Lazard Ltd
$162,819
$306,655
(47%)
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding: Basic
111,962,729
120,118,182
(7%)
Diluted
118,497,717
131,195,725
(10%)
Net income per share: Basic
$1.44
$2.55
(44%)
Diluted
$1.36
$2.34
(42%)
LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION (U.S. GAAP)
June 30, December 31, ($ in thousands)
2019
2018
ASSETS Cash and
cash equivalents
$919,221
$1,246,537
Deposits with banks and short-term investments
1,301,520
1,006,969
Cash deposited with clearing organizations and other segregated
cash
39,761
38,379
Receivables
705,114
685,534
Investments
575,424
575,148
Goodwill and other intangible assets
374,436
375,318
Operating lease right-of-use assets
477,432
-
Deferred tax assets
589,076
597,776
Other assets
525,489
471,580
Total Assets
$5,507,473
$4,997,241
LIABILITIES & STOCKHOLDERS'
EQUITY Liabilities Deposits and other
customer payables
$1,480,684
$1,154,207
Accrued compensation and benefits
331,636
585,484
Senior debt
1,678,131
1,434,260
Tax receivable agreement obligation
246,953
270,640
Operating lease liabilities
555,324
-
Other liabilities
496,867
582,557
Total liabilities
4,789,595
4,027,148
Commitments and contingencies Stockholders'
equity Preferred stock, par value $.01 per share
-
-
Common stock, par value $.01 per share
1,298
1,298
Additional paid-in capital
582,342
750,692
Retained earnings
1,179,901
1,195,563
Accumulated other comprehensive loss, net of tax
(271,984)
(273,818)
Subtotal
1,491,557
1,673,735
Class A common stock held by subsidiaries, at cost
(872,755)
(756,884)
Total Lazard Ltd stockholders' equity
618,802
916,851
Noncontrolling interests
99,076
53,242
Total stockholders' equity
717,878
970,093
Total liabilities and stockholders' equity
$5,507,473
$4,997,241
LAZARD LTD SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited) Three Months Ended % Change From June
30, March 31, June 30, March 31, June 30, ($ in thousands, except
per share data)
2019
2019
2018
2019
2018
Revenues: Financial Advisory
$328,814
$329,994
$415,006
(0%)
(21%)
Asset Management
291,269
283,734
329,409
3%
(12%)
Corporate
9,617
6,262
(3,713)
54%
NM
Operating revenue (b)
$629,700
$619,990
$740,702
2%
(15%)
Expenses: Adjusted compensation and
benefits expense (c)
$362,078
$356,494
$413,312
2%
(12%)
Ratio of adjusted compensation to operating revenue
57.5%
57.5%
55.8%
Non-compensation expense (d)
$128,014
$115,737
$118,481
11%
8%
Ratio of non-compensation to operating revenue
20.3%
18.7%
16.0%
Earnings: Earnings from operations (e)
$139,608
$147,759
$208,909
(6%)
(33%)
Operating margin (f)
22.2%
23.8%
28.2%
Adjusted net income (g)
$85,746
$105,537
$143,020
(19%)
(40%)
Diluted adjusted net income per share
$0.73
$0.87
$1.10
(16%)
(34%)
Diluted weighted average shares (h)
117,422,884
120,934,661
130,249,054
(3%)
(10%)
Effective tax rate (i)
28.8%
19.4%
26.9%
This presentation includes non-GAAP measures. Our non-GAAP measures
are not meant to be considered in isolation or as a substitute for
the corresponding U.S. GAAP measures, and should be read only in
conjunction with our consolidated financial statements prepared in
accordance with U.S. GAAP. For a detailed explanation of the
adjustments made to the corresponding U.S. GAAP measures, see
Reconciliation of U.S. GAAP to Selected Summary Financial
Information and Notes to Financial Schedules.
