Lazard(US:LAZ)2025-10-23 13:00Financial Data and Key Metrics Changes - For the first nine months of 2025, total firm-wide revenue was $2.1 billion, including record Financial Advisory revenue of $1.3 billion [4] - Third quarter firm-wide revenue reached $725 million, up 12% year-over-year, driven by both business segments [8] - Financial Advisory revenue for the third quarter totaled $422 million, reflecting a 14% increase from the previous year [8] - Asset Management revenue for the third quarter was $294 million, an 8% increase year-over-year and a 10% sequential increase [10] - Compensation expense for the third quarter was $475 million, resulting in a compensation ratio of 65.5%, down from 66% a year ago [13] Business Line Data and Key Metrics Changes - Financial Advisory was active in M&A across healthcare, industrials, and consumer sectors, with notable transactions including Mallinckrodt Pharmaceuticals and Ferrero [4][9] - Asset Management achieved record gross inflows for the third quarter, with year-to-date net positive flows of $1.6 billion and total AUM up 17% [6][10] - Management fees for Asset Management increased by 6% year-over-year, while incentive fees rose to $9 million from $3 million in the same quarter last year [10] Market Data and Key Metrics Changes - The company noted strong client engagement and demand across investment platforms, particularly in quantitative and emerging market strategies [11] - The effective tax rate for the third quarter was 21.4%, down from 32.5% in the previous year, with an expected full-year 2025 effective tax rate around 20% [14] Company Strategy and Development Direction - The company is focused on expanding its team of financial advisory managing directors, aiming for a net addition of 10 to 15 MDs per year [16] - The strategy includes enhancing productivity per MD, with average revenue per MD increasing to almost $9 million [17] - The company is also expanding its ETF business, launching six strategies in 2025, and plans to further grow its offerings to reach new clients [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in an increasingly constructive environment for advisory activity, despite potential impacts from the U.S. government shutdown [15][16] - The company anticipates ongoing demand for M&A and restructuring services as businesses adapt to changing market conditions [16] - Management highlighted the importance of active management in areas with information imperfections, which is expected to drive future growth [18] Other Important Information - The company returned $60 million to shareholders in 2025, including a quarterly dividend of $47 million [15] - The hiring of Chris Hodgman as CEO of Lazard Asset Management is expected to accelerate growth and evolution in the asset management business [6][20] Q&A Session Summary Question: How does the company balance hiring strong talent with compensation leverage? - Management noted success in attracting high-quality talent and emphasized that increased productivity per MD will lead to better compensation leverage over time [30][32] Question: What is the outlook for net inflows in Asset Management? - Management indicated that while there are significant gross inflows, outflows from sub-advised accounts remain a challenge, but overall trends are positive [35][36] Question: How is the restructuring business performing amid recent credit concerns? - Management does not view recent bankruptcies as indicative of broader issues and expects both M&A and restructuring activities to coexist due to increased performance dispersion among firms [70][72] Question: What is the outlook for the secondaries business? - Management expressed confidence in continued strong growth in the secondaries business, expecting it to remain a permanent part of the market environment [88] Question: How are fee rates trending in Asset Management? - Management reported a slight increase in average fee rates due to inflows from higher-fee products, with expectations for stability in the near term [91]