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Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-10-27 · 272 added, 372 removed, 543 unchanged (54% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Lazard Ltd’s condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”), as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”).

All references to “2023,” “2022,” “third quarter,” “first nine months” or “the period” refer to, as the context requires, the three month and nine month periods ended September 30, 2023 and 2022.

The following discussion should be read in conjunction with Lazard’s condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”), as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”).

All references to “2024,” “2023,” “first quarter” or “the period” refer to, as the context requires, the three month periods ended March 31, 2024 and 2023.

Forward-Looking Statements and Certain Factors that May Affect Our Business

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In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target,” “goal” or “continue,” and the negative of these terms and other comparable terminology.

These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our strategies, business plans and initiatives and anticipated trends in our business.

These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies, business plans and initiatives and anticipated trends in our business.

These statements are only predictions based on our current expectations and projections about future events.

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• competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels;

• changes in relevant tax laws, regulations or treaties or an adverse interpretation of those items.

These risks and uncertainties are not exhaustive.

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New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Although we believe the statements reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.

Although we believe the statements reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, achievements or events.

Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements.

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Forward-looking statements include, but are not limited to, statements about:

• financial goals, including ratios of compensation and benefits expense to operating revenue;

• financial goals, including ratios of compensation and benefits expense to adjusted net revenue;

• ability to deploy surplus cash through dividends, share repurchases and debt repurchases;

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• recruitment and retention of our managing directors and employees;

• potential levels of compensation expense, including awarded compensation and benefits expense and adjusted compensation and benefits expense, and non-compensation expense;

• potential levels of compensation expense, including adjusted compensation and benefits expense, and non-compensation expense;

• potential operating performance, achievements, productivity improvements, efficiency and cost reduction efforts;

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• likelihood of success and impact of litigation;

• ability to realize the anticipated benefits of Lazard’s conversion to a U.S.

C-Corporation (the “ Conversion”) and impact on the trading price of our stock;

• expected tax rates, including effective tax rates;

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The Company is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations.

To that end, the Company uses its website and social media sites to convey information about our businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of AUM in our Asset Management business.

Investors can link to Lazard Ltd, Lazard Group and their operating company websites through http://www.lazard.com .

To that end, Lazard and its operating companies use their websites, and other social media sites to convey information about their businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of AUM in various mutual funds, hedge funds and other investment products managed by Lazard Asset Management LLC (together with its subsidiaries) (“LAM”) and Lazard Frères Gestion SAS (“LFG”).

Investors can link to Lazard, Inc., Lazard Group and their operating company websites through http://www.lazard.com .

Our websites and social media sites and the information contained therein or connected thereto shall not be deemed to be incorporated into this Form 10-Q.

Business Summary

Lazard, one of the world’s preeminent financial advisory and asset management firms, operates in North and South America, Europe, Asia and Australia.

With origins dating to 1848, we have long specialized in crafting solutions to the complex financial and strategic challenges of a diverse set of clients around the world, including corporations, governments, institutions, partnerships and individuals.

Lazard, one of the world’s preeminent financial advisory and asset management firms, operates in North and South America, Europe, the Middle East, Asia and Australia.

Our primary business purpose is to serve our clients.

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In recent years, we have expanded our geographic reach, bolstered our industry expertise and continued to build in growth areas.

Companies, government bodies and investors seek independent advice with a geographic perspective, deep understanding of capital structure, informed research and knowledge of global, regional and local economic conditions.

Companies, government bodies and investors seek independent advice with a geographic perspective, deep understanding of capital

structure, informed research and knowledge of global, regional and local economic conditions.

We believe that our business model as an independent advisor will continue to create opportunities for us to attract new clients and key personnel.

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• 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.

In addition, we record selected other activities in our Corporate segment, including the management of cash, investments, deferred tax assets, outstanding indebtedness and certain contingent obligations.

We also invest our own capital from time to time, generally alongside capital of qualified institutional and individual investors in alternative investments or private equity investments, and make investments to seed our Asset Management strategies.

Our consolidated net revenue was derived from the following segments:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Financial Advisory 59 % 51 %

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Total 100 % 100 %

Business Environment and Outlook

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As described above, our principal sources of revenue are derived from activities in our Financial Advisory and Asset Management business segments.

Our Financial Advisory revenues are primarily dependent on the successful completion of merger, acquisition, restructuring, capital raising or similar transactions, and our Asset Management revenues are primarily driven by the levels of assets under management (“AUM”).

Our Financial Advisory revenues are primarily dependent on the successful completion of merger, acquisition, sale, restructuring, capital raising or similar transactions, and our Asset Management revenues are primarily driven by the levels of assets under management (“AUM”).

Weak global economic and financial market conditions can result in a challenging business environment for M&A and capital-raising activity as well as our Asset Management business, but may provide opportunities for our restructuring business.

While there remains a level of uncertainty in the markets, the global macroeconomic environment is improving as inflation continues to fall and expectations of further interest rate hikes are moderating.

We believe that the M&A market is stabilizing, however that is yet to be reflected in M&A completions, which have remained low since transaction volume began to slow in the first quarter of 2022 and the pace of recovery will likely be slow.

In the meantime, we are seeing regulatory headwinds reducing, valuation gaps narrowing and financing, while more expensive, is becoming more accessible.

The global macroeconomic environment is improving and capital market trends are positive.

Market expectations have become more closely aligned with the higher for longer interest rate environment .

At the same time, there is a high degree of geopolitical uncertainty that continues to be top of mind for decision-makers.

In our Financial Advisory business, we are seeing M&A activity strengthen while financing, valuation, and regulatory headwinds abate.

In our Asset Management business, we continue to see investor interest across a range of our actively managed strategies.

However, with short term global interest rates rising significantly over the past years, cash and short duration investments are now accumulating as investors are showing patience in allocating additional capital into risk assets.

Our outlook with respect to our Financial Advisory and Asset Management businesses is described below.

• Financial Advisory—Despite the lower level of M&A announcements in 2023, we remain actively engaged with our clients.

The global scale and breadth of our Financial Advisory business enables us to advise on a wide range of strategic and restructuring transactions across a variety of industries.

In addition, we continue to invest in our Financial Advisory business by selectively hiring talented senior professionals in an effort to

enhance our capabilities and sector expertise in M&A, capital structure, restructuring and public and private capital markets.

• Asset Management—Given our diversified investment platform and our ability to provide investment solutions for a global mix of clients, we believe we are positioned to benefit from opportunities across the asset management industry.

• Financial Advisory—M&A announcements are up year-over-year with 2023 being at their lowest levels in a decade.

We remained actively engaged with our clients.

The global scale and breadth of our Financial Advisory business, with particular strength in both the U.S.

and Europe, enables us to advise on a wide range of strategic and restructuring transactions across a variety of industries.

Throughout 2024, we could see increased M&A activity occurring alongside greater restructuring activity as rates remain high and debt maturities approach.

In addition, we continue to invest in our Financial Advisory business by selectively hiring

talented senior professionals in an effort to enhance our capabilities and sector expertise in M&A, capital structure, restructuring, and public and private capital markets.

• Asset Management—Given our diversified, actively managed investment platform and our ability to provide investment solutions for a global mix of clients, we believe we are positioned to benefit from opportunities across the asset management industry.

We are continually developing new investment strategies that extend our existing platforms and assessing potential product acquisitions or other inorganic growth opportunities.

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Financial Advisory

As reflected in the following table, which sets forth global M&A industry statistics, the value and number of all completed transactions, including the subset of completed transactions involving values greater than $500 million, decreased in the first nine months of 2023 as compared to the first nine months of 2022.

With respect to announced M&A transactions, the value and number of all transactions, including the subset of announced transactions involving values greater than $500 million, decreased in the first nine months of 2023 as compared to the first nine months of 2022.

The following table sets forth global M&A industry statistics for completed and announced M&A transactions.

Three Months Ended

September 30, Nine Months Ended

September 30,

Incr / (Decr)

($ in billions)

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Dealogic as of October 4, 2023.

Global restructuring activity during the first nine months of 2023, as measured by the number of corporate defaults, decreased as compared to 2022.

The number of defaulting issuers was 119 in the first nine months of 2023 according to Moody’s Investors Service, Inc., as compared to 128 in the first nine months of 2022.

Dealogic as of April 1, 2024.

Global restructuring activity during the first quarter of 2024, one measure of which is the number of corporate defaults, decreased as compared to the first quarter of 2023.

The number of defaulting issuers was 34 in the first quarter of 2024 according to Moody’s Investors Service, Inc., as compared to 38 in the first quarter of 2023.

Net revenue trends in Financial Advisory are generally correlated to the level of completed industry-wide M&A transactions and restructuring transactions occurring subsequent to corporate debt defaults, respectively.

However, deviations from this relationship can occur in any given year for a number of reasons.

For instance, our results can diverge from industry-wide activity where there are material variances from the level of industry-wide M&A activity in a particular market where Lazard has greater or lesser relative market share, or regarding the relative number of our advisory engagements with respect to larger-sized transactions, and where we are involved in non-public or sovereign advisory assignments.

For instance, our results can diverge

from industry-wide activity where there are material variances from the level of industry-wide M&A activity in a particular market where Lazard has greater or lesser relative market share, or regarding the relative number of our advisory engagements with respect to larger-sized transactions, and where we are involved in non-public or sovereign advisory assignments.

Asset Management

The percentage change in major equity market indices at September 30, 2023, as compared to such indices at June 30, 2023, December 31, 2022 and at September 30, 2022, is shown in the table below:

The percentage change in major equity market indices at March 31, 2024, as compared to such indices at December 31, 2023 and at March 31, 2023, is shown in the table below:

Percentage Changes

September 30, 2023 vs.

June 30, 2023 December 31, 2022 September 30, 2022

March 31, 2024 vs.

December 31, 2023 March 31, 2023

MSCI World Index 9 % 25 %

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Financial Statement Overview

The majority of Lazard’s Financial Advisory net revenue historically has been earned from the successful completion of M&A transactions, capital markets advisory, shareholder advisory, restructuring and liability management, sovereign advisory, geopolitical advisory, and other strategic advisory matters and capital raising and placement.

The main drivers of Financial Advisory net revenue are overall M&A activity, the level of corporate debt defaults and the environment for capital raising activities, particularly in the industries and geographic markets in which Lazard focuses.

In some client engagements, often those involving financially distressed companies, revenue is earned in the form of retainers and similar fees that are contractually agreed upon with each client for each assignment and are not necessarily linked to the completion of a transaction.

In addition, Lazard also earns fees from providing strategic advice to clients, with such fees not being dependent on a specific transaction, and may also earn fees in connection with public and private securities offerings.