LAZARD LTD
SELECTED SUMMARY FINANCIAL INFORMATION (a) (Non-GAAP -
unaudited) Six Months Ended June 30, June 30, ($ in thousands,
except per share data)
2019
2018
% Change
Revenues: Financial Advisory
$658,808
$803,862
(18%)
Asset Management
575,003
659,264
(13%)
Corporate
15,879
1,511
NM
Operating revenue (b)
$1,249,690
$1,464,637
(15%)
Expenses: Adjusted compensation and
benefits expense (c)
$718,572
$817,268
(12%)
Ratio of adjusted compensation to operating revenue
57.5%
55.8%
Non-compensation expense (d)
$243,751
$232,562
5%
Ratio of non-compensation to operating revenue
19.5%
15.9%
Earnings: Earnings from operations (e)
$287,367
$414,807
(31%)
Operating margin (f)
23.0%
28.3%
Adjusted net income (g)
$191,283
$308,935
(38%)
Diluted adjusted net income per share
$1.61
$2.35
(31%)
Diluted weighted average shares (h)
119,178,774
131,195,725
(9%)
Effective tax rate (i)
23.9%
20.4%
This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our
non-GAAP measures are not meant to be considered in isolation or as
a substitute for the corresponding U.S. GAAP measures, and should
be read only in conjunction with our consolidated financial
statements prepared in accordance with U.S. GAAP. For a detailed
explanation of the adjustments made to the corresponding U.S. GAAP
measures, see Reconciliation of U.S. GAAP to Selected Summary
Financial Information and Notes to Financial Schedules.
LAZARD
LTD ASSETS UNDER MANAGEMENT ("AUM") (unaudited)
($ in millions) As of Variance June 30, March 31,
December 31,
2019
2019
2018
Qtr to Qtr YTD
Equity: Emerging Markets
$42,836
$45,112
$41,899
(5.0%)
2.2%
Global
47,559
46,788
41,490
1.6%
14.6%
Local
40,575
40,083
36,020
1.2%
12.6%
Multi-Regional
64,888
63,112
57,589
2.8%
12.7%
Total Equity
195,858
195,095
176,998
0.4%
10.7%
Fixed Income: Emerging Markets
15,692
15,308
14,980
2.5%
4.8%
Global
6,195
6,410
4,851
(3.4%)
27.7%
Local
5,767
5,378
6,113
7.2%
(5.7%)
Multi-Regional
8,935
7,912
6,994
12.9%
27.8%
Total Fixed Income
36,589
35,008
32,938
4.5%
11.1%
Alternative Investments
2,492
2,659
2,430
(6.3%)
2.6%
Private Equity
1,383
1,393
1,469
(0.7%)
(5.9%)
Cash Management
1,144
824
899
38.8%
27.3%
Total AUM
$237,466
$234,979
$214,734
1.1%
10.6%
Three Months Ended June 30, Six Months Ended
June 30,
2019
2018
2019
2018
AUM - Beginning of Period
$234,979
$251,680
$214,734
$249,459
Net Flows
(5,246)
(3,846)
(5,208)
(1,439)
Market and foreign exchange appreciation (depreciation)
7,733
(9,958)
27,940
(10,144)
AUM - End of Period
$237,466
$237,876
$237,466
$237,876
Average AUM
$236,978
$245,127
$232,740
$250,614
% Change in average AUM
(3.3%)
(7.1%)
Note: Average AUM generally represents the average of the monthly
ending AUM balances for the period.
