Market Overview

Lazard Ltd Reports Second-Quarter and First-Half 2018 Results

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Lazard Ltd (NYSE:LAZ):

   

Record quarterly and
first-half operating
revenue:
$741 million and

$1,465 million, respectively

 

Record quarterly and
first-half operating
revenue
for

Financial Advisory

 

Returned $588 million
of capital
to
shareholders

in first half of year

 

 

Lazard Ltd (NYSE:LAZ) today reported record quarterly operating revenue1
of $741 million for the quarter ended June 30, 2018. Net income, as
adjusted1 and excluding a pre-tax benefit2, was
$143 million, or $1.10 (diluted) per share for the quarter.
Second-quarter 2018 net income on a U.S. GAAP basis was $147 million, or
$1.13 per share (diluted).

First-half net income as adjusted1 and excluding a pre-tax
charge2, was $309 million, or $2.35 per share (diluted). On a
U.S. GAAP basis, first-half net income was $307 million, or $2.34 per
share (diluted).

"Record operating revenue for the second quarter and first half
underscores the differentiated strength of Lazard's franchise," said
Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. "Our
global platform incorporates diverse revenue streams of significant
scale, innovative client solutions that drive performance, and growth
opportunities in which we continue to invest."

             
($ in millions, except
per share data and AUM)
    Quarter Ended
June 30,
    Six Months Ended
June 30,

2018

   

2017

   

%'18-'17

2018

   

2017

   

%'18-'17

Net Income

U.S. GAAP $ 147 $ 120 22 % $ 307 $ 228 35 %
Per share, diluted $ 1.13 $ 0.91 24 % $ 2.34 $ 1.72 36 %
Adjusted1,2 $ 143 $ 130 10 % $ 309 $ 240 29 %
Per share, diluted $ 1.10 $ 0.98 12 % $ 2.35 $ 1.81 30 %

Operating Revenue1

Total operating revenue $ 741 $ 720 3 % $ 1,465 $ 1,345 9 %
Financial Advisory $ 415 $ 411 1 % $ 804 $ 747 8 %
Asset Management $ 329 $ 307 7 % $ 659 $ 585 13 %

AUM ($ in billions)

Period End $ 238 $ 226 5 %
Average     $ 245     $ 222     10 %     $ 251     $ 214     17 %
 

Note: Endnotes are on page 7 of this release. A reconciliation of
adjusted GAAP to U.S. GAAP is on page 18.

OPERATING REVENUE

Operating revenue1 was a quarterly record of $741 million for
the second quarter of 2018, and a record $1,465 million for the first
half of 2018, up 3% and 9%, respectively, from the 2017 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.

Second Quarter

Financial Advisory operating revenue was a quarterly record of $415
million for 2018, 1% higher than the record second quarter of 2017.
Operating revenue included strong performance in M&A Advisory and
Restructuring.

During the second quarter of 2018, Lazard was engaged in highly visible,
complex M&A transactions and other advisory assignments, including
cross-border transactions, spin-offs and distressed asset sales, as well
as sovereign, capital and shareholder advisory in the Americas, Europe,
Australia, Africa and Asia.

Among the major M&A transactions that were completed during the second
quarter of 2018 were the following (clients are in italics): Altice
on its $40 billion group reorganization; Unibail-Rodamco's $24.7
billion acquisition of Westfield; Great Plains Energy's $14
billion merger of equals with Westar Energy; AccorHotels' sale of
a 57.8% stake in AccorInvest; Bacardi's $5.1 billion acquisition
of Patrón Tequila; and Dover on the spin-off of Apergy.

During or since the second quarter of 2018 we have been engaged in a
broad range of highly visible and complex restructuring and debt
advisory assignments for debtors and creditors. Assignments completed
during the second quarter of 2018 on which Lazard advised included: Takata;
Community Health Systems; and Breitburn Energy Partners.

Our Sovereign and Capital Advisory services remained active globally,
advising governments and corporations on balance sheet matters,
financing strategy and capital raising.

Please see M&A transactions on which Lazard advised in the second
quarter, or continued to advise or completed since June 30, 2018, as
well as Capital Advisory, Sovereign Advisory and Restructuring
assignments, on pages 8 - 11 of this release.

