Lazard Ltd Reports Full-year and Fourth-Quarter 2019 Results

Record fourth-quarter operating revenue reflecting strength across businesses

Entering 2020 with higher assets under management than 2019 and momentum in M&A activity

Returned $850 million to shareholders in 2019 through dividends and share repurchases  

NEW YORK–(BUSINESS WIRE)–Lazard Ltd (NYSE: LAZ) today reported annual operating revenue1 of $2,546 million for the year ended December 31, 2019. Net income, as adjusted2, was $385 million, or $3.28 per share (diluted) for the year. Net income on a U.S. GAAP basis for the year was $287 million, or $2.44 per share (diluted).

For the fourth quarter of 2019, net income, as adjusted2, was $105 million, or $0.91 per share (diluted). On a U.S. GAAP basis, net income for the fourth quarter was $77 million, or $0.67 per share (diluted).

“Record fourth-quarter operating revenue reflected strength across our businesses,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. “We are in a strong position as we enter 2020, with a global platform that incorporates diverse revenue streams of significant scale, innovative client solutions that drive performance, and growth opportunities in which we continue to invest.”

($ in millions, except

per share data and AUM)

Year Ended
Dec. 31,

 

Quarter Ended
Dec. 31,

2019

2018

%’19-’18

2019

2018

%’19-’18

Net Income (loss)

 

 

 

 

 

 

 

US GAAP

$287

$527

(46)%

 

$77

$113

(32)%

Per share, diluted

$2.44

$4.06

(40)%

 

$0.67

$0.89

(25)%

Adjusted2

$385

$539

(29)%

 

$105

$119

(11)%

Per share, diluted

$3.28

$4.16

(21)%

 

$0.91

$0.94

(3)%

Operating Revenue1

 

 

 

 

 

 

 

Total operating revenue

$2,546

$2,755

(8)%

 

$708

$685

3%

Financial Advisory

$1,357

$1,506

(10)%

 

$395

$399

(1)%

Asset Management

$1,159

$1,242

(7)%

 

$301

$281

7%

AUM ($ in billions)

 

 

 

 

 

 

 

Period End

$248

$215

15%

 

 

 

 

Average

$234

$241

(3)%

 

$238

$225

6%

Note: Endnotes are on page 6 of this release. A reconciliation to U.S. GAAP is on page 14-15.

OPERATING REVENUE

Operating revenue1 was $2,546 million for 2019, 8% lower than 2018. Fourth-quarter 2019 operating revenue was a record $708 million, 3% higher than the fourth quarter of 2018.

Financial Advisory

Our Financial Advisory results include M&A Advisory, Capital Advisory, Capital Raising, Restructuring, Shareholder Advisory, Sovereign Advisory, and other strategic advisory work for clients.

For the full year of 2019, Financial Advisory operating revenue was $1,357 million, 10% lower than 2018. The decrease primarily reflected lower M&A completions compared to a record level in 2018.

For the fourth quarter of 2019, Financial Advisory operating revenue was $395 million, 1% lower than the fourth quarter of 2018.

During and since the fourth quarter of 2019, Lazard has been engaged in significant and complex M&A transactions and other advisory assignments globally, including the following (clients are in italics): Special Committee of the Board of CBS on CBS’s $48 billion merger with Viacom; Exor in the $30.7 billion merger of Fiat Chrysler Automobiles with Peugeot; The Supervisory Board of Takeaway.com on the company’s €12.5 billion combination with Just Eat; a consortium consisting of KIRKBI, Blackstone and CPPIB in its recommended acquisition of Merlin Entertainments, valuing Merlin at £5.9 billion; Visa’s $5.3 billion acquisition of Plaid; Special Committee of the Board of VMware on VMware’s $2.7 billion acquisition of Pivotal Software; Intel’s $2.0 billion acquisition of Habana Labs; Genworth Financial’s CAD 2.4 billion sale of its stake in Genworth MI Canada to Brookfield; Tilt Renewable’s AUD 1.1 billion sale of Snowtown 2 wind farm to Palisade Investment Partners and First State Super; American Express in American Express Global Business Travel’s equity recapitalization with new, long-term investors; and Iliad’s sale to Cellnex of 70% of Iliad TowerCo and the entire capital of Iliad Italia TowerCo.

During and since the fourth quarter of 2019, we have been engaged in a broad range of highly visible and complex restructuring and debt advisory assignments for debtors or creditors, including roles involving: Forever 21; General Ore International; Global Cloud Xchange; PG&E; Premier Oil; Tubos Reunidos; and Weatherford International.