LAZARD LTD
RECONCILIATION OF U.S. GAAP TO SELECTED SUMMARY FINANCIAL
INFORMATION (a) (unaudited) Three Months Ended Six
Months Ended June 30, March 31, June 30, June 30, June 30, ($ in
thousands, except per share data)
2019
2019
2018
2019
2018
Operating Revenue Net revenue - U.S. GAAP Basis
$630,690
$643,674
$757,938
$1,274,364
$1,512,636
Adjustments: Revenue related to noncontrolling interests (j)
(11,819)
(2,271)
(5,622)
(14,090)
(10,839)
(Gains) losses related to Lazard Fund Interests ("LFI") and other
similar arrangements
(6,484)
(13,870)
499
(20,354)
1,935
Distribution fees, reimbursable deal costs and bad debt expense (k)
(13,357)
(24,332)
(24,718)
(37,689)
(64,232)
Private Equity investment adjustment (l)
11,948
-
-
11,948
-
Interest expense
18,722
16,789
12,605
35,511
25,137
Operating revenue, as adjusted (b)
$629,700
$619,990
$740,702
$1,249,690
$1,464,637
Compensation and Benefits Expense Compensation and
benefits expense - U.S. GAAP Basis
$372,470
$372,254
$416,159
$744,724
$821,206
Adjustments: (Charges) credits pertaining to LFI and other
similar arrangements
(6,484)
(13,870)
499
(20,354)
1,935
Compensation related to noncontrolling interests (j)
(3,908)
(1,890)
(3,346)
(5,798)
(5,873)
Compensation and benefits expense, as adjusted (c)
$362,078
$356,494
$413,312
$718,572
$817,268
Non-Compensation Expense Non-compensation expense -
Subtotal - U.S. GAAP Basis
$156,535
$151,757
$141,839
$308,292
$305,662
Adjustments: Expenses associated with ERP system
implementation (m)
(7,626)
(3,205)
(5,404)
(10,831)
(12,830)
Expenses related to office space reorganization (n)
-
-
(1,036)
-
(2,425)
Distribution fees, reimbursable deal costs and bad debt expense (k)
(13,357)
(24,332)
(24,718)
(37,689)
(64,232)
Amortization and other acquisition-related benefits (costs) (o)
(5,042)
(3,470)
8,483
(8,512)
7,617
Charges pertaining to Senior Debt refinancing (p)
(2,262)
(4,243)
-
(6,505)
-
Non-compensation expense related to noncontrolling interests (j)
(234)
(770)
(683)
(1,004)
(1,230)
Non-compensation expense, as adjusted (d)
$128,014
$115,737
$118,481
$243,751
$232,562
Pre-Tax Income and Earnings From Operations Operating
Income - U.S. GAAP Basis
$101,685
$119,663
$199,940
$221,348
$385,768
Adjustments: Expenses associated with ERP system
implementation (m)
7,626
3,205
5,404
10,831
12,830
Expenses related to office space reorganization (n)
-
-
1,036
-
2,425
Acquisition-related (benefits) costs (o)
4,612
3,039
(9,346)
7,651
(9,313)
Private Equity investment adjustment (l)
11,948
-
-
11,948
-
Charges pertaining to Senior Debt refinancing (p)
2,348
4,457
-
6,805
-
Net (income) loss related to noncontrolling interests (j)
(7,736)
566
(1,416)
(7,170)
(3,385)
Pre-tax income, as adjusted
120,483
130,930
195,618
251,413
388,325
Interest expense
18,636
16,575
12,605
35,211
25,137
Amortization (LAZ only)
489
254
686
743
1,345
Earnings from operations, as adjusted (e)
$139,608
$147,759
$208,909
$287,367
$414,807
Net Income (loss) attributable to Lazard Ltd
Net income attributable to Lazard Ltd - U.S. GAAP Basis
$65,777
$97,042
$146,963
$162,819
$306,655
Adjustments: Expenses associated with ERP system implementation (m)
7,626
3,205
5,404
10,831
12,830
Expenses related to office space reorganization (n)
-
-
1,036
-
2,425
Acquisition-related (benefits) costs (o)
4,612
3,039
(9,346)
7,651
(9,313)
Private Equity investment adjustment (l)
11,948
-
-
11,948
-
Charges pertaining to Senior Debt refinancing (p)
2,348
4,457
-
6,805
-
Tax benefit allocated to adjustments
(6,565)
(2,206)
(1,037)
(8,771)
(3,662)
Net income, as adjusted (g)
$85,746
$105,537
$143,020
$191,283
$308,935
Diluted Weighted Average Shares Outstanding Diluted
Weighted Average Shares Outstanding - U.S. GAAP Basis
116,175,349
120,820,084
130,249,054
118,497,717
131,195,725
Adjustment: participating securities
1,247,535
114,577
-
681,057
-
Diluted Weighted Average Shares Outstanding, as adjusted (h)
117,422,884
120,934,661
130,249,054
119,178,774
131,195,725
Diluted net income per share: U.S. GAAP Basis
$0.55
$0.80
$1.13
$1.36
$2.34
Non-GAAP Basis, as adjusted
$0.73
$0.87
$1.10
$1.61
$2.35
This presentation includes non-GAAP measures. Our non-GAAP measures
are not meant to be considered in isolation or as a substitute for
comparable U.S. GAAP measures, and should be read only in
conjunction with our consolidated financial statements prepared in
accordance with U.S. GAAP. For a detailed explanation of the
adjustments made to comparable U.S. GAAP measures, see Notes to
Financial Schedules.
