$588 million in third-quarter operating
revenue
Maintaining cost discipline to accelerate
investment in our businesses
$733 million of capital returned to
shareholders in first nine months of 2019
Lazard Ltd (NYSE: LAZ) today reported third-quarter operating
revenue1 of $588 million for the quarter ended September 30, 2019.
Net income, as adjusted2, was $88 million, or $0.76 per share
(diluted) for the quarter. Third-quarter 2019 net income on a U.S.
GAAP basis was $47 million, or $0.40 per share (diluted).
For the first nine months of 2019, net income, as adjusted, was
$280 million, or $2.37 per share (diluted). On a U.S. GAAP basis,
net income for the first nine months was $210 million, or $1.77 per
share (diluted).
“We see increased activity in our Financial Advisory business,
and continue to provide clients with a diverse range of innovative
investment solutions that position our Asset Management business
well for the future,” said Kenneth M. Jacobs, Chairman and Chief
Executive Officer of Lazard. “We are managing the firm with cost
discipline while investing in our businesses to serve clients,
recruit and develop the best people, and build shareholder
value.”
($ in millions, except per share data and
AUM)
Quarter Ended Sept.
30,
Nine Months Ended Sept.
30,
2019
2018
%’19-’18
2019
2018
%’19-’18
Net
Income
US GAAP
$47
$107
(56)%
$210
$414
(49)%
Per share, diluted
$0.40
$0.82
(51)%
$1.77
$3.16
(44)%
Adjusted2
$88
$111
(21)%
$280
$420
(33)%
Per share, diluted
$0.76
$0.86
(12)%
$2.37
$3.21
(26)%
Operating
Revenue1
Total operating revenue
$588
$606
(3)%
$1,838
$2,070
(11)%
Financial Advisory
$304
$304
%
$963
$1,108
(13)%
Asset Management
$283
$302
(6)%
$858
$961
(11)%
AUM ($ in
billions)
Period End
$231
$240
(4)%
Average
$234
$240
(3)%
$233
$247
(6)%
Note: Endnotes are on page 6 of this release. A reconciliation
of U.S. GAAP to adjusted GAAP is on pages 13-14.
OPERATING REVENUE
Operating revenue1 was $588 million for the third quarter of
2019, down 3% from the third quarter of 2018, and $1,838 million
for the first nine months of 2019, down 11% from the first nine
months of 2018.
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 2019, Financial Advisory operating
revenue was $304 million, approximately even with the third quarter
of 2018. These results reflected an increase in M&A completions
in North America, offset by a decrease in Europe.
For the first nine months of 2019, Financial Advisory operating
revenue was $963 million, 13% lower than the record first nine
months of 2018.
During and since the third quarter of 2019, Lazard has been
engaged in significant and complex M&A transactions and other
advisory assignments globally, including the following (clients are
in italics): Special Committee of the Board of CBS in CBS’s $48
billion merger with Viacom; The Supervisory Board of Takeaway.com
on the company’s €10.6 billion combination with Just Eat; a
consortium consisting of KIRKBI, Blackstone and CPPIB, in its
recommended acquisition of Merlin Entertainments, valuing Merlin at
£5.9 billion; Gilead’s R&D collaboration with Galapagos,
including $5.1 billion in an upfront payment and an equity
investment; Sempra Energy on its $3.6 billion sale of its equity
interests in its Peruvian businesses to China Yangtze Power, and
its $2.2 billion sale of its equity interests in its Chilean
businesses to State Grid International Development; Rabobank’s $2.1
billion sale of Rabobank, National Association to Mechanics Bank;
Exotic Metals in its $1.7 billion sale to Parker Hannifin; and
Carrefour’s sale of an 80% interest in Carrefour China to
Suning.com.
During and since the third 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: Debenhams; FirstEnergy Solutions; Forever 21;
Global Cloud Xchange; PG&E; 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 third quarter of 2019, or continued
to advise or completed since September 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 third quarter of 2019, Asset Management operating
revenue was $283 million, 6% lower than the third quarter of 2018.
For the first nine months of 2019, Asset Management operating
revenue was $858 million, 11% lower than the record first nine
months of 2018.