First Half

Financial Advisory operating revenue was a record $804 million for the
first half of 2018, 8% higher than the record first half of 2017.

Lazard advised or continues to advise on a number of significant and
complex M&A transactions announced year to date, including: Express
Scripts'
$67 billion sale to Cigna; The Woodbridge Company
in Thomson Reuters' sale of a 55% stake in its Financial & Risk business
to Blackstone; and AkzoNobel's €10.1 billion sale of its
Specialty Chemicals business to Carlyle and GIC.

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.

Second Quarter

Asset Management operating revenue was a second-quarter record of $329
million for the second quarter of 2018, 7% higher than the record second
quarter of 2017.

Management fees and other revenue was $317 million for the second
quarter of 2018, 9% higher than the second quarter of 2017, and 2% lower
than the first quarter of 2018.

Average assets under management (AUM) for the second quarter of 2018 was
$245 billion, 10% higher than the second quarter of 2017, and 4% lower
than the first quarter of 2018.

AUM as of June 30, 2018, was $238 billion, up 5% from June 30, 2017, and
down 6% from March 31, 2018. The sequential decrease was primarily
driven by foreign exchange movement, market depreciation, and net
outflows of $3.8 billion.

Incentive fees during the period were $12 million, compared to $17
million for the second quarter of 2017.

First Half

Asset Management operating revenue was a record $659 million for the
first half of 2018, 13% higher than the first half of 2017.

Management fees and other revenue was $641 million for the first half of
2018, 14% higher than the first half of 2017.

Average AUM for the first half of 2018 was $251 billion, 17% higher than
the first half of 2017. Net outflows were $1.4 billion for the first
half of 2018.

Incentive fees were $18 million for the first half of 2018, compared to
$24 million for the first half of 2017.

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 2018, we accrued compensation and benefits
expense1 at an adjusted compensation1 ratio of
55.8%. This resulted in $413 million of adjusted compensation and
benefits expense, compared to $407 million for the second quarter of
2017. The increase reflected higher operating revenue.

For the first half of 2018, adjusted compensation and benefits expense1
was $817 million, compared to $760 million for the first half of
2017, also reflecting higher operating revenue.

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
2018 was $118 million, 2% higher than the second quarter of 2017. The
ratio of adjusted non-compensation expense to operating revenue for the
second quarter of 2018 was 16.0%, compared to 16.1% for the second
quarter of 2017.

Adjusted non-compensation expense1 for the first half of 2018
was $233 million, 4% higher than the first half of 2017. The ratio of
adjusted non-compensation expense to operating revenue for the first
half of 2018 was 15.9%, compared to 16.6% for the first half of 2017.

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 basis1,2, was $53
million for the second quarter of 2018 and $79 million for the first
half of 2018. The effective tax rate on the same basis was 26.9% for the
second quarter and 20.4% for the first half of 2018, compared to 29.6%
and 28.3% for the respective 2017 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 2018, Lazard returned $139 million to
shareholders, which included: $53 million in dividends; $78 million in
share repurchases of our Class A common stock; and $8 million in
satisfaction of employee tax obligations in lieu of share issuances upon
vesting of equity grants.

For the first half of 2018, Lazard returned $588 million to
shareholders, which included: $255 million in dividends; $224 million in
share repurchases of our Class A common stock; and $109 million in
satisfaction of employee tax obligations in lieu of share issuances upon
vesting of equity grants.

Year to date, we have repurchased 4.5 million shares at an average price
of $53.69 per share. In line with our objectives, these repurchases have
more than offset the potential dilution from our 2017 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 $56.22 per share. As of today, our
remaining share repurchase authorization is $308 million.

On July 25, 2018, Lazard declared a quarterly dividend of $0.44 per
share on its outstanding common stock. The dividend is payable on August
17, 2018, to stockholders of record on August 6, 2018.

Lazard's financial position remains strong. As of June 30, 2018, our
cash and cash equivalents were $845 million, and stockholders' equity
related to Lazard's interests was $1,055 million.

***

CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. EDT on July 26, 2018, to
discuss the company's financial results for the second quarter and first
half of 2018. 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) 239-9838 (U.S. and Canada) or +1 (323) 794-2551
(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 26, 2018, 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 2872646.

