Operating revenue momentum in Financial
Advisory and Asset Management
M&A announcements accelerated in U.S.
and Europe; global leader in restructuring
Average assets under management increased 8%
from the second quarter
Lazard Ltd (NYSE: LAZ) today reported operating revenue1 of $569
million for the quarter ended September 30, 2020. Net income, as
adjusted2, was $76 million, or $0.67 per share (diluted) for the
quarter. On a U.S. GAAP basis, third-quarter 2020 net income was
$75 million, or $0.66 per share (diluted).
For the first nine months of 2020, net income, as adjusted, was
$218 million, or $1.92 per share (diluted). On a U.S. GAAP basis,
net income for the first nine months was $213 million, or $1.88 per
share (diluted).
“We are performing well in a volatile environment, with momentum
across our businesses,” said Kenneth M. Jacobs, Chairman and Chief
Executive Officer of Lazard. “Our services are in demand around the
world as our clients seek expert advice and solutions in a period
of unprecedented change.”
($ in millions, except per share data and
AUM)
Quarter Ended Sept.
30,
Nine Months Ended Sept.
30,
2020
2019
%’20-’19
2020
2019
%’20-’19
Net
Income
US GAAP
$75
$47
61%
$213
$210
1%
Per share, diluted
$0.66
$0.40
65%
$1.88
$1.77
6%
Adjusted2
$76
$88
(14)%
$218
$280
(22)%
Per share, diluted
$0.67
$0.76
(12)%
$1.92
$2.37
(19)%
Operating
Revenue1
Total operating revenue
$569
$588
(3)%
$1,675
$1,838
(9)%
Financial Advisory
$307
$304
1%
$895
$963
(7)%
Asset Management
$261
$283
(8)%
$775
$858
(10)%
AUM ($ in
billions)
Period End
$228
$231
(1)%
Average
$226
$234
(3)%
$219
$233
(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 $569 million for the third quarter of
2020, and $1,675 million for the first nine months of 2020, down 3%
and 9% from the respective 2019 periods.
Financial Advisory
Our Financial Advisory results include M&A Advisory, Capital
Advisory, Capital Raising, Restructuring, Shareholder Advisory,
Sovereign Advisory, and other strategic advisory work for
clients.
For the third quarter of 2020, Financial Advisory operating
revenue was $307 million, 1% higher than the third quarter of 2019.
These results reflected increasing M&A and Restructuring
activity.
For the first nine months of 2020, Financial Advisory operating
revenue was $895 million, 7% lower than the first nine months of
2019.
During and since the third quarter of 2020, Lazard has been
engaged in significant and complex M&A transactions and other
advisory assignments globally, including the following (clients are
in italics): Altice Europe in the $45.1 billion take-private offer
by Patrick Drahi; Gilead’s $21 billion acquisition of Immunomedics;
Teladoc Health’s $18.5 billion merger with Livongo; AVEVA’s $5
billion acquisition of OSIsoft; El Paso Electric’s $4.3 billion
sale to Infrastructure Investments Fund; Iliad’s $4.3 billion
acquisition of Play; ENGIE’s €3.4 billion sale of a 29.9% stake in
Suez to Veolia; MassMutual’s $3.4 billion sale of its retirement
plan business to Empower Retirement; Aimmune’s $2.6 billion sale to
Nestlé Health Science; ServiceMaster’s $1.6 billion sale of its
ServiceMaster Brands franchise business to Roark Capital; Siemens
on the spin-off of Siemens Energy; and IBM on the separation of its
Managed Infrastructure Services unit.
Lazard has one of the world’s preeminent restructuring
practices, with a long track record of successfully advising
businesses and governments. During and since the third quarter of
2020, we have been engaged in a broad range of highly visible and
complex restructuring and debt advisory assignments for debtors or
creditors, including roles involving: 24 Hour Fitness; Abengoa;
Diamond Offshore Drilling; FTS International; Gavilan Resources;
Hi-Crush; J.C. Penney; J.Crew; Libbey; Neiman Marcus; NMC Health;
Premier Oil; Pyxus International; Salt Creek Midstream; Seadrill
Limited; Technicolor; Transocean; Ursa Piceance; and Valaris.
Lazard was the global leader in completed restructurings for the
first nine months of 2020 (Source: Refinitiv).
