Lazard(LAZ) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Lazard reported record quarterly operating revenue of $849 million for Q4 2020, which is 20% higher than the same period last year [12] - Adjusted earnings per share for Q4 2020 increased by 82% to $1.66 [12] - Annual revenue for 2020 was approximately $2.5 billion, showing a strong recovery from the volatile environment of 2020 [12] Business Line Data and Key Metrics Changes - Financial Advisory achieved record quarterly revenue of $509 million in Q4 2020, which is 23% higher than the previous peak in 2018 [13] - Asset Management generated $336 million in revenue for Q4 2020, up 12% from the prior year [13] - Average assets under management (AUM) for Q4 2020 were $246 billion, up 3% year-over-year and up 9% from Q3 2020 [14] Market Data and Key Metrics Changes - Global announcement volume for M&A increased by 3% in 2020, despite a 10% decline in market volume [7] - The volume of French and UK announcements increased by 34% and 37% respectively from the prior year [7] - Lazard finished 2020 with AUM of $259 billion, with a slight decrease to approximately $258 billion as of January 28, 2021 [15] Company Strategy and Development Direction - The company is focused on growth opportunities in both Financial Advisory and Asset Management, investing in talent and technology [10][22] - Lazard's restructuring practice ranked number one globally, indicating a strong position in the market [8] - The company is actively recruiting talent from smaller asset management firms to enhance its capabilities [38] Management's Comments on Operating Environment and Future Outlook - The macroeconomic outlook remains uncertain, but fiscal and monetary stimulus, along with vaccine rollouts, are expected to drive recovery in the second half of 2021 [20] - There is strong client activity in Financial Advisory, with expectations of increased M&A activity driven by technology disruption and shareholder activism [21] - In Asset Management, low interest rates are expected to drive demand for risk assets and differentiated investment strategies [22] Other Important Information - The compensation ratio for 2020 was 59.5%, up from 57.5% in 2019, reflecting investments for growth [17] - The company returned $51 million to shareholders in Q4 2020 and resumed its share repurchase program [18] - Lazard's cash and cash equivalents were approximately $1.4 billion as of December 31, 2020 [18] Q&A Session Summary Question: Context of restructuring business in Europe - Management indicated that restructuring mandates in 2020 were primarily from companies already facing difficulties before the pandemic, with expectations for a decent restructuring environment in 2021 [27] Question: Investment banker productivity outlook - Management discussed that productivity is viewed as an output and is expected to grow as bankers utilize more tools and services to generate fees [33] Question: Growth focus in Asset Management - Management highlighted opportunities in smaller asset management firms and the importance of integrating new teams into their platform [38] Question: Operating margins trajectory - Management noted that operating margins are closely tied to revenue growth, with expectations for improvement as revenue increases [56] Question: M&A environment in Europe - Management expressed optimism for a constructive M&A environment in Europe, driven by low interest rates and technological disruption [61] Question: ESG-focused products - Management emphasized the importance of ESG in both Asset Management and advisory services, aiming to integrate sustainability into investment practices [66] Question: Update on unfunded mandates - Management reported strong gross flows and an active pipeline of unfunded mandates, with diversification across various strategies [71]