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 2018 results were affected
primarily by the following benefits and charges:

  • Second-quarter and first-half 2018 adjusted results exclude pre-tax
    charges of (i) $5.4 million and $12.8 million, respectively, of costs
    associated with the implementation of a new Enterprise Resource
    Planning (ERP) system, and (ii) $1.0 million and $2.4 million,
    respectively, of office space reorganization costs primarily relating
    to incremental rent expense and lease abandonment costs. In addition,
    second-quarter and first-half 2018 adjusted results exclude a benefit
    of $9.3 million of acquisition-related items, primarily reflecting
    changes in fair value of contingent consideration associated with
    certain business acquisitions. On a U.S. GAAP basis, these items
    resulted in a net benefit of $3.9 million, or $0.03 (diluted) per
    share, in the second quarter, and a net charge of $2.3 million, or
    $0.02 (diluted) per share, for the first half of 2018.

LAZ-EPE

FINANCIAL ADVISORY ASSIGNMENTS

Mergers and Acquisitions (Completed in the second
quarter of 2018)

Among the large, publicly announced M&A Advisory transactions or
assignments completed during the second quarter of 2018 on which Lazard
advised were the following:

  • Altice on its $40 billion group reorganization, including the
    spin-off of Altice USA and new Altice Europe structure
  • Unibail-Rodamco's $24.7 billion acquisition of Westfield
  • Great Plains Energy's $14 billion merger of equals with Westar
    Energy
  • AccorHotels' sale of a 57.8% stake in AccorInvest to a
    consortium of investors, valuing AccorInvest at €6.3 billion
  • Bacardi's $5.1 billion acquisition of Patrón Tequila
  • Sanofi's €3.9 billion acquisition of Ablynx
  • NJJ Capital in the €3.5 billion consortium acquisition of eir
  • Saint-Gobain on its agreement with Sika and the Burkard family,
    including the CHF 3.2 billion acquisition of Schenker-Winkler Holding
    and associated transactions
  • Imagina Media Audiovisual in Orient Hontai Capital's
    acquisition of a majority stake from existing shareholders, valuing
    the company at €1.9 billion
  • MRH's £1.2 billion combination with MFG
  • Reliance Worldwide's £688 million acquisition of John Guest
  • Wilson Therapeutics on its SEK 7.1 billion sale to Alexion
  • Patricia Industries' SEK 7.0 billion acquisition of Piab Group
  • Owens & Minor's $710 million acquisition of Halyard
    Health's S&IP business
  • Total on the $545 million acquisition of several Gulf of Mexico
    assets from Cobalt International Energy, including a partnership with
    Statoil for the North Platte assets
  • Extant's $525 million sale to TransDigm
  • Dover on the spin-off of Apergy
  • Rhône's strategic partnership with, and sale of a 30% interest
    to, Eurazeo
  • Nippon Steel & Sumitomo Metal's acquisition of Ovako Group
  • H.C. Starck's sale of its Tantalum and Niobium division to JX
    Nippon Mining & Metals
  • RugsUSA in Comvest Partners' investment in the company

Mergers and Acquisitions (Announced)

Among the ongoing, large, publicly announced M&A transactions or
assignments on which Lazard advised during or since the 2018 second
quarter, or completed since June 30, 2018, are the following:

