Lazard Ltd. (LAZ)

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Lazard Ltd. (LAZ)

Q2 FY08 Earnings Call

July 30, 2008, 10:00 AM ET


Judi Frost Mackey - Sr. VP and Director of Global Communications

Bruce Wasserstein - Chairman and CEO

Steven J. Golub - Vice Chairman and Chairman of the Financial Advisory Group

Michael J. Castellano - CFO


Prashant Bhatia - Citigroup

Guy Moszkowski - Merrill Lynch

Michael Hecht - Banc of America Securities

Eric Veiel - T. Rowe Price



Good morning and welcome to Lazard's first half and second quarter 2008 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 Mackey, Lazard's Senior Vice President and Director of Global Communications. Please go ahead.

Judi Frost Mackey - Senior Vice President and Director of Global Communications

Thank you. Good morning, and thank you for joining this conference call to review Lazard's results for the first half and second quarter of 2008. Participating on the call today are Lazard's Chairman and Chief Executive Officer, Bruce Wasserstein; Vice Chairman, Steven J. Golub; and Chief Financial Officer, Mike Castellano. A replay of this call will be available on our website beginning today after 1 p.m. Eastern Time.

Today's call may contain forward-looking statements and these forward-looking statements are based on our current expectations and projections about future events. They 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 Lazards'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. Management cannot guarantee future results, level of activity, performance or achievements.

Moreover, Lazard assumes no responsibility for the accuracy or completeness of any of these forward-looking statements. Investors should not rely upon forward-looking statements with 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. Further, investors should keep in mind that Lazard's quarterly revenue and profits can fluctuate materially depending on many factors, including the number and size of completed transactions on which we advise, as well as on seasonal factors.

As such, Lazard management believes that annual results are the most meaningful. Accordingly, Lazard's revenue and profits in any particular quarter may not be indicative of future results. It is for this reason that Lazard hosts conference calls twice per year to review our first half and full year results.

I will now turn the call over to Mr. Wasserstein.

Bruce Wasserstein - Chairman and Chief Executive Officer

Thank you for joining us. This morning we've reported record first half and second quarter results for our operating revenue, our financial advisory revenue, and our asset management revenue. We also reported a second quarter record in M&A revenue. We are pleased with the performance of our business in these turbulent times. Our core operating business of financial advisory and asset management achieved strong results despite the ongoing softening of these markets. We are also focused on the long term. We continue to invest in our business, while providing our clients with strong experienced teams of top talent.

Our professionals are sought after by both strategic buyers and sellers, as well as asset management clients in this uncertain environment. We have continued to hire senior talent, have been opening new offices and entering new regions. We continue to develop new asset management products. Although the outlook for market activity for the remainder of the year remains unclear, we are confident of the vitality of our firm and we believe our intellectual capital business model will continue to succeed. Steve Golub will now discuss our business and performance in more detail. Steve?

Steven J. Golub - Vice Chairman and Chairman of the Financial Advisory Group

Thank you, Bruce, and good morning everyone. Net income on a fully exchanged basis decreased 31% to $80 million or $0.71 per share diluted for the first half of 2008, compared to $116 million or $1 per share for the first half of 2007. Net income on a fully exchanged basis increased 5% to $64.6 million or $0.54 per share diluted for the second quarter of 2008, compared to $61.5 million or $0.53 per share for the second quarter 2007.

As Bruce mentioned, I will elaborate on our core operating business revenue, which includes both our Financial Advisory and Asset Management businesses. Our core operating business revenue increased 9% to a first half record of $848 million and grew 15% to a second quarter record of $467 million. This follows the first quarter of 2008, where our core business grew modestly over the first quarter of 2007 and follows the full year of 2007, during which we reported record results. Financial Advisory operating revenue increased 7% to a first half record of $501 million and increased 18% to a second quarter record of $289 million. M&A operating revenue increased 9% to $391 million in the first half of 2008 and increased 37% to a second quarter record of $225 million. As I stated in our press release this morning, the volatile environment heightens the need for our experience, diversity, and global breadth to meet and overcome the challenges for our clients.

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