Our Capital and Shareholder Advisory practices remain active
globally, advising on a broad range of public and private
assignments. Our Sovereign Advisory practice continues to be active
advising governments, sovereign and sub-sovereign entities across
developed and emerging markets.
For a list of Lazard’s publicly announced Financial Advisory
transactions, please visit our website at
www.lazard.com/businesses/transactions.
Asset Management
In the text portion of this press release, we present our Asset
Management results as 1) Management fees and other revenue, and 2)
Incentive fees.
For the third quarter of 2020, Asset Management operating
revenue was $261 million, 8% lower than the third quarter of 2019.
For the first nine months of 2020, Asset Management operating
revenue was $775 million, 10% lower than the first nine months of
2019.
For the third quarter of 2020, management fees and other revenue
was $258 million, 8% lower than the third quarter of 2019, and 5%
higher than the second quarter of 2020. For the first nine months
of 2020, management fees and other revenue was $770 million, 9%
lower than the first nine months of 2019.
Average assets under management (AUM) for the third quarter of
2020 was $226 billion, 3% lower than the third quarter of 2019, and
8% higher than the second quarter of 2020. Average AUM for the
first nine months of 2020 was $219 billion, 6% lower than the first
nine months of 2019.
AUM as of September 30, 2020, was $228 billion, down 1% from
September 30, 2019, and up 6% from June 30, 2020. The sequential
increase was driven primarily by market appreciation of $9.5
billion and foreign exchange appreciation of $3.7 billion, offset
by net outflows of $0.2 billion.
For the third quarter of 2020, incentive fees were $3 million,
compared to $1 million for the third quarter of 2019. For the first
nine months of 2020, incentive fees were $6 million, compared to $7
million for the first nine months of 2019.
OPERATING EXPENSES
Compensation and
Benefits
In managing compensation and benefits expense, we focus on
annual awarded compensation (cash compensation and benefits plus
deferred incentive compensation with respect to the applicable
year, net of estimated future forfeitures and excluding charges).
We believe annual awarded compensation reflects the actual annual
compensation cost more accurately than the GAAP measure of
compensation cost, which includes applicable-year cash compensation
and the amortization of deferred incentive compensation principally
attributable to previous years’ deferred compensation. We believe
that by managing our business using awarded compensation with a
consistent deferral policy, we can better manage our compensation
costs, increase our flexibility in the future and build shareholder
value over time.
For the third quarter of 2020, we accrued adjusted compensation
and benefits expense1 at an adjusted compensation1 ratio of 60%.
This resulted in $341 million of adjusted compensation and benefits
expense, compared to $338 million for the third quarter of
2019.
For the first nine months of 2020, adjusted compensation and
benefits expense was $1,005 million, compared to $1,057 million for
the first nine months of 2019.
We manage our compensation and benefits expense based on awarded
compensation with a consistent deferral policy. We take a
disciplined approach to compensation, and our goal is to maintain a
compensation-to-operating revenue ratio over the cycle in the mid-
to high-50s percentage range on both an awarded and adjusted basis,
with consistent deferral policies.
Non-Compensation Expense
Adjusted non-compensation expense1 for the third quarter of 2020
was $103 million, 18% lower than the third quarter of 2019. The
ratio of adjusted non-compensation expense to operating revenue1
for the third quarter of 2020 was 18.1%, compared to 21.3% for the
third quarter of 2019.
Adjusted non-compensation expense for the first nine months of
2020 was $315 million, 15% lower than the first nine months of
2019. The ratio of adjusted non-compensation expense to operating
revenue for the first nine months of 2020 was 18.8%, compared to
20.1% for the first nine months of 2019.
Our goal remains to achieve an adjusted non-compensation
expense-to-operating revenue ratio over the cycle of 16% to
20%.
TAXES
The provision for taxes, on an adjusted basis1, was $29 million
for the third quarter of 2020 and $80 million for the first nine
months of 2020. The effective tax rate on the same basis was 27.9%
for the third quarter and 26.9% for the first nine months of 2020,
compared to 16.6% and 21.7% for the respective 2019 periods.
CAPITAL MANAGEMENT AND BALANCE SHEET
Our primary capital management goals include managing debt and
returning capital to shareholders through dividends and share
repurchases.