Management fees and other revenue was $281 million for the third
quarter of 2019, 6% lower than the third quarter of 2018, and 2%
lower than the second quarter of 2019. For the first nine months of
2019, management fees and other revenue was $850 million, 10% lower
than the first nine months of 2018.
Average assets under management (AUM) for the third quarter of
2019 was $234 billion, 3% lower than the third quarter of 2018, and
1% lower than the second quarter of 2019. Average AUM for the first
nine months of 2019 was $233 billion, 6% lower than the first nine
months of 2018.
AUM as of September 30, 2019, was $231 billion, down 4% from
September 30, 2018, and down 3% from June 30, 2019. The sequential
decrease was driven by foreign exchange depreciation of $4.4
billion and net outflows of $4.4 billion, offset by market
appreciation of $2.2 billion.
For the third quarter of 2019, incentive fees were $1 million,
compared to $2 million for the third quarter of 2018. For the first
nine months of 2019, incentive fees were $7 million, compared to
$20 million for the first nine months of 2018.
OPERATING EXPENSES
We conducted a review of our business, which resulted in a
realignment that included employee reductions and the closing of
subscale offices and investment strategies, most of which were
completed during the third quarter of 2019. These actions resulted
in an expense of $51.5 million in the third quarter, which is
excluded from our adjusted results. We believe these actions better
align the business with changes in the marketplace and create
greater flexibility to focus on strategic growth opportunities.
Compensation and
Benefits
In managing compensation and benefits expense, we focus on
annual awarded compensation (cash compensation and benefits plus
deferred incentive compensation with respect to the applicable
year, net of estimated future forfeitures and excluding charges).
We believe annual awarded compensation reflects the actual annual
compensation cost more accurately than the GAAP measure of
compensation cost, which includes applicable-year cash compensation
and the amortization of deferred incentive compensation principally
attributable to previous years’ deferred compensation. We believe
that by managing our business using awarded compensation with a
consistent deferral policy, we can better manage our compensation
costs, increase our flexibility in the future and build shareholder
value over time.
For the third quarter of 2019, we accrued adjusted compensation
and benefits expense1 at an adjusted compensation1 ratio of 57.5%.
This resulted in $338 million of adjusted compensation and benefits
expense, flat with the third quarter of 2018.
For the first nine months of 2019, adjusted compensation and
benefits expense was $1,057 million, compared to $1,155 million for
the first nine months 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
For the third quarter of 2019, adjusted non-compensation
expense1 was $125 million, 15% higher than the third quarter of
2018. The increase reflects business development expenses and
investments in technology infrastructure. The ratio of adjusted
non-compensation expense to operating revenue1 for the third
quarter of 2019 was 21.3%, compared to 18.1% for the third quarter
of 2018.
For the first nine months of 2019, adjusted non-compensation
expense was $369 million, 8% higher than the first nine months of
2018. The ratio of adjusted non-compensation expense to operating
revenue for the first nine months of 2019 was 20.1%, compared to
16.5% for the first nine months 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 $18 million
for the third quarter of 2019 and $78 million for the first nine
months of 2019. The effective tax rate on the same basis was 16.6%
for the third quarter and 21.7% for the first nine months of 2019,
compared to 23.0% and 21.2% 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 third quarter of 2019, Lazard returned $130 million to
shareholders, which included: $50 million in dividends; $79 million
in share repurchases of our Class A common stock; and $1 million in
satisfaction of employee tax obligations in lieu of share issuances
upon vesting of equity grants.
For the first nine months of 2019, Lazard returned $733 million
to shareholders, which included: $206 million in dividends; $430
million in share repurchases of our Class A common stock; and $97
million in satisfaction of employee tax obligations in lieu of
share issuances upon vesting of equity grants.
During the first nine months of 2019, we repurchased 11.9
million shares at an average price of $36.01 per share, which
included 2.2 million shares repurchased in the third quarter at an
average price of $35.20 per share.
On October 30, 2019, our Board of Directors authorized
additional share repurchases of up to $300 million, which expires
as of December 31, 2021, bringing our total outstanding share
repurchase authorization to $437 million.
On October 30, 2019, Lazard declared a quarterly dividend of
$0.47 per share on its outstanding common stock. The dividend is
payable on November 22, 2019, to stockholders of record on November
11, 2019.