  • Aetna's $77 billion sale to CVS Health
  • Express Scripts' $67 billion sale to Cigna
  • The Supervisory Board of innogy in the company's €37.9
    billion takeover by E.ON
  • The Woodbridge Company in Thomson Reuters' sale of a 55% stake
    in its Financial & Risk business to Blackstone, valuing the business
    at $20 billion
  • AkzoNobel's €10.1 billion sale of its Specialty Chemicals
    business to Carlyle and GIC
  • Beni Stabili's merger with Covivio, creating a combined entity
    with a market capitalization of over €7 billion
  • Thales' €5.6 billion acquisition of Gemalto through a
    recommended all-cash offer
  • WGL Holdings' $6.4 billion sale to AltaGas*
  • WestRock's $4.9 billion acquisition of KapStone
  • Sky on the sale of its stake in Sky Betting & Gaming ("SBG") as
    part of SBG's $4.7 billion sale to The Stars Group*
  • Altice on the sale of a 49.99% stake in Starlight France to
    KKR, valuing the company at €3.6 billion
  • Quality Care Properties on its $3.9 billion sale to Welltower
    in conjunction with the sale of HCR ManorCare to ProMedica
  • Daily Mail & General Trust in the £2.5 billion sale of ZPG
    to Silver Lake*
  • Total's €2.5 billion acquisition of Direct Energie
  • Genworth Financial's $2.7 billion sale to China Oceanwide
  • Servier's $2.4 billion acquisition of Shire's Oncology business
  • Scotiabank's $2.2 billion acquisition of BBVA's 68% interest in
    BBVA Chile*
  • BASF's €1.6 billion acquisition of Solvay's global polyamide
    business
  • Archer Daniels Midland's €1.5 billion acquisition of Neovia
  • CDH Investments in the AUD 1.9 billion consortium acquisition
    of Sirtex
  • Space4 in its combination with Guala Closures, valuing Guala at
    €1.1 billion
  • Telia Company's SEK 9.2 billion acquisition of Bonnier
    Broadcasting
  • VEON on the $940 million sale of its tower business in Pakistan
  • Altice on the sale of a 75% stake in Towers of Portugal to a
    consortium, valuing the company at €660 million
  • Rolls-Royce's £500 million sale of its Commercial Marine
    business to KONGSBERG
  • Asco Industries' $650 million sale to Spirit AeroSystems
  • Liberty House Group's $500 million binding conditional offer to
    acquire Aluminium Dunkerque from Rio Tinto
  • Alpha Bank, Eurobank, National Bank of Greece and Piraeus
    Bank
    in the sale of majority stakes in Nireus and Selonda to
    Andromeda Group, AMERRA and Mubadala, valuing the combined business at
    approximately $500 million
  • Cirsa's sale to Blackstone*
  • Carrefour on the potential investment by Tencent and Yonghui in
    Carrefour China and a strategic cooperation agreement with Tencent in
    China
  • AviAlliance in the 20-year extension of the Athens
    International Airport Concession Agreement
  • Ardian in the sale of its stake in Siaci Saint Honore
  • Selmet's sale to Consolidated Precision Products
  • Investindustrial's acquisition of HTL Strefa

*Transaction completed since June 30, 2018

Capital Advisory

Among the publicly announced Capital Advisory transactions or
assignments on which Lazard advised during or since the second quarter
of 2018 were the following:

  • Special Committee of Independent Directors of VMware in
    VMware's declaration of an $11 billion cash dividend in connection
    with Dell's Class V tracking stock exchange transaction
  • AXA in the $3.2 billion initial public offering of AXA
    Equitable Holdings and concurrent $863 million offering of mandatory
    exchangeable bonds
  • Merlin Entertainments in relation to its £600 million revolving
    credit facility and $400 million senior notes issuance
  • EF Solare Italia, an equal JV between Enel and F2i, on its €1.0
    billion refinancing
  • Infigen Energy on its AUD 605 million corporate loan
  • Carel Industries on its €290 million initial public offering
  • KAEFER Isoliertechnik on its €250 million senior secured notes
    offering
  • Rise Broadband on its $205 million refinancing
  • Scorpio Tankers on its $189 million exchange of convertible
    notes
  • AKASOL's €118 million initial public offering

Sovereign Advisory

Among the publicly announced Sovereign Advisory assignments on which
Lazard advised during or since the second quarter of 2018 were the
following:

  • The Commonwealth of Australia
  • Southern Gas Corridor CJSC of Azerbaijan
  • Economic Development Board (The Kingdom of Bahrain)
  • Ministry of Finance (The Kingdom of Bahrain)
  • The Democratic Republic of the Congo
  • The Republic of the Congo
  • The Republic of Croatia
  • The Federal Democratic Republic of Ethiopia
  • The Gabonese Republic
  • The Hellenic Republic
  • The Hashemite Kingdom of Jordan
  • SNIM (The Islamic Republic of Mauritania)
  • The Republic of Mozambique
  • Nama Holding (Oman)
  • Oman Oil Company
  • Belgrade Nikola Tesla Airport (The Republic of Serbia)
  • Eskom Holdings (Republic of South Africa)
  • Banque Ouest Africaine de Développement (Togo)
  • Ukraine and certain sub-sovereign entities
  • NJSC Naftogaz of Ukraine
  • The Republic of Zimbabwe

Restructuring and Debt Advisory Assignments

Restructuring and debtor or creditor advisory assignments completed
during the second quarter of 2018 on which Lazard advised include: Breitburn
Energy Partners, GST AutoLeather, Remington Outdoor
, and Takata
in connection with their Chapter 11 bankruptcy restructurings; Community
Health Systems
in connection with its liability management and
refinancing transactions; and CGG's refinancing of its first lien
indebtedness.

