Lazard, Inc. 10-Q

Item 1. Financial Statements (Unaudited) Page Condensed Consolidated Statements of Financial Condition as of September 30, 2023 and December 31, 2022 2 Condensed Consolidated Statements of Operations for the three month and nine month periods ended September 30, 2023 and 2022 4 Condensed Consolidated Statements of Comprehensive Income for the three month and nine month periods ended September 30, 2023 and 2022 5 Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2023 and 2022 6 Condensed Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Noncontrolling Interests for the three month and nine month periods ended September 30, 2023 and 2022 8 Notes to Condensed Consolidated Financial Statements 12 1 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION SEPTEMBER 30, 2023 AND DECEMBER 31, 2022 (UNAUDITED) (dollars in thousands, except for per share data) September 30, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 653,355 $ 1,234,773 Deposits with banks and short-term investments 319,382 779,246 Restricted cash 34,038 625,381 Receivables (net of allowance for credit losses of $ 21,081 and $ 17,738 at September 30, 2023 and December 31, 2022, respectively): Fees 505,976 491,861 Customers and other 126,157 160,897 632,133 652,758 Investments 657,880 698,977 Property (net of accumulated amortization and depreciation of $ 405,811 and $ 395,109 at September 30, 2023 and December 31, 2022, respectively) 229,626 250,073 Operating lease right-of-use assets 413,172 431,608 Goodwill and other intangible assets (net of accumulated amortization of $ 70,184 and $ 70,118 at September 30, 2023 and December 31, 2022, respectively) 394,094 377,330 Deferred tax assets 507,952 407,657 Other assets 453,874 394,758 Total Assets $ 4,295,506 $ 5,852,561 See notes to condensed consolidated financial statements. 2 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION SEPTEMBER 30, 2023 AND DECEMBER 31, 2022 (UNAUDITED) (dollars in thousands, except for per share data) September 30, 2023 December 31, 2022 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY Liabilities: Deposits and other customer payables $ 462,841 $ 921,834 Accrued compensation and benefits 496,711 735,576 Operating lease liabilities 492,036 513,688 Tax receivable agreement obligation 118,546 191,189 Senior debt 1,689,579 1,687,714 Deferred tax liabilities 5,383 3,920 Other liabilities 529,068 539,770 Total Liabilities 3,794,164 4,593,691 Commitments and contingencies Redeemable noncontrolling interests 81,781 583,471 STOCKHOLDERS’ EQUITY Preferred stock, par value $ .01 per share; 15,000,000 shares authorized: Series A - no shares issued and outstanding - - Series B - no shares issued and outstanding - - Common stock: Class A, par value $ 0.01 per share ( 500,000,000 shares authorized; 112,766,091 shares issued at September 30, 2023 and December 31, 2022, including shares held by subsidiaries as indicated below) 1,128 1,128 Additional paid-in-capital 202,617 167,890 Retained earnings 1,388,508 1,676,713 Accumulated other comprehensive loss, net of tax ( 293,059 ) ( 295,854 ) 1,299,194 1,549,877 Class A common stock held by subsidiaries, at cost ( 25,356,940 and 26,814,213 shares at September 30, 2023 and December 31, 2022, respectively) ( 937,876 ) ( 993,414 ) Total Lazard Ltd Stockholders’ Equity 361,318 556,463 Noncontrolling interests 58,243 118,936 Total Stockholders’ Equity 419,561 675,399 Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity $ 4,295,506 $ 5,852,561 See notes to condensed consolidated financial statements. 3 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED) (dollars in thousands, except for per share data) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 REVENUE Investment banking and other advisory fees $ 265,314 $ 454,255 $ 892,826 $ 1,249,085 Asset management fees 265,600 279,040 798,716 863,103 Interest income 11,543 8,148 35,096 13,971 Other 713 4,988 40,761 ( 2,926 ) Total revenue 543,170 746,431 1,767,399 2,123,233 Interest expense 19,252 19,687 57,931 62,051 Net revenue 523,918 726,744 1,709,468 2,061,182 OPERATING EXPENSES Compensation and benefits 364,605 420,937 1,386,803 1,181,608 Occupancy and equipment 33,108 30,696 97,681 91,344 Marketing and business development 20,754 19,633 72,098 56,429 Technology and information services 46,897 44,579 142,307 124,577 Professional services 20,451 15,665 66,179 48,243 Fund administration and outsourced services 27,884 27,110 83,428 85,364 Amortization and other acquisition-related costs 96 15 239 45 Benefit pursuant to tax receivable agreement - - ( 40,435 ) - Other 14,980 9,967 53,022 29,864 Total operating expenses 528,775 568,602 1,861,322 1,617,474 OPERATING INCOME (LOSS) ( 4,857 ) 158,142 ( 151,854 ) 443,708 Provision (benefit) for income taxes ( 11,631 ) 35,350 ( 23,053 ) 108,290 NET INCOME (LOSS) 6,774 122,792 ( 128,801 ) 335,418 LESS - NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 365 ) 16,995 10,245 20,265 NET INCOME (LOSS) ATTRIBUTABLE TO LAZARD LTD $ 7,139 $ 105,797 $ ( 139,046 ) $ 315,153 ATTRIBUTABLE TO LAZARD LTD CLASS A COMMON STOCKHOLDERS: WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 89,425,900 93,275,631 88,582,468 98,161,027 Diluted 94,309,224 98,865,156 88,582,468 103,268,378 NET INCOME (LOSS) PER SHARE OF COMMON STOCK: Basic $ 0.07 $ 1.11 $ ( 1.60 ) $ 3.16 Diluted $ 0.06 $ 1.06 $ ( 1.60 ) $ 3.03 See notes to condensed consolidated financial statements. 4 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED) (dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 NET INCOME (LOSS) $ 6,774 $ 122,792 $ ( 128,801 ) $ 335,418 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: Currency translation adjustments: Currency translation adjustments before reclassification ( 19,935 ) ( 54,439 ) ( 2,946 ) ( 134,129 ) Adjustment for items reclassified to earnings 2,129 138 2,157 265 Employee benefit plans: Actuarial gain (loss) (net of tax expense of $ 1,195 and $ 1,832 for the three months ended September 30, 2023 and 2022, respectively, and $ 121 and $ 4,436 for the nine months ended September 30, 2023 and 2022, respectively) 5,054 8,786 ( 332 ) 20,512 Adjustment for items reclassified to earnings (net of tax expense of $ 374 and $ 233 for the three months ended September 30, 2023 and 2022, respectively, and $ 1,135 and $ 748 for the nine months ended September 30, 2023 and 2022, respectively) 1,580 1,162 3,916 2,816 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX ( 11,172 ) ( 44,353 ) 2,795 ( 110,536 ) COMPREHENSIVE INCOME (LOSS) ( 4,398 ) 78,439 ( 126,006 ) 224,882 LESS - COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 364 ) 16,995 10,245 20,264 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO LAZARD LTD $ ( 4,034 ) $ 61,444 $ ( 136,251 ) $ 204,618 See notes to condensed consolidated financial statements. 5 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED) (dollars in thousands) Nine Months Ended September 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ ( 128,801 ) $ 335,418 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization of property 32,177 31,895 Noncash lease expense 47,641 46,046 Currency translation adjustment reclassification 2,157 265 Amortization of deferred expenses and share-based incentive compensation 353,698 333,100 Amortization and other acquisition-related costs 239 45 Deferred tax provision (benefit) ( 100,744 ) 55,725 Benefit pursuant to tax receivable agreement ( 40,435 ) - Impairment of equity method investments and other receivables 22,981 - Impairment of assets associated with cost-saving initiatives 8,561 - Loss on LGAC liquidation 17,929 - (Increase) decrease in operating assets and increase (decrease) in operating liabilities: Receivables-net 18,470 43,233 Investments ( 100,714 ) 236,275 Other assets ( 25,157 ) ( 72,312 ) Accrued compensation and benefits and other liabilities ( 284,936 ) ( 490,029 ) Net cash provided by (used in) operating activities ( 176,934 ) 519,661 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property ( 19,505 ) ( 24,986 ) Disposals of property 352 272 Acquisition of business, net of cash acquired ( 10,516 ) - Other investing activities - ( 7,500 ) Net cash used in investing activities ( 29,669 ) ( 32,214 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from: Customer deposits, net - 281,360 Contributions from noncontrolling interests 1,248 388 Payments for: Customer deposits, net ( 466,658 ) - Distributions to noncontrolling interests ( 5,068 ) ( 27,062 ) Tax receivable agreement ( 32,208 ) ( 21,035 ) Distribution to redeemable noncontrolling interests in connection with LGAC redemption ( 585,891 ) - Purchase of Class A common stock ( 102,051 ) ( 612,175 ) Class A common stock dividends ( 129,367 ) ( 138,914 ) Settlement of share-based incentive compensation in satisfaction of tax withholding requirements ( 53,924 ) ( 61,257 ) LFI Consolidated Funds redemptions ( 36,816 ) ( 11,296 ) Other financing activities ( 10,186 ) ( 10,841 ) Net cash used in financing activities ( 1,420,921 ) ( 600,832 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 5,101 ) ( 353,914 ) NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 1,632,625 ) ( 467,299 ) CASH AND CASH EQUIVALENTS AND RESTRICTED CASH— January 1 2,639,400 3,430,014 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—September 30 $ 1,006,775 $ 2,962,715 See notes to condensed consolidated financial statements. 6 RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION: September 30, 2023 December 31, 2022 Cash and cash equivalents $ 653,355 $ 1,234,773 Deposits with banks and short-term investments 319,382 779,246 Restricted cash 34,038 625,381 TOTAL CASH AND CASH EQUIVALENTS AND RESTRICTED CASH $ 1,006,775 $ 2,639,400 See notes to condensed consolidated financial statements. 7 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2023 (UNAUDITED) (dollars in thousands) Common Stock Additional Paid-In- Capital Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Tax Class A Common Stock Held By Subsidiaries Total Lazard Ltd Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity Redeemable Noncontrolling Interests Shares $ Shares $ Balance - July 1, 2023 112,766,091 $ 1,128 $ 167,622 $ 1,431,181 $ ( 281,886 ) 25,896,701 $ ( 958,067 ) $ 359,978 $ 55,907 $ 415,885 $ 83,583 Comprehensive income (loss): Net income (loss) 7,139 7,139 2,886 10,025 ( 3,251 ) Other comprehensive income (loss) - net of tax ( 11,173 ) ( 11,173 ) 1 ( 11,172 ) Amortization of share-based incentive compensation 57,058 57,058 1,304 58,362 Dividend equivalents 6,133 ( 6,370 ) ( 237 ) ( 1,916 ) ( 2,153 ) Class A common stock dividends ($ 0.50 per share) ( 43,442 ) ( 43,442 ) ( 43,442 ) Purchase of Class A common stock 85,035 ( 2,954 ) ( 2,954 ) ( 2,954 ) Delivery of Class A common stock in connection with share-based incentive compensation and related tax benefit of $ 164 ( 28,196 ) ( 624,796 ) 23,145 ( 5,051 ) - ( 5,051 ) Contributions from noncontrolling interests, net - 61 61 LFI Consolidated Funds - - - 1,449 Balance - September 30, 2023 112,766,091 $ 1,128 $ 202,617 $ 1,388,508 $ ( 293,059 ) 25,356,940 $ ( 937,876 ) $ 361,318 $ 58,243 $ 419,561 $ 81,781 See notes to condensed consolidated financial statements. 8 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2023 (UNAUDITED) (dollars in thousands) Common Stock Additional Paid-In- Capital Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Tax Class A Common Stock Held By Subsidiaries Total Lazard Ltd Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity Redeemable Noncontrolling Interests Shares $ Shares $ Balance - January 1, 2023 112,766,091 $ 1,128 $ 167,890 $ 1,676,713 $ ( 295,854 ) 26,814,213 $ ( 993,414 ) $ 556,463 $ 118,936 $ 675,399 $ 583,471 Comprehensive income (loss): Net income (loss) ( 139,046 ) ( 139,046 ) 4,696 ( 134,350 ) 5,549 Other comprehensive income - net of tax 2,795 2,795 - 2,795 Amortization of share-based incentive compensation 204,641 204,641 4,989 209,630 Dividend equivalents 19,094 ( 19,792 ) ( 698 ) ( 8,636 ) ( 9,334 ) Class A common stock dividends ($ 1.50 per share) ( 129,367 ) ( 129,367 ) ( 129,367 ) Purchase of Class A common stock 2,782,662 ( 102,051 ) ( 102,051 ) ( 102,051 ) Delivery of Class A common stock in connection with share-based incentive compensation and related tax benefit of $ 254 ( 215,539 ) ( 4,203,791 ) 156,205 ( 59,334 ) 5,664 ( 53,670 ) Business acquisitions and related equity transactions: Class A common stock issuable 1,775 1,775 1,775 Delivery of Class A common stock ( 1,533 ) ( 41,384 ) 1,533 - - Distributions to noncontrolling interests, net - ( 3,820 ) ( 3,820 ) LFI Consolidated Funds - ( 74,164 ) ( 74,164 ) 78,063 Change in redemption value of redeemable noncontrolling interests ( 412 ) ( 412 ) ( 177 ) ( 589 ) 589 LGAC liquidation: Distribution to redeemable noncontrolling interests ( 585,891 ) Reversal to net loss of amounts previously charged to additional paid-in-capital and noncontrolling interests 13,195 13,195 4,734 17,929 Reversal of deferred offering costs liability 14,087 14,087 6,038 20,125 Other ( 581 ) 5,240 ( 149 ) ( 730 ) ( 17 ) ( 747 ) Balance - September 30, 2023 112,766,091 $ 1,128 $ 202,617 $ 1,388,508 $ ( 293,059 ) 25,356,940 $ ( 937,876 ) $ 361,318 $ 58,243 $ 419,561 $ 81,781 See notes to condensed consolidated financial statements. 