For the third quarter of 2020, Lazard returned $50 million to
shareholders, which included: $49 million in dividends and $1
million in satisfaction of employee tax obligations in lieu of
share issuances upon vesting of equity grants.
For the first nine months of 2020, Lazard returned $314 million
to shareholders, which included: $147 million in dividends; $95
million in share repurchases of our Class A common stock; and $72
million in satisfaction of employee tax obligations in lieu of
share issuances upon vesting of equity grants.
During the first nine months of 2020, we repurchased 2.9 million
shares at an average price of $32.70 per share. As of September 30,
2020, our remaining share repurchase authorization is $306
million.
On October 28, 2020, Lazard declared a quarterly dividend of
$0.47 per share on its outstanding common stock. The dividend is
payable on November 20, 2020, to stockholders of record on November
9, 2020.
Lazard’s financial position remains strong. As of September 30,
2020, our cash and cash equivalents were $1,110 million.
Stockholders’ equity related to Lazard’s interests was $694
million.
COVID-19 ENVIRONMENT UPDATE
During the third quarter of 2020, the COVID-19 pandemic
continued to have a negative impact on economic activity around the
world. Governments and central banks have taken extraordinary
measures to support local economies and capital markets, but the
macroeconomic outlook remains uncertain while significant health
risks persist.
Lazard’s offices around the world have continued to operate in
the context of applicable local regulations and guidelines
regarding business activity, and in the third quarter, the majority
of our people worked remotely, employing virtual and secure
cloud-based systems.
While the global M&A market strengthened in the third
quarter, we continue to expect a challenging business environment
in the near term due to elevated uncertainty and capital markets
volatility. We believe that our strong financial position, the
diversity of our business, and our consistent focus on cost
discipline will enable us to weather the economic downturn.
CONFERENCE CALL
Lazard will host a conference call at 8:00 a.m. EDT on October
29, 2020, to discuss the company’s financial results for the third
quarter and first nine months of 2020. The conference call can be
accessed via a live audio webcast available through Lazard’s
Investor Relations website at www.lazard.com, or by dialing 1 (800)
289-0438 (toll-free, U.S. and Canada) or +1 (323) 794-2423 (outside
of the U.S. and Canada), 15 minutes prior to the start of the
call.
A replay of the conference call will be available by 10:00 a.m.
EDT on October 29, 2020, via the Lazard Investor Relations website,
www.lazard.com, or by dialing 1 (888) 203-1112 (toll-free, U.S. and
Canada) or +1 (719) 457-0820 (outside of the U.S. and Canada). The
replay access code is: 8159566.
ABOUT LAZARD
Lazard, one of the world's preeminent financial advisory and
asset management firms, operates from more than 40 cities across 25
countries in North America, Europe, Asia, Australia, Central and
South America. With origins dating to 1848, the firm provides
advice on mergers and acquisitions, strategic matters,
restructuring and capital structure, capital raising and corporate
finance, as well as asset management services to corporations,
partnerships, institutions, governments and individuals. For more
information on Lazard, please visit www.lazard.com. Follow Lazard
at @Lazard.
Cautionary Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements. In some
cases, you can identify these statements by forward-looking words
such as “may”, “might”, “will”, “should”, “could”, “would”,
“expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”,
“potential”, “target,” “goal”, or “continue”, and the negative of
these terms and other comparable terminology. These forward-looking
statements, which are subject to known and unknown risks,
uncertainties and assumptions about us, may include projections of
our future financial performance based on our growth strategies,
business plans and initiatives and anticipated trends in our
business. These statements are only predictions based on our
current expectations and projections about future events. There are
important factors that could cause our actual results, level of
activity, performance or achievements to differ materially from the
results, level of activity, performance or achievements expressed
or implied by these forward-looking statements.
These factors include, but are not limited to, those discussed
in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and
also discussed from time to time in our reports on Forms 10-Q and
8-K, including the following:
- A decline in general economic conditions or the global or
regional financial markets;
- A decline in our revenues, for example due to a decline in
overall mergers and acquisitions (M&A) activity, our share of
the M&A market or our assets under management (AUM);
- Losses caused by financial or other problems experienced by
third parties;
- Losses due to unidentified or unanticipated risks;
- A lack of liquidity, i.e., ready access to funds, for use in
our businesses; and
- Competitive pressure on our businesses and on our ability to
retain and attract employees at current compensation levels.
Although we believe the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements.