Lazard’s financial position remains strong. As of September 30,
2019, our cash and cash equivalents were $959 million, and
stockholders’ equity related to Lazard’s interests was $613
million.
CONFERENCE CALL
Lazard will host a conference call at 8:00 a.m. EDT on October
31, 2019, to discuss the company’s financial results for the third
quarter and first nine months 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 (888)
394-8218 (toll-free, U.S. and Canada) or +1 (323) 701-0225 (outside
of the U.S. and Canada), 15 minutes prior to the start of the
call.
A replay of the conference call will be available by 10:00 a.m.
EDT on October 31, 2019, via the Lazard Investor Relations website
at www.lazard.com, or by dialing 1
(888) 203-1112 (toll-free, U.S. and Canada) or +1 (719) 457-0820
(outside of the U.S. and Canada). The replay access code is:
1856836.
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, Lazard’s Twitter account
(twitter.com/Lazard) and other social media sites to convey
information about their businesses, including the anticipated
release of quarterly financial results, quarterly financial,
statistical and business-related information, and the posting of
updates of assets under management in various mutual funds, hedge
funds and other investment products managed by Lazard Asset
Management LLC and Lazard Frères Gestion SAS. Investors can link to
Lazard and its operating company websites through
www.lazard.com.
ENDNOTES
1 A non-U.S. GAAP measure. See attached financial schedules and
related notes for a detailed explanation of adjustments to
corresponding U.S. GAAP results. We believe that presenting our
results on an adjusted basis, in addition to U.S. GAAP results, is
the most meaningful and useful way to compare our operating results
across periods.
2 Adjusted results1 for the third-quarter and first nine months
of 2019 exclude the following items on a pre-tax-basis: (i) $51.5
million in third-quarter costs associated with a business
realignment that included employee reductions and the closing of
subscale offices and investment strategies; (ii) $2.4 million and
$13.2 million, respectively, of costs associated with the
implementation of a new Enterprise Resource Planning (ERP) system;
(iii) $6.8 million relating to a first quarter debt refinancing by
Lazard Ltd’s subsidiary Lazard Group LLC; (iv) ($0.1) million and
$7.6 million, respectively, of acquisition-related (benefits)
costs, primarily reflecting changes in fair value of contingent
consideration associated with certain business acquisitions; (v)
$11.9 million of private equity investment adjustments in the
second quarter; and (vi) $1.1 million in third-quarter costs
related to office space reorganization. On a U.S. GAAP basis, these
items resulted in a net charge of $42 million, or $0.36 (diluted)
per share, for the third quarter, and a net charge of $70 million,
or $0.60 (diluted) per share, for the first nine months of
2019.
LAZ-EPE
LAZARD LTD
UNAUDITED CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
Three Months Ended
% Change From
September 30,
June 30,
September 30,
June 30,
September 30,
($ in thousands, except per share
data)
2019
2019
2018
2019
2018
Total revenue
$611,073
$650,801
$640,800
(6%)
(5%)
Interest expense
(20,005)
(20,111)
(14,319)
Net revenue
591,068
630,690
626,481
(6%)
(6%)
Operating expenses:
Compensation and
benefits
391,363
372,470
343,987
5%
14%
Occupancy and
equipment
29,856
30,953
28,848
Marketing and business
development
27,318
28,784
21,868
Technology and
information services
34,076
38,825
36,394
Professional
services
15,105
19,144
13,353
Fund administration
and outsourced services
28,425
28,493
34,748
Amortization and other
acquisition-related costs (benefits)
1,022
5,042
(5,851)
Other
11,530
5,294
14,453
Subtotal
147,332
156,535
143,813
(6%)
2%
Operating expenses
538,695
529,005
487,800
2%
10%
Operating income
52,373
101,685
138,681
(48%)
(62%)
Provision for income taxes
4,177
28,172
29,956
(85%)
(86%)
Net income
48,196
73,513
108,725
(34%)
(56%)
Net income attributable to
noncontrolling interests
1,492
7,736
1,651
Net income attributable to Lazard
Ltd
$46,704
$65,777
$107,074
(29%)
(56%)
Attributable to Lazard Ltd
Common Stockholders:
Weighted average
shares outstanding:
Basic
109,285,727
111,981,204
119,456,516
(2%)
(9%)
Diluted
113,881,690
116,175,349