9 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2022 (UNAUDITED) (dollars in thousands) Common Stock Additional Paid-In- Capital Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Tax Class A Common Stock Held By Subsidiaries Total Lazard Ltd Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity Redeemable Noncontrolling Interests Shares $ Shares $ Balance - July 1, 2022 112,766,091 $ 1,128 $ 71,918 $ 1,628,182 $ ( 290,029 ) 18,240,059 $ ( 695,537 ) $ 715,662 $ 111,295 $ 826,957 $ 575,710 Comprehensive income (loss): Net income 105,797 105,797 13,253 119,050 3,742 Other comprehensive loss - net of tax ( 44,353 ) ( 44,353 ) - ( 44,353 ) Amortization of share-based incentive compensation 70,281 70,281 4,635 74,916 Dividend equivalents 5,100 ( 5,343 ) ( 243 ) ( 1,823 ) ( 2,066 ) Class A common stock dividends ($ 0.50 per share) ( 46,238 ) ( 46,238 ) ( 46,238 ) Purchase of Class A common stock 6,650,998 ( 236,990 ) ( 236,990 ) ( 236,990 ) Delivery of Class A common stock in connection with share-based incentive compensation and related tax benefit of $ 346 ( 19,685 ) ( 464,482 ) 17,513 ( 2,172 ) - ( 2,172 ) Distributions to noncontrolling interests, net - ( 17,420 ) ( 17,420 ) LFI Consolidated Funds - 6,702 6,702 Change in redemption value of redeemable noncontrolling interests 670 670 287 957 ( 957 ) Other ( 1,538 ) 7,661 ( 240 ) ( 1,778 ) ( 241 ) ( 2,019 ) Balance - September 30, 2022 112,766,091 $ 1,128 $ 126,746 $ 1,682,398 $ ( 334,382 ) 24,434,236 $ ( 915,254 ) $ 560,636 $ 116,688 $ 677,324 $ 578,495 See notes to condensed consolidated financial statements. 10 LAZARD LTD CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2022 (UNAUDITED) (dollars in thousands) Common Stock Additional Paid-In- Capital Retained Earnings Accumulated Other Comprehensive Income (Loss), Net of Tax Class A Common Stock Held By Subsidiaries Total Lazard Ltd Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity Redeemable Noncontrolling Interests Shares $ Shares $ Balance - January 1, 2022 112,766,091 $ 1,128 $ 144,729 $ 1,560,636 $ ( 223,847 ) 12,046,140 $ ( 507,426 ) $ 975,220 $ 102,744 $ 1,077,964 $ 575,000 Comprehensive income (loss): Net income 315,153 315,153 11,017 326,170 9,248 Other comprehensive loss - net of tax ( 110,535 ) ( 110,535 ) ( 1 ) ( 110,536 ) Amortization of share-based incentive compensation 188,529 188,529 12,573 201,102 Dividend equivalents 13,189 ( 13,919 ) ( 730 ) ( 8,074 ) ( 8,804 ) Class A common stock dividends ($ 1.44 per share) ( 138,914 ) ( 138,914 ) ( 138,914 ) Purchase of Class A common stock 17,249,880 ( 612,175 ) ( 612,175 ) ( 612,175 ) Delivery of Class A common stock in connection with share-based incentive compensation and related tax benefit of $ 6,604 ( 222,190 ) ( 40,558 ) ( 4,869,445 ) 204,587 ( 58,161 ) 3,508 ( 54,653 ) Distributions to noncontrolling interests, net - ( 26,674 ) ( 26,674 ) LFI Consolidated Funds - 20,110 20,110 Change in redemption value of redeemable noncontrolling interests 4,027 4,027 1,726 5,753 ( 5,753 ) Other ( 1,538 ) 7,661 ( 240 ) ( 1,778 ) ( 241 ) ( 2,019 ) Balance - September 30, 2022 112,766,091 $ 1,128 $ 126,746 $ 1,682,398 $ ( 334,382 ) 24,434,236 $ ( 915,254 ) $ 560,636 $ 116,688 $ 677,324 $ 578,495 See notes to condensed consolidated financial statements. 11 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) 1. ORGANIZATION AND BASIS OF PRESENTATION Organization Lazard Ltd, a Bermuda holding company, and its subsidiaries (collectively referred to as “Lazard Ltd”, “Lazard”, “we” or the “Company”), including Lazard Ltd’s indirect investment in Lazard Group LLC, a Delaware limited liability company (collectively referred to, together with its subsidiaries, as “Lazard Group”), is one of the world’s preeminent financial advisory and asset management firms that specializes in crafting solutions to the complex financial and strategic challenges of our clients. We serve a diverse set of clients around the world, including corporations, governments, institutions, partnerships and individuals. Lazard Ltd indirectly held 100 % of all outstanding Lazard Group common membership interests as of September 30, 2023 and December 31, 2022. Lazard Ltd, through its control of the managing members of Lazard Group, controls Lazard Group, which as of December 31, 2022 was governed by an Amended and Restated Operating Agreement dated as of February 4, 2019. Such operating agreement was subsequently amended and restated effective as of January 1, 2023 (as so amended and restated, the “Operating Agreement”). Lazard Ltd’s primary operating asset is its indirect ownership of the common membership interests of, and managing member interests in, Lazard Group, whose principal operating activities are included in two business segments: • Financial Advisory, which offers corporate, partnership, institutional, government, sovereign and individual clients across the globe a wide array of financial advisory services regarding strategic and mergers and acquisitions (“M&A”) advisory, capital markets advisory, shareholder advisory, restructuring and liability management, sovereign advisory, geopolitical advisory, and other strategic advisory matters and capital raising and placement, and • Asset Management, which offers a broad range of global investment solutions and investment and wealth management services in equity and fixed income strategies, asset allocation strategies, alternative investments and private equity funds to corporations, public funds, sovereign entities, endowments and foundations, labor funds, financial intermediaries and private clients. In addition, we record selected other activities in our Corporate segment, including management of cash, investments, deferred tax assets, outstanding indebtedness, certain contingent obligations, and certain assets and liabilities associated with (i) Lazard Group’s Paris-based subsidiary, Lazard Frères Banque SA (“LFB”), and (ii) in 2022, a special purpose acquisition company that was sponsored by an affiliate of the Company, Lazard Growth Acquisition Corp. I (“LGAC”). Basis of Presentation The accompanying condensed consolidated financial statements of Lazard Ltd have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in Lazard Ltd’s Annual Report on Form 10-K for the year ended December 31, 2022. The accompanying December 31, 2022 unaudited condensed consolidated statement of financial condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP for annual financial statement purposes. The accompanying condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the condensed consolidated financial statements and the accompanying disclosures. For example, discretionary compensation and benefits expense for interim periods is accrued based on the year-to-date amount of revenue earned, and an estimated annual ratio of compensation and benefits expense to revenue, with the applicable 12 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) amounts adjusted for certain items. Although these estimates are based on management’s knowledge of current events and actions that Lazard may undertake in the future, actual results may differ materially from the estimates. The consolidated results of operations for the three month and nine month periods ended September 30, 2023 are not indicative of the results to be expected for any future interim or annual period. The condensed consolidated financial statements include Lazard Ltd and its subsidiaries including Lazard Group and Lazard Group’s principal operating subsidiaries: Lazard Frères & Co. LLC (“LFNY”), a New York limited liability company, along with its subsidiaries, including Lazard Asset Management LLC and its subsidiaries (collectively referred to as “LAM”); the French limited liability companies Compagnie Financière Lazard Frères SAS (“CFLF”), along with its subsidiaries, LFB and Lazard Frères Gestion SAS (“LFG”), and Maison Lazard SAS and its subsidiaries; and Lazard & Co., Limited (“LCL”), through Lazard & Co., Holdings Limited (“LCH”), an English private limited company, together with their jointly owned affiliates and subsidiaries. The Company’s policy is to consolidate entities in which it has a controlling financial interest. The Company consolidates: • Voting interest entities (“VOEs”) where the Company holds a majority of the voting interest in such VOEs and • Variable interest entities (“VIEs”) where the Company is the primary beneficiary having the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or receive benefits from, the VIE that could be potentially significant to the VIE (see Note 20). When the Company does not have a controlling interest in an entity, but exerts significant influence over such entity’s operating and financial decisions, the Company either (i) applies the equity method of accounting in which it records a proportionate share of the entity’s net earnings or losses or (ii) elects the option to measure its investment at fair value. Intercompany transactions and balances have been eliminated. Lazard Growth Acquisition Corp. I In February 2021, LGAC consummated its $ 575,000 initial public offering (the “LGAC IPO”). LGAC is a dormant special purpose acquisition company, that was incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). LGACo 1 LLC, a Delaware series limited liability company and the Company’s subsidiary, was the sponsor of LGAC. LGAC is considered to be a VIE. The Company holds a controlling financial interest in LGAC through the sponsor’s ownership of Class B founder shares of LGAC. As a result, both LGAC and the sponsor are consolidated in the Company’s financial statements. The proceeds from the LGAC IPO of $ 575,000 were held in a trust account, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the trust account to the LGAC shareholders in connection with the redemption of LGAC’s Class A ordinary shares, subject to certain conditions. The cash held in the trust account was recorded in “restricted cash” on the condensed consolidated statements of financial condition as of December 31, 2022. Transaction costs, which consisted of a net underwriting fee of $ 8,500 , $ 20,125 of non-cash deferred underwriting fees (included in “other liabilities” on the condensed consolidated statements of financial condition as of December 31, 2022) and $ 852 of other offering costs, were charged against the gross proceeds of the LGAC IPO. “Redeemable noncontrolling interests” of $ 583,471 associated with the publicly held LGAC Class A ordinary shares were recorded on the Company’s condensed consolidated statements of financial condition as of December 31, 2022 at redemption value and classified as temporary equity. Changes in redemption value are recognized immediately as they occur and will adjust the carrying value of redeemable noncontrolling interests to equal the redemption value at the end of 13 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) each reporting period. Increases or decreases in the carrying amount of redeemable noncontrolling interests shall be affected by credits or charges to additional paid-in-capital and noncontrolling interests attributable to certain members of LGACo 1 LLC based on pro rata ownership. The warrants exercisable for LGAC Class A ordinary shares that were issued in connection with the LGAC IPO (the “LGAC Warrants”) meet the definition of a liability under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815 and were classified as derivative liabilities which were remeasured at fair value at each balance sheet date until exercised or cancelled, with changes in fair value reported to earnings. See Note 6. On February 23, 2023, LGAC redeemed all of its outstanding publicly held Class A ordinary shares as a result of LGAC not consummating a Business Combination within the time period required by its amended and restated memorandum and articles of association resulting in the distribution of $ 585,891 of the cash held in the trust account to the LGAC shareholders. The Company recognized $ 17,929 of losses on the liquidation of LGAC in “revenue-other” on the condensed consolidated statement of operations for the nine month period ended September 30, 2023. In addition, the $ 20,125 of non-cash deferred underwriting fees noted above was no longer probable of being incurred and therefore was reversed from other liabilities to additional paid-in-capital. There were no redemption rights or liquidating distributions with respect to the LGAC warrants. 2. REVENUE RECOGNITION The Company disaggregates revenue based on its business segment results and believes that the following information provides a reasonable representation of how performance obligations relate to the nature, amount, timing and uncertainty of revenue and cash flows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net Revenue: Financial Advisory (a) $ 266,048 $ 456,521 $ 896,099 $ 1,254,621 Asset Management: Management fees and other (b) $ 282,657 $ 277,202 $ 843,590 $ 872,351 Incentive fees (c) 2,198 21,595 13,622 54,098 Total Asset Management $ 284,855 $ 298,797 $ 857,212 $ 926,449 ___________________________________ (a) Financial Advisory is comprised of a wide array of financial advisory services regarding M&A advisory, capital markets advisory, shareholder advisory, restructuring and liability management, sovereign advisory, geopolitical advisory, and other strategic advisory and capital raising and placement work for clients. The benefits of these advisory services are generally transferred to the Company’s clients over time, and consideration for these advisory services typically includes transaction completion, transaction announcement and retainer fees. Retainer fees are generally fixed and recognized over the period in which the advisory services are performed. However, transaction announcement and transaction completion fees are variable and subject to constraints, and they are typically not recognized until there is an announcement date or a completion date, respectively, due to the uncertainty associated with those events. Therefore, in any given period, advisory fees recognized for certain transactions may relate to services performed in prior periods. The advisory fees that may be unrecognized as of the end of a reporting period, primarily comprised of fees associated with transaction announcements and transaction completions, generally remain unrecognized due to the uncertainty associated with those events. (b) Management fees and other is primarily comprised of management services. The benefits of these management services are transferred to the Company’s clients over time. Consideration for these management services generally includes management fees, which are based on assets under management and recognized over the period in which the management services are performed. The selling or distribution of fund interests is a separate performance obligation 14 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) within management fees and other, and the benefits of such services are transferred to the Company’s clients at the point in time that such fund interests are sold or distributed. (c) Incentive fees is primarily comprised of management services. The benefits of these management services are transferred to the Company’s clients over time. Consideration for these management services is generally variable and includes performance or incentive fees. The fees allocated to these management services that are unrecognized as of the end of the reporting period are generally amounts that are subject to constraints due to the uncertainty associated with performance targets and clawbacks. In addition to the above, contracts with clients include trade-based commission income, which is recognized at the point in time of execution and presented within other revenue. Such income may be earned by providing trade facilitation, execution, clearance and settlement, custody, and trade administration services to clients. With regard to the disclosure requirement for remaining performance obligations, the Company elected the practical expedients permitted in the guidance to (i) exclude contracts with a duration of one year or less; and (ii) exclude variable consideration, such as transaction completion and transaction announcement fees, that is allocated entirely to unsatisfied performance obligations. Excluded variable consideration typically relates to contracts with a duration of one year or less, and is generally constrained due to uncertainties. Therefore, when applying the practical expedients, amounts related to remaining performance obligations are not material to the Company’s financial statements. 3. RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES The Company’s receivables represent fee receivables, amounts due from customers and other receivables. Where applicable, receivables are stated net of an estimated allowance for credit losses determined in accordance with the current expected credit losses (“CECL”) model, for general credit risk of the overall portfolio and for specific accounts deemed uncollectible, which may include situations where a fee is in dispute. Of the Company’s fee receivables at September 30, 2023 and December 31, 2022, $ 115,379 and $ 97,964 , respectively, represented financing receivables for our Private Capital Advisory fees. At September 30, 2023 and December 31, 2022, customers and other receivables included $ 89,753 and $ 128,890 , respectively, of customer loans, which are fully collateralized and monitored for counterparty creditworthiness, with such collateral having a fair value in excess of the carrying amount of the loans as of both September 30, 2023 and December 31, 2022. The aggregate carrying amount of other fees and customers and other receivables was $ 427,001 and $ 425,904 at September 30, 2023 and December 31, 2022, respectively. Activity in the allowance for credit losses for the three month and nine month periods ended September 30, 2023 and 2022 was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Beginning Balance $ 27,095 $ 30,271 $ 17,738 $ 33,957 Bad debt expense, net of reversals 2,268 566 13,287 24 Charge-offs, foreign currency translation and other adjustments ( 8,282 ) ( 15,517 ) ( 9,944 ) ( 18,661 ) Ending Balance $ 21,081 $ 15,320 $ 21,081 $ 15,320 Bad debt expense, net of reversals represents the current period provision of expected credit losses and is included in “operating expenses-other” on the condensed consolidated statements of operations. 15 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) The allowance for credit losses is substantially all related to M&A and Restructuring fee receivables and other receivables. 4. INVESTMENTS The Company’s investments consist of the following at September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Debt $ 4,481 $ - Equities 40,659 43,889 Funds: Alternative investments (a) 60,210 56,947 Debt (a) 183,790 178,556 Equity (a) 324,239 350,282 Private equity 44,501 53,822 612,740 639,607 Investments, at fair value 657,880 683,496 Equity method investments - 15,481 Total investments $ 657,880 $ 698,977 ___________________________________ (a) Interests in alternative investment funds, debt funds and equity funds include investments, including those held by LFI Consolidated Funds (see Note 20), with fair values of $ 27,145 , $ 168,624 and $ 262,223 , respectively, at September 30, 2023 and $ 24,137 , $ 142,632 and $ 266,528 , respectively, at December 31, 2022, held in order to satisfy the Company’s obligation upon vesting of previously granted Lazard Fund Interests (“LFI”) and other similar deferred compensation arrangements. LFI represent grants by the Company to eligible employees of interests in a number of Lazard-managed funds, subject to service-based vesting conditions (see Notes 6 and 12). Debt primarily consists of U.S. Treasury securities with original maturities at time of purchase of greater than three months and less than one year . Equities primarily consist of investments in marketable equity securities of large-, mid- and small-cap domestic, international and global companies held within separately managed accounts to seed strategies and funds in our Asset Management business. Alternative investment funds primarily consist of interests in various Lazard-managed hedge funds, funds of funds and mutual funds. Such amounts primarily consist of investments in funds to seed strategies and funds in our Asset Management business and amounts related to LFI discussed above. Debt funds primarily consist of investments in funds to seed strategies and funds in our Asset Management business that invest in debt securities, amounts related to LFI discussed above and an investment in a Lazard-managed debt fund. Equity funds primarily consist of investments in funds to seed strategies and funds in our Asset Management business that invest in equity securities, and amounts related to LFI discussed above. Private equity investments include those owned by Lazard and those consolidated but not owned by Lazard. Private equity investments owned by Lazard are primarily comprised of investments in private equity funds. Such investments primarily include (i) Edgewater Growth Capital Partners III, L.P. (“EGCP III”), a fund primarily making equity and buyout investments in middle market companies, (ii) a fund targeting significant noncontrolling-stake 16 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) investments in established private companies and (iii) a seed investment in a fund that invests in sustainable private infrastructure opportunities. Private equity investments consolidated but not owned by Lazard relate to the economic interests that are owned by the management team and other investors in the Edgewater Funds (“Edgewater”). Equity method investments represent certain partnership interests accounted for under the equity method of accounting. During the three month and nine month periods ended September 30, 2023 and 2022, the Company reported in “revenue-other” on its condensed consolidated statements of operations net unrealized investment gains and losses pertaining to equity securities and trading debt securities still held as of the reporting date as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net unrealized investment gains (losses) $ ( 23,879 ) $ ( 31,093 ) $ 14,551 $ ( 134,091 ) 5. FAIR VALUE MEASUREMENTS Fair Value Hierarchy of Investments and Certain Other Assets and Liabilities —Lazard categorizes its investments and certain other assets and liabilities recorded at fair value into a three-level fair value hierarchy as follows: Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that Lazard has the ability to access. Level 2. Assets and liabilities whose values are based on (i) quoted prices for similar assets or liabilities in an active market, or quoted prices for identical or similar assets or liabilities in non-active markets, or (ii) inputs other than quoted prices that are directly observable or derived principally from, or corroborated by, market data. Level 3. Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability. Items included in Level 3 include securities or other financial assets whose trading volume and level of activity have significantly decreased when compared with normal market activity and there is no longer sufficient frequency or volume to provide pricing information on an ongoing basis. The fair value of debt is classified as Level 1 when the fair values are based on unadjusted quoted prices in active markets, or Level 2 when based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. The fair value of equities is classified as Level 1 or Level 3 as follows: marketable equity securities are classified as Level 1 and are valued based on the last trade price on the primary exchange for that security as provided by external pricing services; equity interests in private companies are generally classified as Level 3. The fair value of investments in alternative investment funds, debt funds and equity funds is classified as Level 1 when the fair values are based on the publicly reported closing price for the fund, or Level 2 when based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. The fair value of investments in certain private equity funds is classified as Level 3 for (i) certain investments that are valued based on the potential transaction value and (ii) when the acquisition price is considered the best measure of fair value. The fair value of securities sold, not yet purchased, is classified as Level 1 when the fair values are based on unadjusted quoted prices in active markets. 17 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) The fair value of the contingent consideration liability is classified as Level 3 and the fair value of the liability is remeasured at each reporting period. The inputs used to derive the fair value of the contingent consideration include the application of probabilities when assessing certain performance thresholds for the relevant periods. Any change in the fair value is recognized in “amortization and other acquisition-related costs” in the condensed consolidated statement of operations. Our business acquisitions may involve the potential payment of contingent consideration upon the achievement of certain performance thresholds. The contingent consideration liability is initially recorded at fair value of the contingent payments on the acquisition date and is included in “other liabilities” on the condensed consolidated statements of financial condition. The fair value of derivatives entered into by the Company and classified as Level 1 is based on the listed market price of such instruments. The fair value of derivatives entered into by the Company and classified as Level 2 is based on the values of the related underlying assets, indices or reference rates as follows: the fair value of forward foreign currency exchange rate contracts is a function of the spot rate and the interest rate differential of the two currencies from the trade date to settlement date; the fair value of total return swaps is based on the change in fair value of the related underlying equity security, financial instrument or index and a specified notional holding; the fair value of interest rate swaps is based on the interest rate yield curve; and the fair value of derivative liabilities related to LFI and other similar deferred compensation arrangements is based on the value of the underlying investments, adjusted for forfeitures. See Note 6. Investments Measured at Net Asset Value (“NAV”) —As a practical expedient, the Company uses NAV or its equivalent to measure the fair value of certain investments. NAV is primarily determined based on information provided by external fund administrators. The Company’s investments valued at NAV as a practical expedient in (i) alternative investment funds, debt funds and equity funds are redeemable in the near term, and (ii) private equity funds are not redeemable in the near term as a result of redemption restrictions. The following tables present, as of September 30, 2023 and December 31, 2022, the classification of (i) investments and certain other assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy and (ii) investments measured at NAV or its equivalent as a practical expedient: September 30, 2023 Level 1 Level 2 Level 3 NAV Total Assets: Investments: Debt $ 3,524 $ 957 $ - $ - $ 4,481 Equities 40,119 - 540 - 40,659 Funds: Alternative investments 15,534 - - 44,676 60,210 Debt 173,546 10,240 - 4 183,790 Equity 324,197 - - 42 324,239 Private equity - - 261 44,240 44,501 Derivatives - 3,678 - - 3,678 Total $ 556,920 $ 14,875 $ 801 $ 88,962 $ 661,558 Liabilities: Securities sold, not yet purchased $ 1,724 $ - $ - $ - $ 1,724 Contingent consideration liability - - 6,503 - 6,503 Derivatives - 342,483 - - 342,483 Total $ 1,724 $ 342,483 $ 6,503 $ - $ 350,710 18 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) December 31, 2022 Level 1 Level 2 Level 3 NAV Total Assets: Investments: Equities $ 43,243 $ - $ 646 $ - $ 43,889 Funds: Alternative investments 27,073 - - 29,874 56,947 Debt 178,552 - - 4 178,556 Equity 350,242 - - 40 350,282 Private equity - - 18,772 35,050 53,822 Derivatives - 14,554 - - 14,554 Total $ 599,110 $ 14,554 $ 19,418 $ 64,968 $ 698,050 Liabilities: Securities sold, not yet purchased $ 4,651 $ - $ - $ - $ 4,651 Derivatives 115 327,045 - - 327,160 Total $ 4,766 $ 327,045 $ - $ - $ 331,811 The following tables provide a summary of changes in fair value of the Company’s Level 3 assets and liabilities for the three month and nine month periods ended September 30, 2023 and 2022: Three Months Ended September 30, 2023 Beginning Balance Net Unrealized/ Realized Gains/Losses Included In Earnings (a) Purchases/ Issuances Sales/ Settlements Foreign Currency Translation Adjustments Ending Balance Assets: Investments: Equities $ 642 $ ( 95 ) $ - $ - $ ( 7 ) $ 540 Private equity funds 268 - - - ( 7 ) 261 Total Level 3 assets $ 910 $ ( 95 ) $ - $ - $ ( 14 ) $ 801 Liabilities: Contingent consideration liability $ 6,422 $ 81 $ - $ - $ - $ 6,503 Total Level 3 liabilities $ 6,422 $ 81 $ - $ - $ - $ 6,503 19 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) Nine Months Ended September 30, 2023 Beginning Balance Net Unrealized/ Realized Gains/Losses Included In Earnings (a) Purchases/Acquisitions/ Issuances Sales/ Settlements/ Transfers (b) Foreign Currency Translation Adjustments Ending Balance Assets: Investments: Equities $ 646 $ ( 81 ) $ - $ - $ ( 25 ) $ 540 Private equity funds 18,772 - - ( 18,508 ) ( 3 ) 261 Total Level 3 assets $ 19,418 $ ( 81 ) $ - $ ( 18,508 ) $ ( 28 ) $ 801 Liabilities: Contingent consideration liability (c) $ - $ 194 $ 7,754 $ ( 1,445 ) $ - $ 6,503 Total Level 3 liabilities $ - $ 194 $ 7,754 $ ( 1,445 ) $ - $ 6,503 Three Months Ended September 30, 2022 Beginning Balance Net Unrealized/ Realized Gains/Losses Included In Earnings (a) Purchases/ Issuances Sales/ Settlements Foreign Currency Translation Adjustments Ending Balance Assets: Investments: Equities $ 542 $ 28 $ - $ - $ ( 41 ) $ 529 Private equity funds 256 - - - ( 16 ) 240 Total Level 3 assets $ 798 $ 28 $ - $ - $ ( 57 ) $ 769 Nine Months Ended September 30, 2022 Beginning Balance Net Unrealized/ Realized Gains/Losses Included In Earnings (a) Purchases/ Issuances Sales/ Settlements Foreign Currency Translation Adjustments Ending Balance Assets: Investments: Equities $ 578 $ 35 $ - $ - $ ( 84 ) $ 529 Private equity funds 293 - - ( 13 ) ( 40 ) 240 Total Level 3 assets $ 871 $ 35 $ - $ ( 13 ) $ ( 124 ) $ 769 __________________________________ (a) Earnings recorded in “other revenue” for investments in Level 3 assets for the three month and nine month periods ended September 30, 2023 and 2022 include net unrealized gains (losses) of $( 76 ), $( 62 ), $ 28 and $ 35 , respectively. Unrealized losses of $ 81 and $ 194 were recorded in “amortization and other acquisition-related costs” for the contingent consideration liability for the three month and nine month periods ended September 30, 2023. (b) Transfers out of Level 3 private equity funds in the nine month period ended September 30, 2023 reflect investments valued at NAV as of September 30, 2023. 20 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) (c) For the nine month period ended September 30, 2023, acquisitions represent the initial recognition of the contingent consideration liability (noncash transaction), and settlements represent aggregate cash and noncash settlement of contingent consideration after the acquisition date. There were no other transfers into or out of Level 3 within the fair value hierarchy during the three month and nine month periods ended September 30, 2023 and 2022. The following tables present, at September 30, 2023 and December 31, 2022, certain investments that are valued using NAV or its equivalent as a practical expedient in determining fair value: September 30, 2023 Investments Redeemable NAV Unfunded Commitments % of NAV Not Redeemable Redemption Frequency Redemption Notice Period Alternative investment funds: Hedge funds $ 44,022 $ - NA (a) 30 - 60 days Other 654 - NA (b) < 30 - 30 days Debt funds 4 - NA (c) < 30 days Equity funds 42 - NA (d) < 30 - 60 days Private equity funds: Equity growth 44,240 5,547 (e) 100 % (f) NA NA Total $ 88,962 $ 5,547 ___________________________________ (a) monthly ( 73 %) and quarterly ( 27 %) (b) daily ( 5 %) and monthly ( 95 %) (c) daily ( 100 %) (d) monthly ( 33 %) and annually ( 67 %) (e) Unfunded commitments to private equity investments consolidated but not owned by Lazard of $ 10,206 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders. (f) Distributions from each fund will be received as the underlying investments of the funds are liquidated. December 31, 2022 Investments Redeemable NAV Unfunded Commitments % of NAV Not Redeemable Redemption Frequency Redemption Notice Period Alternative investment funds: Hedge funds $ 29,259 $ - NA (a) 30 - 60 days Other 615 - NA (b) < 30 - 30 days Debt funds 4 - NA (c) < 30 days Equity funds 40 - NA (d) < 30 - 60 days Private equity funds: Equity growth 35,050 5,455 (e) 100 % (f) NA NA Total $ 64,968 $ 5,455 ___________________________________ (a) monthly ( 68 %) and quarterly ( 32 %) (b) daily ( 5 %) and monthly ( 95 %) 21 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) (c) daily ( 100 %) (d) monthly ( 35 %) and annually ( 65 %) (e) Unfunded commitments to private equity investments consolidated but not owned by Lazard of $ 8,003 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders. (f) Distributions from each fund will be received as the underlying investments of the funds are liquidated. Investment Capital Funding Commitments —At September 30, 2023, the Company’s maximum unfunded commitments for capital contributions to investment funds primarily arose from commitments to EGCP III, which amounted to $ 5,028 . The investment period for EGCP III ended on October 12, 2016, after which point the Company’s obligation to fund capital contributions for new investments in EGCP III expired. The Company remains obligated until October 12, 2023 (or any earlier liquidation of EGCP III) to make capital contributions necessary to fund follow-on investments and to pay for fund expenses. 6. DERIVATIVES The tables below present the fair value of the Company’s derivative instruments reported within “other assets” and “other liabilities” and the fair value of the Company’s derivative liabilities relating to its obligations pertaining to LFI and other similar deferred compensation arrangements reported within “accrued compensation and benefits” (see Note 12) on the accompanying condensed consolidated statements of financial condition as of September 30, 2023 and December 31, 2022. Notional amounts provide an indication of the volume of the Company's derivative activity. Derivative assets and liabilities, as well as the related cash collateral from the same counterparty, have been netted on the condensed consolidated statements of financial condition where the Company has obtained an appropriate legal opinion with respect to the master netting agreement. Where such a legal opinion has not been either sought or obtained, amounts are not eligible for netting on the condensed consolidated statements of financial condition, and those derivative assets and liabilities are shown separately in the table below. In addition to the cash collateral received and transferred that is presented on a net basis with derivative assets and liabilities, the Company receives and transfers additional securities and cash collateral. These amounts mitigate counterparty credit risk associated with the Company’s derivative instruments, but are not eligible for net presentation on the condensed consolidated statements of financial condition. September 30, 2023 Derivative Assets Derivative Liabilities Fair Value Notional Fair Value Notional Forward foreign currency exchange rate contracts $ 1,985 $ 151,496 $ 1,979 $ 207,558 Total return swaps and other 4,042 79,756 2,270 54,754 LFI and other similar deferred compensation arrangements - - 340,583 357,133 Total gross derivatives 6,027 $ 231,252 344,832 $ 619,445 Counterparty and cash collateral netting: Forward foreign currency exchange rate contracts ( 79 ) ( 83 ) Total return swaps and other ( 2,270 ) ( 2,265 ) Net derivatives in "other assets" and "other liabilities" 3,678 342,484 Amounts not netted (a): Cash collateral - ( 1,692 ) Securities collateral - - $ 3,678 $ 340,792 22 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) December 31, 2022 Derivative Assets Derivative Liabilities Fair Value Notional Fair Value Notional Forward foreign currency exchange rate contracts $ 1,356 $ 170,103 $ 921 $ 128,098 Total return swaps and other 13,427 155,026 72 1,398 LGAC Warrants - - 115 11,500 LFI and other similar deferred compensation arrangements - - 326,282 338,126 Total gross derivatives 14,783 $ 325,129 327,390 $ 479,122 Counterparty and cash collateral netting: Forward foreign currency exchange rate contracts ( 157 ) ( 158 ) Total return swaps and other ( 72 ) ( 72 ) Net derivatives in "other assets" and "other liabilities" 14,554 327,160 Amounts not netted (a): Cash collateral - - Securities collateral - - $ 14,554 $ 327,160 ___________________________________ (a) Amounts are subject to master netting arrangements but do not meet the criteria for netting on the condensed consolidated statements of financial condition under U.S. GAAP. For some counterparties, the collateral amounts of securities and cash collateral pledged may exceed the derivative assets and derivative liabilities balances. Where this is the case, the total amount reported is limited to the net derivative assets and net derivative liabilities balances with that counterparty. Net gains (losses) with respect to derivative instruments (included in “revenue-other”) and the Company’s derivative liabilities relating to its obligations pertaining to LFI and other similar deferred compensation arrangements (included in “compensation and benefits” expense) as reflected on the accompanying condensed consolidated statements of operations for the three month and nine month periods ended September 30, 2023 and 2022, were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Forward foreign currency exchange rate contracts $ ( 984 ) $ 2,650 $ ( 1,684 ) $ 8,260 LFI and other similar deferred compensation arrangements 10,598 16,180 ( 15,530 ) 65,601 LGAC Warrants - 2,300 115 9,430 Total return swaps and other 6,523 7,177 ( 4,907 ) 32,676 Total $ 16,137 $ 28,307 $ ( 22,006 ) $ 115,967 See Note 1 for additional information on LGAC Warrants. 23 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) 7. PROPERTY, NET At September 30, 2023 and December 31, 2022, property consisted of the following: Estimated Depreciable Life in Years September 30, 2023 December 31, 2022 Buildings 33 $ 163,900 $ 135,103 Leasehold improvements 3 - 20 225,602 208,323 Furniture and equipment 3 - 10 232,664 236,194 Construction in progress 13,271 65,562 Total 635,437 645,182 Less - Accumulated depreciation and amortization 405,811 395,109 Property, net $ 229,626 $ 250,073 8. GOODWILL AND OTHER INTANGIBLE ASSETS The components of goodwill and other intangible assets at September 30, 2023 and December 31, 2022 are presented below: September 30, 2023 December 31, 2022 Goodwill $ 394,049 $ 377,240 Other intangible assets (net of accumulated amortization) 45 90 $ 394,094 $ 377,330 At September 30, 2023 and December 31, 2022, goodwill of $ 312,779 and $ 312,699 , respectively, was attributable to the Company’s Financial Advisory segment and, goodwill of $ 81,270 and $ 64,541 , respectively, was attributable to the Company’s Asset Management segment. Changes in the carrying amount of goodwill for the nine month periods ended September 30, 2023 and 2022 are as follows: Nine Months Ended September 30, 2023 2022 Balance, January 1 $ 377,240 $ 379,421 Acquisition of business 16,729 - Foreign currency translation adjustments 80 ( 3,637 ) Balance, September 30 $ 394,049 $ 375,784 The acquisition in the nine month period ended September 30, 2023 was attributable to the Company’s Asset Management segment. All other changes in the carrying amount of goodwill for the nine month periods ended September 30, 2023 and 2022 are attributable to the Company’s Financial Advisory segment. Amortization expense of intangible assets, included in “amortization and other acquisition-related costs” in the condensed consolidated statements of operations, for both the three month and nine month periods ended September 30, 2023 and 2022 was $ 15 and $ 45 , respectively. 24 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) 9. SENIOR DEBT Senior debt is comprised of the following as of September 30, 2023 and December 31, 2022: Outstanding as of September 30, 2023 December 31, 2022 Initial Principal Amount Maturity Date Annual Interest Rate(a) Principal Unamortized Debt Costs Carrying Value Principal Unamortized Debt Costs Carrying Value Lazard Group 2025 Senior Notes $ 400,000 2/13/25 3.75 % $ 400,000 $ 649 $ 399,351 $ 400,000 $ 1,003 $ 398,997 Lazard Group 2027 Senior Notes 300,000 3/1/27 3.625 % 300,000 1,333 298,667 300,000 1,625 298,375 Lazard Group 2028 Senior Notes 500,000 9/19/28 4.50 % 500,000 4,225 495,775 500,000 4,864 495,136 Lazard Group 2029 Senior Notes 500,000 3/11/29 4.375 % 500,000 4,214 495,786 500,000 4,794 495,206 Total $ 1,700,000 $ 10,421 $ 1,689,579 $ 1,700,000 $ 12,286 $ 1,687,714 __________________________ (a) The effective interest rates of Lazard Group’s 3.75 % senior notes due February 13, 2025 (the “2025 Notes”), Lazard Group’s 3.625 % senior notes due March 1, 2027 (the “2027 Notes”), Lazard Group’s 4.50 % senior notes due September 19, 2028 (the “2028 Notes”) and Lazard Group’s 4.375 % senior notes due March 11, 2029 (the “2029 Notes”) are 3.87 %, 3.76 %, 4.67 % and 4.53 %, respectively. The Company’s senior debt at September 30, 2023 and December 31, 2022 is carried at their principal balances outstanding, net of unamortized debt costs. At those dates, the fair value of such senior debt was approximately $ 1,586,000 and $ 1,602,000 , respectively. The fair value of the Company’s senior debt is based on market quotations. The Company’s senior debt would be categorized within Level 2 of the hierarchy of fair value measurements if carried at fair value. On June 6, 2023 , Lazard Group entered into a Second Amended and Restated Credit Agreement with a group of lenders for a five-year , $ 200,000 senior revolving credit facility expiring in June 2028 (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement amended and restated the three-year , $ 200,000 senior revolving credit facility that was due to expire in July 2023 (the “Previous Credit Agreement”) in its entirety. Borrowings under the Second Amended and Restated Credit Agreement generally will bear interest at adjusted term SOFR plus an applicable margin for specific interest periods determined based on Lazard Group’s highest credit rating from an internationally recognized credit agency. The Second Amended and Restated Credit Agreement contains certain covenants, events of default and other customary provisions, including customary benchmark-replacement mechanics. At September 30, 2023 and December 31, 2022, no amounts were outstanding under the Second Amended and Restated Credit Agreement and the Previous Credit Agreement, respectively. As of September 30, 2023, the Company had approximately $ 209,000 in unused lines of credit available to it, including the credit facility provided under the Second Amended and Restated Credit Agreement. The Second Amended and Restated Credit Agreement and the indenture and the supplemental indentures relating to Lazard Group’s senior notes contain certain covenants, events of default and other customary provisions, including a customary make-whole provision in the event of early redemption, where applicable. As of September 30, 2023, the Company was in compliance with such provisions. All of the Company’s senior debt obligations are unsecured. 