Our Capital and Shareholder Advisory practices remain active globally, advising on a broad range of public and private assignments. Our Sovereign Advisory practice continues to be active advising governments, sovereign and sub-sovereign entities across developed and emerging markets.

For a list of publicly announced Financial Advisory transactions on which Lazard advised in the fourth quarter of 2019, or continued to advise or completed since December 31, 2019, please visit our website at www.lazard.com/businesses/transactions.

Asset Management

In the text portion of this press release, we present our Asset Management results as 1) Management fees and other revenue, and 2) Incentive fees.

For the full year of 2019, Asset Management operating revenue was $1,159 million, 7% lower than 2018. For the fourth quarter of 2019, Asset Management operating revenue was $301 million, 7% higher than the fourth quarter of 2018.

Management fees and other revenue was $1,137 million for full-year 2019, 7% lower than 2018. For the fourth quarter of 2019, management fees and other revenue was $287 million, 2% higher than the fourth quarter of 2018, and 2% higher than the third quarter of 2019.

Average assets under management (AUM) for full-year 2019 was $234 billion, 3% lower than 2018. Average AUM for the fourth quarter of 2019 was $238 billion, 6% higher than the fourth quarter of 2018, and 2% higher than the third quarter of 2019.

AUM as of December 31, 2019 was $248 billion, up 15% from December 31, 2018, and up 7% from September 30, 2019. The sequential increase from September 30, 2019 was driven by market appreciation of $13 billion, foreign exchange appreciation of $4 billion, and net inflows of $519 million.

For the full year of 2019, incentive fees were $21 million, the same as $21 million for 2018. For the fourth quarter of 2019, incentive fees were $14 million, compared to $1 million for the fourth quarter of 2018.

OPERATING EXPENSES

Compensation and Benefits

In managing compensation and benefits expense, we focus on annual awarded compensation (cash compensation and benefits plus deferred incentive compensation with respect to the applicable year, net of estimated future forfeitures and excluding charges). We believe annual awarded compensation reflects the actual annual compensation cost more accurately than the GAAP measure of compensation cost, which includes applicable-year cash compensation and the amortization of deferred incentive compensation principally attributable to previous years’ deferred compensation. We believe that by managing our business using awarded compensation with a consistent deferral policy, we can better manage our compensation costs, increase our flexibility in the future and build shareholder value over time.

Adjusted compensation and benefits expense1 for 2019 was $1,464 million, 3% lower than 2018, with a consistent deferral policy. The corresponding adjusted compensation ratio1 was 57.5% for 2019, compared to 55.1% for 2018.

Awarded compensation expense1 for 2019 was $1,469 million, 4% lower than 2018. The corresponding awarded compensation ratio1 was 57.7% for 2019, compared to 55.8% for 2018.

We take a disciplined approach to compensation, and our goal is to maintain a compensation-to-operating revenue ratio over the cycle in the mid- to high-50s percentage range on both an awarded and adjusted basis, with consistent deferral policies.

Non-Compensation Expense

Adjusted non-compensation expense1 for 2019 was $499 million, 3% higher than 2018. The ratio of non-compensation expense to operating revenue1 was 19.6% for 2019, compared to 17.6% for 2018.

Adjusted non-compensation expense1 for the fourth quarter of 2019 was $130 million, 9% lower than the fourth quarter of 2018. The ratio of non-compensation expense to operating revenue1 was 18.3% for the fourth quarter of 2019, compared to 20.8% for the fourth quarter of 2018.

Our goal remains to achieve an adjusted non-compensation expense-to-operating revenue ratio over the cycle of 16% to 20%.

TAXES

The provision for taxes, on an adjusted basis1, was $122 million for full-year 2019 and $44 million for the fourth quarter of 2019. The effective tax rate on the same basis was 24.1% for full-year 2019, compared to 22.7% for full-year 2018.

CAPITAL MANAGEMENT AND BALANCE SHEET

Our primary capital management goals include managing debt and returning capital to shareholders through dividends and share repurchases.

In 2019, Lazard returned $850 million to shareholders, which included: $255 million in dividends; $495 million in share repurchases of our Class A common stock; and $100 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

During 2019, we repurchased 13.7 million shares of our Class A common stock for an average price of $36.18 per share. This included the repurchase of 1.7 million shares in the fourth quarter at an average price of $37.28 per share. In line with our objectives, these repurchases more than offset the potential dilution from our 2018 year-end equity-based compensation awards (net of estimated forfeitures and tax withholding to be paid in cash in lieu of share issuances), which were granted at an average price of $37.69 per share. As of January 24, 2020, our remaining share repurchase authorization is $379 million.