129,859,728
(2%)
(12%)
Net income per
share:
Basic
$0.42
$0.57
$0.90
(26%)
(53%)
Diluted
$0.40
$0.55
$0.82
(27%)
(51%)
LAZARD LTD
UNAUDITED CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
Nine Months Ended
September 30,
September 30,
($ in thousands, except per share
data)
2019
2018
% Change
Total revenue
$1,923,552
$2,180,533
(12%)
Interest expense
(58,120)
(41,416)
Net revenue
1,865,432
2,139,117
(13%)
Operating expenses:
Compensation and
benefits
1,136,087
1,165,193
(2%)
Occupancy and
equipment
89,104
88,326
Marketing and business
development
84,086
75,755
Technology and
information services
104,956
102,173
Professional
services
48,466
42,498
Fund administration
and outsourced services
85,848
103,159
Amortization and other
acquisition-related costs (benefits)
9,534
(13,468)
Other
33,630
51,032
Subtotal
455,624
449,475
1%
Operating expenses
1,591,711
1,614,668
(1%)
Operating income
273,721
524,449
(48%)
Provision for income taxes
55,536
105,684
(47%)
Net income
218,185
418,765
(48%)
Net income attributable to
noncontrolling interests
8,662
5,036
Net income attributable to Lazard
Ltd
$209,523
$413,729
(49%)
Attributable to Lazard Ltd
Common Stockholders:
Weighted average
shares outstanding:
Basic
111,070,395
119,897,626
(7%)
Diluted
116,959,041
130,750,392
(11%)
Net income per
share:
Basic
$1.87
$3.45
(46%)
Diluted
$1.77
$3.16
(44%)
LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION (U.S. GAAP)
September 30, December 31, ($ in thousands)
2019
2018
ASSETS Cash and
cash equivalents
$959,001
$1,246,537
Deposits with banks and short-term investments
1,289,288
1,006,969
Cash deposited with clearing organizations and other segregated
cash
40,280
38,379
Receivables
668,167
685,534
Investments
535,848
575,148
Goodwill and other intangible assets
368,996
375,318
Operating lease right-of-use assets
558,723
-
Deferred tax assets
601,183
597,776
Other assets
530,393
471,580
Total Assets
$5,551,879
$4,997,241
LIABILITIES & STOCKHOLDERS'
EQUITY Liabilities Deposits and other
customer payables
$1,405,836
$1,154,207
Accrued compensation and benefits
418,779
585,484
Senior debt
1,678,921
1,434,260
Tax receivable agreement obligation
246,953
270,640
Operating lease liabilities
652,681
-
Other liabilities
462,488
582,557
Total liabilities
4,865,658
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
682,003
750,692
Retained earnings
1,168,382
1,195,563
Accumulated other comprehensive loss, net of tax
(288,621)
(273,818)
Subtotal
1,563,062
1,673,735
Class A common stock held by subsidiaries, at cost
(949,620)
(756,884)
Total Lazard Ltd stockholders' equity
613,442
916,851
Noncontrolling interests
72,779
53,242
Total stockholders' equity
686,221
970,093
Total liabilities and stockholders' equity
$5,551,879
$4,997,241
LAZARD LTD SELECTED SUMMARY FINANCIAL INFORMATION
(a) (Non-GAAP - unaudited) Three Months Ended % Change
From September 30, June 30, September 30, June 30, September 30, ($
in thousands, except per share data)
2019
2019
2018
2019
2018
Revenues: Financial Advisory
$303,901
$328,814
$303,769
(8%)
0%
Asset Management
282,596
291,269
301,527
(3%)
(6%)
Corporate
1,765
9,617
314
(82%)
NM
Operating revenue (b)
$588,262
$629,700
$605,610
(7%)
(3%)
Expenses: Adjusted compensation and
benefits expense (c)
$338,250
$362,078
$337,930
(7%)
0%
Ratio of adjusted compensation to operating revenue
57.5%
57.5%
55.8%
Non-compensation expense (d)
$125,185
$128,014
$109,330
(2%)
15%
Ratio of non-compensation to operating revenue
21.3%
20.3%
18.1%
Earnings: Earnings from operations (e)
$124,827
$139,608
$158,350
(11%)
(21%)
Operating margin (f)
21.2%
22.2%
26.1%
Adjusted net income (g)
$88,260
$85,746
$111,424
3%
(21%)
Diluted adjusted net income per share
$0.76
$0.73
$0.86
4%
(12%)
Diluted weighted average shares (h)
115,513,679
117,422,884
129,859,728
(2%)
(11%)
Effective tax rate (i)
16.6%
28.8%
23.0%
This presentation includes non-GAAP measures. Our non-GAAP
measures are not meant to be considered in isolation or as a
substitute for the corresponding U.S. GAAP measures, and should be
read only in conjunction with our consolidated financial statements
prepared in accordance with U.S. GAAP. For a detailed explanation
of the adjustments made to the corresponding U.S. GAAP measures,
see Reconciliation of U.S. GAAP to Selected Summary Financial
Information and Notes to Financial Schedules.
