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Lazard Ltd. (LAZ)
Q4 2011 Earnings Results Conference
February 6, 2012 8:00 am ET
Kenneth M. Jacobs - Chairman and CEO
Matthieu Bucaille – Chief Financial Officer
Judi Frost Mackey - Director, Global Communications
Guy Moszkowski - Bank of America Merrill Lynch
Howard Chen - Credit Suisse
Christopher Kotowski - Oppenheimer & Co. Inc
Devin Ryan - Sandler O'Neill & Partners
Daniel Harris - Goldman Sachs
Joel Jeffrey - Keefe, Bruyette & Woods, Inc
James Mitchell - Buckingham Research Group, Inc
Steven Gavios - Jennison Associates, LLC
Previous Statements by LAZ
» Lazard's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Lazard Ltd. Q4 2009 Earnings Call Transcript
» Lazard Ltd. Q4 2008 Earnings Call Transcript
At this time, I’d like to 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 our conference call to review Lazard’s results for the fourth quarter and full year of 2011. Hosting the call today are Lazard’s Chairman and Chief Executive Officer, Ken Jacobs, and Chief Financial Officer, Matthieu Bucaille. A replay of this call will be available on our website at www.lazard.com beginning today shortly after the call.
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 certain 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 in our investor presentation of supplemental information, both of which are posted on our website at www.lazard.com. Ken and Matthieu will be happy to answer your questions following their remarks.
I’ll now turn the call over to our Chairman and Chief Executive Officer, Ken Jacobs.
Kenneth M. Jacobs
Good morning. Thank you for joining our call. The financial markets were difficult in 2011 and Lazard had a challenging fourth quarter. Yet, our franchise is better positioned today than ever before with significant operating leverage in both our businesses, Financial Advisory and Asset Management, as macroeconomic conditions improve.
We entered 2011 with a broad and deep platform, with the best people and an unrivaled network of relationships with corporations, governments and investing institutions around the world. We achieved record revenues through the third quarter. In the fourth quarter we experienced a revenue decline in Financial Advisory and a slow down in Asset Management. Both were primarily caused by the market turmoil centered in Europe, which began in summer and continue to year-end. The fourth quarter revenue decline combined with our discipline on compensation deferrals, led to a drop in fourth quarter earnings.
In Financial Advisory, full-year operating revenue decreased 11% from 2010. Fourth quarter revenue increased 3% from the third quarter, but declined 26% from the strong fourth quarter of 2010. The Financial Advisory, each quarter in 2011, was better than the previous one from a revenue perspective.
Asset Management achieved record operating revenue for the year, up 6% from 2010 driven by a 14% increase in management fees, offset by lower performance fees. Fourth quarter revenue declined 20% from year-ago levels primarily driven by lower performance fees in our alternatives business.
I’d like to cover three topics in my remarks. First, our macro outlook. Second, our compensation approach and goals, and third some perspective on Lazard today.
Let’s start with the outlook. Across developed and developing markets, confidence is improving. We believe the U.S is enjoying a slow, but steady recovery. The developing markets have stabilized and their long-term growth story appears intact. In Europe, business conditions were likely remained difficult for some time.
A recovery in M&A appears increasingly likely. In the developed world, multinational corporations have limited opportunities for organic growth, if they have strong balance sheet and record amounts of cash and financing is available. Developing market champions are also looking for opportunities in the developed world, as a result we expect to see more cross-border activity.
Our Strategic Advisory business is in a strong position to benefit from these trends. We are the leading independent advisor globally with deep roots in every major developed market and most developing markets throughout the world. We have strong operating leverage from an M&A recovery in Europe and the U.S. We’re increasingly well positioned in Asia, Latin America and the Middle East.
On the restructuring front, we expect to see an increase in European activity this year as financial sector pressure tightens credit. This should affect midsized, highly leveraged and privately owned companies. In the U.S., we expect less activity as the economy recovers and financing is available.