25 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) 10. COMMITMENTS AND CONTINGENCIES Guarantees —A subsidiary of LAM guaranteed a revolving credit facility of an unconsolidated fund expiring on October 1, 2023. At September 30, 2023, the maximum amount of future payments under such guarantee is $ 10,000 . Other Commitments —From time to time, LFB and LFNY may enter into underwriting commitments in which they will participate as an underwriter. At September 30, 2023, LFB and LFNY had no such underwriting commitments. See Notes 5 and 13 for information regarding commitments relating to investment capital funding commitments and obligations to fund our pension plans, respectively. The fulfillment of the commitments described herein should not have a material adverse effect on the Company’s condensed consolidated financial position or results of operations. Legal —The Company is involved from time to time in judicial, governmental, regulatory and arbitration proceedings and inquiries concerning matters arising in connection with the conduct of our businesses, including proceedings initiated by former employees alleging wrongful termination. The Company reviews such matters on a case-by-case basis and establishes any required accrual if a loss is probable and the amount of such loss can be reasonably estimated. The Company may experience significant variation in its revenue and earnings on a quarterly basis. Accordingly, the results of any pending matter or matters could be significant when compared to the Company’s earnings in any particular quarter. The Company believes, however, based on currently available information, that the results of any pending matters, in the aggregate, will not have a material effect on its business or financial condition. 11. STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS Share Repurchase Program —Since 2021 and through the nine month period ended September 30, 2023, the Board of Directors of Lazard authorized the repurchase of Lazard Ltd Class A common stock (“common stock”), the only class of common stock of Lazard outstanding as set forth in the table below: Date Repurchase Authorization Expiration April 2021 $ 300,000 December 31, 2022 February 2022 $ 300,000 December 31, 2024 July 2022 $ 500,000 December 31, 2024 The Company expects that the share repurchase program will continue to be used to offset a portion of the shares that have been or will be issued under the Lazard Ltd 2018 Incentive Compensation Plan, as amended (the “2018 Plan”). Pursuant to the share repurchase program, purchases have been made in the open market or through privately negotiated transactions. The rate at which the Company purchases shares in connection with the share repurchase program may vary from period to period due to a variety of factors. Purchases with respect to such program are set forth in the table below: Nine Months Ended September 30: Number of Shares Purchased Average Price Per Share 2022 17,249,880 $ 35.49 2023 2,782,662 $ 36.67 During the nine month periods ended September 30, 2023 and 2022, certain of our executive officers received common stock in connection with the vesting or settlement of previously-granted deferred equity incentive awards. The vesting or settlement of such equity awards gave rise to a tax payable by the executive officers, and, consistent with our past practice, the Company purchased shares of common stock from certain of our executive officers equal in value to all or a portion of the estimated amount of such tax. In addition, during the nine month periods ended September 30, 2023 and 2022, the Company purchased shares of common stock from certain of our executive officers. The aggregate value of all 26 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) such purchases during the nine month periods ended September 30, 2023 and 2022 was approximately $ 11,100 and $ 16,500 , respectively. Such shares of common stock are reported at cost. As of September 30, 2023, a total of $ 200,095 of share repurchase authorization remained available under Lazard Ltd’s share repurchase program, which authorization will expire on December 31, 2024 . During the nine month period ended September 30, 2023, Lazard Ltd had in place trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to which it effected stock repurchases in the open market. Preferred Stock —Lazard Ltd has 15,000,000 authorized shares of preferred stock, par value $ 0.01 per share, inclusive of its Series A and Series B preferred stock. Series A and Series B preferred shares were issued in connection with certain prior year business acquisitions and were each non-participating securities convertible into common stock, and had no voting or dividend rights. As of both September 30, 2023 and December 31, 2022, no shares of Series A or Series B preferred stock were outstanding. Accumulated Other Comprehensive Income (Loss) (“AOCI”), Net of Tax —The tables below reflect the balances of each component of AOCI at September 30, 2023 and 2022 and activity during the three month and nine month periods then ended: Three Months Ended September 30, 2023 Currency Translation Adjustments Employee Benefit Plans Total AOCI Amount Attributable to Noncontrolling Interests Total Lazard Ltd AOCI Balance, July 1, 2023 $ ( 139,907 ) $ ( 141,980 ) $ ( 281,887 ) $ ( 1 ) $ ( 281,886 ) Activity: Other comprehensive income (loss) before reclassifications ( 19,935 ) 5,054 ( 14,881 ) 1 ( 14,882 ) Adjustments for items reclassified to earnings, net of tax 2,129 1,580 3,709 - 3,709 Net other comprehensive income (loss) ( 17,806 ) 6,634 ( 11,172 ) 1 ( 11,173 ) Balance, September 30, 2023 $ ( 157,713 ) $ ( 135,346 ) $ ( 293,059 ) $ - $ ( 293,059 ) Nine Months Ended September 30, 2023 Currency Translation Adjustments Employee Benefit Plans Total AOCI Amount Attributable to Noncontrolling Interests Total Lazard Ltd AOCI Balance, January 1, 2023 $ ( 156,924 ) $ ( 138,930 ) $ ( 295,854 ) $ - $ ( 295,854 ) Activity: Other comprehensive loss before reclassifications ( 2,946 ) ( 332 ) ( 3,278 ) - ( 3,278 ) Adjustments for items reclassified to earnings, net of tax 2,157 3,916 6,073 - 6,073 Net other comprehensive income (loss) ( 789 ) 3,584 2,795 - 2,795 Balance, September 30, 2023 $ ( 157,713 ) $ ( 135,346 ) $ ( 293,059 ) $ - $ ( 293,059 ) 27 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) Three Months Ended September 30, 2022 Currency Translation Adjustments Employee Benefit Plans Total AOCI Amount Attributable to Noncontrolling Interests Total Lazard Ltd AOCI Balance, July 1, 2022 $ ( 171,741 ) $ ( 118,289 ) $ ( 290,030 ) $ ( 1 ) $ ( 290,029 ) Activity: Other comprehensive income (loss) before reclassifications ( 54,439 ) 8,786 ( 45,653 ) - ( 45,653 ) Adjustments for items reclassified to earnings, net of tax 138 1,162 1,300 - 1,300 Net other comprehensive income (loss) ( 54,301 ) 9,948 ( 44,353 ) - ( 44,353 ) Balance, September 30, 2022 $ ( 226,042 ) $ ( 108,341 ) $ ( 334,383 ) $ ( 1 ) $ ( 334,382 ) Nine Months Ended September 30, 2022 Currency Translation Adjustments Employee Benefit Plans Total AOCI Amount Attributable to Noncontrolling Interests Total Lazard Ltd AOCI Balance, January 1, 2022 $ ( 92,178 ) $ ( 131,669 ) $ ( 223,847 ) $ - $ ( 223,847 ) Activity: Other comprehensive income (loss) before reclassifications ( 134,129 ) 20,512 ( 113,617 ) ( 1 ) ( 113,616 ) Adjustments for items reclassified to earnings, net of tax 265 2,816 3,081 - 3,081 Net other comprehensive income (loss) ( 133,864 ) 23,328 ( 110,536 ) ( 1 ) ( 110,535 ) Balance, September 30, 2022 $ ( 226,042 ) $ ( 108,341 ) $ ( 334,383 ) $ ( 1 ) $ ( 334,382 ) The table below reflects adjustments for items reclassified out of AOCI, by component, for the three month and nine month periods ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Currency translation losses (a) $ 2,129 $ 138 $ 2,157 $ 265 Employee benefit plans: Amortization relating to employee benefit plans (b) 1,954 1,395 5,051 3,564 Less - related income taxes 374 233 1,135 748 1,580 1,162 3,916 2,816 Total reclassifications, net of tax $ 3,709 $ 1,300 $ 6,073 $ 3,081 __________________________ (a) Represents currency translation losses reclassified from AOCI associated with closing of certain of our offices. Such amounts are included in “revenue—other” on the condensed consolidated statements of operations. (b) Included in the computation of net periodic benefit cost (see Note 13). Such amounts are included in “operating expenses—other” on the condensed consolidated statements of operations. 28 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) Noncontrolling Interests —Noncontrolling interests principally represent (i) interests held in Edgewater’s management vehicles that the Company is deemed to control, but does not own, (ii) profits interest participation rights (see Note 12), (iii) LGAC interests (see Note 1) and (iv) consolidated VIE interests held by employees (see Note 20). The tables below summarize net income (loss) attributable to noncontrolling interests for the three month and nine month periods ended September 30, 2023 and 2022 and noncontrolling interests as of September 30, 2023 and December 31, 2022 in the Company’s condensed consolidated financial statements: Net Income (Loss) Attributable to Noncontrolling Interests Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Edgewater $ 2,885 $ 18,209 $ 4,557 $ 28,715 LFI Consolidated Funds ( 3,251 ) ( 5,237 ) 3,718 ( 18,393 ) LGAC - 4,023 1,968 9,941 Other 1 - 2 2 Total $ ( 365 ) $ 16,995 $ 10,245 $ 20,265 Noncontrolling Interests as of September 30, 2023 December 31, 2022 Edgewater $ 45,371 $ 44,681 Profits interest participation rights 12,859 10,792 LFI Consolidated Funds - 74,164 LGAC - ( 10,714 ) Other 13 13 Total $ 58,243 $ 118,936 Redeemable Noncontrolling Interests —Redeemable noncontrolling interests principally represent LGAC interests as of December 31, 2022 (see Note 1) and consolidated VIE interests held by employees as of September 30, 2023 (see Note 20). Consolidated VIE interests held by employees (vested LFI awards), which may be redeemed at any time at the option of the holder for cash, are recorded on the Company’s condensed consolidated statements of financial position at redemption value and classified as temporary equity. Changes in redemption value are recognized immediately as they occur and will adjust the carrying value of redeemable noncontrolling interests to equal the redemption value at the end of each reporting period. Dividends Declared, October 25, 2023 —On October 25, 2023 , the Board of Directors of Lazard declared a quarterly dividend of $ 0.50 per share on our common stock. The dividend is payable on November 17, 2023 , to stockholders of record on November 6, 2023 . 12. INCENTIVE PLANS Share-Based Incentive Plan Awards A description of Lazard Ltd’s 2018 Plan, 2008 Incentive Compensation Plan (the “2008 Plan”) and 2005 Equity Incentive Plan (the “2005 Plan”) and activity with respect thereto during the three month and nine month periods ended September 30, 2023 and 2022 is presented below. 