LAZARD LTD SELECTED SUMMARY FINANCIAL INFORMATION
(a) (Non-GAAP - unaudited) Nine Months Ended September
30, September 30, ($ in thousands, except per share data)
2019
2018
% Change
Revenues: Financial Advisory
$962,709
$1,107,631
(13%)
Asset Management
857,599
960,791
(11%)
Corporate
17,644
1,825
NM
Operating revenue (b)
$1,837,952
$2,070,247
(11%)
Expenses: Adjusted compensation and
benefits expense (c)
$1,056,822
$1,155,198
(9%)
Ratio of adjusted compensation to operating revenue
57.5%
55.8%
Non-compensation expense (d)
$368,936
$341,892
8%
Ratio of non-compensation to operating revenue
20.1%
16.5%
Earnings: Earnings from operations (e)
$412,194
$573,157
(28%)
Operating margin (f)
22.4%
27.7%
Adjusted net income (g)
$279,543
$420,359
(33%)
Diluted adjusted net income per share
$2.37
$3.21
(26%)
Diluted weighted average shares (h)
117,957,075
130,750,392
(10%)
Effective tax rate (i)
21.7%
21.2%
This presentation includes non-U.S. GAAP ("non-GAAP") measures.
Our non-GAAP measures are not meant to be considered in isolation
or as a substitute for the corresponding U.S. GAAP measures, and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with U.S. GAAP. For a detailed
explanation of the adjustments made to the corresponding U.S. GAAP
measures, see Reconciliation of U.S. GAAP to Selected Summary
Financial Information and Notes to Financial Schedules.
LAZARD LTD
ASSETS UNDER MANAGEMENT
("AUM")
(unaudited)
($ in millions)
As of
Variance
September 30,
June 30,
December 31,
2019
2019
2018
Qtr to Qtr
YTD
Equity:
Emerging Markets
$38,385
$42,836
$41,899
(10.4%)
(8.4%)
Global
46,539
47,559
41,490
(2.1%)
12.2%
Local
40,706
40,575
36,020
0.3%
13.0%
Multi-Regional
62,825
64,888
57,589
(3.2%)
9.1%
Total Equity
188,455
195,858
176,998
(3.8%)
6.5%
Fixed Income:
Emerging Markets
14,738
15,692
14,980
(6.1%)
(1.6%)
Global
8,433
6,195
4,851
36.1%
73.8%
Local
5,818
5,767
6,113
0.9%
(4.8%)
Multi-Regional
8,733
8,935
6,994
(2.3%)
24.9%
Total Fixed Income
37,722
36,589
32,938
3.1%
14.5%
Alternative
Investments
2,347
2,492
2,430
(5.8%)
(3.4%)
Private Equity
1,387
1,383
1,469
0.3%
(5.6%)
Cash Management
963
1,144
899
(15.8%)
7.1%
Total AUM
$230,874
$237,466
$214,734
(2.8%)
7.5%
Three Months Ended September
30
Nine Months Ended September
30
2019
2018
2019
2018
AUM - Beginning of Period
$237,466
$237,876
$214,734
$249,459
Net Flows
(4,385)
(288)
(9,593)
(1,727)
Market and foreign exchange
appreciation
(depreciation)
(2,207)
2,499
25,733
(7,645)
AUM - End of Period
$230,874
$240,087
$230,874
$240,087
Average AUM
$233,878
$239,897
$232,885
$246,920
% Change in average
AUM
(2.5%)
(5.7%)
Note: Average AUM generally represents the average of the
monthly ending AUM balances for the period.