See Notes to Financial
Schedules
LAZARD LTD
RECONCILIATION OF NON-COMPENSATION U.S. GAAP TO ADJUSTED (a)
(unaudited) Three Months Ended Six Months Ended June 30,
March 31, June 30, June 30, June 30, ($ in thousands)
2019
2019
2018
2019
2018
Non-compensation expense - U.S. GAAP Basis: Occupancy and
equipment
$30,953
$28,295
$29,240
$59,248
$59,478
Marketing and business development
28,784
27,984
28,228
56,768
53,887
Technology and information services
38,825
32,055
32,527
70,880
65,779
Professional services
19,144
14,217
16,714
33,361
29,145
Fund administration and outsourced services
28,493
28,930
33,227
57,423
68,411
Amortization and other acquisition-related (benefits) costs
5,042
3,470
(8,483)
8,512
(7,617)
Other
5,294
16,806
10,386
22,100
36,579
Non-compensation expense - Subtotal - U.S. GAAP Basis
$156,535
$151,757
$141,839
$308,292
$305,662
Non-compensation expense - Adjustments: Occupancy and
equipment (j) (n)
($25)
($33)
($1,106)
($58)
($2,565)
Marketing and business development (j) (k) (m)
(6,493)
(3,404)
(4,621)
(9,897)
(8,730)
Technology and information services (j) (k) (m)
(7,427)
(3,276)
(5,258)
(10,703)
(12,315)
Professional services (j) (k) (m)
(2,091)
(1,364)
(1,898)
(3,455)
(2,593)
Fund administration and outsourced services (k)
(12,549)
(15,909)
(17,606)
(28,458)
(36,855)
Amortization and other acquisition-related (benefits) costs (o)
(5,042)
(3,470)
8,483
(8,512)
7,617
Other (j) (k) (m) (p)
5,106
(8,564)
(1,352)
(3,458)
(17,659)
Subtotal Non-compensation adjustments
($28,521)
($36,020)
($23,358)
($64,541)
($73,100)
Non-compensation expense, as adjusted: Occupancy and
equipment
$30,928
$28,262
$28,134
$59,190
$56,913
Marketing and business development
22,291
24,580
23,607
46,871
45,157
Technology and information services
31,398
28,779
27,269
60,177
53,464
Professional services
17,053
12,853
14,816
29,906
26,552
Fund administration and outsourced services
15,944
13,021
15,621
28,965
31,556
Amortization and other acquisition-related costs
-
-
-
-
-
Other
10,400
8,242
9,034
18,642
18,920
Non-compensation expense, as adjusted (d)
$128,014
$115,737
$118,481
$243,751
$232,562
This presentation includes non-GAAP measures. Our non-GAAP measures
are not meant to be considered in isolation or as a substitute for
comparable 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 comparable 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 the most
meaningful basis for comparison of its operating results across
periods. (b) A non-GAAP measure which excludes (i) revenue related
to noncontrolling interests (see (j) 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 and reimbursable deal costs in
accordance with the revenue recognition guidance and bad debt
expense (see (k) below), (iv) for the three and six month periods
ended June 30, 2019, private equity investment adjustment (see (l)
below), (v) interest expense primarily related to corporate
financing activities, and (vi) for the three and six month periods
ended June 30, 2019 and for the three month period ended March 31,
2019, excess interest expense pertaining to Senior Debt refinancing
(see (p) below). (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, and
(ii) compensation and benefits related to noncontrolling interests
(see (j) below). (d) A non-GAAP measure which excludes (i) expenses
associated with ERP system implementation (see (m) below), (ii) for
the three and six month periods ended June 30, 2018, expenses
related to office space reorganization (see (n) below), (iii)
expenses related to distribution fees and reimbursable deal costs
in accordance with the revenue recognition guidance and bad debt
expense (see (k) below), (iv) amortization and other
acquisition-related benefits (costs) (see (o) below), (v) for the
three and six month periods ended June 30, 2019 and for the three
month period ended March 31, 2019, charges pertaining to Senior