Neither we nor any other person assumes responsibility for the
accuracy or completeness of any of these forward-looking
statements. You should not rely upon forward-looking statements as
predictions of future events. We are under no duty to update any of
these forward-looking statements after the date of this release to
conform our prior statements to actual results or revised
expectations and we do not intend to do so.
Lazard Ltd is committed to providing timely and accurate
information to the investing public, consistent with our legal and
regulatory obligations. To that end, Lazard and its operating
companies use their websites, Lazard’s Twitter account
(twitter.com/Lazard) and other social media sites to convey
information about their businesses, including the anticipated
release of quarterly financial results, quarterly financial,
statistical and business-related information, and the posting of
updates of assets under management in various mutual funds, hedge
funds and other investment products managed by Lazard Asset
Management LLC and Lazard Frères Gestion SAS. Investors can link to
Lazard and its operating company websites through
www.lazard.com.
ENDNOTES
1 A non-U.S. GAAP measure. See attached financial schedules and
related notes for a detailed explanation of adjustments to
corresponding U.S. GAAP results. We believe that presenting our
results on an adjusted basis, in addition to U.S. GAAP results, is
the most meaningful and useful way to compare our operating results
across periods.
2 Third-quarter and first-nine-months 2020 adjusted results1
exclude pre-tax charges of $2.3 million and $8.5 million,
respectively, of costs relating to an office space reorganization.
On a U.S. GAAP basis, these resulted in a net charge of $1 million,
or $0.01 (diluted) per share, for the third quarter, and a net
charge of $5.2 million, or $0.05 (diluted) per share, for the first
nine months of 2020.
LAZ-EPE
LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS (U.S. GAAP)
Three Months Ended
% Change From
September 30,
June 30,
September 30,
June 30,
September 30,
($ in thousands, except per share data)
2020
2020
2019
2020
2019
Total revenue
$598,022
$592,264
$611,073
1%
(2%)
Interest expense
(20,344)
(19,972)
(20,005)
Net revenue
577,678
572,292
591,068
1%
(2%)
Operating expenses:
Compensation and benefits
354,625
351,568
391,363
1%
(9%)
Occupancy and equipment
31,318
30,574
29,856
Marketing and business development
7,562
6,517
27,318
Technology and information services
33,457
32,629
34,076
Professional services
14,701
16,728
15,105
Fund administration and outsourced services
26,196
24,053
28,425
Amortization and other acquisition-related costs
458
455
1,022
Other
4,681
13,903
11,530
Subtotal
118,373
124,859
147,332
(5%)
(20%)
Operating expenses
472,998
476,427
538,695
(1%)
(12%)
Operating income
104,680
95,865
52,373
9%
NM
Provision for income taxes
28,165
22,789
4,177
24%
NM
Net income
76,515
73,076
48,196
5%
59%
Net income (loss) attributable to noncontrolling interests
1,423
(382)
1,492
Net income attributable to Lazard Ltd
$75,092
$73,458
$46,704
2%
61%
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding:
Basic
107,168,615
106,662,064
109,285,727
0%
(2%)
Diluted
113,181,564
111,487,749
113,881,690
2%
(1%)
Net income per share:
Basic
$0.69
$0.68
$0.42
1%
64%
Diluted
$0.66
$0.66
$0.40
0%
65%
LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS (U.S. GAAP)
Nine Months Ended
September 30,
September 30,
($ in thousands, except per share data)
2020
2019
% Change
Total revenue
$1,748,443
$1,923,552
(9%)
Interest expense
(60,459)
(58,120)
Net revenue
1,687,984
1,865,432
(10%)
Operating expenses:
Compensation and benefits
1,025,948
1,136,087
(10%)
Occupancy and equipment
94,090
89,104
Marketing and business development
34,265
84,086
Technology and information services