The majority of Lazard’s Financial Advisory net revenue historically has been earned from advice and other services provided in M&A transactions.

The amount of the fee earned can vary depending upon the type, size and complexity of the transaction Lazard is advising on.

M&A fees can be earned as a retainer, working fee, announcement fee, milestone fee, opinion fee or transaction completion fee.

Most fees are paid upon completion of a transaction, the timing of which can be impacted by delays to securing financing, board approvals, regulatory approvals, shareholder votes, changing market conditions or other factors.

Our restructuring and liability management team advises on situations where our clients are financially distressed, providing advice on financial debt restructurings, liability management and M&A.

Bankruptcy proceedings may require court approval of our fees.

The capital markets advisory team advises both public and private issuers on the raising of capital, while the private capital advisory team provides fundraising and secondary advisory services for private equity, private credit, real estate and real assets-focused investment firms.

Additionally, Lazard earns fees from providing strategic advice to clients, which may include shareholder advisory, geopolitical advisory and other strategic advisory matters, with such fees not being dependent on the completion of a transaction.

Our Financial Advisory businesses may be impacted by overall M&A activity levels in the market, the level of corporate debt defaults and the environment for capital raising activities, among other factors.

Significant fluctuations in Financial Advisory net revenue can occur over the course of any given year, because a significant portion of such net revenue is earned upon the successful completion of a transaction, restructuring or capital raising activity, the timing of which is uncertain and is not subject to Lazard’s control.

Lazard’s Asset Management segment principally includes Lazard Asset Management LLC (together with its subsidiaries (“LAM”), Lazard Frères Gestion SAS (“LFG”) and Edgewater Funds (“Edgewater”).

Lazard’s Asset Management segment principally includes LAM, LFG, Lazard Frères Banque SA (“LFB”) and the Edgewater Funds (“Edgewater”).

Asset Management net revenue is derived from fees for investment management and advisory services provided to clients.

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As a result, fluctuations (including timing thereof) in financial markets and client asset inflows and outflows have a direct effect on Asset Management net revenue and operating income.

Asset Management fees are generally based on the level of AUM measured daily, monthly or quarterly, and an increase or reduction in AUM, due to market price fluctuations, currency fluctuations, changes in product mix, or net client asset flows will result in a corresponding increase or decrease in management fees.

The majority of our investment advisory contracts are generally terminable at any time or on notice of 30 days or less.

or decrease in management fees.

Our investment advisory contracts are generally terminable at any time or on notice of 30 days or less.

Institutional and individual clients, and firms with which we have strategic alliances, can terminate their relationship with us, reduce the aggregate amount of AUM or shift their funds to other types of accounts with different rate structures for a number of reasons, including investment performance, changes in prevailing interest rates and financial market performance.

addition, as Lazard’s AUM includes significant amounts of assets that are denominated in currencies other than U.S.

In addition, as Lazard’s AUM includes significant amounts of assets that are denominated in currencies other than U.S.

Dollars, changes in the value of the U.S.

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The incentive fees received at the end of the measurement period are not subject to reversal or payback.

Incentive fees on hedge funds are often subject to loss carryforward provisions in which losses incurred by the hedge funds in any year are applied against certain gains realized by the hedge funds in future periods before any incentive fees can be earned.

For private equity funds, incentive fees may be earned in the form of a “carried interest” if profits arising from realized investments exceed a specified threshold.

Typically, such carried interest is ultimately calculated on a whole-fund or investment by investment basis and, therefore, clawback of carried interest toward the end of the life of the fund can occur.

As a result, the Company recognizes incentive fees earned on our private equity funds when it is probable that a clawback will not occur.

Corporate segment net revenue consists primarily of investment gains and losses on the Company’s investments to seed strategies and funds in our Asset Management business and principal investments in private equity funds, net of hedging activities, as well as gains and losses on investments held in connection with Lazard Fund Interests (“LFI”) and interest income and interest expense.

Corporate net revenue also can fluctuate due to changes in the fair value of debt and equity securities, as well as due to changes in interest and currency exchange rates and in the levels of cash, investments and indebtedness.

Corporate segment total assets represented 57% of Lazard’s consolidated total assets as of September 30, 2023, which are attributable to cash and cash equivalents, investments in debt and equity securities, interests in alternative investment, debt, equity and private equity funds, deferred tax assets and certain other assets associated with LFB.

As a result, the Company recognizes incentive fees earned on our private equity funds only when it is probable that a clawback will not occur.

Corporate segment net revenue consists primarily of investment gains and losses on the Company’s investments to seed strategies in our Asset Management business, net of hedging activities, and principal investments in private equity funds, as well as gains and losses on investments held in connection with Lazard Fund Interests (“LFI”) and interest income and interest expense.

Corporate net revenue can fluctuate due to changes in the fair value of debt and equity securities, as well as due to changes in interest and currency exchange rates and the levels of cash, investments and indebtedness.

Corporate segment total assets represented 50% of Lazard’s consolidated total assets as of March 31, 2024, which are attributable to cash and cash equivalents, investments in debt and equity securities, interests in alternative investment, debt, equity and private equity funds and deferred tax assets.

Operating Expenses

The majority of Lazard’s operating expenses relate to compensation and benefits for managing directors and employees.

Our compensation and benefits expense includes (i) salaries and benefits, (ii) amortization of the relevant portion of previously granted deferred incentive compensation awards, including (a) share-based incentive compensation under the Lazard Ltd 2018 Incentive Compensation Plan, as amended (the “2018 Plan”) and (b) LFI and other similar deferred compensation arrangements (see Note 12 of Notes to Condensed Consolidated Financial Statements), (iii) a provision for discretionary or guaranteed cash bonuses and profit pools and (iv) when applicable, severance payments.

Our compensation and benefits expense includes (i) salaries and benefits, (ii) amortization of the relevant portion of previously granted deferred incentive compensation awards, including (a) share-based incentive compensation under Lazard’s 2018 Incentive Compensation Plan, as amended (the “2018 Plan”) and (b) LFI and other similar deferred compensation arrangements (see Note 13 of Notes to Condensed Consolidated Financial Statements), (iii) a provision for discretionary or guaranteed cash bonuses and profit pools and (iv) when applicable, severance payments and cash retention awards.

Compensation expense in any given period is dependent on many factors, including general economic and market conditions, our actual and forecasted operating and financial performance, staffing levels, estimated forfeiture rates, competitive pay conditions and the nature of revenues earned, as well as the mix between current and deferred compensation.

For interim periods, we use “adjusted compensation and benefits expense” and the ratio of “adjusted compensation and benefits expense” to “operating revenue,” both non-GAAP measures, for comparison of compensation and benefits expense between periods.

For the reconciliations and calculations with respect to “adjusted compensation and benefits expense” and related ratios to “operating revenue,” see the table under “Consolidated Results of Operations” below.

We believe that “awarded compensation and benefits expense” and the ratio of “awarded compensation and benefits expense” to “operating revenue,” both non-GAAP measures, when presented in conjunction with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) measures, are appropriate measures to assess the annual cost of compensation and provide a meaningful and useful basis for comparison of compensation and benefits

expense between present, historical and future years.

“Awarded compensation and benefits expense” for a given year is calculated using “adjusted compensation and benefits expense,” also a non-GAAP measure, as modified by the following items:

• we deduct amortization expense recorded for U.S.

GAAP purposes in the fiscal year associated with deferred incentive compensation awards;

• we add incentive compensation with respect to the fiscal year, which is comprised of:

(i) the deferred incentive compensation awards granted in the year-end compensation process with respect to the fiscal year ( e.g ., deferred incentive compensation awards granted in 2023 related to the 2022 year-end compensation process), including performance-based restricted stock unit (“PRSU”) and performance-based restricted participation unit (“PRPU”) awards (based on the target payout level);

(ii) the portion of investments in people ( e.g ., “sign-on” bonuses or retention awards) and other special deferred incentive compensation awards including stock performance-based restricted participation units (“SPRPUs”) that is applicable to the fiscal year the award becomes effective;

(iii) amounts in excess of the target payout level for PRSU and PRPU awards at the end of their respective performance periods;

• we reduce the amounts in (i), (ii) and (iii) above by an estimate of future forfeitures with respect to such awards.

We use “adjusted compensation and benefits expense” and the ratio of “adjusted compensation and benefits expense” to “adjusted net revenue,” both non-GAAP measures, for comparison of compensation and benefits expense between periods.

For the reconciliations and calculations with respect to “adjusted compensation and benefits expense” and related ratios to “adjusted net revenue,” see the table under “Consolidated Results of Operations” below.

Compensation and benefits expense is the largest component of our operating expenses.

We seek to maintain discipline with respect to compensation, including the rate at which we award deferred compensation.

Our goal is to maintain a ratio of awarded compensation and benefits expense to operating revenue and a ratio of adjusted compensation and benefits expense to operating revenue over the cycle in the mid-to high-50s percentage range, while targeting a consistent deferral policy.

We focus on a ratio of adjusted compensation and benefits expense to adjusted net revenue to manage costs, balancing a view of current conditions in the market for talent alongside our objective to drive long-term shareholder value.

Our goal remains to deliver a ratio of adjusted compensation and benefits expense to adjusted net revenue over the cycle in the mid-to high-50s percentage range, while targeting a consistent deferral policy.

While we have implemented policies and initiatives that we believe will assist us in maintaining ratios within this range, there can be no guarantee that we will be able to maintain such ratios, or that our policies or initiatives will not change, in the future.

Increased competition for professionals, changes in the macroeconomic environment or the financial markets generally, lower operating revenue resulting from, for example, a decrease in M&A activity, our share of the M&A market or our AUM levels, changes in the mix of revenues from our businesses, investments in our businesses or various other factors could prevent us from achieving this goal;

however, in future periods we may benefit from pressure on compensation costs within the financial services industry.

Our operating expenses also include “non-compensation expense”, which includes costs for occupancy and equipment, marketing and business development, technology and information services, professional services, fund administration and outsourced services and other expenses.

Our practice is to pay our employees competitively to foster retention and motivate performance and, in doing so, we look to the market for talent and other factors, which are typically correlated with industry revenues, but may vary year by year.

At the same time, the amount of compensation we award in a particular year is, in part, deferred and amortized over the successive years.

Increased competition for professionals, changes in the macroeconomic environment or the financial markets generally, lower adjusted net revenue resulting from, for example, a decrease in M&A activity, our share of the M&A market or our AUM levels, changes in the mix of revenues from our businesses, investments in our businesses or various other factors could prevent us from achieving this goal.

