Lazard Ltd (NYSE: LAZ)

Lazard Ltd (NYSE: LAZ) today reported annual operating revenue¹ of $2,769 million for the year ended December 31, 2022. Net income, as adjusted², was $384 million, or $3.73 per share (diluted) for the year. On a U.S. GAAP basis, net income for the year was $358 million, or $3.51 per share (diluted).

For the fourth quarter of 2022, net income, as adjusted, was $67 million, or $0.69 per share (diluted). On a U.S. GAAP basis, net income for the fourth quarter was $42 million, or $0.44 per share (diluted).

“Lazard's businesses proved resilient amid the challenging macroeconomic and capital markets environment in 2022," said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. "We continued to make strategic investments, which strengthen and broaden our capabilities, and we are well-positioned to serve clients as they navigate 2023."

Note: Endnotes are on page 7 of this release. A reconciliation of adjusted GAAP to U.S. GAAP is on pages 15-16.

OPERATING REVENUE

Operating revenue¹ was $2,769 million for 2022, 12% lower than 2021. Fourth-quarter 2022 operating revenue was $671 million, 31% lower than the fourth quarter of 2021.

Financial Advisory

Our Financial Advisory results include Strategic and M&A Advisory, Capital Markets Advisory, Shareholder Advisory, Restructuring and Capital Solutions, Sovereign Advisory, Geopolitical Advisory, Capital Raising and Placement, and other strategic advisory for clients.

For the full year of 2022, Financial Advisory operating revenue was $1,652 million, 7% lower than 2021.

For the fourth quarter of 2022, Financial Advisory operating revenue was $404 million, 34% lower than the fourth quarter of 2021.

During and since the fourth quarter of 2022, Lazard has been engaged in significant and complex M&A transactions and other strategic advisory assignments globally, including the following completed transactions (clients are in italics): Terminix's $7.5 billion sale to Rentokil Initial; Tenneco's $7.1 billion sale to funds of Apollo; WestRock’s $1.7 billion acquisition of remaining interests in Grupo Gondi; Bain Capital's acquisition of a 55% stake in House of HR; BC Partners’ acquisition of Havea; Celerion’s acquisition by H.I.G. Capital; OCS Group’s sale of its facilities services division to CD&R; Encap Investments on its sale of Jupiter Power to BlackRock; and Green Street’s sale of a majority interest in the company to TA Associates. Announced transactions include: Xylem’s $7.5 billion acquisition of Evoqua; InfraViaCapital's investment in Virgin Media O2’s fiber network along with joint venture partners Liberty Global and Telefonica, for a total investment of approximately $5.5 billion; Southwest Gas Holdings on its decision to spin-off Centuri; Southwest Gas Holdings on its announced sale of MountainWest Pipelines to Williams; and CAES Space Systems’ sale to Veritas Capital.

Lazard has one of the world’s preeminent restructuring and capital solutions practices. During and since the fourth quarter of 2022, we have been engaged in a broad range of visible and complex restructuring and debt advisory assignments, including debtor roles involving Bed Bath & Beyond, GenapSys, Trevi Finanziaria Industriale, and Vue Entertainment, and creditor and/or related party roles involving Andrade Gutierrez, Brazos Electric Power Cooperative, Endo Pharmaceuticals, Ruby Pipeline and Party City.

Our Capital Markets 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 2022, or continued to advise or completed since December 31, 2022, 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 2022, Asset Management operating revenue was $1,099 million, 17% lower than 2021. For the fourth quarter of 2022, Asset Management operating revenue was $259 million, 25% lower than the fourth quarter of 2021.

Management fees and other revenue was $1,031 million for full-year 2022, 15% lower than 2021. For the fourth quarter of 2022, management fees and other revenue was $245 million, 18% lower than the fourth quarter of 2021, and 2% higher than the third quarter of 2022.