29 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) Shares Available Under the 2018 Plan, 2008 Plan and 2005 Plan The 2018 Plan became effective on April 24, 2018 and was amended on April 29, 2021 to increase the aggregate number of shares authorized for issuance under the 2018 Plan by 20,000,000 shares. The 2018 Plan replaced the 2008 Plan, which was terminated on April 24, 2018. The 2018 Plan originally authorized issuance of up to 30,000,000 shares of common stock, plus any shares of common stock that were subject to outstanding awards under the 2008 Plan as of March 14, 2018 that are forfeited, canceled or settled in cash following April 24, 2018, which was the date that the 2018 Plan was approved by our shareholders. Such shares may be issued pursuant to the grant or exercise of stock options, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”), restricted stock awards (“RSAs”), profits interest participation rights, including performance-based restricted participation units (“PRPUs”) and stock performance-based restricted participation units (“SPRPUs”), and other share-based awards. The 2008 Plan authorized the issuance of shares of common stock pursuant to the grant or exercise of stock options, stock appreciation rights, RSUs, PRSUs and other share-based awards. Under the 2008 Plan, the maximum number of shares available was based on a formula that limited the aggregate number of shares that could, at any time, be subject to awards that were considered “outstanding” under the 2008 Plan to 30 % of the then-outstanding shares of common stock. The 2008 Plan was terminated on April 24, 2018 although outstanding deferred stock unit (“DSU”) awards granted under the 2008 Plan before its termination continue to be subject to its terms. The 2005 Plan authorized the issuance of up to 25,000,000 shares of common stock pursuant to the grant or exercise of stock options, stock appreciation rights, RSUs and other share-based awards. The 2005 Plan expired in the second quarter of 2015, although outstanding DSU awards granted under the 2005 Plan before its expiration continue to be subject to its terms. The following reflects the amortization expense recorded with respect to share-based incentive plans within “compensation and benefits” expense (with respect to RSUs, PRSUs, RSAs and profits interest participation rights, including PRPUs and SPRPUs) and “professional services” expense (with respect to DSUs) within the Company’s accompanying condensed consolidated statements of operations for the three month and nine month periods ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Share-based incentive awards: RSUs $ 41,085 $ 37,061 $ 136,772 $ 98,012 PRSUs 569 498 1,920 1,387 RSAs 5,742 6,420 21,117 19,197 Profits interest participation rights 10,815 30,762 48,077 80,454 DSUs 151 175 1,744 2,052 Total $ 58,362 $ 74,916 $ 209,630 $ 201,102 Compensation and benefits expense relating to share-based awards with service and/or performance conditions is reversed if the awards are forfeited due to these conditions not being met. Compensation and benefits expense relating to share-based awards with market conditions is not reversed if these awards are forfeited based solely on failing to meet such market conditions. The Company periodically assesses the forfeiture rates used for such estimates, including as a result of any applicable performance conditions. A change in estimated forfeiture rates or performance results in a cumulative adjustment to compensation and benefits expense and also would cause the aggregate amount of compensation expense recognized in future periods to differ from the estimated unrecognized compensation expense described below. The Company’s share-based incentive plans and awards are described below. 30 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) RSUs and DSUs RSUs generally require future service as a condition for the delivery of the underlying shares of common stock (unless the recipient is then eligible for retirement under the Company’s retirement policy) and convert into shares of common stock on a one-for-one basis after the stipulated vesting periods. The grant date fair value of the RSUs, net of an estimated forfeiture rate, is amortized over the requisite service periods (generally, one-third after two years and the remaining two-thirds after the third year), and is adjusted for actual forfeitures over such period. RSUs generally include a dividend participation right that provides that, during the applicable vesting period, each RSU is attributed additional RSUs equivalent to any dividends paid on common stock during such period. During the nine month period ended September 30, 2023, dividend participation rights required the issuance of 515,420 RSUs and the associated charge to “retained earnings”, net of estimated forfeitures (with corresponding credits to “additional paid-in-capital”) was $ 16,736 . Non-executive members of the Board of Directors (“Non-Executive Directors”) receive approximately 55 % of their annual compensation for service on the Board of Directors and its committees in the form of DSUs, which resulted in 43,999 DSUs being granted during the nine month period ended September 30, 2023. Their remaining compensation is payable in cash, which they may elect to receive in the form of additional DSUs under the Directors’ Fee Deferral Unit Plan described below. DSUs are convertible into shares of common stock at the time of cessation of service to the Board of Directors. DSUs include a cash dividend participation right equivalent to dividends paid on common stock. Lazard Ltd’s Directors’ Fee Deferral Unit Plan permits the Non-Executive Directors to elect to receive additional DSUs in lieu of some or all of their cash fees. The number of DSUs granted to a Non-Executive Director pursuant to this election will equal the value of cash fees that the applicable Non-Executive Director has elected to forego pursuant to such election, divided by the market value of a share of common stock on the date immediately preceding the date of the grant. During the nine month period ended September 30, 2023, 14,415 DSUs had been granted pursuant to such Plan. DSU awards are expensed at their fair value on their date of grant, inclusive of amounts related to the Directors’ Fee Deferral Unit Plan. The following is a summary of activity relating to RSUs and DSUs during the nine month period ended September 30, 2023: RSUs DSUs Units Weighted Average Grant Date Fair Value Units Weighted Average Grant Date Fair Value Balance, January 1, 2023 9,022,917 $ 37.97 400,820 $ 37.66 Granted (including 515,420 RSUs relating to dividend participation) 5,496,350 $ 36.51 58,414 $ 29.87 Forfeited ( 127,546 ) $ 33.34 - $ - Settled ( 3,359,950 ) $ 41.65 ( 134,744 ) $ 36.21 Balance, September 30, 2023 11,031,771 $ 36.17 324,490 $ 36.86 The weighted-average grant date fair value of RSUs granted in the nine month periods ended September 30, 2023 and 2022 was $ 36.51 and $ 33.64 , respectively. The weighted-average grant date fair value of DSUs granted in the nine month periods ended September 30, 2023 and 2022 was $ 29.87 and $ 35.53 , respectively. In connection with RSUs that settled during the nine month period ended September 30, 2023, the Company satisfied its minimum statutory tax withholding requirements in lieu of delivering 1,204,403 shares of common stock during such nine month period. Accordingly, 2,155,547 shares of common stock held by the Company were delivered during the nine month period ended September 30, 2023. 31 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) As of September 30, 2023, estimated unrecognized RSU compensation expense was $ 156,284 , with such expense expected to be recognized over a weighted average period of approximately 1.0 year subsequent to September 30, 2023. RSAs The following is a summary of activity related to RSAs associated with compensation arrangements during the nine month period ended September 30, 2023: RSAs Weighted Average Grant Date Fair Value Balance, January 1, 2023 1,266,424 $ 36.99 Granted (including 71,900 relating to dividend participation) 646,979 $ 37.65 Forfeited ( 12,447 ) $ 38.35 Settled ( 660,282 ) $ 39.27 Balance, September 30, 2023 1,240,674 $ 36.10 The weighted-average grant date fair value of RSAs granted in the nine month periods ended September 30, 2023 and 2022 was $ 37.65 and $ 33.31 , respectively. In connection with RSAs that settled during the nine month period ended September 30, 2023, the Company satisfied its minimum statutory tax withholding requirements in lieu of delivering 268,402 shares of common stock during such nine month period. Accordingly, 391,880 shares of common stock held by the Company were delivered during the nine month period ended September 30, 2023. RSAs granted in 2023 generally include a dividend participation right that provides that during the applicable vesting period each RSA is attributed additional RSAs equivalent to any dividends paid on common stock during such period. During the nine month period ended September 30, 2023, dividend participation rights required the issuance of 71,900 RSAs and the associated charge to “retained earnings”, net of estimated forfeitures (with corresponding credits to “additional paid-in-capital”) was $ 2,358 . At September 30, 2023, estimated unrecognized RSAs expense was $ 20,050 , with such expense to be recognized over a weighted average period of approximately 0.9 years subsequent to September 30, 2023. PRSUs PRSUs are RSUs that are subject to performance-based and service-based vesting conditions, and beginning with awards granted in February 2021, a market-based condition. The number of shares of common stock that a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance-based and market-based metrics that relate to Lazard Ltd’s performance over a three-year period. The target number of shares of common stock subject to each PRSU is one; however, based on the achievement of both the performance-based and market-based criteria, the number of shares of common stock that may be received will range from zero to 2.4 times the target number. PRSUs will vest on a single date approximately three years following the date of the grant, provided the applicable service and performance conditions are satisfied. PRSUs include dividend participation rights that are subject to the same vesting restrictions (including performance criteria) as the underlying PRSUs to which they relate and are settled in cash at the same rate that dividends are paid on common stock. 32 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) The following is a summary of activity relating to PRSUs during the nine month period ended September 30, 2023: PRSUs Weighted Average Grant Date Fair Value Balance, January 1, 2023 94,690 $ 39.27 Balance, September 30, 2023 94,690 $ 39.27 The weighted-average grant date fair value of PRSUs granted in the nine month period ended September 30, 2022 was $ 35.44 . Compensation expense recognized for PRSU awards is determined by multiplying the number of shares of common stock underlying such awards that, based on the Company’s estimate, are considered probable of vesting, by the grant date fair value. As of September 30, 2023, the total estimated unrecognized compensation expense was $ 1,754 , and the Company expects to amortize such expense over a weighted-average period of approximately 0.5 years subsequent to September 30, 2023. Profits Interest Participation Rights Profits interest participation rights are equity incentive awards that, subject to certain conditions, may be exchanged for shares of common stock pursuant to the 2018 Plan. The Company has granted profits interest participation rights subject to service-based and performance-based vesting criteria and other conditions, and beginning in February 2021, incremental market-based vesting criteria, which we refer to as performance-based restricted participation units (“PRPUs”), to certain of our executive officers. The Company has also granted profits interest participation rights subject to service-based vesting criteria and other conditions, but not the performance-based and incremental market-based vesting criteria associated with PRPUs, to a limited number of other senior employees, including in March 2023 to certain of our executive officers. In August 2023, the Company granted profits interest participation rights, SPRPUs, to certain of our executive officers that are eligible to vest in three tranches, each subject to service-based vesting criteria and the achievement of specified common stock price milestones measured as of a specified anniversary of the grant date. Profits interest participation rights, with the exception of SPRPUs, as explained below, generally provide for vesting approximately three years following the grant date, so long as applicable conditions have been satisfied. Profits interest participation rights are a class of membership interests in Lazard Group that are intended to qualify as “profits interests” for U.S. federal income tax purposes, and are recorded as noncontrolling interests within stockholders’ equity in the Company’s condensed consolidated statements of financial condition until they are exchanged into common stock, at which time there is a reclassification to additional paid-in-capital. The profits interest participation rights generally allow the recipient to realize value only to the extent that (i) the service-based vesting conditions and, if applicable, the performance-based and incremental market-based conditions, or stock price milestones, are satisfied, and (ii) an amount of economic appreciation in the assets of Lazard Group occurs as necessary to satisfy certain partnership tax rules (referred to as the “Minimum Value Condition”), otherwise the profits interest participation rights will be forfeited. Upon satisfaction of such conditions, profits interest participation rights that are in parity with the value of common stock will be exchanged on a one-for-one basis for shares of common stock. If forfeited based solely on failing to meet the Minimum Value Condition, or, if applicable, stock price milestones, the associated compensation expense would not be reversed. With regard to the profits interest participation rights granted in February 2020, the Minimum Value Condition was met during the year ended December 31, 2021. On March 8, 2023, the profits interest participation rights granted in February 2020, for which the Minimum Value Condition and other vesting conditions were satisfied, were exchanged on a one-for-one basis for shares of common stock. Like outstanding RSUs and similar awards, profits interest participation rights are subject to continued employment and other conditions and restrictions and are forfeited if those conditions and restrictions are not fulfilled. More specifically, vesting of profits interest participation rights are subject to compliance with restrictive covenants 33 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) including non-compete, non-solicitation of clients, no hire of employees and confidentiality, which are similar to those applicable to PRSUs and RSUs. In addition, profits interest participation rights must satisfy the Minimum Value Condition. The number of shares of common stock that a recipient will receive upon the exchange of a PRPU award is calculated by reference to applicable performance-based conditions and, beginning with PRPUs granted in 2021, incremental