Our occupancy costs represent a significant portion of our aggregate operating expenses and are subject to change from time to time, particularly as leases for real property expire and are renewed or replaced with new, long-term leases for the same or other real property.

We believe that “adjusted non-compensation expense”, a non-GAAP measure, when presented in conjunction with U.S.

GAAP measures provides a meaningful and useful basis for our investors to assess our operating results.

We believe that “adjusted non-compensation expense”, a non-GAAP measure, when presented in conjunction with measures prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), provides a meaningful and useful basis for our investors to assess our operating results.

For calculations with respect to “adjusted non-compensation expense”, see the table under “Consolidated Results of Operations” below.

Our operating expenses also include our “benefit pursuant to tax receivable agreement” and “amortization and other acquisition-related costs”.

Our operating expenses also include our “benefit pursuant to tax receivable agreement”.

To the extent inflation results in rising interest rates and has other effects upon the securities markets or general macroeconomic conditions, it may adversely affect our financial position and results of operations by impacting overall levels of M&A activity, reducing our AUM or net revenue, increasing non-compensation expense, or otherwise.

Cost-Saving Initiatives

The Company is conducting firm-wide cost-saving initiatives over the course of 2023.

The Company conducted firm-wide cost-saving initiatives over the course of 2023 and during the first quarter of 2024.

See Note 15 of Notes to Condensed Consolidated Financial Statements.

Provision for 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.

On January 1, 2024, we completed our Conversion from an exempted company incorporated under the laws of Bermuda named Lazard Ltd to a U.S C-Corporation named Lazard, Inc.

Following the Conversion, all of our operating income will be subject to U.S.

federal corporate income taxes, which we anticipate will increase our effective tax rate.

is subject to U.S.

federal income taxes on all of its operating income and, through its subsidiaries, is also subject to state and local taxes on its income apportioned to various state and local jurisdictions.

Lazard Group operates principally through subsidiary corporations including through those domiciled outside the U.S.

that are subject to local income taxes in foreign jurisdictions.

In addition, Lazard Group is subject to Unincorporated Business Tax (“UBT”) attributable to its operations apportioned to New York City.

Additionally, the Organization for Economic Cooperation and Development (the “OECD”) reached agreement among various countries, including the EU member states, to establish a 15% minimum tax on certain multinational companies, commonly called “Pillar Two”.

Many countries continue to announce changes in their tax laws and regulations to implement the OECD Pillar Two proposals.

Lazard is continuing to evaluate the potential impact on future periods of the Pillar Two proposals, as new guidance becomes available.

See “Critical Accounting Policies and Estimates—Income Taxes” below and Notes 16 and 18 of Notes to Condensed Consolidated Financial Statements for additional information regarding income taxes, our deferred tax assets and the tax receivable agreement obligation.

Noncontrolling Interests

Noncontrolling interests primarily consist of (i) amounts related to Edgewater’s management vehicles that the Company is deemed to control but not own, (ii) LGAC interests (see Note 1 of Notes to Condensed Consolidated Financial Statements), (iii) profits interest participation rights and (iv) consolidated VIE interests held by employees.

Net Income Attributable to Noncontrolling Interests

Noncontrolling interests primarily consist of (i) amounts related to Edgewater’s management vehicles that the Company is deemed to control but not own, (ii) Lazard Growth Acquisition Corp.

I (“LGAC”) interests (see Note 1 of Notes to Condensed Consolidated Financial Statements), (iii) profits interest participation rights and (iv) consolidated VIE interests held by employees.

See Notes 12 and 21 of Notes to Condensed Consolidated Financial Statements for information regarding the Company’s noncontrolling interests and consolidated VIEs.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

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Non-compensation 159,368 169,828

Amortization and other acquisition-related costs 96 15 239 45

Benefit pursuant to tax receivable agreement – (40,435)

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Net Income (Loss) 40,224 (15,199)

Less - Net Income (Loss) Attributable to

Less - Net Income Attributable to

Noncontrolling Interests 4,469 6,973

Net Income (Loss) Attributable to Lazard Ltd $ 7,139 $ 105,797 $ (139,046) $ 315,153

Net Income (Loss) Attributable to Lazard $ 35,755 $ (22,172)

Operating Income (Loss), as a % of net revenue 7.1 % (6.8) %

The tables below describe the components of operating revenue, adjusted compensation and benefits expense, adjusted non-compensation expense, earnings from operations and related key ratios, which are non-GAAP measures used by the Company to manage its business.

The tables below describe the components of adjusted net revenue, adjusted compensation and benefits expense, adjusted non-compensation expense, adjusted operating income (loss) and related key ratios, which are non-GAAP measures used by the Company to manage its business.

We believe such non-GAAP measures in conjunction with U.S.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

Operating Revenue:

Adjusted Net Revenue:

Net revenue $ 764,753 $ 542,436

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Revenue related to noncontrolling interests (c) (7,103) (10,823)

(Gains) losses on investments pertaining to LFI (d) 10,598 16,180 (15,530) 65,601

Gains related to LFI (d) (9,373) (16,453)

Losses associated with cost-saving initiatives (e) 587 -

Operating revenue $ 531,617 $ 723,551 $ 1,678,661 $ 2,098,097

Adjusted net revenue (f) $ 746,565 $ 527,018

____________________________________

(a) Interest expense (excluding interest expense incurred by LFB) is added back in determining operating revenue because such expense relates to corporate financing activities and is not considered to be a cost directly related to the revenue of our business.

(b) Represents certain distribution, introducer and management fees paid to third parties, reimbursable deal costs and bad debt expense relating to fees and other receivables that are deemed uncollectible for which an equal amount is excluded for purposes of determining adjusted non-compensation expense.

(c) Revenue or loss related to the consolidation of noncontrolling interests is excluded from operating revenue because the Company has no economic interest in such amount.

(a) Interest expense (excluding interest expense incurred by LFB) is added back in determining adjusted net revenue because such expense relates to corporate financing activities and is not considered to be a cost directly related to the revenue of our business.

(b) Represents certain distribution, introducer and management fees paid to third parties, reimbursable deal costs and bad debt expenses relating to fees and other receivables that are deemed uncollectible for which an equal amount is excluded for purposes of determining adjusted non-compensation expense.

(c) Revenue or loss related to the consolidation of noncontrolling interests is excluded from adjusted net revenue because the Company has no economic interest in such amount.

(d) Represents changes in the fair value of investments held in connection with LFI and other similar deferred compensation arrangements for which a corresponding equal amount is excluded from compensation and benefits expense.

(e) Represents losses associated with the closing of certain offices as part of the cost-saving initiatives including the reclassification of currency translation adjustments to earnings from accumulated other comprehensive loss and transactions related to foreign currency exchange.

(f) Adjusted net revenue is a non-GAAP measure.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

1 unchanged sentence

Total compensation and benefits expense $ 550,824 $ 449,967

Noncontrolling interests (a) (2,636) (2,986) (7,497) (8,969)

(Charges) credits pertaining to LFI (b) 10,598 16,180 (15,530) 65,601

Compensation related to noncontrolling interests (a) (2,108) (3,010)

Charges pertaining to LFI (b) (9,373) (16,453)

Expenses associated with senior management

transition (c)

- - (10,674) -

Expenses associated with cost-saving initiatives (46,610) (20,740)

Adjusted compensation and benefits expense $ 363,626 $ 434,131 $ 1,186,813 $ 1,238,240

Adjusted compensation and benefits expense (d) $ 492,733 $ 399,090

Adjusted compensation and benefits expense, as a %

of operating revenue 68.4 % 60.0 % 70.7 % 59.0 %

of adjusted net revenue 66.0 % 75.7 %

____________________________________

(a) Expenses related to the consolidation of noncontrolling interests are excluded because Lazard has no economic interest in such amounts.

(b) Represents changes in fair value of the compensation liability recorded in connection with LFI and other similar deferred incentive compensation awards for which a corresponding equal amount is excluded from operating revenue.

(c) Represents expenses associated with senior management transition reflecting the departure of certain executive officers.

(d) Adjusted compensation and benefits expense is a non-GAAP measure.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

1 unchanged sentence

Total non-compensation expense $ 159,368 $ 169,828

Expenses relating to office space reorganization (a) - (933) - (2,928)

Distribution fees, reimbursable deal costs, bad debt

expense and other (b) (23,880) (17,588) (76,899) (53,493)

Noncontrolling interests (c) (625) (866) (2,215) (3,070)

expense and other (a) (22,949) (26,681)

Amortization and other acquisition-related costs (68) (48)

Non-compensation expense related to noncontrolling interests (b) (526) (841)

Expenses associated with cost-saving initiatives (1,532) –

Adjusted non-compensation expense $ 137,450 $ 128,263 $ 423,385 $ 376,330

Adjusted non-compensation expense (c) $ 134,293 $ 142,258

Adjusted non-compensation expense, as a % of

operating revenue 25.9 % 17.7 % 25.2 % 17.9 %

adjusted net revenue 18.0 % 27.0 %

____________________________________

(a) Represents building depreciation and other costs related to office space reorganization.

(b) Represents certain distribution, introducer and management fees paid to third parties, reimbursable deal costs and bad debt expense relating to fees and other receivables that are deemed uncollectible for which an equal amount is included for purposes of determining operating revenue.

(c) Expenses related to the consolidation of noncontrolling interests are excluded because the Company has no economic interest in such amounts.

(a) Represents certain distribution, introducer and management fees paid to third parties, reimbursable deal costs and bad debt expenses relating to fees and other receivables that are deemed uncollectible for which an equal amount is included for purposes of determining adjusted net revenue.

(b) Expenses related to the consolidation of noncontrolling interests are excluded because the Company has no economic interest in such amounts.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

Earnings From Operations:

Operating revenue $ 531,617 $ 723,551 $ 1,678,661 $ 2,098,097

Adjusted Operating Income (Loss) (a):

Adjusted net revenue $ 746,565 $ 527,018

Adjusted compensation and benefits expense (492,733) (399,090)

Adjusted non-compensation expense (134,293) (142,258)

Earnings from operations $ 30,541 $ 161,157 $ 68,463 $ 483,527

Earnings from operations, as a % of operating revenue 5.7 % 22.3 % 4.1 % 23.1 %

Adjusted operating income (loss) $ 119,539 $ (14,330)

Adjusted operating income (loss), as a % of adjusted net revenue 16.0 % (2.7) %

____________________________________

(a) Adjusted operating income (loss) is a non-GAAP measure.

