Lazard(US:LAZ)2025-10-27 20:31M&A Transactions - Completed M&A transactions in Q3 2025 reached a total value of $1,028 billion, a 40% increase from $734 billion in Q3 2024[332] - The number of completed M&A transactions decreased by 21% to 7,663 in Q3 2025 compared to 9,640 in Q3 2024[332] - The value of announced M&A transactions in Q3 2025 was $1,276 billion, a 42% increase from $898 billion in Q3 2024[332] - The value of completed M&A transactions for the first nine months of 2025 was $2,761 billion, a 25% increase from $2,202 billion in the same period of 2024[332] - The number of announced M&A transactions for the first nine months of 2025 was 29,899, a 5% decrease from 31,447 in the same period of 2024[332] Asset Management Performance - Asset Management's AUM is significantly influenced by equity market performance, with the MSCI World Index increasing by 7% from June 30, 2025, and 17% from September 30, 2024[336] - The total AUM for Lazard's Asset Management segment is affected by market movements and foreign currency exchange rate volatility, impacting revenue levels[336] - Total assets under management (AUM) increased by $39 billion, or 17%, to $265 billion as of September 30, 2025, due to market appreciation and net inflows[410] - Approximately 84% of AUM was managed on behalf of institutional and intermediary clients as of September 30, 2025, up from 82% at the end of 2024[411] - For the three months ended September 30, 2025, total AUM increased to $264,537 million, up from $248,360 million in the same period of 2024, representing a growth of 6.5%[414] Financial Performance - Lazard's net revenue for the three months ended September 30, 2025, was $748,078,000, a decrease of 4.7% compared to $784,866,000 for the same period in 2024[361] - Operating income for the three months ended September 30, 2025, was $94,930,000, representing 12.7% of net revenue, down from 20.5% in the prior year[361] - Net income attributable to Lazard for the three months ended September 30, 2025, was $71,247,000, a decrease from $107,938,000 in the same period of 2024[361] - Net revenue decreased by $37 million, or 5%, while adjusted net revenue increased by $79 million, or 12%, compared to the 2024 period[376] - Adjusted operating income for the nine months ended September 30, 2025, was $296 million, an increase of $37 million, or 14%, compared to $259 million in 2024[407] Expenses and Compensation - Compensation and benefits expense increased to $498,212,000 for the three months ended September 30, 2025, compared to $465,405,000 in the same period of 2024[361] - Adjusted compensation and benefits expense was $1,400 million, an increase of $29 million, or 2%, with a ratio of 65.5% to adjusted net revenue[386] - Non-compensation expense increased by $35 million, or 7%, primarily due to increased marketing and technology expenses[387] - Adjusted non-compensation expense increased by $10 million, or 8%, compared to the 2024 period[379] - The ratio of adjusted compensation and benefits expense to adjusted net revenue was 65.5% for the 2025 period, compared to 66.0% for the 2024 period[378] Tax and Regulatory Compliance - The effective tax rate was 22.6%, compared to 28.0% for the 2024 period, primarily due to changes in the geographic mix of earnings[381] - The effective tax rate decreased to 18.9% in 2025 from 25.4% in 2024, primarily due to discrete benefits for share-based compensation[389] - The company is monitoring developments related to the OECD's 15% minimum tax on multinational companies, known as "Pillar Two"[356] - The company actively monitors its regulatory capital base to comply with minimum capital requirements across different jurisdictions[467] Cash and Investments - Cash provided by operating activities was $120 million for the nine months ended September 30, 2025, down from $380 million in the same period of 2024[442] - As of September 30, 2025, the company had approximately $1,172 million in cash and cash equivalents, including $658 million held outside the U.S.[448] - The company issued $300 million of 5.625% senior notes due in 2035 in Q3 2025, using the proceeds to redeem all outstanding 2027 Notes[457] - As of September 30, 2025, total investments amounted to $623.7 million, an increase from $614.9 million on December 31, 2024[497] - Seed investments totaled $294.7 million as of September 30, 2025, up from $195.2 million at the end of 2024, with equity investments increasing from $123.5 million to $225.3 million[497] Shareholder Activities - During the nine months ended September 30, 2025, the company repurchased 879,334 shares at an average price of $46.64, with $159 million remaining under the share repurchase authorization[464] - A quarterly dividend of $0.50 per share was declared on October 22, 2025, payable on November 14, 2025[465] - The company aims to offset dilution from share-based incentive compensation plans through stock repurchases, with the rate of purchases varying based on various factors[464] Credit and Risk Management - The allowance for credit losses is determined based on historical credit loss experience and client creditworthiness assessments[473] - The company recognizes liabilities for unrecognized tax benefits based on amounts likely to be settled with relevant taxing authorities, involving significant judgment[482] - The company's exposure to equity market price risk was approximately $279 million as of September 30, 2025, compared to $164 million at the end of 2024[501] - Customers and other receivables included $130 million in fully collateralized loans as of September 30, 2025, compared to $83 million at the end of 2024[508] - The company does not hedge investments associated with LFI and similar deferred compensation arrangements due to lack of net economic exposure[498]