market-based conditions and only result in value to the recipient to the extent the conditions are satisfied. The target number of shares of common stock subject to each PRPU is one. Based on the achievement of performance criteria, as determined by the Compensation Committee, the number of shares of common stock that may be received in connection with the PRPU awards granted prior to February 2021 will range from zero to two times the target number. For the PRPU awards granted beginning in February 2021, subject to both performance-based and incremental market-based criteria, the number of shares that may be received will range from zero to 2.4 times the target number. Unless applicable conditions are satisfied during the three year performance period, and the Minimum Value Condition is satisfied within five years following the grant date, all PRPUs will be forfeited, and the recipients will not be entitled to any such awards. SPRPUs are eligible to vest in three tranches (each, a “Tranche”) based on the achievement of service conditions and Tranche-specific common stock price milestones measured as of a specified anniversary of the date of grant, as described below. Their aggregate fair value at the grant date, which based on the estimated probability of achieving the common stock price milestones is approximately $ 33,900 , is amortized over the requisite service periods. SPRPUs will vest: • 20 % if, three years following the date of grant, the Company’s common stock price has appreciated 25 % above the average trailing 30 consecutive day stock price preceding the date of grant (the “Grant Date Stock Price”); • 40 % if, five years following the date of grant, the Company’s common stock price has appreciated 50 % above the Grant Date Stock Price; • and the remainder of the SPRPUs will vest if, seven years following the date of grant, the Company’s common stock price has appreciated 100 % above the Grant Date Stock Price. Each Tranche is subject to the executive’s continued employment through the applicable anniversary of the date of grant and requires that the applicable common stock price milestone is sustained for any 30 consecutive day period prior to the anniversary of the date of grant of the applicable Tranche (the “Expiration Date”). If the vesting conditions, as described above, are not achieved as of the Expiration Date, all SPRPUs in such Tranche will be forfeited. The following is a summary of activity relating to all profits interest participation rights, including PRPUs and SPRPUs, during the nine month period ended September 30, 2023: Profits Interest Participation Rights Weighted Average Grant Date Fair Value Balance, January 1, 2023 4,131,628 $ 40.15 Granted 3,488,074 $ 22.47 Forfeited ( 16,695 ) $ 43.23 Settled ( 1,521,620 ) $ 42.17 Balance, September 30, 2023 (a) 6,081,387 $ 29.50 __________________________ (a) Table includes 1,474,002 PRPUs and 2,250,000 SPRPUs as of September 30, 2023. This includes 2,447,224 PRPUs as of January 1, 2023, net of 973,222 PRPUs settled and 2,250,000 SPRPUs granted during the nine month period ended September 30, 2023. The balance as of September 30, 2023 reflects the target number of PRPUs granted in February 2021 and March 2022. There were no PRPUs granted during the nine month period ended September 30, 2023. The 34 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) weighted average grant date fair values for PRPUs and other profits interest participation rights outstanding as of January 1, 2023 were $ 40.29 and $ 39.96 , respectively. The weighted average grant date fair values for SPRPUs and other profits interest participation rights granted during the nine month period ended September 30, 2023 was $ 15.06 and $ 35.94 , respectively. The weighted average grant date fair values for other profits interest participation rights forfeited during the nine month period ended September 30, 2023 was $ 43.23 . The weighted average grant date fair values for PRPUs and other profits interest participation rights settled during the nine month period ended September 30, 2023 were $ 41.76 and $ 42.89 , respectively. The weighted average grant date fair values for PRPUs, SPRPUs and other profits interest participation rights outstanding as of September 30, 2023 were $ 39.31 , $ 15.06 and $ 37.14 , respectively. The weighted average grant date fair value of profits interest participation rights, including PRPUs and SPRPUs, granted in the nine month periods ended September 30, 2023 and 2022 was $ 22.47 and $ 34.53 , respectively. Compensation expense recognized for profits interest participation rights, including PRPUs, is determined by multiplying the number of shares of common stock underlying such awards that, based on the Company’s estimate, are considered probable of vesting, by the grant date fair value. Compensation expense recognized for SPRPUs is determined by multiplying the number of shares of common stock underlying such awards by the grant date fair value. As of September 30, 2023, the total estimated unrecognized compensation expense of all profits interest participation rights, including PRPUs and SPRPUs was $ 57,590 and the Company expects to amortize such expense over a weighted-average period of approximately 1.9 years subsequent to September 30, 2023. LFI and Other Similar Deferred Compensation Arrangements In connection with LFI and other similar deferred compensation arrangements, granted to eligible employees, which generally require future service as a condition for vesting, the Company recorded a prepaid compensation asset and a corresponding compensation liability on the grant date based upon the fair value of the award. The prepaid asset is amortized on a straight-line basis over the applicable requisite service periods (which are generally similar to the comparable periods for RSUs) and is charged to “compensation and benefits” expense within the Company’s condensed consolidated statement of operations. LFI and similar deferred compensation arrangements that do not require future service are expensed immediately. The related compensation liability is accounted for at fair value as a derivative liability, which contemplates the impact of estimated forfeitures, and is adjusted for changes in fair value primarily related to changes in value of the underlying investments. The following is a summary of activity relating to LFI and other similar deferred compensation arrangements during the nine month period ended September 30, 2023: Prepaid Compensation Asset Compensation Liability Balance, January 1, 2023 $ 112,124 $ 326,282 Granted 159,981 159,981 Settled - ( 167,526 ) Amortization and the impact of forfeitures ( 126,169 ) 7,285 Change in fair value of underlying investments - 15,530 Other 109 ( 969 ) Balance, September 30, 2023 $ 146,045 $ 340,583 The amortization of the prepaid compensation asset will generally be recognized over a weighted average period of approximately 0.9 years subsequent to September 30, 2023. 35 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) The following is a summary of the impact of LFI and other similar deferred compensation arrangements on “compensation and benefits” expense within the accompanying condensed consolidated statements of operations for the three month and nine month periods ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Amortization and the impact of forfeitures $ 41,368 $ 41,956 $ 133,454 $ 125,210 Change in the fair value of underlying investments ( 10,598 ) ( 16,180 ) 15,530 ( 65,601 ) Total $ 30,770 $ 25,776 $ 148,984 $ 59,609 13. EMPLOYEE BENEFIT PLANS The Company provides retirement and other post-retirement benefits to certain of its employees through defined benefit pension plans (the “pension plans”). The Company also offers defined contribution plans to its employees. The pension plans generally provide benefits to participants based on average levels of compensation. Expenses related to the Company’s employee benefit plans are included in “compensation and benefits” expense for the service cost component, and “operating expenses-other” for the other components of benefit costs on the condensed consolidated statements of operations. Employer Contributions to Pension Plans —The Company’s funding policy for its U.S. and non-U.S. pension plans is to fund when required or when applicable upon an agreement with the plans’ trustees. Management also evaluates from time to time whether to make voluntary contributions to the plans. The following table summarizes the components of net periodic benefit cost (credit) related to the Company’s pension plans for the three month and nine month periods ended September 30, 2023 and 2022: Pension Plans Three Months Ended September 30, 2023 2022 Components of Net Periodic Benefit Cost (Credit): Service cost $ 74 $ 116 Interest cost 5,322 2,642 Expected return on plan assets ( 6,068 ) ( 5,808 ) Amortization of: Prior service cost 28 25 Net actuarial loss 1,926 1,370 Settlement loss 791 380 Net periodic benefit cost (credit) $ 2,073 $ ( 1,275 ) 36 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) Pension Plans Nine Months Ended September 30, 2023 2022 Components of Net Periodic Benefit Cost (Credit): Service cost $ 256 $ 386 Interest cost 15,746 8,459 Expected return on plan assets ( 17,916 ) ( 18,627 ) Amortization of: Prior service cost 81 80 Net actuarial loss (gain) 4,970 3,484 Settlement loss 2,333 1,223 Net periodic benefit cost (credit) $ 5,470 $ ( 4,995 ) 14. COST-SAVING INITIATIVES The Company is conducting firm-wide cost-saving initiatives over the course of 2023. Expenses and losses associated with the cost-saving initiatives for the three month and nine month periods ended September 30, 2023 consisted of the following: Three Months Ended September 30, 2023 Financial Advisory Asset Management Corporate Total Severance and other employee termination expenses (included in "compensation and benefits" expense) $ ( 21 ) $ 4,190 $ 4,772 $ 8,941 Technology asset impairments (included in "technology and information services") 56 515 - 571 Foreign exchange related losses associated with closing of certain offices (included in "revenue-other") 2,164 - 2,483 4,647 Other 1,478 28 42 1,548 Total $ 3,677 $ 4,733 $ 7,297 $ 15,707 37 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) Nine Months Ended September 30, 2023 Financial Advisory Asset Management Corporate Total Severance and other employee termination expenses (included in "compensation and benefits" expense) $ 90,022 $ 44,958 $ 31,309 $ 166,289 Technology asset impairments (included in "technology and information services") 144 7,812 - 7,956 Foreign exchange related losses associated with closing of certain offices (included in "revenue-other") 2,164 - 2,483 4,647 Other 2,000 308 1,952 4,260 Total $ 94,330 $ 53,078 $ 35,744 $ 183,152 Activity related to the obligations pursuant to the cost-saving initiatives during the nine month period ended September 30, 2023 was as follows: Accrued Compensation and Benefits Other Total Balance, January 1, 2023 $ - $ - $ - Total expenses 166,289 16,863 183,152 Less: Noncash expenses (a) 31,073 10,726 41,799 Payments and settlements 73,511 4,834 78,345 Balance, September 30, 2023 $ 61,705 $ 1,303 $ 63,008 ___________________________________ (a) Noncash expenses reflected in “accrued compensation and benefits” activity principally represents accelerated amortization of deferred incentive compensation awards. Noncash expenses reflected in “other” activity principally relates to technology asset impairments and certain foreign exchange related losses. 15. INCOME TAXES Lazard Ltd, through its subsidiaries, is subject to U.S. federal income taxes on all of its U.S. operating income, as well as on the portion of non-U.S. income attributable to its U.S. subsidiaries. In addition, Lazard Ltd, through its subsidiaries, is subject to state and local taxes on its income apportioned to various state and local jurisdictions. Outside the U.S., Lazard Group operates principally through subsidiary corporations that are subject to local income taxes in foreign jurisdictions. Lazard Group is also subject to Unincorporated Business Tax (“UBT”) attributable to its operations apportioned to New York City. The Company recorded income tax benefits of $ 11,631 and $ 23,053 for the three month and nine month periods ended September 30, 2023, respectively, and income tax provisions of $ 35,350 and $ 108,290 for the three month and nine month periods ended September 30, 2022, respectively, representing effective tax rates of 239.5 %, 15.2 %, 22.4 % and 24.4 %, respectively. The difference between the U.S. federal statutory rate of 21.0 % and the effective tax rates reflected above principally relates to (i) the tax impact of differences in the value of share based incentive compensation and other discrete items, (ii) foreign source income (loss) not subject to U.S. income taxes (including interest on intercompany financings), (iii) taxes payable to foreign jurisdictions that are not offset against U.S. income taxes, (iv) change in the U.S. 38 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) federal valuation allowance affecting the provision for income taxes and (v) U.S. state and local taxes, which are incremental to the U.S. federal statutory tax rate. 16. NET INCOME (LOSS) PER SHARE OF COMMON STOCK The Company issued certain profits interest participation rights, including certain PRPUs, that the Company is required under U.S. GAAP to treat as participating securities and therefore the Company is required to utilize the “two-class” method of computing basic and diluted net income per share. The Company’s basic and diluted net income (loss) per share calculations using the “two-class” method for the three month and nine month periods ended September 30, 2023 and 2022 are presented below: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income (loss) attributable to Lazard Ltd $ 7,139 $ 105,797 $ ( 139,046 ) $ 315,153 Add - adjustment for earnings attributable to participating securities ( 1,029 ) ( 1,903 ) ( 2,917 ) ( 4,726 ) Net income (loss) attributable to Lazard Ltd - basic 6,110 103,894 ( 141,963 ) 310,427 Add - adjustment for earnings attributable to participating securities - 635 - 2,318 Net income (loss) attributable to Lazard Ltd - diluted $ 6,110 $ 104,529 $ ( 141,963 ) $ 312,745 Weighted average number of shares of common stock outstanding 87,067,104 91,742,376 86,529,833 96,585,793 Add - adjustment for shares of common stock issuable on a non-contingent basis 2,358,796 1,533,255 2,052,635 1,575,234 Weighted average number of shares of common stock outstanding - basic 89,425,900 93,275,631 88,582,468 98,161,027 Add - dilutive effect, as applicable, of: Weighted average number of incremental shares of common stock issuable from share-based incentive compensation (a) 4,883,324 5,589,525 - 5,107,351 Weighted average number of shares of common stock outstanding - diluted 94,309,224 98,865,156 88,582,468 103,268,378 Net income (loss) attributable to Lazard Ltd per share of common stock: Basic $ 0.07 $ 1.11 $ ( 1.60 ) $ 3.16 Diluted $ 0.06 $ 1.06 $ ( 1.60 ) $ 3.03 ___________________________________ (a) The aggregate weighted average number of incremental shares of common stock issuable from RSUs, PRSUs and profits interest participation rights for the nine month period ended September 30, 2023 of 4,785,903 , that could be potentially dilutive in future periods, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive in the current periods. 