On January 29, 2020, Lazard declared a quarterly dividend of $0.47 per share on its outstanding common stock. The dividend is payable on February 28, 2020, to stockholders of record on February 18, 2020.

Lazard’s financial position remains strong. As of December 31, 2019, our cash and cash equivalents were $1,232 million, and stockholders’ equity related to Lazard’s interests was $610 million.

CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. EST on January 30, 2020, to discuss the company’s financial results for the full year and fourth quarter of 2019. The conference call can be accessed via a live audio webcast available through Lazard’s Investor Relations website at www.lazard.com, or by dialing 1 (888) 394-8218 (U.S. and Canada) or +1 (323) 701-0225 (outside of the U.S. and Canada), 15 minutes prior to the start of the call.

A replay of the conference call will be available by 10:00 a.m. EST on January 30, 2020, via the Lazard Investor Relations website, or by dialing 1 (888) 203-1112 (U.S. and Canada) or +1 (719) 457-0820 (outside of the U.S. and Canada). The replay access code is 6868932.

ABOUT LAZARD

Lazard, one of the world’s preeminent financial advisory and asset management firms, operates from more than 40 cities and 25 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating to 1848, the firm provides advice on mergers and acquisitions, strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as asset management services to corporations, partnerships, institutions, governments and individuals. For more information on Lazard, please visit www.lazard.com. Follow Lazard at @Lazard.

Cautionary Note Regarding Forward-Looking Statements:

This press release contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “could”, “would”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “target,” “goal”, or “continue”, and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies, business plans and initiatives and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements.

These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and also discussed from time to time in our reports on Forms 10-Q and 8-K, including the following:

  • A decline in general economic conditions or the global or regional financial markets;
  • A decline in our revenues, for example due to a decline in overall mergers and acquisitions (M&A) activity, our share of the M&A market or our assets under management (AUM);
  • Losses caused by financial or other problems experienced by third parties;
  • Losses due to unidentified or unanticipated risks;
  • A lack of liquidity, i.e., ready access to funds, for use in our businesses; and
  • Competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this release to conform our prior statements to actual results or revised expectations and we do not intend to do so.

Lazard Ltd is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, Lazard and its operating companies use their websites, Lazard’s Twitter account (twitter.com/Lazard) and other social media sites to convey information about their businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of assets under management in various mutual funds, hedge funds and other investment products managed by Lazard Asset Management LLC and Lazard Frères Gestion SAS. Investors can link to Lazard and its operating company websites through www.lazard.com.

ENDNOTES

1 A non-U.S. GAAP measure. See attached financial schedules and related notes for a detailed explanation of adjustments to corresponding U.S. GAAP results. We believe that presenting our results on an adjusted basis, in addition to U.S. GAAP results, is the most meaningful and useful way to compare our operating results across periods.

2 Adjusted results1 for the fourth-quarter and twelve months of 2019 exclude the following items on a pre-tax basis: (i) $16.4 million and $67.8 million, respectively, of costs associated with a business realignment that included employee reductions and the closing of subscale offices and investment strategies; (ii) $4.2 million and $17.4 million, respectively, of costs associated with the implementation of a new Enterprise Resource Planning (ERP) system; (iii) $6.8 million relating to a first quarter debt refinancing by Lazard Ltd’s subsidiary Lazard Group LLC; (iv) $9.6 million and $17.2 million, respectively, of acquisition-related costs, primarily reflecting changes in fair value of contingent consideration associated with certain business acquisitions; (v) $0.1 million $12.1 million, respectively, of private equity investment adjustments; (vi) $3.6 million and $4.7 million, respectively, of costs related to office space reorganization; and (vii) $0.5 million in the fourth quarter and full year relating to the reduction of our Tax Receivable Agreement (TRA) obligation. On a U.S. GAAP basis, these items resulted in a net charge of $28 million, or $0.25 (diluted) per share, for the fourth quarter, and a net charge of $98 million, or $0.85 (diluted) per share, for the full year of 2019.

