Lazard Ltd Announces Conversion to C-Corporation

Financial Advisory momentum in Private Capital Advisory and Restructuring

Asset Management AUM of $228 billion increased 15% since third quarter 2022

Returned $285 million in capital to shareholders year to date

Lazard Ltd (NYSE: LAZ) today reported operating revenue¹ of $532 million for the quarter ended September 30, 2023. Net income, as adjusted², was $10 million, or $0.10 per share, diluted, for the quarter. On a U.S. GAAP basis, third-quarter 2023 net income was $7 million, or $0.06 per share, diluted.

For the first nine months of 2023 net income, as adjusted, was $10 million, or $0.10 per share, diluted. On a U.S. GAAP basis, net loss for the first nine months of 2023 was $139 million, or $1.60 per share, diluted.

"While our third-quarter results reflect challenging conditions for M&A, we view the market as poised for a recovery in the quarters ahead. In addition, we see continued solid performance in Asset Management and we expect changes made in that business to contribute to future growth," said Peter R. Orszag, Chief Executive Officer, Lazard. “Today's announcement of our conversion to a C-Corporation positions us to attract a broader base of investors, enhances liquidity and reflects our focus on delivering long-term value for shareholders.”

Note: Endnotes are on page 5 of this release. A reconciliation of adjusted GAAP to U.S. GAAP is on pages 13-14.

OPERATING REVENUE

Operating revenue was $532 million for the third quarter of 2023, and $1,679 million for the first nine months of 2023, 27% and 20% lower, respectively, from the comparable 2022 periods.

Financial Advisory

For the third quarter of 2023, Financial Advisory operating revenue was $261 million, 42% lower than the third quarter of 2022.

For the first nine months of 2023, Financial Advisory operating revenue was $879 million, 30% lower than the first nine months of 2022.

During and since the third quarter of 2023, Lazard has been engaged in significant and complex M&A transactions globally, including the following (clients are in italics): Westrock’s $33.5 billion combination with Smurfit Kappa Group; Biogen’s $7.3 billion acquisition of Reata Pharmaceuticals; HEICO’s $2.05 billion acquisition of Wencor; RPT’s $2 billion acquisition by Kimco Realty; Tawal’s €1.2 billion acquisition of mobile tower infrastructure assets from BC Partners-backed United Group; SAES Getters’ $900 million divestiture of its nitinol business to Resonetics; STERIS’ $540 million acquisition of surgical instrumentation assets from Becton, Dickinson and Company; Anthesis’ sale of a majority stake of the company to Carlyle; The Ferrero Group on Ferrara Candy’s acquisition of Dori Alimentos S.A.; IBM’s sale of The Weather Company assets to Francisco Partners and Mitsui’s acquisition of a 70% Stake in Nutrinova from Celanese.

Lazard's preeminent restructuring and liability management practices have been engaged in a broad range of visible and complex restructuring and debt advisory assignments, including debtor roles involving Air Methods, Bed Bath & Beyond, Inversiones Latin America Power, IKKS, Latécoère, National CineMedia, SiO2 Medical Products, and creditor and/or related party roles involving Endo Pharmaceuticals, Hilding Anders, Orpea, Party City, SVB Financial Group, Telegraph Media Group and Venator.

Our Private Capital Advisory practice remains active and engaged in assignments, including BPEA EQT's $6.5 billion merger of and cross-fund investment in Vistra and Tricor, Paine Schwartz Partners' raise of $1.7 billion for Paine Schwartz Food Chain Fund VI, L.P. and Wells Fargo’s $2 billion sale of private equity fund investments. Our Sovereign Advisory practice continues to be active in advising governments, sovereign and sub-sovereign entities across developed and emerging markets, including assignments for the governments of Sri Lanka and Greece.

For a list of publicly announced Financial Advisory transactions on which Lazard advised in the third quarter of 2023, or continued to advise or completed since September 30, 2023, please visit our website at www.lazard.com/financial-advisory/transactions/.

Asset Management

For the third quarter of 2023, Asset Management operating revenue was $262 million, flat compared to the third quarter of 2022. For the first nine months of 2023, Asset Management operating revenue was $794 million, 5% lower than the first nine months of 2022.

For the third quarter of 2023, management fees and other revenue was $260 million, 8% higher than the third quarter of 2022, and in line with the second quarter of 2023. For the first nine months of 2023, management fees and other revenue was $780 million, 1% lower than the first nine months of 2022.

Average assets under management (AUM) for the third quarter of 2023 was $236 billion, 11% higher than the third quarter of 2022, and level with the second quarter of 2023. Average AUM for the first nine months of 2023 was $233 billion, level with the first nine months of 2022.

AUM as of September 30, 2023, was $228 billion, 5% lower than June 30, 2023, and 15% higher than September 30, 2022. The sequential change from June 30, 2023 was driven by market depreciation of $5.8 billion, foreign exchange depreciation of $3.3 billion and net outflows of $2.0 billion.

For the third quarter of 2023, incentive fees were $2 million, compared to $22 million for the third quarter of 2022. For the first nine months of 2023, incentive fees were $14 million, compared to $54 million for the first nine months of 2022.

OPERATING EXPENSES

Compensation and Benefits³

For the third quarter of 2023, adjusted compensation and benefits expense¹ was $364 million, compared to $434 million for the third quarter of 2022. The adjusted compensation ratio for the third quarter of 2023 was 68.4%, compared to the third-quarter 2022 ratio of 60.0%.