Notable ongoing restructuring and debtor or creditor advisory
assignments on which Lazard advised during or since the second quarter
of 2018 include: Assured Guaranty in connection with Puerto
Rico's restructuring; Claire's Stores, FirstEnergy Solutions, Nine
West
, Seadrill*, and Toys "R" Us in connection with
their Chapter 11 or similar bankruptcy restructurings; lenders to Danaos
on the company's restructuring; Quality Care Properties on
strategic options in relation to HCR ManorCare; and an ad hoc group of
secured noteholders to Tops Markets with regard to the company's
restructuring.

*Assignment completed since June 30, 2018

***

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)   2018     2018     2017   2018 2017
 
Total revenue $ 771,528 $ 768,205 $ 729,946 0 % 6 %
Interest expense   (13,590 )   (13,507 )   (12,766 )
Net revenue 757,938 754,698 717,180 0 % 6 %
Operating expenses:
Compensation and benefits 416,159 405,047 414,612 3 % 0 %
 
Occupancy and equipment 29,240 30,238 30,828
Marketing and business development 28,228 25,659 24,027
Technology and information services 32,527 33,252 32,032
Professional services 16,714 12,431 11,234
Fund administration and outsourced services 33,227 35,184 18,338
Amortization and other acquisition-related (benefits) costs (8,483 ) 866 1,257
Other   10,386     26,193     12,351  
Subtotal   141,839     163,823     130,067   (13 %) 9 %
Operating expenses   557,998     568,870     544,679   (2 %) 2 %
 
Operating income 199,940 185,828 172,501 8 % 16 %
 
Provision for income taxes   51,561     24,167     51,600   NM (0 %)
Net income 148,379 161,661 120,901 (8 %) 23 %
Net income attributable to noncontrolling interests   1,416     1,969     523  
Net income attributable to Lazard Ltd $ 146,963   $ 159,692   $ 120,378   (8 %) 22 %
 
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding:
Basic 120,306,257 119,930,106 122,368,150 0 % (2 %)
Diluted 130,249,054 132,142,394 132,139,616 (1 %) (1 %)
 
Net income (loss) per share:
Basic $ 1.22 $ 1.33 $ 0.98 (8 %) 24 %
Diluted $ 1.13 $ 1.21 $ 0.91 (7 %) 24 %
 
 
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
           
Six Months Ended
June 30, June 30,
($ in thousands, except per share data)   2018     2017   % Change
 
Total revenue $ 1,539,733 $ 1,367,366 13 %
Interest expense   (27,097 )   (26,722 )
Net revenue 1,512,636 1,340,644 13 %
Operating expenses:
Compensation and benefits 821,206 776,413 6 %
 
Occupancy and equipment 59,478 58,312
Marketing and business development 53,887 43,779
Technology and information services 65,779 56,056
Professional services 29,145 22,696
Fund administration and outsourced services 68,411 34,251
Amortization and other acquisition-related (benefits) costs (7,617 ) 4,831
Other   36,579     21,608  
Subtotal   305,662     241,533   27 %
Operating expenses   1,126,868     1,017,946   11 %
 
Operating income 385,768 322,698 20 %
 
Provision for income taxes   75,728     91,367   (17 %)
Net income 310,040 231,331 34 %
Net income attributable to noncontrolling interests   3,385     3,400  
Net income attributable to Lazard Ltd $ 306,655   $ 227,931   35 %
 
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding:
Basic 120,118,182 122,591,656 (2 %)
Diluted 131,195,725 132,414,496 (1 %)
 
Net income per share:
Basic $ 2.55 $ 1.86 37 %
Diluted $ 2.34 $ 1.72 36 %
 
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(U.S. GAAP)
       