97,444
104,956
Professional services
45,974
48,466
Fund administration and outsourced services
76,639
85,848
Amortization and other acquisition-related costs
1,359
9,534
Other
27,623
33,630
Subtotal
377,394
455,624
(17%)
Operating expenses
1,403,342
1,591,711
(12%)
Operating income
284,642
273,721
4%
Provision for income taxes
76,720
55,536
38%
Net income
207,922
218,185
(5%)
Net income (loss) attributable to noncontrolling interests
(4,650)
8,662
Net income attributable to Lazard Ltd
$212,572
$209,523
1%
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding:
Basic
106,711,547
111,070,395
(4%)
Diluted
112,929,830
116,959,041
(3%)
Net income per share:
Basic
$1.96
$1.87
5%
Diluted
$1.88
$1.77
6%
LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION (U.S. GAAP)
September 30,
December 31,
($ in thousands)
2020
2019
ASSETS Cash and
cash equivalents
$1,109,745
$1,231,593
Deposits with banks and short-term investments
1,193,717
1,180,686
Cash deposited with clearing organizations and other segregated
cash
41,260
43,280
Receivables
575,098
663,138
Investments
535,245
531,995
Goodwill and other intangible assets
373,841
373,594
Operating lease right-of-use assets
517,583
551,504
Deferred tax assets
557,120
586,750
Other assets
563,388
477,041
Total Assets
$5,466,997
$5,639,581
LIABILITIES & STOCKHOLDERS'
EQUITY Liabilities Deposits and other
customer payables
$1,244,562
$1,246,200
Accrued compensation and benefits
451,180
602,777
Operating lease liabilities
609,850
644,345
Tax receivable agreement obligation
221,890
247,344
Senior debt
1,681,487
1,679,562
Other liabilities
479,330
537,779
Total liabilities
4,688,299
4,958,007
Commitments and contingencies Stockholders'
equity Preferred stock, par value $.01 per share
-
-
Common stock, par value $.01 per share
1,128
1,128
Additional paid-in capital
95,143
41,020
Retained earnings
1,160,310
1,193,570
Accumulated other comprehensive loss, net of tax
(279,785)
(293,648)
Subtotal
976,796
942,070
Class A common stock held by subsidiaries, at cost
(282,983)
(332,079)
Total Lazard Ltd stockholders' equity
693,813
609,991
Noncontrolling interests
84,885
71,583
Total stockholders' equity
778,698
681,574
Total liabilities and stockholders' equity
$5,466,997
$5,639,581
LAZARD LTD SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited)
Three Months Ended
% Change From
September 30,
June 30,
September 30,
June 30,
September 30,
($ in thousands, except per share data)
2020
2020
2019
2020
2019
Revenues: Financial Advisory
$306,977
$292,906
$303,901
5%
1%
Asset Management
261,047
245,346
282,596
6%
(8%)
Corporate
1,023
4,662
1,765
(78%)
(42%)
Operating revenue (b)
$569,047
$542,914
$588,262
5%
(3%)
Expenses:
Adjusted compensation and benefits expense (c)
$341,428
$325,749
$338,250
5%
1%
Ratio of adjusted compensation to operating revenue
60.0%
60.0%
57.5%
Non-compensation expense (d)
$103,081
$99,617
$125,185
3%
(18%)
Ratio of non-compensation to operating revenue
18.1%
18.3%
21.3%
Earnings:
Earnings from operations (e)
$124,538
$117,548
$124,827
6%
0%
Operating margin (f)
21.9%
21.7%
21.2%
Adjusted net income (g)
$76,102
$75,151
$88,260
1%
(14%)
Diluted adjusted net income per share
$0.67
$0.67
$0.76
0%
(12%)
Diluted weighted average shares (h)
113,780,625
111,845,101
115,513,679
2%
(2%)
Effective tax rate (i)
27.9%
23.9%
16.6%
This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our
non-GAAP measures are not meant to be considered in isolation or as
a substitute for the corresponding U.S. GAAP measures, and should
be read only in conjunction with our consolidated financial
statements prepared in accordance with U.S. GAAP. For a detailed
explanation of the adjustments made to the corresponding U.S. GAAP
measures, see Reconciliation of U.S. GAAP to Selected Summary
Financial Information and Notes to Financial Schedules.
