Lazard Ltd Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Advisory: Strong third quarter with marquee transactions. Ongoing momentum in M&A, restructuring, and fundraising. Outlook for improving advisory activity, especially with private capital and global diversification.
• Asset Management: 2025 is an inflection point. Focus on quantitative, emerging market, and customized strategies. Launched 6 ETF strategies in 2025. Chris Hogbin to join as CEO in December.
• Expenses: Compensation expense ratio 65.5% in Q3 2025, non-compensation expense ratio 20.5%. Disciplined approach to expenses, investing in growth.
• Taxes: Effective tax rate for Q3 2025 was 21.4%, full-year 2025 expected around 20%.
• Capital Allocation: Returned $60 million to shareholders in Q3 2025, including a $47 million dividend, and declared a $0.50 per share quarterly dividend.

Segment Performance

• Financial Advisory: For the first 9 months of 2025, total revenue was $1.3 billion. In the third quarter, financial advisory revenue was $422 million, up 14% year-over-year. It was active in M&A across health care, industrials, consumer and retail, restructuring, liability management, and primary/secondary fundraising. 20 new MDs joined in 2025.
• Asset Management: For the first 9 months, revenue totaled $827 million. In the third quarter, revenue was $294 million, up 8% year-over-year. Average AUM for Q3 was $257 billion, up 5% year-over-year. Record gross inflows in Q3, with net positive flows of $1.6 billion year-to-date and total AUM up 17%.

Guidance

• Financial Advisory: On track to expand MD team by 10-15 net per year. Average revenue per MD increased to almost $9 million, aiming for $10 million by 2028.
• Asset Management: Confident in achieving net neutral flows. Positive trends in inflows to key strategies, expecting operating leverage in the business.

Risks

• U.S. government shutdown could temporarily affect deal approvals.
• Geopolitical and macroeconomic uncertainties.
• Continued dispersion in corporate performance affecting Restructuring and Liability Management vs. M&A dynamics.

Question and Answer

Q: Hiring environment and comp leverage.

A: Focus on hiring productive MDs, comp leverage from productivity increase.

Q: Asset Management inflows and gross outflows.

A: Gross outflows lower than last year, disproportionately from sub-advised accounts.

Q: Asset Management turnaround and operating leverage.

A: Expect operating leverage in Asset Management, positive trajectory outside sub-advised accounts.

Q: Chris Hogbin's plans.

A: Expect to hear his plans in January/February.

Q: Advisory business mix and Europe outlook.

A: M&A vs. non-M&A mix trending to 50-50, Europe activity strong with global exposure.

Q: U.S. government shutdown impact on deals.

A: Deals needing regulatory approvals may be affected, but will clear quickly after shutdown.

Q: Secondary market outlook.

A: No deceleration, strong tailwinds, room for growth.

Q: Asset Management fee rates.

A: Slight increase in Q3 due to higher fee inflows, expecting roughly flat near term.