Headcount information is set forth below:

September 30, 2023 (a) December 31, 2022 September 30, 2022

March 31, 2024 December 31, 2023 March 31, 2023

Managing Directors:

8 unchanged sentences

Total 3,114 3,291 3,442

____________________________________

(a) Includes reductions associated with the cost-saving initiatives as of September 30, 2023.

Operating Results

2 unchanged sentences

Lazard management believes that annual results are the most meaningful basis for comparison among present, historical and future periods.

Three Months Ended September 30, 2023 versus September 30, 2022

The Company reported net income attributable to Lazard Ltd of $7 million, as compared to net income attributable to Lazard Ltd of $106 million in the 2022 period.

Net revenue decreased $203 million, or 28%, with operating revenue decreasing $192 million, or 27%, as compared to the 2022 period.

Fee revenue from investment banking and other advisory activities decreased $189 million, or 42%, as compared to the 2022 period.

Asset management fees, including incentive fees, decreased $13 million, or 5%, as compared to the 2022 period.

In the aggregate, interest income, other revenue and interest expense remained substantially the same, as compared to the 2022 period.

Compensation and benefits expense decreased $56 million, or 13%, as compared to the 2022 period.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for improved comparability between periods, as described above) was $364 million, a decrease of $71 million, or 16%, as compared to $434 million in the 2022 period.

The ratio of adjusted compensation and benefits expense to operating revenue was 68.4% for the 2023 period, as compared to 60.0% for the 2022 period.

Non-compensation expense increased $16 million, or 11%, as compared to the 2022 period.

Adjusted non-compensation expense increased $9 million, or 7%, as compared to the 2022 period.

The ratio of adjusted non-compensation expense to operating revenue was 25.9% for the 2023 period, as compared to 17.7% for the 2022 period.

The Company reported an operating loss of $5 million, as compared to operating income of $158 million in the 2022 period.

Earnings from operations decreased $131 million, or 81%, as compared to the 2022 period, and, as a percentage of operating revenue, were 5.7% for the 2023 period, as compared to 22.3% in the 2022 period.

The provision for income taxes reflects an effective tax rate of 239.5%, as compared to 22.4% for the 2022 period.

The change in the effective tax rate principally relates to changes in the geographic mix of earnings inclusive of losses without tax benefits and the impact of discrete items.

Net income attributable to noncontrolling interests was de minimis in the 2023 period as compared to income of $17 million in the 2022 period.

Nine Months Ended September 30, 2023 versus September 30, 2022

The Company reported net loss attributable to Lazard Ltd of $139 million, as compared to net income attributable to Lazard Ltd of $315 million in the 2022 period.

Net revenue decreased $352 million, or 17%, with operating revenue decreasing $419 million, or 20%, as compared to the 2022 period.

Fee revenue from investment banking and other advisory activities decreased $356 million, or 29%, as compared to the 2022 period.

Asset management fees, including incentive fees, decreased $64 million, or 7%, as compared to the 2022 period.

In the aggregate, interest income, other revenue and interest expense increased $69 million, as compared to the 2022 period.

Compensation and benefits expense, which included $166 million associated with the cost-saving initiatives in 2023, increased $205 million, or 17%, as compared to the 2022 period.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for improved comparability between periods, as described above) was $1,187 million, a decrease of $51 million, or 4%, as compared to $1,238 million in the 2022 period.

The ratio of adjusted compensation and benefits expense to operating revenue was 70.7% for the 2023 period, as compared to 59.0% for the 2022 period.

Non-compensation expense increased $79 million, or 18%, as compared to the 2022 period, primarily due to higher travel and business development expenses and professional services expenses, continued investments in technology and expenses associated with the cost-saving initiatives in 2023.

Adjusted non-compensation expense increased $47 million, or 13%, as compared to the 2022 period.

The ratio of adjusted non-compensation expense to operating revenue was 25.2% for the 2023 period, as compared to 17.9% for the 2022 period.

The Company reported an operating loss of $152 million, as compared to operating income of $444 million in the 2022 period.

Earnings from operations decreased $415 million, or 86%, as compared to the 2022 period, and, as a percentage of operating revenue, were 4.1% for the 2023 period, as compared to 23.1% in the 2022 period.

Three Months Ended March 31, 2024 versus March 31, 2023

The Company reported net income attributable to Lazard of $36 million, as compared to net loss attributable to Lazard of $22 million in the 2023 period.

Net revenue increased $222 million, or 41%, with adjusted net revenue increasing $220 million, or 42%, as compared to the 2023 period.

Fee revenue from investment banking and other advisory activities increased $176 million, or 63%, as compared to the 2023 period.

Asset management fees, including incentive fees, increased $15 million, or 6%, as compared to the 2023 period.

In the aggregate, interest income, other revenue and interest expense increased $31 million as compared to the 2023 period, the majority of which is recorded in the Corporate segment.

Compensation and benefits expense increased $101 million, or 22%, as compared to the 2023 period.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for improved comparability between periods, as described above) was $493 million, an increase of $94 million, or 23%, as compared to $399 million in the 2023 period.

The ratio of adjusted compensation and benefits expense to adjusted net revenue was 66.0% for the 2024 period, as compared to 75.7% for the 2023 period.

Non-compensation expense decreased $10 million, or 6%, as compared to the 2023 period reflecting lower professional services and other expenses.

Adjusted non-compensation expense decreased $8 million, or 6%, as compared to the 2023 period.

The ratio of adjusted non-compensation expense to adjusted net revenue was 18.0% for the 2024 period, as compared to 27.0% for the 2023 period.

The Company reported operating income of $55 million, as compared to an operating loss of $37 million in the 2023 period.

The Company reported adjusted operating income of $120 million as compared to an adjusted operating loss of $14 million in the 2023 period, and, as a percentage of adjusted net revenue, was 16.0% for the 2024 period, as compared to (2.7)% in the 2023 period.

The provision for income taxes reflects an effective tax rate of 26.3%, as compared to 58.8% for the 2023 period.

The change in the effective tax rate principally relates to changes in the geographic mix of earnings inclusive of losses without tax benefits and the impact of discrete items.

Net income attributable to noncontrolling interests decreased $10 million as compared to the 2022 period.

The change in the effective tax rate principally relates to changes in the geographic mix of earnings inclusive of losses without tax benefits in 2023 and the impact of discrete items.

Net income attributable to noncontrolling interests decreased $3 million, or 36% as compared to the 2023 period.

Business Segments

The following is a discussion of net revenue and operating income for the Company’s segments:

The following is a discussion of net revenue and operating income (loss) for the Company’s segments:

Financial Advisory, Asset Management and Corporate.

Each segment’s operating expenses include (i) compensation and benefits expenses that are incurred directly in support of the segment 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 outsourcing, and indirect support costs (including compensation and benefits expense and other operating expenses related thereto) for administrative services.

Such administrative services include, but are not limited to, accounting, tax, human resources, legal, information technology, facilities management and senior management activities.

Such support costs are allocated to the relevant segments based on various statistical drivers such as revenue, headcount, square footage and other factors.

See Note 20 of Notes to Condensed Consolidated Financial Statements for further information regarding segments.

Financial Advisory

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Lazard Statistics:

6 unchanged sentences

________________________________________

Dealogic as of October 4, 2023.

and Latin America), EMEA (primarily in the U.K., France, Germany, Italy and Spain) and the Asia Pacific region and therefore may not be reflective of the geography in which the clients are located.

Dealogic as of April 1, 2024.

The geographical distribution of Financial Advisory net revenue is set forth below in percentage terms and is based on the Lazard offices that generate Financial Advisory net revenue, which are located in the Americas (primarily in the U.S.), EMEA (primarily in the U.K., France, Germany, Italy and Spain) and the Asia Pacific region and therefore may not be reflective of the geography in which the clients are located.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Americas 63 % 49 %

EMEA 39 44 43 43

Asia Pacific – 1

3 unchanged sentences

While Lazard measures revenue by practice area, Lazard does not separately measure the costs or profitability of M&A services as compared to restructuring or other services.

Accordingly, Lazard measures performance in its Financial Advisory segment based on overall segment operating revenue and operating income margins.

Accordingly, Lazard measures performance in its Financial Advisory segment based on overall segment adjusted net revenue and operating income margins.

Financial Advisory Results of Operations

2 unchanged sentences

Lazard management believes that annual results are the most meaningful basis for comparison among present, historical and future periods.

Three Months Ended September 30, 2023 versus September 30, 2022

Financial Advisory net revenue decreased $190 million, or 42%, as compared to the 2022 period.

The decrease in Financial Advisory net revenue was primarily driven by decreased number of completed M&A transactions with values greater than $500 million as compared to the 2022 period, reflecting a significant decline in industry-wide completed M&A transactions.

Operating expenses decreased $46 million, or 13%, as compared to the 2022 period primarily due to a decrease in compensation and benefits expense associated with decreased operating revenue.

Financial Advisory operating loss was $30 million as compared to operating income of $115 million in the 2022 period and, as a percentage of net revenue, was (11.1)%, as compared to 25.2% in the 2022 period.

Nine Months Ended September 30, 2023 versus September 30, 2022

Financial Advisory net revenue decreased $359 million, or 29%, as compared to the 2022 period .

Operating expenses, which included $92 million associated with cost-saving initiatives in the 2023 period, increased $107 million, or 11%, as compared to the 2022 period.

Financial Advisory operating loss was $168 million as compared to operating income of $298 million in the 2022 period and, as a percentage of net revenue, was (18.7)%, as compared to 23.8% in the 2022 period.

Three Months Ended March 31, 2024 versus March 31, 2023

Financial Advisory net revenue increased $176 million, or 63%, as compared to the 2023 period.

The increase in Financial Advisory net revenue was primarily driven by increased number of completed M&A transactions with values greater than $500 million as compared to the 2023 period, despite a decline in industry-wide completed M&A transactions.

Operating expenses increased $99 million, or 30%, as compared to the 2023 period primarily due to increased compensation and benefits expense associated with increased adjusted net revenue.

The Financial Advisory operating income was $25 million as compared to an operating loss of $51 million in the 2023 period and, as a percentage of net revenue, was 5.6%, as compared to (18.4)% in the 2023 period.

Asset Management

4 unchanged sentences

Either directly, or through our third-party vendors, we perform a variety of regular due diligence procedures on our pricing service providers.

The following table shows the composition of AUM for the Asset Management segment:

September 30, 2023 December 31, 2022

The following table shows the composition of AUM for the Asset Management segment (see Item 1, “Business—Principal Business Lines—Asset Management—Investment Strategies”):

March 31, 2024 December 31, 2023

($ in millions)

16 unchanged sentences

Total AUM $ 250,432 $ 246,651

Total AUM at September 30, 2023 was $228 billion, an increase of $12 billion, or 6%, as compared to total AUM of $216 billion at December 31, 2022 due to market appreciation partially offset by foreign exchange depreciation.