LAZARD
LTD SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited)
Nine Months Ended
September 30,
September 30,
($ in thousands, except per share data)
2020
2019
% Change
Revenues: Financial Advisory
$894,656
$962,709
(7%)
Asset Management
775,346
857,599
(10%)
Corporate
4,770
17,644
(73%)
Operating revenue (b)
$1,674,772
$1,837,952
(9%)
Expenses:
Adjusted compensation and benefits expense (c)
$1,004,863
$1,056,822
(5%)
Ratio of adjusted compensation to operating revenue
60.0%
57.5%
Non-compensation expense (d)
$315,330
$368,936
(15%)
Ratio of non-compensation to operating revenue
18.8%
20.1%
Earnings:
Earnings from operations (e)
$354,579
$412,194
(14%)
Operating margin (f)
21.2%
22.4%
Adjusted net income (g)
$217,805
$279,543
(22%)
Diluted adjusted net income per share
$1.92
$2.37
(19%)
Diluted weighted average shares (h)
113,261,923
117,957,075
(4%)
Effective tax rate (i)
26.9%
21.7%
This presentation includes non-GAAP measures. Our non-GAAP measures
are not meant to be considered in isolation or as a substitute for
the corresponding U.S. GAAP measures, and should be read only in
conjunction with our consolidated financial statements prepared in
accordance with U.S. GAAP. For a detailed explanation of the
adjustments made to the corresponding U.S. GAAP measures, see
Reconciliation of U.S. GAAP to Selected Summary Financial
Information and Notes to Financial Schedules.
LAZARD LTD
ASSETS UNDER MANAGEMENT ("AUM") (unaudited)
($ in millions)
As of
Variance
September 30,
June 30,
December 31,
2020
2020
2019
Qtr to Qtr
YTD
Equity: Emerging Markets
$29,942
$28,937
$40,612
3.5%
(26.3%)
Global
48,382
45,178
49,759
7.1%
(2.8%)
Local
43,559
43,477
48,985
0.2%
(11.1%)
Multi-Regional
61,872
55,923
66,185
10.6%
(6.5%)
Total Equity
183,755
173,515
205,541
5.9%
(10.6%)
Fixed Income:
Emerging Markets
12,743
12,412
14,387
2.7%
(11.4%)
Global
9,948
9,883
9,233
0.7%
7.7%
Local
5,554
5,436
5,450
2.2%
1.9%
Multi-Regional
11,252
9,153
9,193
22.9%
22.4%
Total Fixed Income
39,497
36,884
38,263
7.1%
3.2%
Alternative Investments
2,283
2,028
2,149
12.6%
6.2%
Private Equity
1,396
1,412
1,385
(1.1%)
0.8%
Cash Management
821
865
901
(5.1%)
(8.9%)
Total AUM
$227,752
$214,704
$248,239
6.1%
(8.3%)
Three Months Ended September
30
Nine Months Ended September
30,
2020
2019
2020
2019
AUM - Beginning of Period
$214,704
$237,466
$248,239
$214,734
Net Flows
(201)
(4,385)
(11,082)
(9,593)
Market and foreign exchange appreciation (depreciation)
13,249
(2,207)
(9,405)
25,733
AUM - End of Period
$227,752
$230,874
$227,752
$230,874
Average AUM
$226,046
$233,878
$218,652
$232,885
% Change in average AUM
(3.3%)
(6.1%)
Note: Average AUM generally represents the average of
the monthly ending AUM balances for the period.
LAZARD LTD
RECONCILIATION OF U.S. GAAP TO SELECTED SUMMARY FINANCIAL
INFORMATION (a) (unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
($ in thousands, except per share data)
2020
2020
2019
2020
2019
Operating
Revenue Net revenue - U.S. GAAP Basis
$577,678
$572,292
$591,068
$1,687,984
$1,865,432
Adjustments:
Revenue related to
noncontrolling interests (j)
(4,042)
(2,173)
(4,164)
(3,443)
(18,254)
Gains related to Lazard Fund Interests ("LFI") and other similar
arrangements
(11,261)
(23,803)
(1,764)
(15,427)
(22,118)
Distribution fees, reimbursable deal costs and bad debt expense (k)
(12,016)
(21,936)
(15,413)
(50,336)
(53,102)
Private Equity investment adjustment (l)
-
-
-
-
11,948
Interest expense
18,688
18,534
18,535
55,994
54,046
Operating revenue,
as adjusted (b)
$569,047
$542,914
$588,262
$1,674,772
$1,837,952
Compensation
and Benefits Expense Compensation and benefits expense - U.S.
