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Lazard(LAZ) - 2024 Q1 - Earnings Call Transcript
LazardLazard(US:LAZ)2024-04-25 17:29

Financial Data and Key Metrics Changes - Lazard reported record first quarter adjusted net revenue of $747 million, an increase of 42% year-over-year [5][40] - Adjusted compensation expense was $493 million, equating to a ratio of 66%, down from 75.7% in the same quarter last year [43] - Adjusted effective tax rate for the first quarter was 32.6%, compared to 32.1% for the first quarter of 2023 [44] Business Line Data and Key Metrics Changes - Financial advisory adjusted net revenue was $447 million for the first quarter, up 63% from the first quarter last year [40] - Asset management adjusted net revenue was $276 million for the first quarter, up 1% from the fourth quarter and 4% higher than the first quarter last year [15] - Average assets under management (AUM) increased to $247 billion, up 6% sequentially and 9% year-over-year [42] Market Data and Key Metrics Changes - The company experienced strong performance across the U.S. and Europe, with several large-cap transactions completed during the first quarter [14] - Net outflows in the asset management segment were $6.6 billion, offset by market appreciation of $14 billion [42] - The current interest rate environment has led to increased cash accumulation on the sidelines, impacting inflows into active strategies [29][49] Company Strategy and Development Direction - The company aims to double firm-wide revenue and deliver an average annual shareholder return of 10% to 15% through 2030 [24] - Lazard is focusing on enhancing insights for clients and increasing overall firm efficiency, actively exploring generative AI [24] - The company is expanding its connectivity to private capital, which is seen as a growing source of strength [47] Management's Comments on Operating Environment and Future Outlook - Management noted that headwinds have diminished, with a more constructive market environment emerging [19][20] - Geopolitical concerns remain significant, particularly regarding the ongoing conflicts in Ukraine and the Middle East, increasing demand for geopolitical advisory services [46][98] - The company expects a productive 2024, supported by strong first quarter results and ongoing M&A activity driven by various market factors [45][39] Other Important Information - The company repurchased 958,000 shares year-to-date and declared a quarterly dividend of $0.50 per share [18] - Lazard completed its target headcount reduction of 10% during the first quarter, focusing on expense management while making targeted investments [17] Q&A Session Summary Question: Insights on the compensation ratio and sustainability of revenue levels - Management acknowledged the elevated compensation ratio due to prior year deferrals but expressed optimism about returning to target levels as revenues improve [27][28] Question: Trends in asset management and net outflows - Management indicated that net outflows were driven by a higher for longer environment, which has led to cash sitting on the sidelines, impacting inflows into active strategies [29][31] Question: Differences in M&A activity between the U.S. and Europe - Management noted a disproportionate uptick in North America compared to Europe, but both regions are experiencing increased activity [68] Question: Outlook on restructuring revenue as a proportion of advisory - Management reported that restructuring and liability management revenue was over two times that of the previous year, indicating strong ongoing activity [64][86] Question: Client hesitancy regarding the U.S. election and its impact - Management observed that geopolitical forces are on clients' minds, with increased demand for insights into the geopolitical and business environment [98][106]