17. RELATED PARTIES Sponsored Funds The Company serves as an investment advisor for certain affiliated investment companies and fund entities and receives management fees and, for the alternative investment funds, performance-based incentive fees for providing such services. Investment advisory fees relating to such services were $ 135,899 and $ 405,269 for the three month and nine 39 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) month periods ended September 30, 2023, respectively, and $ 159,749 and $ 458,462 for the three month and nine month periods ended September 30, 2022, respectively, and are included in “asset management fees” on the condensed consolidated statements of operations. Of such amounts, $ 57,040 and $ 57,283 remained as receivables at September 30, 2023 and December 31, 2022, respectively, and are included in “fees receivable” on the condensed consolidated statements of financial condition. Tax Receivable Agreement The Second Amended and Restated Tax Receivable Agreement, dated as of October 26, 2015 (the “TRA”), between Lazard and LTBP Trust, a Delaware statutory trust (the “Trust”), provides for the payment by our subsidiaries to the Trust of (i) approximately 45 % of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of the increases in the tax basis of certain assets and of certain other tax benefits related to the TRA, and (ii) an amount that we currently expect will equal 85 % of the cash tax savings that may arise from tax basis increases attributable to payments under the TRA. Our subsidiaries expect to benefit from the balance of cash savings, if any, in income tax that our subsidiaries realize from such tax basis increases. Any amount paid by our subsidiaries to the Trust will generally be distributed pro rata to the owners of the Trust, who include certain of our executive officers. For purposes of the TRA, cash savings in income and franchise tax will be computed by comparing our subsidiaries’ actual income and franchise tax liability to the amount of such taxes that our subsidiaries would have been required to pay had there been no increase in the tax basis of certain assets of Lazard Group and had our subsidiaries not entered into the TRA. The term of the TRA will continue until approximately 2033 or, if earlier, until all relevant tax benefits have been utilized or expired. The amount of the TRA liability is an undiscounted amount based upon current tax laws and the structure of the Company and various assumptions regarding potential future operating profitability. The assumptions reflected in the estimate involve significant judgment and if our structure or income assumptions were to change, we could be required to accelerate payments under the TRA. As such, the actual amount and timing of payments under the TRA could differ materially from our estimates. Any changes in the amount of the estimated liability would be recorded as a non-compensation expense in the condensed consolidated statement of operations. Adjustments, if necessary, to the related deferred tax assets would be recorded through the “provision (benefit) for income taxes”. Pursuant to the periodic revaluation of the TRA liability and the assumptions reflected in the estimate, the revaluation had the effect of reducing the estimated liability under the TRA. As a result, the Company recorded a “benefit pursuant to tax receivable agreement” of $ 40,435 on the condensed consolidated statement of operations for the nine month period ended September 30, 2023. In addition, the Company made a payment under the TRA in the nine months ended September 30, 2023 of $ 32,208 . The cumulative liability relating to our obligations under the TRA as of September 30, 2023 and December 31, 2022 was $ 118,546 and $ 191,189 , respectively, and is recorded in “tax receivable agreement obligation” on the condensed consolidated statements of financial condition. Other See Note 11 for information regarding related party transactions pertaining to shares repurchased from certain of our executive officers. 18. REGULATORY AUTHORITIES LFNY is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. Under the basic method permitted by this rule, the minimum required net capital, as defined, is a specified fixed percentage (6 2/3%) of total aggregate indebtedness recorded in LFNY’s Financial and Operational Combined Uniform Single (“FOCUS”) report filed with the Financial Industry Regulatory Authority (“FINRA”), or $ 5 , whichever is greater. In addition, the ratio of aggregate indebtedness (as defined) to net capital may not exceed 15:1. At September 30, 40 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) 2023, LFNY’s regulatory net capital was $ 73,105 , which exceeded the minimum requirement by $ 69,493 . LFNY’s aggregate indebtedness to net capital ratio was 0.74 :1 as of September 30, 2023. Certain U.K. subsidiaries of the Company, including LCL, Lazard Fund Managers Limited and Lazard Asset Management Limited (collectively, the “U.K. Subsidiaries”) are regulated by the Financial Conduct Authority. At September 30, 2023, the aggregate regulatory net capital of the U.K. Subsidiaries was $ 174,572 , which exceeded the minimum requirement by $ 111,142 . CFLF, under which asset management and commercial banking activities are carried out in France, is subject to regulation by the Autorité de Contrôle Prudentiel et de Résolution (“ACPR”) for its banking activities conducted through its subsidiary, LFB. LFB, as a registered bank, is engaged primarily in commercial and private banking services for clients and funds managed by LFG (asset management) and other clients, and asset-liability management. The investment services activities exercised through LFB and other subsidiaries of CFLF, primarily LFG, also are subject to regulation and supervision by the Autorité des Marchés Financiers. At June 30, 2023, the consolidated regulatory net capital of CFLF was $ 154,143 , which exceeded the minimum requirement set for regulatory capital levels by $ 68,939 . In addition, pursuant to the consolidated supervision rules in the European Union, LFB, in particular, as a French credit institution, is required to be supervised by a regulatory body, either in the U.S. or in the European Union. During the third quarter of 2013, the Company and the ACPR agreed on terms for the consolidated supervision of LFB and certain other non-Financial Advisory European subsidiaries of the Company (referred to herein, on a combined basis, as the “combined European regulated group”) under such rules. Under this supervision, the combined European regulated group is required to comply with minimum requirements for regulatory net capital to be reported on a quarterly basis and satisfy periodic financial and other reporting obligations. At June 30, 2023, the regulatory net capital of the combined European regulated group was $ 180,261 , which exceeded the minimum requirement set for regulatory capital levels by $ 86,449 . Additionally, the combined European regulated group, together with our European Financial Advisory entities, is required to perform an annual risk assessment and provide certain other information on a periodic basis, including financial reports and information relating to financial performance, balance sheet data and capital structure. Certain other U.S. and non-U.S. subsidiaries are subject to various capital adequacy requirements promulgated by various regulatory and exchange authorities in the countries in which they operate. At September 30, 2023, for those subsidiaries with regulatory capital requirements, their aggregate net capital was $ 141,320 , which exceeded the minimum required capital by $ 114,703 . At September 30, 2023, each of these subsidiaries individually was in compliance with its regulatory capital requirements. 19. SEGMENT INFORMATION The Company’s reportable segments offer different products and services and are managed separately, as different levels and types of expertise are required to effectively manage the segments’ transactions. Each segment is reviewed to determine the allocation of resources and to assess its performance. The Company’s principal operating activities are included in its Financial Advisory and Asset Management business segments as described in Note 1. In addition, as described in Note 1, the Company records selected other activities in its Corporate segment. The Company’s segment information for the three month and nine month periods ended September 30, 2023 and 2022 is prepared using the following methodology: • Revenue and expenses directly associated with each segment are included in determining operating income. • Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other factors. • Segment assets are based on those directly associated with each segment, and include an allocation of certain assets relating to various segments, based on the most relevant measures applicable, including headcount, square footage and other factors. 41 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) The Company records other revenue, interest income and interest expense among the various segments based on the segment in which the underlying asset or liability is reported. Each segment’s operating expenses include (i) compensation and benefits expenses incurred directly in support of the businesses and (ii) other operating expenses, which include directly incurred expenses for occupancy and equipment, marketing and business development, technology and information services, professional services, fund administration and outsourced services and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, human resources, legal, facilities management and senior management activities. Management evaluates segment results based on net revenue and operating income (loss) and believes that the following information provides a reasonable representation of each segment’s contribution with respect to net revenue, operating income (loss) and total assets: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Financial Advisory Net Revenue $ 266,048 $ 456,521 $ 896,099 $ 1,254,621 Operating Expenses 295,609 341,578 1,063,789 956,410 Operating Income (Loss) $ ( 29,561 ) $ 114,943 $ ( 167,690 ) $ 298,211 Asset Management Net Revenue $ 284,855 $ 298,797 $ 857,212 $ 926,449 Operating Expenses 232,011 233,614 749,281 707,676 Operating Income $ 52,844 $ 65,183 $ 107,931 $ 218,773 Corporate Net Revenue (Loss) $ ( 26,985 ) $ ( 28,574 ) $ ( 43,843 ) $ ( 119,888 ) Operating Expenses (Credit) 1,155 ( 6,590 ) 48,252 ( 46,612 ) Operating Loss $ ( 28,140 ) $ ( 21,984 ) $ ( 92,095 ) $ ( 73,276 ) Total Net Revenue $ 523,918 $ 726,744 $ 1,709,468 $ 2,061,182 Operating Expenses 528,775 568,602 1,861,322 1,617,474 Operating Income (Loss) $ ( 4,857 ) $ 158,142 $ ( 151,854 ) $ 443,708 As Of September 30, 2023 December 31, 2022 Total Assets Financial Advisory $ 1,036,825 $ 1,099,921 Asset Management 828,890 978,083 Corporate 2,429,791 3,774,557 Total $ 4,295,506 $ 5,852,561 42 LAZARD LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (UNAUDITED) (dollars in thousands, except for per share data, unless otherwise noted) 20. CONSOLIDATED VIEs The Company’s consolidated VIEs as of September 30, 2023 and December 31, 2022 include LGAC (see Note 1) and certain funds (“LFI Consolidated Funds”) that were established for the benefit of employees participating in the Company’s existing LFI deferred compensation arrangement. Lazard invests in these funds and is the investment manager and is therefore deemed to have both the power to direct the most significant activities of the funds and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to these funds. The assets of LFI Consolidated Funds, except as it relates to $ 112,773 and $ 115,666 of LFI held by Lazard Group as of September 30, 2023 and December 31, 2022, respectively, can only be used to settle the obligations of LFI Consolidated Funds. The Company’s consolidated VIE assets and liabilities for LFI Consolidated Funds as reflected in the condensed consolidated statements of financial condition consist of the following at September 30, 2023 and December 31, 2022. September 30, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 3,224 $ 3,644 Customers and other receivables 1,789 240 Investments 190,511 186,300 Other assets 737 622 Total assets $ 196,261 $ 190,806 LIABILITIES Deposits and other customer payables $ 1,307 $ 528 Other liabilities 400 448 Total liabilities $ 1,707 $ 976 43