GAAP Basis
$354,625
$351,568
$391,363
$1,025,948
$1,136,087
Adjustments:
Expenses associated with
business realignment (m)
-
-
(49,119)
-
(49,119)
Charges pertaining to LFI and other similar arrangements
(11,261)
(23,803)
(1,764)
(15,427)
(22,118)
Compensation related to noncontrolling interests (j)
(1,936)
(2,016)
(2,230)
(5,658)
(8,028)
Compensation and
benefits expense, as adjusted (c)
$341,428
$325,749
$338,250
$1,004,863
$1,056,822
Non-Compensation Expense Non-compensation expense - Subtotal
- U.S. GAAP Basis
$118,373
$124,859
$147,332
$377,394
$455,624
Adjustments:
Expenses associated with
business realignment (m)
-
-
(1,810)
-
(1,810)
Expenses associated with ERP system implementation (n)
-
-
(2,362)
-
(13,193)
Expenses related to office space reorganization (o)
(2,311)
(2,487)
(1,143)
(8,462)
(1,143)
Distribution fees, reimbursable deal costs and bad debt expense (k)
(12,016)
(21,936)
(15,413)
(50,336)
(53,102)
Amortization and other acquisition-related costs (p)
(458)
(455)
(1,022)
(1,359)
(9,534)
Charges pertaining to Senior Debt refinancing (q)
-
-
-
-
(6,505)
Non-compensation expense related to noncontrolling interests (j)
(507)
(364)
(397)
(1,907)
(1,401)
Non-compensation
expense, as adjusted (d)
$103,081
$99,617
$125,185
$315,330
$368,936
Pre-Tax Income
and Earnings From Operations Operating Income - U.S. GAAP Basis
$104,680
$95,865
$52,373
$284,642
$273,721
Adjustments:
Expenses associated with
business realignment (m)
-
-
51,454
-
51,454
Expenses associated with ERP system implementation (n)
-
-
2,362
-
13,193
Expenses related to office space reorganization (o)
2,311
2,487
1,143
8,462
1,143
Acquisition-related costs (benefits) (p)
-
-
(74)
-
7,577
Private Equity investment adjustment (l)
-
-
-
-
11,948
Charges pertaining to Senior Debt refinancing (q)
-
-
-
-
6,805
Net (income) loss related to noncontrolling interests (j)
(1,423)
382
(1,492)
4,650
(8,662)
Pre-tax income, as adjusted
105,568
98,734
105,766
297,754
357,179
Interest expense
18,688
18,534
18,535
55,994
53,746
Amortization (LAZ only)
282
280
526
831
1,269
Earnings from operations, as adjusted (e)
$124,538
$117,548
$124,827
$354,579
$412,194
Net Income
attributable to Lazard Ltd Net income attributable to Lazard
Ltd - U.S. GAAP Basis
$75,092
$73,458
$46,704
$212,572
$209,523
Adjustments: Expenses
associated with business realignment (m)
-
-
51,454
-
51,454
Expenses associated with ERP system implementation (n)
-
-
2,362
-
13,193
Expenses related to office space reorganization (o)
2,311
2,487
1,143
8,462
1,143
Acquisition-related costs (benefits) (p)
-
-
(74)
-
7,577
Private Equity investment adjustment (l)
-
-
-
-
11,948
Charges pertaining to Senior Debt refinancing (q)
-
-
-
-
6,805
Tax benefit allocated to adjustments
(1,301)
(794)
(13,329)
(3,229)
(22,100)
Net income, as
adjusted (g)
$76,102
$75,151
$88,260
$217,805
$279,543
Diluted
Weighted Average Shares Outstanding Diluted Weighted Average
Shares Outstanding - U.S. GAAP Basis
113,181,564
111,487,749
113,881,690
112,929,830
116,959,041
Adjustment: participating securities including profits interest
participation rights
599,061
357,352
1,631,989
332,093
998,034
Diluted Weighted
Average Shares Outstanding, as adjusted (h)
113,780,625
111,845,101
115,513,679
113,261,923
117,957,075
Diluted net
income per share:
U.S. GAAP Basis
$0.66
$0.66
$0.40
$1.88
$1.77
Non-GAAP Basis, as adjusted
$0.67
$0.67
$0.76
$1.92
$2.37
This presentation includes non-GAAP
measures. Our non-GAAP measures are not meant to be considered in
isolation or as a substitute for comparable U.S. GAAP measures, and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with U.S. GAAP. For a detailed
explanation of the adjustments made to comparable U.S. GAAP
measures, see Notes to Financial Schedules.