Average AUM for the three month period ended September 30, 2023 increased 11% as compared to the three month period ended September 30, 2022 and remained substantially the same as compared to the nine month period ended September 30, 2022.

As of September 30, 2023, approximately 84% of our AUM was managed on behalf of institutional clients, including corporations, labor unions, public pension funds, insurance companies and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors, compared to 85% as of December 31, 2022.

As of September 30, 2023, approximately 16% of our AUM was managed on behalf of individual client relationships, which was principally with family offices and individuals, compared to approximately 15% as of December 31, 2022.

As of September 30, 2023, AUM with foreign currency exposure represented approximately 63% of our total AUM as compared to 65% at December 31, 2022.

Total AUM at March 31, 2024 was $250 billion, an increase of $3 billion, or 2%, as compared to total AUM of $247 billion at December 31, 2023 due to market appreciation partially offset by net outflows and foreign exchange depreciation.

Average AUM for the first quarter of 2024 increased 9% as compared to the first quarter of 2023 and increased 6% as compared to the fourth quarter of 2023.

As of March 31, 2024, approximately 84% of our AUM was managed on behalf of institutional and intermediary clients, including corporations, labor unions, public pension funds, insurance companies and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors, compared to 85% as of December 31, 2023.

As of March 31, 2024, approximately 16% of our AUM was managed on behalf of individual client relationships, compared to approximately 15% as of December 31, 2023.

As of March 31, 2024, AUM with foreign currency exposure represented approximately 60% of our total AUM as compared to 64% at December 31, 2023.

AUM with foreign currency exposure generally declines in value with the strengthening of the U.S.

1 unchanged sentence

Dollar weakens, with all other factors held constant.

The following is a summary of changes in AUM by asset class for the three month and nine month periods ended September 30, 2023 and 2022:

Three Months Ended September 30, 2023

The following is a summary of changes in AUM by asset class for the three month periods ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024

Balance Inflows Outflows Net

9 unchanged sentences

Total $ 246,651 $ 6,084 $ (12,714) $ (6,630) $ 13,971 $ (3,560) $ 250,432

Inflows in the Equity asset class were primarily attributable to the Global platform, and inflows in the Fixed Income asset class were primarily attributable to the Multi-Regional platform.

Outflows in the Equity asset class were primarily attributable to the Global, Multi-Regional and Local platforms, and outflows in the Fixed Income asset class were primarily attributable to the Multi-Regional and Global platforms.

Nine Months Ended September 30, 2023

Net flows were primarily driven by outflows across all platforms within the Equity asset class.

Three Months Ended March 31, 2023

Balance Inflows Outflows Net

10 unchanged sentences

Inflows include approximately $3.9 billion related to a wealth management acquisition.

Inflows in the Equity asset class were primarily attributable to the Global, Multi-Regional and Emerging Markets platforms, and inflows in the Fixed Income asset class were primarily attributable to the Multi-Regional and Global platforms.

Three Months Ended September 30, 2022

Balance Inflows Outflows Net

Flows Market Value

Appreciation/

(Depreciation) Foreign

Appreciation/

(Depreciation) AUM

($ in millions)

Equity $ 170,274 $ 4,338 $ (6,477) $ (2,139) $ (9,618) $ (4,808) $ 153,709

Fixed Income 39,929 2,330 (1,790) 540 (503) (1,654) 38,312

Other 6,423 480 (887) (407) (135) (136) 5,745

Total $ 216,626 $ 7,148 $ (9,154) $ (2,006) $ (10,256) $ (6,598) $ 197,766

Nine Months Ended September 30, 2022

Balance Inflows Outflows Net

Flows Market Value

Appreciation/

(Depreciation) Foreign

Appreciation/

(Depreciation) AUM

($ in millions)

Equity $ 221,006 $ 17,543 $ (30,278) $ (12,735) $ (41,958) $ (12,604) $ 153,709

Fixed Income 46,286 6,825 (7,488) (663) (3,335) (3,976) 38,312

Other 6,447 2,202 (1,984) 218 (605) (315) 5,745

Total $ 273,739 $ 26,570 $ (39,750) $ (13,180) $ (45,898) $ (16,895) $ 197,766

Average AUM for the three month and nine month periods ended September 30, 2023 and 2022 for each significant asset class is set forth below.

Average AUM for the three month periods ended March 31, 2024 and 2023 for each significant asset class is set forth below.

Average AUM generally represents the average of the monthly ending AUM balances for the period.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in millions)

9 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Americas 41 % 41 %

EMEA 46 37 45 40

Asia Pacific 13 14

3 unchanged sentences

Lazard management believes that annual results are the most meaningful basis for comparison among present, historical and future periods.

Three Months Ended September 30, 2023 versus September 30, 2022

Asset Management net revenue decreased $14 million, or 5%, as compared to the 2022 period.

Three Months Ended March 31, 2024 versus March 31, 2023

Asset Management net revenue increased $11 million, or 4%, as compared to the 2023 period.

Management fees and other revenue was $287 million, an increase of $8 million, or 3%, as compared to $279 million in the 2023 period.

Incentive fees were $2 million, a decrease of $20 million as compared to $22 million in the 2022 period.

Operating expenses decreased $2 million, or 1%, as compared to the 2022 period.

Asset Management operating income was $53 million, a decrease of $12 million, or 19%, as compared to operating income of $65 million in the 2022 period and, as a percentage of net revenue, was 18.6%, as compared to 21.8% in the 2022 period.

Nine Months Ended September 30, 2023 versus September 30, 2022

Asset Management net revenue decreased $69 million, or 7%, as compared to the 2022 period.

Management fees and other revenue was $844 million, a decrease of $29 million, or 3%, as compared to $872 million in the 2022 period.

Incentive fees were $14 million, a decrease of $40 million as compared to $54 million in the 2022 period.

Operating expenses, which included $53 million associated with cost-saving initiatives in the 2023 period, increased $42 million, or 6%, as compared to the 2022 period.

Incentive fees were $9 million, an increase of $4 million as compared to $5 million in the 2023 period.

Operating expenses increased $14 million, or 5%, as compared to the 2023 period.

Asset Management operating income was $34 million, a decrease of $2 million, or 6%, as compared to operating income of $36 million in the 2023 period and, as a percentage of net revenue, was 11.4%, as compared to 12.7% in the 2023 period.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in thousands)

4 unchanged sentences

Net Revenue (Loss) 15,770 (19,182)

Operating Expenses (Credits) (a) 1,155 (6,590) 48,252 (46,612)

Benefit pursuant to tax receivable agreement – (40,435)

Other operating expenses (a) 20,504 43,009

Operating Expenses 20,504 2,574

Operating Loss $ (4,734) $ (21,756)

4 unchanged sentences

Lazard management believes that annual results are the most meaningful basis for comparison among present, historical and future periods.

Three Months Ended September 30, 2023 versus September 30, 2022

Three Months Ended March 31, 2024 versus March 31, 2023

Net interest expense increased $2 million, or 15%, as compared to the 2023 period.

Other revenue (loss) reflects losses in both periods attributable to investments held in connection with LFI.

Operating expenses increased $8 million as compared to the 2022 period.

Nine Months Ended September 30, 2023 versus September 30, 2022

Net interest expense decreased $6 million, or 13%, as compared to the 2022 period.

Other revenue (loss) was positively impacted by gains attributable to investments held in connection with LFI in the 2023 period, as compared to losses in the 2022 period.

Such gains in the 2023 period were offset by losses incurred from the impairment of equity method investments and the liquidation of LGAC in February 2023.

Operating expenses excluding the benefit pursuant to the TRA of $40 million, increased $135 million as compared to the 2022 period primarily due to $33 million associated with cost-saving initiatives in the 2023 period, and charges in the 2023 period as compared to credits in the 2022 period pertaining to LFI.

Other revenue (loss) was positively impacted by investment gains in the 2024 period, as compared to losses incurred from the impairment of equity method investments and the liquidation of LGAC in the 2023 period.

Operating expenses excluding the benefit pursuant to TRA, decreased $23 million as compared to the 2023 period, reflecting lower professional services and other expenses.

The Company’s cash flows are influenced primarily by the timing of the receipt of Financial Advisory and Asset Management fees, the timing of distributions to shareholders, payments of incentive compensation to managing directors and employees and purchases of common stock.

1 unchanged sentence

Fees from our Private Capital Advisory activities are generally collected over a four-year period from billing and typically include an interest component.

The Company makes cash payments for a significant portion of its incentive compensation during the first three months of each calendar year with respect to the prior year’s results.

The Company makes cash payments for a significant portion of its incentive compensation with respect to the prior year’s results during the first three months of each calendar year.

See the Condensed Consolidated Financial Statements—Consolidated Statements of Cash Flows for further detail.

Summary of Cash Flows:

Nine Months Ended

September 30,

Three Months Ended

($ in millions)

13 unchanged sentences

________________________________________

(a) Consists of the following:

Nine Months Ended

September 30,

($ in millions)

Depreciation and amortization of property $ 32 $ 32

Noncash lease expense 47 46

Currency translation adjustment reclassification 2 -

Amortization of deferred expenses and share-based incentive

compensation 354 333

Deferred tax provision (benefit) (101) 56

Benefit pursuant to tax receivable agreement (40) -

Impairment of equity method investments and other receivables 23 -

Impairment of assets associated with cost-saving initiatives 9 -

Loss on LGAC liquidation 18 -

Total $ 344 $ 467

(a) Consists primarily of amortization of deferred expenses and share-based incentive compensation, noncash lease expenses, depreciation and amortization of property and deferred tax provision (benefit).

(b) Includes net changes in operating assets and liabilities.

(c) Consists primarily of purchases of shares of common stock, tax withholdings related to the settlement of vested RSUs, vested RSAs and vested PRSUs, common stock dividends, changes in customer deposits, distributions to noncontrolling interest holders, and in 2023, distributions to redeemable noncontrolling interests associated with LGAC's redemption of all its outstanding Class A ordinary shares.

(c) Consists primarily of purchases of shares of common stock, tax withholdings related to the settlement of vested RSUs, vested RSAs and vested PRSUs, common stock dividends, changes in customer deposits, distributions to noncontrolling interest holders, activity related to borrowings (including in 2024, the issuance of the 2031 Notes and the partial redemption of the 2025 Notes), distributions to redeemable noncontrolling interests associated with LGAC's redemption of all its outstanding Class A ordinary shares in 2023.

