Lazard Ltd. (LAZ)

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Lazard Ltd. (LAZ)

Q4 2012 Earnings Conference Call

February 6, 2013 8:00 a.m. ET


Judi Frost Mackey - Director of Global Communications

Kenneth M. Jacobs - Chief Executive Officer and Director

Matthieu Bucaille - Chief Financial Officer

Alexander F. Stern - Chief Operating Officer


Joel Jeffrey – Keefe, Bruyette, & Woods, Inc.

Brennan Hawken – UBS

Howard Chen – Crédit Suisse

Devin Ryan – Sandler O'Neill

David Trone – JMP Securities



Good morning, and welcome to Lazard's Fourth Quarter and Full Year 2012 Earnings Conference Call. This call is being recorded. (Operator Instructions).

At this time, I'll turn the conference over to Judi Frost Mackey, Lazard's Director of Global Communications. Please go ahead.

Judi Frost Mackey

Good morning, and thank you for joining our conference call to review Lazard's results for the full year and fourth quarter of 2012. Hosting the call today are Kenneth Jacobs, Lazard's Chairman and Chief Executive Officer; Matthieu Bucaille, Chief Financial Officer; and Alex Stern, Chief Operating Officer. A replay of this call will be available on our website by 10:00 a.m. today

Today's call may contain forward-looking statements. These statements are based on our current expectations about future events and are subject to known and unknown risks, uncertainties and assumptions. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. These factors include, but are not limited to, those discussed in Lazard's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Lazard assumes no responsibility for the accuracy or completeness of any of these forward-looking statements. Investors should not rely upon forward-looking statements as predictions of future events. Lazard is under no duty to update any of these forward-looking statements after the date on which they are made.

Today's discussion may also include certain non-GAAP financial measures. A description of these non-GAAP financial measures and their reconciliations to the comparable GAAP measures are contained in our earnings release, which has been issued this morning.

For today's call, we will focus on highlights of our performance. The details of our earnings can be found in our press release issued this morning and in our investor presentation of supplemental information, both of which are posted on our website at

Following their remarks, Ken, Matthieu and Alex will be happy to answer your questions. I will now turn the call over to our Chairman and Chief Executive Officer, Ken Jacobs.

Kenneth M. Jacobs

Thank you, Judy. Good morning. Thank you for joining our call. We’re pleased to report strong results for the full year and fourth quarter 2012. Some highlights. Annual operating revenue rose 5% over last year, approaching record levels. Adjusted GAAP earnings per share increased 10%. M&A and other advisory revenue was up 13% for the year, even as global M&A completions were down 14%.

Lazard continues to gain significant share of the advisory fee pool. In the fourth quarter, M&A and other advisory revenue increased 40% and active management revenue increased 20% compared to the prior period. For the year, Asset Management operating revenue matched the record level of 2011. Assets under Management at yearend 2012 reached a record high of $167 billion, up 18% over the prior year.

Behind the numbers is the story of Lazard’s continuing evolution. In the last several years, we have diversified our sources of revenue in both our businesses, financial advisory and asset management. We’re adapting to clients changing needs in an integrated global marketplace. We made great strides in driving shareholder value. The strategic decisions we’ve made and our execution of them are positioning Lazard for continued growth and profitability.

Today, Lazard is the only independent advisory firm with a fully built out global infrastructure and global industry teams. We have a network of relationships with key decision makers in business, government and investing institutions around the world. The power of our network allows us to deliver better solutions to our clients and it becomes more powerful as the world becomes more integrated. For example, in financial advisory, more than half of our M&A volume was cross-border, including our largest and most complex transactions. Our participation in emerging markets M&A reached its highest level ever, almost 20% of announced deals.

In Asset Management, we are equally globally diversified, meeting the needs of a primarily institutional client base around the world. Nearly half of our Asset Management revenue comes from clients based outside of North America. Our investment strategies in global, local and emerging markets in both equities and fixed income led AUM growth in 2012. Our investment platforms continue their strong pattern of performance.

Lazard’s global network is a competitive strength and a platform for revenue growth as services evolve to meet clients’ needs. A significant portion of our 2012 revenue came from income streams that either did not exist at Lazard 10 years ago or that we’ve grown substantially. Lazard’s middle market which we acquired five years ago had its best year ever. Our Sovereign advisory business was active on some of the world’s most prominent assignments, which included work in Europe, Latin America, Africa and the U.S.

Our advisory work on capital structure, balance sheets and capital raising continues to grow, complementing our traditional M&A business. For example, capital structure advice was key to Lazard’s role as an advisor to Deutsche Telekom on the T-Mobile Metro PCS transaction as well as our recent representation of Microsoft on the Dell buyout.

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