Lazard(US:LAZ)2023-05-01 16:00Financial Performance - Consolidated net revenue for the first quarter of 2023 was derived from Financial Advisory (51%), Asset Management (52%), and Corporate (-3%) segments [256]. - Lazard's net revenue for the three months ended March 31, 2023, was $542,436, a decrease of 22% compared to $694,892 in the same period of 2022 [296]. - Operating income for the same period was a loss of $36,924, compared to an operating income of $159,728 in the prior year, representing a significant decline [296]. - Net income attributable to Lazard Ltd for the first quarter of 2023 was a loss of $22,172, compared to a net income of $113,876 in the same quarter of 2022 [296]. - Operating revenue decreased by $172 million, or 25%, to $527 million for the three months ended March 31, 2023, compared to $699 million in 2022 [309]. - Financial Advisory net revenue decreased by $113 million, or 29%, primarily due to a reduction in the number of fees greater than $10 million [321]. - Net revenue for the Asset Management segment decreased by $54 million, or 16%, to $284.04 million in Q1 2023 compared to $338.50 million in Q1 2022 [338]. Market Activity - Completed M&A transactions in Q1 2023 saw a total value of $617 billion, a decrease of 51% from $1,262 billion in Q1 2022, with the number of deals dropping by 32% [267]. - Announced M&A transactions in Q1 2023 had a total value of $589 billion, down 48% from $1,123 billion in Q1 2022, with a 25% decrease in the number of deals [267]. - The number of corporate defaults increased to 33 in Q1 2023 from 25 in Q1 2022, indicating a rise in restructuring activity [268]. - The global macroeconomic environment remains uncertain, characterized by significant inflation and rising interest rates, impacting M&A activity [258]. Asset Management - Total Assets Under Management (AUM) increased by $16 billion, or 7%, to $232 billion as of March 31, 2023, compared to $216 billion at December 31, 2022 [327]. - Approximately 84% of AUM was managed on behalf of institutional clients as of March 31, 2023, down from 85% at the end of 2022 [328]. - The company experienced a 12% decrease in average AUM for the first quarter of 2023 compared to the same quarter in 2022 [327]. - Equity AUM decreased from $221.01 billion in Q1 2022 to $178.63 billion in Q1 2023, a decline of 19.2%, while Fixed Income AUM decreased from $46.29 billion to $45.46 billion, a decline of 1.8% [332]. - Average AUM for Q1 2023 was $226.85 billion, a decrease of 11.5% from $256.43 billion in Q1 2022 [335]. Cost Management - Compensation and benefits expenses increased to $449,967, up from $396,841 in the previous year, reflecting a rise of approximately 13% [296]. - The company is implementing cost-saving initiatives expected to reduce approximately 10% of its workforce in 2023, with $21 million in associated expenses recorded for the first quarter [289]. - Additional costs of approximately $95 million related to compensation and benefits are anticipated in subsequent quarters of 2023 [290]. - Adjusted compensation and benefits expense was $399 million, a decrease of $10 million, or 2%, compared to $409 million in the prior year, with the ratio to operating revenue increasing to 75.7% from 58.5% [310]. - Adjusted non-compensation expense increased by $25 million, or 21%, to $142 million, with the ratio to operating revenue rising to 27.0% from 16.8% [311]. Shareholder Returns - Total stockholders' equity decreased to $508 million as of March 31, 2023, down from $675 million at December 31, 2022, primarily due to a net loss of $21 million and stock repurchases totaling $99 million [366]. - During the three months ended March 31, 2023, Lazard repurchased 2,692,161 shares at an average price of $36.75 per share, with $203 million remaining under the share repurchase authorization [369]. - On April 26, 2023, the Board of Directors declared a quarterly dividend of $0.50 per share, payable on May 19, 2023 [370]. Regulatory and Compliance - Lazard's financial condition is subject to regulatory capital requirements in various jurisdictions, which may restrict the flow of funds to and from affiliates [372]. - For the 12-month period ending March 31, 2023, Lazard's Consolidated Leverage Ratio was 1.93 to 1.00 and the Consolidated Interest Coverage Ratio was 13.80 to 1.00, indicating compliance with financial covenants [358]. Operational Risk Management - The Company has implemented a framework to monitor and manage operational risk, including internal controls and business continuity programs [420]. - Management regularly reviews the investment profile and credit profile of depositor banks to adjust deposit or investment thresholds as necessary [419]. - The Company maintains insurance policies to protect against accidental loss and significant financial impacts [420].