(d) Consists of cash and cash equivalents, deposits with banks and short-term investments and restricted cash.

Liquidity and Capital Resources

The Company’s liquidity and capital resources are derived from multiple sources as described in “—Sources and Uses of Liquidity”.

Sources and Uses of Liquidity

4 unchanged sentences

We also pay certain tax advances during the year on behalf of certain managing directors, which serve to reduce their respective incentive compensation payments.

Additionally, we made payments in August 2023 with respect to deferred cash awards and anticipate payments throughout the year relating to severance and other employee termination costs associated with the cost-saving initiatives (See Note 14 of Notes to Condensed Consolidated Financial Statements).

Liquidity is also affected by the level of deposits and other customer payables, principally at LFB.

To the extent that such deposits and other customer payables rise or fall, this has a corresponding impact on liquidity held at LFB, with the majority of such amounts generally being recorded in “deposits with banks and short-term investments.” In the first nine months of 2023, as reflected on the condensed consolidated statements of financial condition, both “deposits with banks and short-term investments” and “deposits and other customer payables” decreased as compared to December 31, 2022, and reflect the level of LFB customer-related demand deposits, primarily from clients and funds managed by LFG.

We regularly monitor our liquidity position, including cash levels, lease obligations, investments, credit lines, principal investment commitments, interest and principal payments on debt, capital expenditures, dividend payments, purchases of shares of common stock and matters relating to liquidity and to compliance with regulatory net capital requirements.

At September 30, 2023, Lazard had approximately $653 million of cash, including approximately $382 million held at Lazard’s operations outside the U.S.

Additionally, we made payments in the first quarter of 2024 relating to severance and other employee termination costs associated with the cost-saving initiatives.

(See Note 15 of Notes to Condensed Consolidated Financial Statements).

Also see “Senior Debt” below for senior debt refinancing in the first quarter of 2024.

Liquidity is also affected by the level of LFB customer-related demand deposits, primarily from clients and funds managed by LFG.

To the extent that such deposits rise or fall, and assuming unchanged asset allocation, this has a corresponding impact on liquidity held at LFB, with the majority of such amounts generally being recorded in “deposits with banks and short-term investments”.

LFB is subject to, and in compliance with, regulatory liquidity coverage ratios and liquidity levels are monitored on a daily basis.

purchases of shares of common stock, compensation and matters relating to liquidity and to compliance with regulatory net capital requirements.

At March 31, 2024, Lazard had approximately $923 million of cash and cash equivalents, including approximately $427 million held at Lazard’s operations outside the U.S.

Lazard provides for income taxes on substantially all of its foreign earnings.

We expect that no material amount of additional taxes would be recognized upon receipt of dividends or distributions of such earnings from our foreign operations.

As of September 30, 2023, the Company’s remaining lease obligations were $21 million for 2023 (October 1 through December 31), $154 million from 2024 through 2025, $127 million from 2026 through 2027 and $281 million through 2033.

As of September 30, 2023, Lazard had approximately $209 million in unused lines of credit available to it, including a $200 million, five-year, senior revolving credit facility under the Second Amended and Restated Credit Agreement.

As of March 31, 2024, the Company’s remaining lease obligations were $62 million for 2024 (April 1 through December 31), $139 million from 2025 through 2026, $124 million from 2027 through 2028 and $222 million through 2034.

As of March 31, 2024, Lazard had approximately $209 million in unused lines of credit available to it, including a $200 million, five-year, senior revolving credit facility under the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains customary terms and conditions, including limitations on consolidations, mergers, indebtedness and certain payments, as well as financial condition covenants relating to leverage and interest coverage ratios.

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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.

As long as the lenders’ commitments remain in effect, any loan pursuant to the Second Amended and Restated Credit Agreement remains outstanding and unpaid or any other amount is due to the lending bank group, the Second Amended and Restated Credit Agreement includes financial covenants that require that Lazard Group not permit (i) its Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) for the 12-month period ending on the last day of any fiscal quarter to be greater than 3.25 to 1.00, provided that the Consolidated Leverage Ratio may be greater than 3.25 to 1.00 for four (consecutive or nonconsecutive) quarters so long as it is not greater than 3.50 to 1.00 on the last day of any such quarter, or (ii) its Consolidated Interest Coverage Ratio (as defined in the Second Amended and Restated Credit Agreement) for the 12-month period ending on the last day of any fiscal quarter to be less than 3.00 to 1.00.

For the 12-month period ended September 30, 2023, Lazard Group was in compliance with such ratios, with its Consolidated Leverage Ratio being 2.86 to 1.00 and its Consolidated Interest Coverage Ratio being 11.51 to 1.00.

In any event, no amounts were outstanding under the Second Amended and Restated Credit Agreement as of September 30, 2023.

The Second Amended and Restated Credit Agreement includes financial covenants that require that Lazard Group not permit (i) its Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) for the 12-month period ending on the last day of any fiscal quarter to be greater than 3.25 to 1.00, provided that the Consolidated Leverage Ratio may be greater than 3.25 to 1.00 for four (consecutive or nonconsecutive) quarters so long as it is not greater than 3.50 to 1.00 on the last day of any such quarter, or (ii) its Consolidated Interest Coverage Ratio (as defined in the Second Amended and Restated Credit Agreement) for the 12-month period ending on the last day of any fiscal quarter to be less than 3.00 to 1.00.

For the 12-month period ended March 31, 2024, Lazard Group was in compliance with such ratios.

In any event, no amounts were outstanding under the Second Amended and Restated Credit Agreement as of March 31, 2024.

In addition, the Second Amended and Restated Credit Agreement contains certain other covenants (none of which relate to financial condition), events of default and other customary provisions.

At September 30, 2023, the Company was in compliance with all of these provisions.

At March 31, 2024, the Company was in compliance with all of these provisions.

Lazard’s annual cash flow generated from operations historically has been sufficient to enable it to meet its annual obligations.

We believe that the sources of liquidity described above should be sufficient for us to fund our current obligations for the next 12 months.

See also Notes 10, 12, 13, 15 and 17 of Notes to Condensed Consolidated Financial Statements regarding information in connection with commitments, incentive plans, employee benefit plans, income taxes and tax receivable agreement obligations, respectively.

The table below sets forth our corporate indebtedness as of September 30, 2023 and December 31, 2022.

See also Notes 11, 13, 14, 16, 18 and 19 of Notes to Condensed Consolidated Financial Statements regarding information in connection with commitments, incentive plans, employee benefit plans, income taxes, tax receivable agreement obligations and regulatory requirements, respectively.

The table below sets forth our corporate indebtedness as of March 31, 2024 and December 31, 2023.

The agreements with respect to this indebtedness are discussed in more detail in our condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q and in our Form 10-K.

Outstanding as of

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Senior Debt Maturity Principal Unamortized

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Senior Notes 2029 500.0 3.8 496.2 500.0 4.0 496.0

Lazard Group 2031

Senior Notes 2031 400.0 4.0 396.0 – – –

$ 1,864.3 $ 12.9 $ 1,851.4 $ 1,700.0 $ 9.8 $ 1,690.2

In the first quarter of 2024, we issued $400 million of 6.0% senior notes due March 2031 to refinance the upcoming maturity of our 2025 Notes.

We used part of the net proceeds to purchase in a tender offer $236 million of the 2025 Notes ($164 million remains outstanding).

We invested the net proceeds in short-term U.S.

Treasury securities which are included in cash and cash equivalents on the condensed consolidated statements of financial condition as of March 31, 2024.

The indenture and supplemental indentures relating to Lazard Group’s senior notes contain certain covenants (none of which relate to financial condition), events of default and other customary provisions.

At September 30, 2023, the Company was in compliance with all of these provisions.

At March 31, 2024, the Company was in compliance with all of these provisions.

We may, to the extent required and subject to restrictions contained in our financing arrangements, use other financing sources, which may cause us to be subject to additional restrictions or covenants.

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Stockholders’ Equity

At September 30, 2023, total stockholders’ equity was $420 million, as compared to $675 million at December 31, 2022, including $361 million and $556 million attributable to Lazard Ltd on the respective dates.

The net activity in stockholders’ equity during the nine month period ended September 30, 2023 is reflected in the table below (in millions of dollars):

At March 31, 2024, total stockholders’ equity was $449 million, as compared to $482 million at December 31, 2023, including $393 million and $424 million attributable to Lazard, Inc.

on the respective dates.

The net activity in stockholders’ equity during the three month period ended March 31, 2024 is reflected in the table below (in millions of dollars):

Stockholders’ Equity - January 1, 2024 $ 482

Increase (decrease) due to:

Net loss (a) (134)

Other comprehensive income 3

Net income (a) 38

Other comprehensive loss (14)

Amortization of share-based incentive compensation 70

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Common stock dividends (44)

LFI Consolidated Funds (74)

Reversal to net loss of amounts previously charged to

additional paid-in-capital and noncontrolling interests 18

Reversal of deferred offering costs liability 20

Other - net (5)

Stockholders’ Equity - September 30, 2023 $ 420

Stockholders’ Equity - March 31, 2024 $ 449

________________________________________

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(b) The tax withholding portion of share-based compensation is settled in cash, not shares.

See the Consolidated Financial Statements—Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Noncontrolling Interests for further detail.

The Board of Directors of Lazard has issued a series of authorizations to repurchase common stock, which help offset the dilutive effect of our share-based incentive compensation plans.

The Company aims to repurchase at least as many shares as it expects to issue pursuant to such compensation plans in respect of year-end incentive compensation attributable to the prior year.

The Company aims to repurchase at least as many shares as it expects to issue pursuant to such compensation plans in respect of year-end incentive compensation over time.

The rate at which the Company purchases shares in connection with this annual objective 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:

Three Months Ended March 31:

Shares Purchased Average

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2024 564,692 $ 38.97

As of September 30, 2023, a total of $200 million 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.

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.

As of March 31, 2024, a total of $178 million of share repurchase authorization remaining available under Lazard, Inc.’s share repurchase program will expire on December 31, 2024.

During the three month period ended March 31, 2024, Lazard, Inc.

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.

On April 24, 2024, the Board of Directors of Lazard declared a quarterly dividend of $0.50 per share on our common stock.

The dividend is payable on May 17, 2024 to stockholders of record on May 6, 2024.

See Notes 12 and 13 of Notes to Condensed Consolidated Financial Statements for additional information regarding Lazard’s stockholders’ equity and incentive plans, respectively.

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We actively monitor our regulatory capital base.

Our principal subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure their general financial soundness and liquidity, which require, among other things, that we comply with rules regarding certain minimum capital requirements, record-keeping, reporting procedures, relationships with customers, experience and training requirements for employees and certain other requirements and procedures.

