Lazard Ltd. Q4 2009 Earnings Call Transcript

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Lazard Ltd. (LAZ)

Q4 2009 Earnings Call

February 03, 2010 10:00 am ET

Executives

Judi Frost Mackey - Director, Global Communications

Ken Jacobs - Chairman and CEO

Michael Castellano - CFO

Analysts

Michael Hecht - JMP Securities

Daniel Harris - Goldman Sachs

Devin Ryan - Sandler O'Neill

Howard Chen - Credit Suisse

David Trone - Macquarie

James Mitchell - Buckingham Research

Presentation

Operator

Good morning and welcome to Lazard’s fourth quarter and full year 2009 earnings conference call. This call is being recorded. At this time all participants are in a listen-only mode. Following the remarks, we will conduct a question-and-answer session. Instructions will be provided at that time.

(Operator Instructions). At this time I will turn the call over to Judi Frost Mackey, Lazard’s Director of Global Communications. Please go ahead.

Judi Frost Mackey

Good morning and thank you for joining this conference call to review Lazard’s results for the fourth quarter and full year of 2009. Participating on the call today are Lazard’s Chairman and Chief Executive Officer, Kenneth Jacobs and Chief Financial Officer Michael Castellano. A replay of this call will be available on our website www.lazard.com beginning today after 1pm.

Today's call may contain forward-looking statements. These statements are based on our current expectations about future events that 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 non-GAAP financial measures. A description of these non-GAAP financial measures and a reconciliation to the comparable GAAP measures are contained in our earning release which has been filed with the SEC in our current report on Form 8-K.

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 our investor presentation, both of which are posted on our website. Ken and Mike will be happy to answer your questions following their remarks.

I will now turn the call over to our Chairman and Chief Executive Officer, Ken Jacobs.

Ken Jacobs

Good morning everyone and thank you for joining our call. During my first two months as Chairman and CEO, I’ve had a chance to spend time with many of our clients and partners worldwide in both, the financial advisory and asset management businesses. Lazard is better positioned today in its two core businesses, financial advisory and asset management, that at anytime in my 22 years at the firm.

We ended 2009 with the third strongest quarter of operating revenues in our history. Operating revenues for the second half of 2009 were up 40% of revenues for the first half of 2009. Operating revenues for the year were down just 3%. Financial advisory revenue was up 24% for the fourth quarter of 2009 over the fourth quarter of 2008 and was down just 3% for the year.

Financial advisory revenue for the second half of 2009 was up 38% over revenue for the first half of 2009. While M&A was down 35% through the year during one of the weakest M&A environments in history, M&A in the fourth quarter increased 37% over the third quarter of 2009. We captured M&A market share throughout the year. Our global restructuring business had a record year, up over 200%.

Asset management revenues increased 63% for the fourth quarter of 2009 over the fourth quarter of 2008. Assets under management at year end increased 42% to $130 billion, up from $91 billion a year earlier. Management fees for the fourth quarter were up 42% over that same period. We had near record inflows of more than $10 billion for the year.

Few long-only equity asset management firms can demonstrate such a performance for 2009. Our globally diversified asset management business is positioned well for 2010. So why are we in such a strong position today? This is testament to the success of our strategy and the strength of our model.

Lazard strategy is simple and powerful. It's built around two businesses. Financial advisory and asset management, both generate returns from intellectual capital, not financial capital. We take no risks that could threaten our firm. Success in each business enhances the Lazard brand, and then enables the firm to compete on equal footing with firms many, many times our size without the commensurate reliance and inherent risks and conflicts associated with capital.

Lazard is a global business. Our historical position, our ongoing investments in both our businesses both currently and in previous cycles give us the scale to compete against our largest competitors again on a global basis and distinguish us from the financial advisory boutiques. Lazard's model is tested and resilient. Our largest competitors will need to adjust and reinvent their business models to adapt to the changing financial and regulatory environment, our smaller competitors are trying to anticipate and develop the models and culture necessary to drive this big growth.

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