LAZ-EPE

 LAZARD LTD 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 
(U.S. GAAP)
     

 

 

Three Months Ended  

 % Change From 

December 31,

 

September 30,

 

December 31,

 

September 30,

December 31,

($ in thousands, except per share data)

2019

 

2019

 

2018

 

2019

2018

     

 

 

Total revenue

          $743,406

 

          $611,073

 

          $704,300

 

22%

6%

Interest expense

             (22,065)

 

             (20,005)

 

             (17,065)

 

 

 

Net revenue

            721,341

 

            591,068

 

            687,235

 

22%

5%

Operating expenses:      

 

 

Compensation and benefits

            427,308

 

            391,363

 

            349,542

 

9%

22%

     

 

 

Occupancy and equipment 

              34,045

 

              29,856

 

              32,781

 

 

 

Marketing and business development

              30,947

 

              27,318

 

              32,889

 

 

 

Technology and information services

              38,783

 

              34,076

 

              37,520

 

 

 

Professional services

              23,386

 

              15,105

 

              18,851

 

 

 

Fund administration and outsourced services

              28,201

 

              28,425

 

              29,805

 

 

 

Amortization and other acquisition-related costs (benefits)

                9,876

 

                1,022

 

               (2,429)

 

 

 

Other

              10,321

 

              11,530

 

              38,454

 

 

 

Subtotal

            175,559

 

            147,332

 

            187,871

 

19%

(7%)

   Benefit pursuant to tax receivable agreement

                 (503)

 

                     –  

 

               (6,495)

 

 

 

Operating expenses

            602,364

 

            538,695

 

            530,918

 

12%

13%

     

 

 

Operating income

            118,977

 

              52,373

 

            156,317

 

NM

(24%)

     

 

 

Provision for income taxes

              39,446

 

                4,177

 

              42,633

 

NM

(7%)

Net income

              79,531

 

              48,196

 

            113,684

 

65%

(30%)

Net income attributable to noncontrolling interests

                2,554

 

                1,492

 

                  288

 

 

 

Net income attributable to Lazard Ltd

            $76,977

 

            $46,704

 

          $113,396

 

65%

(32%)

     

 

 

Attributable to Lazard Ltd Common Stockholders:      

 

 

Weighted average shares outstanding:      

 

 

         Basic

107,548,260

 

109,285,727

 

116,333,243

 

(2%)

(8%)

         Diluted

113,442,101

 

113,881,690

 

126,819,190

 

(0%)

(11%)

     

 

 

Net income per share:      

 

 

         Basic

$0.70

 

$0.42

 

$0.97

 

67%

(28%)

         Diluted

$0.67

 

$0.40

 

$0.89

 

68%

(25%)

     

 

 

 LAZARD LTD 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 
(U.S. GAAP)
   
Year Ended

December 31,

 

December 31,

 

 

($ in thousands, except per share data)

2019

 

2018

 

% Change

   

 

Total revenue

         $2,666,958

 

         $2,884,833

 

(8%)

Interest expense

              (80,185)

 

              (58,481)

 

 

Net revenue

           2,586,773

 

           2,826,352

 

(8%)

Operating expenses:    

 

Compensation and benefits

           1,563,395

 

           1,514,735

 

3%

   

 

Occupancy and equipment 

             123,149

 

             121,107

 

 

Marketing and business development

             115,033

 

             108,644

 

 

Technology and information services

             143,739

 

             139,693

 

 

Professional services

               71,852

 

               61,349

 

 

Fund administration and outsourced services

             114,049

 

             132,964

 

 

Amortization and other acquisition-related costs (benefits)

               19,410

 

              (15,897)

 

 

Other

               43,951

 

               89,486

 

 

Subtotal

             631,183

 

             637,346

 

(1%)

   Benefit pursuant to tax receivable agreement

                   (503)

 

                (6,495)

 

 

Operating expenses

           2,194,075

 

           2,145,586

 

2%

   

 

Operating income

             392,698

 

             680,766

 

(42%)

   

 

Provision for income taxes

               94,982

 

             148,317

 

(36%)

Net income

             297,716

 

             532,449

 

(44%)

Net income attributable to noncontrolling interests

               11,216

 

                 5,324

 

 

Net income attributable to Lazard Ltd

            $286,500

 

            $527,125

 

(46%)

   

 

Attributable to Lazard Ltd Common Stockholders:    

 

Weighted average shares outstanding:    

 

         Basic

110,189,862

 

119,006,531

 

(7%)

         Diluted

116,079,806

 

129,767,592

 

(11%)

   

 

Net income per share:    

 

         Basic

$2.57

 

$4.43

 

(42%)

         Diluted

$2.44

 