See Notes to Financial
Schedules
LAZARD LTD
RECONCILIATION OF NON-COMPENSATION U.S. GAAP TO ADJUSTED (a)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
($ in thousands)
2020
2020
2019
2020
2019
Non-compensation
expense - U.S. GAAP Basis:
Occupancy and equipment
$31,318
$30,574
$29,856
$94,090
$89,104
Marketing and business development
7,562
6,517
27,318
34,265
84,086
Technology and information services
33,457
32,629
34,076
97,444
104,956
Professional services
14,701
16,728
15,105
45,974
48,466
Fund administration and outsourced services
26,196
24,053
28,425
76,639
85,848
Amortization and other acquisition-related costs
458
455
1,022
1,359
9,534
Other
4,681
13,903
11,530
27,623
33,630
Non-compensation expense - Subtotal - U.S. GAAP Basis
$118,373
$124,859
$147,332
$377,394
$455,624
Non-compensation
expense - Adjustments:
Occupancy and equipment (j) (o)
($2,278)
($2,448)
($1,195)
($8,459)
($1,253)
Marketing and business development (j) (k) (m) (n)
(185)
(755)
(3,005)
(3,631)
(12,902)
Technology and information services (j) (k) (n)
(169)
(167)
(2,396)
(771)
(13,099)
Professional services (j) (k) (n) (o)
(2,269)
(1,658)
(1,392)
(5,705)
(4,847)
Fund administration and outsourced services (j) (k)
(13,593)
(10,129)
(13,329)
(35,842)
(41,787)
Amortization and other acquisition-related costs (m) (p)
(458)
(455)
(1,022)
(1,359)
(9,534)
Other (j) (k) (m) (n) (q)
3,660
(9,630)
192
(6,297)
(3,266)
Subtotal Non-compensation adjustments
($15,292)
($25,242)
($22,147)
($62,064)
($86,688)
Non-compensation
expense, as adjusted:
Occupancy and equipment
$29,040
$28,126
$28,661
$85,631
$87,851
Marketing and business development
7,377
5,762
24,313
30,634
71,184
Technology and information services
33,288
32,462
31,680
96,673
91,857
Professional services
12,432
15,070
13,713
40,269
43,619
Fund administration and outsourced services
12,603
13,924
15,096
40,797
44,061
Amortization and other acquisition-related costs
-
-
-
-
-
Other
8,341
4,273
11,722
21,326
30,364
Non-compensation expense, as adjusted (d)
$103,081
$99,617
$125,185
$315,330
$368,936
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 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 (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,
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, 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) for the three and
nine month periods ended September 30, 2019, expenses associated
with ERP system implementation (see (n) below), (iii) 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 costs (see (p) below), (vi) for the nine month
period ended September 30, 2019, 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) for the three and
nine month periods ended September 30, 2019, expenses associated
with ERP system implementation (see (n) below), (iii) expenses
related to office space reorganization (see (o) below), (iv)
amortization and for the three and nine month periods ended
September 30, 2019, other acquisition-related costs (benefits) (see
(p) below), (v) for the nine month period ended September 30, 2019,
private equity investment adjustment (see (l) below), (vi) for the
nine month period ended September 30, 2019, 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) for the three and
nine month periods ended September 30, 2019, expenses associated
with ERP system implementation (see (n) below), (iii) expenses
related to office space reorganization (see (o) below), (iv) for
the three and nine month periods ended September 30, 2019,
acquisition-related costs (benefits) (see (p) below), (v) for the
nine month period ended September 30, 2019, private equity
investment adjustment, (see (l) below), and (vi) for the nine month
period ended September 30, 2019, charges pertaining to Senior Debt
refinancing (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.
(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 $29,466,
$23,583, and $17,507 for the three month periods ended September
30, 2020, June 30, 2020, and September 30, 2019, respectively,
$79,949 and $77,637 for the nine month periods ended September 30,
2020 and 2019 and the denominator of which is pre-tax income of
$105,568, $98,734, and $105,766 for the three month periods ended
September 30, 2020, June 30, 2020, and September 30, 2019,
respectively, $297,754 and $357,179 for the nine month periods
ended September 30, 2020 and 2019.
(j)
Noncontrolling interests include revenue and expenses
related to Edgewater and ESC funds.
(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 related to office space
reorganization.
(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
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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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