LAZARD LTD
RECONCILIATION OF U.S. GAAP TO
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
($ in thousands, except per share
data)
2019
2019
2018
2019
2018
Operating Revenue
Net revenue - U.S. GAAP Basis
$591,068
$630,690
$626,481
$1,865,432
$2,139,117
Adjustments:
Revenue related to
noncontrolling interests (j)
(4,164)
(11,819)
(4,512)
(18,254)
(15,351)
Gains related to
Lazard Fund Interests ("LFI") and other similar arrangements
(1,764)
(6,484)
(3,647)
(22,118)
(1,712)
Distribution fees,
reimbursable deal costs and bad debt expense (k)
(15,413)
(13,357)
(25,880)
(53,102)
(90,112)
Private Equity
investment adjustment (l)
-
11,948
-
11,948
-
Interest expense
18,535
18,722
13,168
54,046
38,305
Operating revenue, as adjusted
(b)
$588,262
$629,700
$605,610
$1,837,952
$2,070,247
Compensation and Benefits
Expense
Compensation and benefits expense
- U.S. GAAP Basis
$391,363
$372,470
$343,987
$1,136,087
$1,165,193
Adjustments:
Expenses associated
with business realignment (m)
(49,119)
-
-
(49,119)
-
Charges pertaining to
LFI and other similar arrangements
(1,764)
(6,484)
(3,647)
(22,118)
(1,712)
Compensation related
to noncontrolling interests (j)
(2,230)
(3,908)
(2,410)
(8,028)
(8,283)
Compensation and benefits
expense, as adjusted (c)
$338,250
$362,078
$337,930
$1,056,822
$1,155,198
Non-Compensation
Expense
Non-compensation expense -
Subtotal - U.S. GAAP Basis
$147,332
$156,535
$143,813
$455,624
$449,475
Adjustments:
Expenses associated
with business realignment (m)
(1,810)
-
-
(1,810)
-
Expenses associated
with ERP system implementation (n)
(2,362)
(7,626)
(7,659)
(13,193)
(20,489)
Expenses related to
office space reorganization (o)
(1,143)
-
-
(1,143)
(2,425)
Distribution fees,
reimbursable deal costs and bad debt expense (k)
(15,413)
(13,357)
(25,880)
(53,102)
(90,112)
Amortization and other
acquisition-related benefits (costs) (p)
(1,022)
(5,042)
5,851
(9,534)
13,468
Charges pertaining to
Senior Debt refinancing (q)
-
(2,262)
(6,523)
(6,505)
(6,523)
Non-compensation
expense related to noncontrolling interests (j)
(397)
(234)
(272)
(1,401)
(1,502)
Non-compensation expense, as
adjusted (d)
$125,185
$128,014
$109,330
$368,936
$341,892
Pre-Tax Income and Earnings
From Operations
Operating Income - U.S. GAAP
Basis
$52,373
$101,685
$138,681
$273,721
$524,449
Adjustments:
Expenses associated
with business realignment (m)
51,454
-
-
51,454
-
Expenses associated
with ERP system implementation (n)
2,362
7,626
7,659
13,193
20,489
Expenses related to
office space reorganization (o)
1,143
-
-
1,143
2,425
Acquisition-related
(benefits) costs (p)
(74)
4,612
(6,707)
7,577
(16,020)
Private Equity
investment adjustment (l)
-
11,948
-
11,948
-
Charges pertaining to
Senior Debt refinancing (q)
-
2,348
6,818
6,805
6,818
Net income related to
noncontrolling interests (j)
(1,492)
(7,736)
(1,651)
(8,662)
(5,036)
Pre-tax income, as adjusted
105,766
120,483
144,800
357,179
533,125
Interest expense
18,535
18,636
12,873
53,746
38,010
Amortization (LAZ
only)
526
489
677
1,269
2,022
Earnings from operations, as
adjusted (e)
$124,827
$139,608
$158,350
$412,194
$573,157
Net Income attributable to
Lazard Ltd
Net income attributable to Lazard
Ltd - U.S. GAAP Basis
$46,704
$65,777
$107,074
$209,523
$413,729
Adjustments:
Expenses associated
with business realignment (m)
51,454
-
-
51,454
-
Expenses associated
with ERP system implementation (n)
2,362
7,626
7,659
13,193
20,489
Expenses related to
office space reorganization (o)
1,143
-
-
1,143
2,425
Acquisition-related
(benefits) costs (p)
(74)
4,612
(6,707)
7,577
(16,020)
Private Equity
investment adjustment (l)
-
11,948
-
11,948
-
Charges pertaining to
Senior Debt refinancing (q)
-
2,348
6,818
6,805
6,818
Tax benefit allocated
to adjustments
(13,329)
(6,565)
(3,420)
(22,100)
(7,082)
Net income, as adjusted (g)
$88,260
$85,746
$111,424
$279,543
$420,359
Diluted Weighted Average
Shares Outstanding
Diluted Weighted Average Shares
Outstanding - U.S. GAAP Basis
113,881,690
116,175,349
129,859,728
116,959,041
130,750,392
Adjustment: participating
securities