$4.06

 

(40%)

   

 

LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(U.S. GAAP)
   

December 31,

 

December 31,

($ in thousands)

2019

 

2018

   
ASSETS
   
Cash and cash equivalents

           $1,231,593

 

           $1,246,537

Deposits with banks and short-term investments

            1,180,686

 

            1,006,969

Cash deposited with clearing organizations and other segregated cash

                 43,280

 

                 38,379

Receivables

               663,138

 

               685,534

Investments

               531,995

 

               575,148

Goodwill and other intangible assets

               373,594

 

               375,318

Operating lease right-of-use assets

               551,504

 

                        –  

Deferred tax assets

               611,570

 

               597,776

Other assets

               477,042

 

               471,580

   
Total Assets

           $5,664,402

 

           $4,997,241

   
LIABILITIES & STOCKHOLDERS’ EQUITY
   
Liabilities  
Deposits and other customer payables

           $1,246,200

 

           $1,154,207

Accrued compensation and benefits

               602,777

 

               585,484

Senior debt

            1,679,562

 

            1,434,260

Tax receivable agreement obligation

               247,344

 

               270,640

Operating lease liabilities

               644,345

 

                        –  

Other liabilities

               562,600

 

               582,557

Total liabilities

            4,982,828

 

            4,027,148

   
Commitments and contingencies  
   
Stockholders’ equity   
Preferred stock, par value $.01 per share

                        –  

 

                        –  

Common stock, par value $.01 per share

                   1,128

 

                   1,298

Additional paid-in capital

                 41,020

 

               750,692

Retained earnings

            1,193,570

 

            1,195,563

Accumulated other comprehensive loss, net of tax

              (293,648)

 

              (273,818)

Subtotal

               942,070

 

            1,673,735

Class A common stock held by subsidiaries, at cost

              (332,079)

 

              (756,884)

Total Lazard Ltd stockholders’ equity

               609,991

 

               916,851

Noncontrolling interests 

                 71,583

 

                 53,242

Total stockholders’ equity 

               681,574

 

               970,093

   
Total liabilities and stockholders’ equity

           $5,664,402

 

           $4,997,241

 LAZARD LTD 
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP – unaudited)
Three Months Ended  

 % Change From 

 

December 31,

 

September 30,

 

December 31,

 

September 30,

 

December 31,

($ in thousands, except per share data)

2019

 

2019

 

2018

 

2019

 

2018

     

 

 

 

Revenues:      

 

 

 

     

 

 

 

Financial Advisory

$394,689

 

$303,901

 

$398,581

 

30%

 

(1%)

Asset Management

           301,046

 

           282,596

 

           280,750

 

7%

 

7%

Corporate 

            12,275

 

              1,765

 

              5,204

 

NM

 

NM

     

 

 

 

Operating revenue (b)    

         $708,010

 

         $588,262

 

         $684,535

 

20%

 

3%

               

 

 

 

Expenses:      

 

 

 

     

 

 

 

Adjusted compensation and benefits expense (c)

         $407,106

 

         $338,250

 

         $361,434

 

20%

 

13%

Ratio of adjusted compensation to operating revenue

57.5%

 

57.5%

 

52.8%

 

 

 

 

     

 

 

 

Non-compensation expense (d)   

         $129,615

 

         $125,185

 

         $142,239

 

4%

 

(9%)

Ratio of non-compensation to operating revenue

18.3%

 

21.3%

 

20.8%

 

 

 

 

               

 

 

 

Earnings:      

 

 

 

     

 

 

 

Earnings from operations (e)

         $171,289

 

         $124,827

 

         $180,862

 

37%

 

(5%)

Operating margin (f)

24.2%

 

21.2%

 

26.4%

 

 

 

 

     

 

 

 

Adjusted net income (g)

         $105,268

 

           $88,260

 

         $118,878

 

19%

 

(11%)

     

 

 

 

Diluted adjusted net income per share

              $0.91

 

              $0.76

 

              $0.94

 

20%

 

(3%)

     

 

 

 

Diluted weighted average shares (h)

115,522,380

 

115,513,679

 

126,819,190

 

0%

 

(9%)

     

 

 

 

Effective tax rate (i)

29.7%

 

16.6%

 

27.8%

 

 

 

 

Contacts

Media:

Judi Frost Mackey, +1 212 632 1428

judi.mackey@lazard.com

Investors:

Alexandra Deignan, +1 212 632 6886

alexandra.deignan@lazard.com

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