Lazard(US:LAZ)2025-04-25 14:51Financial Data and Key Metrics Changes - Firmwide adjusted net revenue for Q1 2025 was $643 million, with financial advisory adjusted net revenue at $370 million, a decrease of 17% year-over-year [16][17] - Asset management adjusted net revenue was $264 million, down 4% from the prior year quarter, with management fees of $206 million, a 1% decrease from the previous quarter [19][20] - The adjusted compensation expense was $421 million, resulting in a compensation ratio of 65.5%, compared to 66% one year ago [21] Business Line Data and Key Metrics Changes - Financial advisory revenue associated with private capital was over 40% of total financial advisory revenue, reflecting strong market activity [9] - In asset management, AUM as of March 31st was $227 billion, up from the previous quarter, with average AUM for Q1 at $231 billion, a 1% decrease from the prior quarter [20] - Incentive fees totaled $9 million, driven by strong performance in credit fixed income and Japanese equity strategies [19] Market Data and Key Metrics Changes - The backlog in financial advisory has continued to grow, driven by activity in Europe and restructuring, along with growth in M&A and financing solutions [14] - The geopolitical advisory group is in high demand, reflecting the importance of combining business insights with geopolitical context [23] Company Strategy and Development Direction - The company is executing its Lazard Ltd 2030 long-term strategy, including expanding connectivity to private capital across Europe and opening a financial advisory office in Abu Dhabi [11][12] - The introduction of new active ETF products aims to meet investor preferences and demand, with a focus on global and emerging market strategies [12][27] - The company plans to continue expanding its ETF offerings and is actively recruiting to increase client coverage [25][27] Management's Comments on Operating Environment and Future Outlook - Management noted substantial unpredictability due to shifts in trade policies, but strong corporate balance sheets and economic growth preconditions remain [13] - The company expects continued engagement with clients and a robust backlog, although future patterns depend on tariff regime clarifications [14][35] - Management emphasized the importance of geopolitical insights in decision-making, especially in uncertain environments [120] Other Important Information - The company returned $175 million to shareholders in Q1 2025, including a quarterly dividend of $45 million and $36 million in stock repurchases [22] - The effective tax rate for Q1 was negative 13.9% due to a discrete benefit related to stock compensation awards [21] Q&A Session Summary Question: Are there M&A deals dropping out despite backlog growth? - Management indicated that while some deals may get pushed out, the backlog continues to expand, and the situation is dependent on tariff regime clarifications [34][35] Question: How does the second quarter compare to the first quarter? - Management stated it is challenging to provide a definitive view, but client engagement remains strong [39] Question: What is the outlook for sponsor M&A and secondaries? - Management noted countervailing forces affecting sponsor M&A, but underlying growth in the secondaries market is expected [48][49] Question: How quickly can restructuring mandates translate into revenue? - Restructuring mandates can translate into revenue faster than many M&A deals, with a mix of other non-M&A businesses also contributing [81] Question: What is the status of the $10 billion asset management mandate? - The one but not yet funded mandates have increased, and funding is expected to occur over the next 12 to 15 months [90] Question: How is capital allocation prioritized? - The company prioritizes returning capital to shareholders while considering various inorganic options for growth [94]