For the first nine months of 2023, adjusted compensation and benefits expense was $1,187 million, compared to $1,238 million for the first nine months of 2022.

Our goal remains to maintain a compensation-to-operating revenue ratio over the cycle in the mid- to high-50s percentage range on both an awarded and adjusted basis, while targeting a consistent deferral policy.

Non-Compensation Expense

For the third quarter of 2023, adjusted non-compensation expense¹ was $137 million, 7% higher than the third quarter of 2022, primarily reflecting increased occupancy costs as well as higher technology and professional services expenses.

The ratio of adjusted non-compensation expense to operating revenue was 25.9% for the third quarter of 2023, compared to 17.7% for the third quarter of 2022.

Adjusted non-compensation expense for the first nine months of 2023 was $423 million, 13% higher than the first nine months of 2022. The ratio of adjusted non-compensation expense to operating revenue for the first nine months of 2023 was 25.2%, compared to 17.9% for the first nine months of 2022.

Our goal remains to maintain an adjusted non-compensation expense-to-operating revenue ratio over the cycle of 16% to 20%.

TAXES

The effective tax rate on an adjusted basis¹ was 8.4% for the third quarter of 2023 and 3.9% for the first nine months of 2023, compared to 25.1% and 25.6% for the respective 2022 periods.

LAZARD LTD CONVERSION TO U.S. C-CORPORATION

Lazard Ltd announced today its intention to convert to a U.S. C-Corporation effective January 1, 2024. The conversion is expected to be non-taxable to Lazard and its shareholders and timing is subject to compliance with global regulatory requirements. As we build on our foundation for earnings growth across our businesses, we believe the conversion to a corporation will simplify shareholders' tax reporting, may act as a catalyst for enhanced shareholder ownership and potentially provides increased liquidity benefits for our stock. Conversion to a C-Corporation is expected to result in a low single-digit increase to our effective tax rate, subject to a normalized level of earnings.

CAPITAL MANAGEMENT AND BALANCE SHEET

In the third quarter of 2023, Lazard returned $52 million to shareholders, which included: $43 million in dividends; $3 million in repurchases of our common stock; and $5 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

In the first nine months of 2023, Lazard returned $285 million to shareholders, which included: $129 million in dividends; $102 million in repurchases of our common stock; and $54 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

During the first nine months of 2023, we repurchased 2.8 million shares. As of September 30, 2023, our remaining share repurchase authorization was $200 million.

On October 25, 2023, Lazard declared a quarterly dividend of $0.50 per share on its outstanding common stock. The dividend is payable on November 17, 2023, to stockholders of record on November 6, 2023.

Lazard’s financial position remains strong. As of September 30, 2023, our cash and cash equivalents were $653 million. Stockholders’ equity related to Lazard’s interests was $361 million.

ENDNOTES

CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. ET on October 26, 2023, to discuss the company’s financial results for the third quarter and first nine months of 2023. The conference call can be accessed via a live audio webcast available through Lazard’s Investor Relations website at www.lazard.com, or by dialing 1 800-245-3047 (toll-free, U.S. and Canada) or +1 203-518-9765 (outside of the U.S. and Canada), 15 minutes prior to the start of the call. Conference ID: LAZQ323.

A replay of the conference call will be available by 10:00 a.m. ET, October 26, 2023, via the Lazard Investor Relations website at www.lazard.com, or by dialing +1 800-839-3012 (toll-free, U.S. and Canada) or +1 402-220-7232 (outside of the U.S. and Canada).

ABOUT LAZARD

Lazard, one of the world's preeminent financial advisory and asset management firms, operates in North and South America, Europe, Asia and Australia. Celebrating its 175^th year, the firm provides advice on mergers and acquisitions, capital markets and other strategic matters, restructuring and liability management, and asset management services to corporations, partnerships, institutions, governments and individuals. For more information on Lazard, please visit www.lazard.com. Follow Lazard at @Lazard.

Cautionary Note Regarding Forward-Looking Statements:

This press release contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target,” “goal,” or “continue,” and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our strategies, business plans and initiatives and anticipated trends in our business. These forward-looking statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements.

These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and also discussed from time to time in our reports on Forms 10-Q and 8-K, including the following:

• A decline in general economic conditions or the global or regional financial markets;
• A decline in our revenues, for example due to a decline in overall mergers and acquisitions (M&A) activity, our share of the M&A market or our assets under management (AUM);
• Losses caused by financial or other problems experienced by third parties;
• Losses due to unidentified or unanticipated risks;
• A lack of liquidity, i.e., ready access to funds, for use in our businesses; and
• Competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels
• In the event of a change or adverse interpretation of relevant income tax law, regulation or treaty, or a failure to qualify for treaty benefits, or in the event tax authorities challenge our tax computations or classifications.

Although we believe the statements reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, achievements or events. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this release to conform our prior statements to actual results or revised expectations and we do not intend to do so.

Lazard Ltd is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, Lazard and its operating companies use their websites, Lazard’s Twitter account (twitter.com/Lazard) and other social media sites to convey information about their businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of assets under management in various mutual funds, hedge funds and other investment products managed by Lazard Asset Management LLC and Lazard Frères Gestion SAS. Investors can link to Lazard and its operating company websites through www.lazard.com.

***

LAZ-EPE

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.

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.

Note: Average AUM generally represents the average of the monthly ending AUM balances for the period.

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Notes to Financial Schedules.

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Notes to Financial Schedules.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231026184118/en/