Lazard(US:LAZ)2021-04-30 16:11Financial Data and Key Metrics Changes - The company reported a 15% increase in operating revenue for Q1 2021, with financial advisory revenue of $317 million, an 8% increase year-over-year [7][10] - Asset management revenue for Q1 2021 was $328 million, reflecting a 22% increase from the previous year [10] - Assets Under Management (AUM) reached a record level of $265 billion, up 37% year-over-year and 2% sequentially [11] Business Line Data and Key Metrics Changes - Financial advisory showed strong momentum with increased M&A activity, particularly in the $1 billion to $10 billion range and in Europe [8][9] - The capital advisory business is growing, advising clients on capital structure and ESG [9] - In asset management, management fees increased due to a larger base of AUM and strong incentive fees from various strategies [10] Market Data and Key Metrics Changes - The volume of publicly announced M&A transactions increased significantly compared to last year, with a notable rise in Europe [8][9] - Net outflows of $1.7 billion were primarily from the emerging markets and equity platform, but net inflows were achieved in convertibles and international equities [12] Company Strategy and Development Direction - The company is investing in growth areas such as sustainability, ESG, and alternative strategies in asset management [14][15] - Plans for significant senior hires in financial advisory to enhance coverage of private equity sponsors [16] - The launch of Lazard Growth Acquisition Corp I, a SPAC, indicates a focus on sectors with competitive expertise [17] Management's Comments on Operating Environment and Future Outlook - The global macroeconomic environment is improving, supported by fiscal and monetary stimulus, which is expected to drive strong growth in 2021 and 2022 [23][24] - The company anticipates an increase in transaction closings in financial advisory and continued demand for risk assets in asset management [27][28] - Management remains focused on profitable growth and shareholder value while adapting to changing market conditions [29] Other Important Information - The effective tax rate for Q1 was 28.6%, with expectations for the annual rate to be in the mid-20% range [19] - The company returned $237 million to shareholders in Q1, including $49 million in dividends and $123 million in share repurchases [19][20] Q&A Session Summary Question: M&A activity in Europe - Management noted a pickup in M&A activity in Europe, particularly in the financial sponsor sector, and expects continued improvement [36][37] Question: Risks to M&A activity - Management discussed the potential impact of corporate tax reform and interest rate hikes on M&A activity, suggesting that financing remains available and confidence levels are improving [41][46] Question: Strategy to increase market share with sponsors - Management acknowledged underrepresentation in the sponsor market and plans to improve coverage through senior hires [50] Question: Advisory revenue performance - Management indicated that Q1 advisory revenue was affected by timing and expects stronger performance in subsequent quarters [58] Question: Asset management fee dynamics - Management explained that fee rates were impacted by outflows from higher fee strategies and inflows into lower fee areas, but gross inflows have been increasing [70][71] Question: Non-compensation expenses outlook - Management expects non-compensation expenses to rise as business activity increases, but anticipates a lower run rate compared to historical levels [78][81] Question: Asset management strategy and inflows - Management expressed optimism about reaching a point of consistent net inflows and highlighted the strategy of acquiring smaller teams to enhance AUM [95][96] Question: Share repurchase strategy - Management confirmed plans to continue share repurchases to normalize cash levels, with a focus on maintaining a healthy balance sheet [102][103] Question: Hiring strategy in advisory - Management discussed plans for significant senior hires to capitalize on growth opportunities in advisory services [110]