June 30, December 31,
($ in thousands)   2018     2017  
 

ASSETS

 
Cash and cash equivalents $ 845,167 $ 1,483,836
Deposits with banks and short-term investments 1,000,662 935,431
Cash deposited with clearing organizations and other segregated cash 37,089 35,539
Receivables 714,397 571,616
Investments 505,194 427,186
Goodwill and other intangible assets 382,360 391,364
Deferred tax assets 618,455 650,260
Other assets   524,668     433,445  
 
Total Assets $ 4,627,992   $ 4,928,677  
 

LIABILITIES & STOCKHOLDERS' EQUITY

 
Liabilities
Deposits and other customer payables $ 1,055,244 $ 992,338
Accrued compensation and benefits 403,495 593,781
Senior debt 1,191,277 1,190,383
Tax receivable agreement obligation 277,163 310,275
Other liabilities   587,709     582,995  
Total liabilities 3,514,888 3,669,772
 
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 652,013 788,140
Retained earnings 1,092,381 1,080,413
Accumulated other comprehensive loss, net of tax   (253,499 )   (232,518 )
Subtotal 1,492,193 1,637,333
Class A common stock held by subsidiaries, at cost   (437,031 )   (437,530 )
Total Lazard Ltd stockholders' equity 1,055,162 1,199,803
Noncontrolling interests   57,942     59,102  
Total stockholders' equity   1,113,104     1,258,905  
 
Total liabilities and stockholders' equity $ 4,627,992   $ 4,928,677  
 
 
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)   2018     2018     2017   2018   2017  
 
Revenues:
 
Financial Advisory $ 415,006 $ 388,856 $ 410,882 7 % 1 %
Asset Management 329,409 329,855 306,796 (0 %) 7 %
Corporate   (3,713 )   5,224     2,483   NM NM
 
Operating revenue (b) $ 740,702   $ 723,935   $ 720,161   2 % 3 %
                               
Expenses:
 
Adjusted compensation and benefits expense (c) $ 413,312   $ 403,956   $ 406,891   2 % 2 %
Ratio of adjusted compensation to operating revenue 55.8 % 55.8 % 56.5 %
 
Non-compensation expense (d) $ 118,481   $ 114,081   $ 116,111   4 % 2 %
Ratio of non-compensation to operating revenue 16.0 % 15.8 % 16.1 %
                               
Earnings:
 
Earnings from operations (e) $ 208,909   $ 205,898   $ 197,159   1 % 6 %
Operating margin (f) 28.2 % 28.4 % 27.4 %
 
Adjusted net income (g) $ 143,020   $ 165,915   $ 129,840   (14 %) 10 %
 
Diluted adjusted net income per share $ 1.10   $ 1.26   $ 0.98   (13 %) 12 %
 
Diluted weighted average shares 130,249,054 132,142,394 132,139,616 (1 %) (1 %)
 
Effective tax rate (h) 26.9 % 13.9 % 29.6 %
 
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)   2018     2017   % Change  
 
Revenues:
 
Financial Advisory $ 803,862 $ 746,694 8 %
Asset Management 659,264 585,224 13 %
Corporate   1,511     12,677   (88 %)
 
Operating revenue (b) $ 1,464,637   $ 1,344,595   9 %
                   
Expenses:
 
Adjusted compensation and benefits expense (c) $ 817,268   $ 759,696   8 %
Ratio of adjusted compensation to operating revenue 55.8 % 56.5 %
 
Non-compensation expense (d) $ 232,562   $ 223,581   4 %
Ratio of non-compensation to operating revenue 15.9 % 16.6 %
                   
Earnings:
 
Earnings from operations (e) $ 414,807   $ 361,318   15 %
Operating margin (f) 28.3 % 26.9 %
 
Adjusted net income (g) $ 308,935   $ 239,981   29 %
 
Diluted adjusted net income per share $ 2.35   $ 1.81   30 %
 
Diluted weighted average shares 131,195,725 132,414,496 (1 %)
 
Effective tax rate (h) 20.4 % 28.3 %
 
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,
  2018     2018     2017 Qtr to Qtr YTD
 