1,631,989
1,247,535
-
998,034
-
Diluted Weighted Average Shares
Outstanding, as adjusted (h)
115,513,679
117,422,884
129,859,728
117,957,075
130,750,392
Diluted net income per
share:
U.S. GAAP Basis
$0.40
$0.55
$0.82
$1.77
$3.16
Non-GAAP Basis, as
adjusted
$0.76
$0.73
$0.86
$2.37
$3.21
This presentation includes
non-GAAP measures. Our non-GAAP measures are not meant to be
considered in isolation or as a substitute for comparable U.S. GAAP
measures, and should be read only in conjunction with our
consolidated financial statements prepared in accordance with U.S.
GAAP. For a detailed explanation of the adjustments made to
comparable U.S. GAAP measures, see Notes to Financial
Schedules.
See Notes to Financial
Schedules
LAZARD LTD
RECONCILIATION OF
NON-COMPENSATION U.S. GAAP TO ADJUSTED (a)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
($ in thousands)
2019
2019
2018
2019
2018
Non-compensation expense - U.S.
GAAP Basis:
Occupancy and
equipment
$29,856
$30,953
$28,848
$89,104
$88,326
Marketing and business
development
27,318
28,784
21,868
84,086
75,755
Technology and
information services
34,076
38,825
36,394
104,956
102,173
Professional
services
15,105
19,144
13,353
48,466
42,498
Fund administration
and outsourced services
28,425
28,493
34,748
85,848
103,159
Amortization and other
acquisition-related (benefits) costs
1,022
5,042
(5,851)
9,534
(13,468)
Other
11,530
5,294
14,453
33,630
51,032
Non-compensation expense -
Subtotal - U.S. GAAP Basis
$147,332
$156,535
$143,813
$455,624
$449,475
Non-compensation expense -
Adjustments:
Occupancy and
equipment (j) (o) (k)
($1,195)
($25)
$131
($1,253)
($2,434)
Marketing and business
development (j) (k) (m) (n)
(3,005)
(6,493)
(4,476)
(12,902)
(13,206)
Technology and
information services (j) (k) (n)
(2,396)
(7,427)
(7,548)
(13,099)
(19,863)
Professional services
(j) (k) (n)
(1,392)
(2,091)
(1,102)
(4,847)
(3,695)
Fund administration
and outsourced services (k)
(13,329)
(12,549)
(19,257)
(41,787)
(56,112)
Amortization and other
acquisition-related (benefits) costs (m) (p)
(1,022)
(5,042)
5,851
(9,534)
13,468
Other (j) (k) (m) (n)
(q)
192
5,106
(8,082)
(3,266)
(25,741)
Subtotal Non-compensation
adjustments
($22,147)
($28,521)
($34,483)
($86,688)
($107,583)
Non-compensation expense, as
adjusted:
Occupancy and
equipment
$28,661
$30,928
$28,979
$87,851
$85,892
Marketing and business
development
24,313
22,291
17,392
71,184
62,549
Technology and
information services
31,680
31,398
28,846
91,857
82,310
Professional
services
13,713
17,053
12,251
43,619
38,803
Fund administration
and outsourced services
15,096
15,944
15,491
44,061
47,047
Amortization and other
acquisition-related costs
-
-
-
-
-
Other
11,722
10,400
6,371
30,364
25,291
Non-compensation expense, as
adjusted (d)
$125,185
$128,014
$109,330
$368,936
$341,892
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 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 nine
month period ended September 30, 2019 and for the three month
period ended June 30, 2019, private equity investment adjustment
(see (l) below), (v) interest expense primarily related to
corporate financing activities, and (vi) for the nine month period
ended September 30, 2019, for the three month period ended June 30,
2019 and for the three and nine month periods ended September 30,
2018, excess interest expense pertaining to Senior Debt refinancing
(see (q) below). (c) A non-GAAP measure which excludes (i)
for the three and nine month periods ended September 30, 2019,
expenses associated with business realignment plan (see (m) below),
(ii) charges 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
(iii) compensation and benefits related to noncontrolling interests
(see (j) below). (d) A non-GAAP measure which excludes (i)
for the three and nine month periods ended September 30, 2019,
expenses associated with business realignment plan (see (m) below),
(ii) expenses associated with ERP system implementation (see (n)
below), (iii) for the three and nine month periods ended September