For the full year of 2022, incentive fees were $67 million, compared to $120 million for 2021. For the fourth quarter of 2022, incentive fees were $13 million, compared to $46 million for the fourth quarter of 2021.

Average assets under management (AUM) for full-year 2022 was $227 billion, 16% lower than 2021. Average AUM for the fourth quarter of 2022 was $211 billion, 23% lower than the fourth quarter of 2021, and essentially flat compared to the third quarter of 2022.

AUM as of December 31, 2022 was $216 billion, down 21% from December 31, 2021, and 9% higher than September 30, 2022. The sequential change from September 30, 2022 was driven by market appreciation of $14.4 billion, foreign exchange appreciation of $7.7 billion and net outflows of $3.7 billion.

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), a non-GAAP measure. 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 while targeting 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 2022 was $1,657 million, 10% lower than 2021. The corresponding adjusted compensation ratio¹ was 59.8% for 2022, compared to 58.5% for 2021.

Awarded compensation expense¹ for 2022 was $1,768 million, 4% lower than 2021. The corresponding awarded compensation ratio¹ was 63.8% for 2022, compared to 58.8% for 2021.

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, while targeting a consistent deferral policy.

Non-Compensation Expense

Adjusted non-compensation expense¹ for 2022 was $518 million, 10% higher than 2021. The ratio of non-compensation expense to operating revenue was 18.7% for 2022, compared to 15.0% for 2021.

Adjusted non-compensation expense for the fourth quarter of 2022, was $142 million, 6% higher than the fourth quarter of 2021. The ratio of adjusted non-compensation expense to operating revenue was 21.1% for the fourth quarter of 2022, compared to 13.8% for the fourth quarter of 2021.

Our goal remains to maintain 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 $133 million for full-year 2022 and $24 million for the fourth quarter of 2022. The effective tax rate on the same basis was 25.7% for full-year 2022, compared to 23.9% for full-year 2021.

CAPITAL MANAGEMENT AND BALANCE SHEET

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

In 2022, Lazard returned $936 million to shareholders, which included: $182 million in dividends; $692 million in share repurchases of our common stock; and $62 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

During 2022, we repurchased a record 19.7 million shares. As of December 31, 2022, our remaining share repurchase authorization was $302 million.

On February 1, 2023, Lazard declared a quarterly dividend of $0.50 per share on its outstanding common stock. The dividend is payable on February 24, 2023, to stockholders of record on February 13, 2023.

Lazard’s financial position remains strong. As of December 31, 2022, our cash and cash equivalents were $1.2 billion. Stockholders’ equity related to Lazard’s interests was $556 million.

CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. ET on February 2, 2023, to discuss the company’s financial results for the full year and fourth quarter of 2022. 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 1 800-245-3047 (toll-free, U.S. and Canada) or +1 203-518-9765 (outside of the U.S. and Canada), 15 minutes prior to the start of the call. Conference ID: LAZQ422.

A replay of the conference call will be available by 10:00 a.m. ET, February 2, 2023, via the Lazard Investor Relations website at www.lazard.com, or by dialing 1 800-839-5637 (toll-free, U.S. and Canada) or +1 402-220-2562 (outside of the U.S. and Canada).

ABOUT LAZARD

Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 43 cities across 26 countries in North and South America, Europe, Asia and Australia. Celebrating its 175^th year, the firm provides advice on mergers and acquisitions, capital markets and other strategic matters, restructuring and capital solutions, and 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 forward-looking 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 the U.S. GAAP results, is the most meaningful and useful way to compare our operating results across periods.

² Fourth-quarter and full-year 2022 adjusted results¹ exclude pre-tax charges of $0.8 million and $3.8 million, respectively, relating to office space reorganization, $33.0 million in the fourth quarter and full year relating to expenses associated with senior management transition, and $1.2 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 resulted in a net charge of $24.8 million, or $0.26 (diluted) per share, for the fourth quarter, and a net charge of $26.9 million, or $0.27 (diluted) per share, for the full year of 2022.

LAZ-EPE