Equity:
Emerging Markets $ 47,207 $ 53,862 $ 52,349 (12.4 %) (9.8 %)
Global 43,932 44,403 43,663 (1.1 %) 0.6 %
Local 40,688 41,407 42,650 (1.7 %) (4.6 %)
Multi-Regional   67,014     70,405     70,696 (4.8 %) (5.2 %)
Total Equity 198,841 210,077 209,358 (5.3 %) (5.0 %)
Fixed Income:
Emerging Markets 16,453 18,191 17,320 (9.6 %) (5.0 %)
Global 4,155 4,418 4,109 (6.0 %) 1.1 %
Local 5,306 5,176 4,497 2.5 % 18.0 %
Multi-Regional   8,151     8,871     9,154 (8.1 %) (11.0 %)
Total Fixed Income 34,065 36,656 35,080 (7.1 %) (2.9 %)
Alternative Investments 2,764 2,884 2,846 (4.2 %) (2.9 %)
Private Equity 1,458 1,455 1,478 0.2 % (1.4 %)
Cash Management   748     608     697 23.0 % 7.3 %
Total AUM $ 237,876   $ 251,680   $ 249,459 (5.5 %) (4.6 %)
 
 
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
 
AUM - Beginning of Period $ 251,680 $ 215,178 $ 249,459 $ 197,910
 
Net Flows (3,846 ) (365 ) (1,439 ) 2,938
Market and foreign exchange
appreciation (depreciation)   (9,958 )   10,948     (10,144 )   24,913  
 
AUM - End of Period $ 237,876   $ 225,761   $ 237,876   $ 225,761  
 
Average AUM $ 245,127   $ 222,208   $ 250,614   $ 214,495  
 
% Change in average AUM   10.3 %   16.8 %
 
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)   2018     2018     2017     2018     2017  
 
Operating Revenue
Net revenue - U.S. GAAP Basis $ 757,938 $ 754,698 $ 717,180 $ 1,512,636 $ 1,340,644
 
Adjustments:
Revenue related to noncontrolling interests (i) (5,622 ) (5,217 ) (3,098 ) (10,839 ) (8,040 )
(Gains) losses related to Lazard Fund Interests ("LFI") and other
similar arrangements
499 1,436 (5,753 ) 1,935 (13,106 )
Distribution fees, reimbursable deal costs and bad debt expense (j) (24,718 ) (39,514 ) - (64,232 ) -
Interest expense   12,605     12,532     11,832     25,137     25,097  
 
Operating revenue, as adjusted (b) $ 740,702   $ 723,935   $ 720,161   $ 1,464,637   $ 1,344,595  
 
Compensation and Benefits Expense
Compensation and benefits expense - U.S. GAAP Basis $ 416,159 $ 405,047 $ 414,612 $ 821,206 $ 776,413
 
Adjustments:
(Charges) credits pertaining to LFI and other similar arrangements 499 1,436 (5,753 ) 1,935 (13,106 )
Compensation related to noncontrolling interests (i)   (3,346 )   (2,527 )   (1,968 )   (5,873 )   (3,611 )
 
Compensation and benefits expense, as adjusted (c) $ 413,312   $ 403,956   $ 406,891   $ 817,268   $ 759,696  
 
Non-Compensation Expense
Non-compensation expense - Subtotal - U.S. GAAP Basis $ 141,839 $ 163,823 $ 130,067 $ 305,662 $ 241,533
 
Adjustments:
Expenses associated with ERP system implementation (k) (5,404 ) (7,426 ) (8,861 ) (12,830 ) (8,861 )
Expenses related to office space reorganization (l) (1,036 ) (1,389 ) (3,161 ) (2,425 ) (3,161 )
Distribution fees, reimbursable deal costs and bad debt expense (j) (24,718 ) (39,514 ) - (64,232 ) -
Amortization and other acquisition-related benefits (costs) (m) 8,483 (866 ) (1,257 ) 7,617 (4,831 )
Non-compensation expense related to noncontrolling interests (i)   (683 )   (547 )   (677 )   (1,230 )   (1,099 )
 
Non-compensation expense, as adjusted (d) $ 118,481   $ 114,081   $ 116,111   $ 232,562   $ 223,581  
 
Pre-Tax Income and Earnings From Operations
Operating Income - U.S. GAAP Basis $ 199,940 $ 185,828 $ 172,501 $ 385,768 $ 322,698
 