These regulatory requirements may restrict the flow of funds to and from affiliates.

See Note 18 of Notes to Condensed Consolidated Financial Statements for further information.

See Note 19 of Notes to Condensed Consolidated Financial Statements for further

These regulations differ in the U.S., the U.K., France and other countries in which we operate.

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We determine the adequacy of the allowance under the current expected credit losses (“CECL”) guidance by (i) applying a bad debt charge-off rate based on historical charge-off experience;

(ii) estimating the probability of loss based on our analysis of the client’s creditworthiness and specifically reserve against exposures where we determine the receivables are uncollectible, which may include situations where a fee is in dispute or litigation has commenced;

(ii) estimating the probability of loss based on our analysis of the client’s creditworthiness resulting in specific reserves against exposures where we determine the receivables are uncollectible, which may include situations where a fee is in dispute or litigation has commenced;

and (iii) performing qualitative assessments to monitor economic risks that may require additional adjustments.

The allowance for credit losses involves judgment including incorporation of historical loss experience and assessment of risk characteristics of our clients.

The allowance for credit losses involves judgment including the incorporation of historical loss experience and assessment of risk characteristics of our clients.

The bad debt charge-off rate based on historical charge-off experience was an average annual rate estimated using the most recent two years of charge-off data.

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Annual discretionary compensation represents a significant portion of our annual compensation and benefits expense.

We allocate the estimated amount of such annual discretionary compensation to interim periods in proportion to the amount of operating revenue earned in such periods based on an estimated annual ratio of adjusted compensation and benefits expense to operating revenue.

We allocate the estimated amount of such annual discretionary compensation to interim periods in proportion to the amount of adjusted net revenue earned in such periods based on an estimated annual ratio of adjusted compensation and benefits expense to adjusted net revenue.

See “Financial Statement Overview—Operating Expenses” for more information on our periodic compensation and benefits expense.

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Differences which are temporary in nature result in deferred tax assets and liabilities.

Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, any valuation allowance recorded against our deferred tax assets and our unrecognized tax benefits.

Significant judgment is required in determining our

provision for income taxes, our deferred tax assets and liabilities, any valuation allowance recorded against our deferred tax assets and our unrecognized tax benefits.

We recognize a deferred tax asset if it is more likely than not (defined as a likelihood of greater than 50%) that a tax benefit will be accepted by the relevant taxing authority.

The measurement of deferred tax assets and liabilities is based upon currently enacted tax rates in the applicable jurisdictions.

At December 31, 2022, on a consolidated basis, we recorded gross deferred tax assets of approximately $598 million, with such amount partially offset by a valuation allowance of approximately $88 million (as described below).

Subsequent to the initial recognition of deferred tax assets, we also must continually assess the likelihood that such deferred tax assets will be realized.

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Taking into account all available information, we cannot determine that it is more likely than not that deferred tax assets held by these entities will be realized.

Consequently, we have recorded valuation allowances on $88 million of deferred tax assets held by these entities as of December 31, 2022.

Consequently, we have recorded valuation allowances on deferred tax assets held by these entities as of December 31, 2023.

We record tax positions taken or expected to be taken in a tax return based upon our estimates regarding the amount that is more likely than not to be realized or paid, including in connection with the resolution of any related appeals or other legal processes.

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See Item 1A, “Risk Factors” in our Form 10-K and Note 16 of Notes to Condensed Consolidated Financial Statements for additional information related to income taxes.

Amended and Restated Tax Receivable Agreement

Tax Receivable Agreement

The Second Amended and Restated Tax Receivable Agreement, dated as of October 26, 2015 (the “TRA”), between Lazard and LTBP Trust (the “Trust”) provides for payments by our subsidiaries to the owners of the Trust, who include certain of our executive officers.

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.

The assumptions reflected in the estimate involve significant judgment, and if our structure or actual income are different than our assumptions, 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.

See Note 18 of Notes to Condensed Consolidated Financial Statements for additional information regarding the TRA.

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 million 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 million.

The cumulative liability relating to our obligations under the TRA as of September 30, 2023 and December 31, 2022 was $119 million and $191 million, respectively, and is recorded in “tax receivable agreement obligation” on the condensed consolidated statements of financial condition.

In accordance with current accounting guidance, goodwill has an indefinite life and is tested for impairment annually, as of November 1, or more frequently if circumstances indicate impairment may have occurred.

The goodwill associated with each business combination is allocated to the related reporting units for impairment testing.

The Company performs a qualitative evaluation about whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount in lieu of actually calculating the fair value of the reporting unit.

The qualitative evaluation includes significant judgment on the business outlook assumptions of each reporting unit based on historical data, current economic conditions, stock performance and industry trends.

The Company currently expects that approximately $32 million of such obligation will be paid in the second quarter of 2024.

Goodwill has an indefinite life and is tested for impairment annually, as of November 1, or more frequently if circumstances indicate impairment may have occurred.

The Company performs a qualitative assessment about whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount in lieu of actually calculating the fair value of the reporting unit.

The qualitative assessment includes significant judgment on the business outlook assumptions of each reporting unit based on historical data, current economic conditions, stock performance and industry trends.

If events indicate that it is more likely than not that the reporting unit’s fair value is less than its carrying value, the Company performs a quantitative assessment to determine the fair value of the reporting unit and compares it to its carrying values.

If the carrying value of a reporting unit exceeds its fair value, the Company would recognize an impairment loss equal to the excess.

The goodwill impairment tests indicated no reporting units were at risk of impairment.

See Note 9 of Notes to Condensed Consolidated Financial Statements for additional information regarding goodwill.

Consolidation

The condensed consolidated financial statements include entities in which Lazard has a controlling interest.

Lazard determines whether it has a controlling interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”) under U.S.

The condensed consolidated financial statements include entities in which Lazard has a controlling financial interest.

Lazard determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”) under U.S.

• Voting Interest Entities.

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Lazard is required to consolidate a VIE if we are the primary beneficiary having (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of, or receive benefits from, the VIE that could be potentially significant to the VIE.

Lazard’s involvement with various entities that are VOEs or VIEs primarily arises from LFI investments, investment management contracts with fund entities in our Asset Management business and LGAC.

Lazard is not required to consolidate such entities because, with the exception of certain seed and LFI investments, and LGAC, as discussed below, we do not hold more than an inconsequential equity interest in such entities and we do not hold other variable interests (including our investment management agreements, which do not meet the definition of variable interests) in such entities.

Lazard makes seed and LFI investments in certain entities that are considered VOEs and VIEs and often require consolidation as a result of our investment.

Lazard’s involvement with various entities that are VOEs or VIEs primarily arises from LFI investments, seed and other investments in our Asset Management business.

Lazard consolidates these entities when it has a controlling financial interest.

The impact of seed and LFI investment entities that require consolidation on the condensed consolidated financial statements, including any consolidation or deconsolidation of such entities, is not material to our financial statements.

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Generally, when the Company initially invests to seed an investment entity, the Company is the majority owner of the entity.

Our majority ownership in seed investment entities represents a controlling interest, except when we are the general partner in such entities and the third-party investors have the right to replace the general partner.

To the extent material, we consolidate seed and LFI investment entities in which we own a controlling interest, and we would deconsolidate any such entity when we no longer have a controlling interest in such entity.

Seed investments held in entities in which the Company maintained a controlling interest were $89 million in nine entities as of September 30, 2023, as compared to $112 million in thirteen entities as of December 31, 2022.

LFI investments held in entities in which the Company maintained a controlling interest were $150 million in ten entities as of September 30, 2023, as compared to $139 million in nine entities as of December 31, 2022.

As of September 30, 2023 and December 31, 2022, the Company did not consolidate any seed investment entities or LFI investment entities, with the exception of the consolidation of certain LFI funds (see Note 20 of Notes to Condensed Consolidated Financial Statements).

As such, seed investments and substantially all of LFI investments included in “investments” on the consolidated statements of financial condition represented the Company’s economic interest in the seed and LFI investments.

See Note 1 of Notes to Condensed Consolidated Financial Statements for additional information on the consolidation of LGAC.

Our majority ownership in seed investment entities represents a controlling financial interest, except when we are the general partner in such entities and the third-party investors have the right to replace the general partner.

To the extent material, we consolidate seed and LFI investment entities in which we own a controlling financial interest, and we would deconsolidate any such entity when we no longer have a controlling financial interest in such entity.

Seed investments held in entities in which the Company maintained a controlling financial interest were $109 million in eleven entities as of March 31, 2024, as compared to $114 million in eleven entities as of December 31, 2023.

LFI investments held in entities in which the Company maintained a controlling financial interest were $105 million in nine entities as of March 31, 2024, as compared to $144 million in nine entities as of December 31, 2023.

As of March 31, 2024 and December 31, 2023, the Company did not consolidate any seed investment entities or LFI investment entities, with the exception of the consolidation of certain LFI funds (see Note 21 of Notes to Condensed Consolidated Financial Statements).

As such, seed investments and substantially all of LFI investments included in “investments” on the condensed consolidated statements of financial condition represented the Company’s economic interest in the seed and LFI investments.

Risk Management

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The fair value of investments is generally based upon market prices or the net asset value (“NAV”) or its equivalent for investments in funds.

Investments also include those investments accounted for under the equity method of accounting.

Any increases or decreases in the Company’s share of net income or losses pertaining to its equity method investments are reflected in earnings.

See Note 6 of Notes to Condensed Consolidated Financial Statements for additional information on the measurement of the fair value of investments.

Lazard is subject to market and credit risk on investments held.

Lazard is subject to market and other risks on investments held.

As such, gains and losses on investment positions held, which arise from sales or changes in the fair value of the investments, are not predictable and can cause periodic fluctuations in net income.

Data relating to investments is set forth below:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

($ in thousands)

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Debt $ 546 $ 4,285

Equities (a) 101,723 126,632

Equity (a) 120,771 112,807

Fixed income 16,120 15,860

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Private equity consolidated, not owned 17,382 16,494

Equity method - 15,481

LFI 399,343 487,002

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_______________________

(a) At September 30, 2023 and December 31, 2022, seed investments in directly owned equity securities were invested as follows:

September 30, 2023 December 31, 2022

(a) At March 31, 2024 and December 31, 2023, seed investments in directly owned equity securities were invested as follows:

March 31, 2024 December 31, 2023

Percentage invested in:

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Total 100 % 100 %

The Company makes investments primarily to seed strategies and funds in our Asset Management business or to reduce exposure arising from LFI and other similar deferred compensation arrangements.