Debt refinancing (see (p) below), and (vi) expenses related to
noncontrolling interests (see (j) below). (e) A non-GAAP measure
which excludes (i) expenses associated with ERP system
implementation (see (m) below), (ii) for the three and six month
periods ended June 30, 2018, expenses related to office space
reorganization (see (n) below), (iii) amortization and other
acquisition-related (benefits) costs (see (o) below), (iv) for the
three and six month periods ended June 30, 2019, private equity
investment adjustment (see (l) below), (v) for the three and six
month periods ended June 30, 2019 and for the three month period
ended March 31, 2019, charges pertaining to Senior Debt refinancing
(see (p) below), (vi) net revenue and expenses related to
noncontrolling interests (see (j) below), and (vii) interest
expense primarily related to corporate financing activities. (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) expenses associated with ERP system implementation
(see (m) below), (ii) for the three and six month periods ended
June 30, 2018, expenses related to office space reorganization (see
(n) below), (iii) amortization and other acquisition-related
(benefits) costs (see (o) below), (iv) for the three and six month
periods ended June 30, 2019, private equity investment adjustment,
(see (l) below), and (v) for the three and six month periods ended
June 30, 2019 and for the three month period ended March 31, 2019,
charges pertaining to Senior Debt refinancing (see (p) below), net
of tax benefits. (h) A non-GAAP measure which includes for the
three and six month periods ended June 30, 2019 and for the three
month period ended March 31, 2019, units of the newly established
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 Class A common stock. Profits interest participation rights and
other participating securities are excluded from the computation of
outstanding stock equivalents for U.S. GAAP net income per share.
(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 $34,737, $25,393, and
$52,599 for the three month periods ended June 30, 2019, March 31,
2019, and June 30, 2018, respectively, $60,130 and $79,391 for the
six month periods ended June 30, 2019 and 2018 and the denominator
of which is pre-tax income of $120,483, $130,930, and $195,618 for
the three month periods ended June 30, 2019, March 31, 2019, and
June 30, 2018, respectively, $251,413 and $388,325 for the six
month periods ended June 30, 2019 and 2018. (j) Noncontrolling
interests include revenue and expenses principally related to
Edgewater, and is a non-GAAP measure. (k) Represents certain
distribution fees and reimbursable deal costs paid to third parties
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 that are deemed
uncollectible. (l) Represents write-down of private equity
investment to potential transaction value. (m) Represents expenses
associated with Enterprise Resource Planning (ERP) system
implementation. (n) Represents incremental rent expense and lease
abandonment costs related to office space reorganization and an
onerous lease provision. (o) Primarily represents the change in
fair value of the contingent consideration associated with certain
business acquisitions. (p) The company incurred charges related to
the extinguishment of the remaining 4.25% Senior Notes maturing in
November 2020. $168 million of the 2020 Notes were redeemed in
March 2019 and the remaining $82 million have been redeemed in
April 2019. The charges include a pre-tax loss on the
extinguishment of $6.5 million and excess interest expense of $0.3
million (due to the period of time between the issuance of the 2029
notes and the settlement of the 2020 notes). NM Not meaningful
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190725005227/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
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