Adjustments:
Expenses associated with ERP system implementation (k) 5,404 7,426 8,861 12,830 8,861
Expenses related to office space reorganization (l) 1,036 1,389 3,161 2,425 3,161
Acquisition-related (benefits) costs (m) (9,346 ) 33 435 (9,313 ) 3,180
Net income related to noncontrolling interests (i)   (1,416 )   (1,969 )   (454 )   (3,385 )   (3,331 )
Pre-tax income, as adjusted 195,618 192,707 184,504 388,325 334,569
Interest expense 12,605 12,532 11,832 25,137 25,097
Amortization (LAZ only)   686     659     823     1,345     1,652  
Earnings from operations, as adjusted (e) $ 208,909   $ 205,898   $ 197,159   $ 414,807   $ 361,318  
 
Net Income (loss) attributable to Lazard Ltd
Net income attributable to Lazard Ltd - U.S. GAAP Basis $ 146,963 $ 159,692 $ 120,378 $ 306,655 $ 227,931
Adjustments:
Expenses associated with ERP system implementation (k) 5,404 7,426 8,861 12,830 8,861
Expenses related to office space reorganization (l) 1,036 1,389 3,161 2,425 3,161
Acquisition-related (benefits) costs (m) (9,346 ) 33 435 (9,313 ) 3,180
Tax benefit allocated to adjustments   (1,037 )   (2,625 )   (2,995 )   (3,662 )   (3,152 )
 
Net income, as adjusted (g) $ 143,020   $ 165,915   $ 129,840   $ 308,935   $ 239,981  
 
Diluted net income per share:
U.S. GAAP Basis $ 1.13 $ 1.21 $ 0.91 $ 2.34 $ 1.72
Non-GAAP Basis, as adjusted $ 1.10 $ 1.26 $ 0.98 $ 2.35 $ 1.81
 
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.
 
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
non-controlling interests (see (i) 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) for the three
and six month periods ended June 30, 2018 and for the three month
period ended March 31, 2018, revenue related to distribution fees
and reimbursable deal costs in accordance with the newly adopted
revenue recognition guidance and bad debt expense (see (j) below),
and (iv) interest expense primarily related to corporate financing
activities.
(c) A non-GAAP measure which excludes (i) (charges) credits related to
the changes in the fair value of the compensation liability recorded
in connection with Lazard Fund Interests and other similar deferred
compensation arrangements, and (ii) compensation and benefits
related to noncontrolling interests (see (i) below).
(d) A non-GAAP measure which excludes (i) expenses associated with ERP
system implementation (see (k) below), (ii) expenses related to
office space reorganization (see (l) below), (iii) for the three and
six month periods ended June 30, 2018 and for the three month period
ended March 31, 2018, expenses related to distribution fees and
reimbursable deal costs in accordance with the newly adopted revenue
recognition guidance and bad debt expense (see (j) below), (iv)
amortization and other acquisition-related benefits (costs) (see (m)
below), and (v) expenses related to noncontrolling interests (see
(i) below).
(e) A non-GAAP measure which excludes (i) expenses associated with ERP
system implementation (see (k) below), (ii) expenses related to
office space reorganization (see (l) below), (iii)
acquisition-related (benefits) costs (see (m) below), (iv) net
revenue and expenses related to noncontrolling interests (see (i)
below), and (v) 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 (k) below), (ii) expenses related to
office space reorganization (see (l) below), and (iii) amortization
and other acquisition-related (benefits) costs, net of tax benefits
(see (m) below).
(h) 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 $52,599, $26,792, and $54,664 for
the three month periods ended June 30, 2018, March 31, 2018, and
June 30, 2017, respectively, $79,391 and $94,588 for the six month
periods ended June 30, 2018 and 2017 and the denominator of which is
pre-tax income of $195,618, $192,707, and $184,504 for the three
month periods ended June 30, 2018, March 31, 2018, and June 30,
2017, respectively, $388,325 and $334,569 for the six month periods
ended June 30, 2018 and 2017.
(i) Noncontrolling interests include revenue and expenses principally
related to Edgewater, and is a non-GAAP measure.
(j) 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.
(k) Represents expenses associated with Enterprise Resource Planning
(ERP) system implementation.
(l) Represents incremental rent expense and lease abandonment costs
related to office space reorganization and an onerous lease
provision.
(m) Primarily represents the change in fair value of the contingent
consideration associated with certain business acquisitions.
NM Not meaningful

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