The Company measures its net economic exposure to market and other risks arising from investments that it owns, excluding (i) investments held in connection with LFI and other similar deferred compensation arrangements, (ii) investments in funds owned entirely by the noncontrolling interest holders of certain acquired entities and (iii) investments accounted for under the equity method of accounting.

The Company makes investments primarily to seed strategies in our Asset Management business or to reduce exposure arising from LFI and other similar deferred compensation arrangements.

The Company manages its net economic exposure to market and other risks arising from seed investments and other investments owned.

The Company does not

hedge investments associated with LFI and other similar deferred compensation arrangements, or investments in funds owned entirely by the noncontrolling interest holders as there is no net economic exposure.

The market risk associated with investments held in connection with LFI and other similar deferred compensation arrangements is equally offset by the market risk associated with the derivative liability with respect to awards expected to vest.

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For equity market price risk, investment portfolios and their corresponding hedges are beta-adjusted to the All-Country World equity index.

Fair value and sensitivity measurements presented herein are based on various portfolio exposures at a particular point in time and may not be

representative of future results.

Interest rate and credit spread risk and foreign exchange rate risk are hedged using relevant benchmark indices.

Private equity risk is not hedged due to lack of proxy hedging instruments.

Fair value and sensitivity measurements presented herein are based on various portfolio exposures at a particular point in time and may not be representative of future results.

Risk exposures may change as a result of ongoing portfolio activities and changing market conditions, among other things.

Equity Market Price Risk—At September 30, 2023 and December 31, 2022, the Company’s exposure to equity market price risk in its investment portfolio, which primarily relates to investments in equity securities, equity funds and hedge funds, was approximately $140 million and $147 million, respectively.

Equity Market Price Risk—At March 31, 2024 and December 31, 2023, the Company’s exposure to equity market price risk in its investment portfolio, which primarily relates to investments in equity securities, equity funds and hedge funds, was approximately $158 million and $150 million, respectively.

The Company hedges market exposure arising from a significant portion of our equity investment portfolios by entering into total return swaps.

The Company estimates that a hypothetical 10% adverse change in market prices would result in a net (increase) decrease of approximately $(0.8) million and $2.0 million in the carrying value of such investments as of September 30, 2023 and December 31, 2022, respectively, including the effect of the hedging transactions.

Interest Rate and Credit Spread Risk—At September 30, 2023 and December 31, 2022, the Company’s exposure to interest rate and credit spread risk in its investment portfolio related to investments in debt securities or funds which invest primarily in debt securities was $17 million and $53 million, respectively.

The Company estimates that a hypothetical 10% adverse change in market prices would result in a net decrease of approximately $1.5 million as of March 31, 2024 and a net increase of approximately $0.2 million as of December 31, 2023, in the carrying value of such investments, including the effect of the hedging transactions.

Interest Rate and Credit Spread Risk—At both March 31, 2024 and December 31, 2023, the Company’s exposure to interest rate and credit spread risk in its investment portfolio related to investments in debt securities or funds which invest primarily in debt securities was $18 million.

The Company hedges market exposure arising from a portion of our debt investment portfolios by entering into total return swaps.

The Company estimates that a hypothetical 100 basis point adverse change in interest rates or credit spreads would result in a net decrease of approximately $0.01 million and $0.1 million in the carrying value of such investments as of September 30, 2023 and December 31, 2022, respectively, including the effect of the hedging transactions.

Foreign Exchange Rate Risk—At September 30, 2023 and December 31, 2022, the Company’s exposure to foreign exchange rate risk in its investment portfolio, which primarily relates to investments in foreign currency denominated equity and debt securities was $65 million and $63 million, respectively.

The Company estimates that a hypothetical 100 basis point adverse change in interest rates or credit spreads would not result in a net change in the carrying value of such investments as of March 31, 2024 and December 31, 2023, respectively, including the effect of the hedging transactions.

Foreign Exchange Rate Risk—At March 31, 2024 and December 31, 2023, the Company’s exposure to foreign exchange rate risk in its investment portfolio, which primarily relates to investments in foreign currency denominated equity and debt securities and, at December 31, 2023, private equity investments, was $72 million and $69 million, respectively.

A significant portion of the Company’s foreign currency exposure related to our equity and debt investment portfolios is hedged through the aforementioned total return swaps.

The Company estimates that a 10% adverse change in foreign exchange rates versus the U.S.

Dollar would result in a net decrease of approximately $1.4 million and $3.0 million in the carrying value of such investments as of September 30, 2023 and December 31, 2022, respectively, including the effect of the hedging transactions.

Dollar would result in a net decrease of approximately $2.9 million and $2.0 million in the carrying value of such investments as of March 31, 2024 and December 31, 2023, respectively, including the effect of the hedging transactions.

Private Equity—The Company invests in private equity primarily as a part of its co-investment activities and in connection with certain legacy businesses.

At September 30, 2023 and December 31, 2022, the Company’s exposure to changes in fair value of such investments was approximately $29 million and $37 million, respectively.

The Company estimates that a hypothetical 10% adverse change in fair value would result in a decrease of approximately $2.9 million and $3.7 million in the carrying value of such investments as of September 30, 2023 and December 31, 2022, respectively.

At both March 31, 2024 and December 31, 2023, the Company’s exposure to changes in fair value of such investments was approximately $30 million.

The Company estimates that a hypothetical 10% adverse change in fair value would result in a decrease of approximately $3.0 million in the carrying value of such investments as of both March 31, 2024 and December 31, 2023, respectively.

For additional information regarding risks associated with our investments, see Item 1A, “Risk Factors—Other Business Risks—Our results of operations may be affected by fluctuations in the fair value of positions held in our investment portfolios” in our Form 10-K.

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We maintain an allowance for credit losses to provide coverage for expected losses from our receivables.

We determine the adequacy of the allowance by estimating the expected credit losses based on our analysis of the client’s creditworthiness and specifically provide for exposures where we determine the receivables are uncollectible.

At September 30, 2023, total receivables amounted to $632 million, net of an allowance for credit losses of $21 million.

At March 31, 2024, total receivables amounted to $750 million, net of an allowance for credit losses of $30 million.

As of that date, Financial Advisory and Asset Management fees, and customers and other receivables comprised 61% and 39% of total receivables, respectively.

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As of that date, Financial Advisory and Asset Management fees, and customers and other receivables comprised 74% and 26% of total receivables, respectively.

See also “Critical Accounting Policies and Estimates—Revenue Recognition” above and Note 3 of Notes to Condensed Consolidated Financial Statements for additional information regarding receivables.

See also “Critical Accounting Policies and

Estimates—Revenue Recognition” above and Note 4 of Notes to Condensed Consolidated Financial Statements for additional information regarding receivables.

LFG and LFB offer wealth management and banking services to high net worth individuals and families.

At September 30, 2023 and December 31, 2022, customers and other receivables included $90 million and $129 million, respectively, of LFB loans.

Such loans were fully collateralized and monitored for counterparty creditworthiness.

At March 31, 2024 and December 31, 2023, customers and other receivables included $82 million and $86 million, respectively, of such LFB loans which are fully collateralized and monitored for counterparty creditworthiness.

Therefore, there was no allowance for credit losses required at those dates related to such receivables.

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Risks Related to Derivatives

Lazard enters into forward foreign currency exchange contracts and interest rate swaps to hedge exposures to currency exchange rates and interest rates and uses total return swap contracts on various equity and debt indices to hedge a portion of its market exposure with respect to certain investments that seed strategies and funds in our Asset Management business.

Derivative contracts are recorded at fair value.

Net derivative assets amounted to $4 million and $15 million at September 30, 2023 and December 31, 2022, respectively, and net derivative liabilities, excluding the derivative liability arising from the Company’s obligation pertaining to LFI and other similar deferred compensation arrangements amounted to $2 million and $1 million at September 30, 2023 and December 31, 2022, respectively.

In entering into derivative agreements, the Company is subject to counterparty risk.

Net derivative assets amounted to $3 million at both March 31, 2024 and December 31, 2023, respectively, and net derivative liabilities, excluding the derivative liability arising from the Company’s obligation pertaining to LFI and other similar deferred compensation arrangements amounted to $4 million and $3 million at March 31, 2024 and December 31, 2023, respectively.

The Company also records derivative liabilities relating to its obligations pertaining to LFI awards and other similar deferred compensation arrangements, the fair value of which is based on the value of the underlying investments, adjusted for estimated forfeitures.

Changes in the fair value of the derivative liabilities are equally offset by the changes in the fair value of investments which are expected to be delivered upon settlement of LFI awards.

Derivative liabilities relating to LFI amounted to $341 million and $326 million at September 30, 2023 and December 31, 2022, respectively.

Derivative liabilities relating to LFI amounted to $282 million and $365 million at March 31, 2024 and December 31, 2023, respectively.

Risks Related to Cash and Cash Equivalents and Corporate Indebtedness

A significant portion of the Company’s indebtedness has fixed interest rates, while its cash and cash equivalents generally have market interest rates.

Based on account balances as of September 30, 2023, Lazard estimates that its annual operating income relating to cash and cash equivalents would increase by approximately $7 million in the event interest rates were to increase by 1% and decrease by approximately $7 million if rates were to decrease by 1%.

As of September 30, 2023, the Company’s cash and cash equivalents totaled approximately $653 million.

Based on account balances as of March 31, 2024, Lazard estimates that its annual operating income relating to cash and cash equivalents would increase by approximately $9 million in the event interest rates were to increase by 1% and decrease by approximately $9 million if rates were to decrease by 1%.

As of March 31, 2024, the Company’s cash and cash equivalents totaled approximately $923 million.

Substantially all of the Company’s cash and cash equivalents were invested in (i) highly liquid institutional money market funds (a significant majority of which were invested solely in U.S.

Government or agency money market funds), (ii) in short-term interest bearing and non-interest bearing accounts at a number of leading banks throughout the world, and (iii) in short-term certificates of deposit from such banks.

Government or agency money market funds), (ii) in short-term interest bearing and non-interest bearing accounts at a number of leading banks throughout the world, (iii) in short-term certificates of deposit from such banks and (iv) short-term U.S.

Treasury securities.

Cash and cash equivalents are continuously monitored.

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We purchase insurance policies designed to help protect the Company against accidental loss and losses that may significantly affect our financial objectives, personnel, property or our ability to continue to meet our responsibilities to our various stakeholder groups.

See Item 1A, “Risk Factors” in our Form 10-K for more information regarding operational risk in our business and Item 1C,

“Cybersecurity” in our Form 10-K for more information on the Company’s processes to identify, assess and manage cybersecurity risks.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis