Earnings
Lazard posts record third-quarter advisory revenue, but asset management suffers $2.3 billion of outflows
Adjusted earnings fell to 36 cents a share from 56 cents as the adjusted compensation ratio rose to 69.9%, far from Lazard's 60% target.
HedgeWeekly News Desk ·
Lazard said on Thursday that third-quarter net revenue rose 9% to $814 million on a GAAP basis, and 11% to $805 million on an adjusted basis. Financial Advisory revenue grew 10% to $470 million, which chief executive Peter Orszag described as a third-quarter record, and Asset Management revenue increased 9% to $357 million.
Earnings moved the other way. Adjusted net income was $40 million, or 36 cents a diluted share, compared with 56 cents a year earlier, while GAAP earnings dropped to 26 cents from 65 cents. The adjusted compensation ratio rose to 69.9% from 65.5%, offsetting a lower non-compensation ratio of 19.3%, down from 20.5%. Lazard also said advisory revenue included some deals pulled forward from just after September 30, an amount it put in line with its two-year average.
The asset manager had net outflows of $2.3 billion in the quarter, following $1.6 billion in the second quarter. Market gains of $1.9 billion and a $0.2 billion currency drag left assets under management at $284 billion, roughly flat on end-June but 7% higher than a year earlier; net flows for the first nine months remain positive at $5.1 billion. Lazard returned $88 million to shareholders in the quarter, including $33 million of buybacks, and declared a 50-cent quarterly dividend payable on November 13.
Why it matters: Lazard's Lazard 2030 plan targets an adjusted compensation ratio of 60% or below, yet the ratio stood at 69.9% at both the second- and third-quarter reports, so a record advisory quarter is not yet translating into margin. For allocators, two straight quarters of net outflows at a manager that reports record year-to-date gross inflows point to elevated redemptions. Watch whether the pulled-forward advisory fees weigh on the fourth quarter, the next monthly AUM update, and the private capital advisory unit, Lazard CL, which the firm says launches in early November.