30, 2019 and for the nine month period ended September 30, 2018,
expenses related to office space reorganization (see (o) below),
(iv) expenses related to distribution fees and reimbursable deal
costs in accordance with the revenue recognition guidance and bad
debt expense (see (k) below), (v) amortization and other
acquisition-related benefits (costs) (see (p) below), (vi) for the
nine month period ended September 30, 2019, for the three month
period ended June 30, 2019 and for the three and nine month periods
ended September 30, 2018, charges pertaining to Senior Debt
refinancing (see (q) below), and (vii) expenses related to
noncontrolling interests (see (j) below). (e) A non-GAAP
measure which excludes (i) for the three and nine month periods
ended September 30, 2019, expenses associated with business
realignment plan (see (m) below), (ii) expenses associated with ERP
system implementation (see (n) below), (iii) for the three and nine
month periods ended September 30, 2019 and for the nine month
period ended September 30, 2018, expenses related to office space
reorganization (see (o) below), (iv) amortization and other
acquisition-related (benefits) costs (see (p) below), (v) for the
nine month period ended September 30, 2019 and for the three month
period ended June 30, 2019, private equity investment adjustment
(see (l) below), (vi) for the nine month period ended September 30,
2019, for the three month period ended June 30, 2019 and for the
three and nine month periods ended September 30, 2018, charges
pertaining to Senior Debt refinancing (see (q) below), (vii) net
revenue and expenses related to noncontrolling interests (see (j)
below), and (viii) 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) for the
three and nine month periods ended September 30, 2019, expenses
associated with business realignment plan (see (m) below), (ii)
expenses associated with ERP system implementation (see (n) below),
(iii) for the three and nine month period ended September 30, 2019
and for the nine month period ended September 30, 2018, expenses
related to office space reorganization (see (o) below), (iv)
amortization and other acquisition-related (benefits) costs (see
(p) below), (v) for the nine month period ended September 30, 2019
and for the three month period ended June 30, 2019, private equity
investment adjustment, (see (l) below), and (vi) for the nine month
period ended September 30, 2019, for the three month period ended
June 30, 2019 and for the three and nine month periods ended
September 30, 2018, charges pertaining to Senior Debt refinancing
(see (q) below), net of tax benefits. (h) A non-GAAP measure
which includes for the three and nine month periods ended September
30, 2019 and for the three month period ended June 30, 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 $17,507, $34,737, and $33,376 for the three month
periods ended September 30, 2019, June 30, 2019, and September 30,
2018, respectively, $77,637 and $112,767 for the nine month periods
ended September 30, 2019 and 2018, respectively, and the
denominator of which is pre-tax income of $105,766, $120,483, and
$144,800 for the three month periods ended September 30, 2019, June
30, 2019, and September 30, 2018, respectively, $357,179 and
$533,125 for the nine month periods ended September 30, 2019 and
2018, respectively. (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 a business realignment which included employee
reductions and the closing of subscale offices and investment
strategies. (n) Represents expenses associated with
Enterprise Resource Planning (ERP) system implementation. (o)
Represents incremental rent expense and lease abandonment
costs related to office space reorganization and an onerous lease
provision. (p) Primarily represents the change in fair value
of the contingent consideration associated with certain business
acquisitions. (q) 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/20191031005369/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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