What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-26 compared with 2024-04-26 · 257 added, 150 removed, 665 unchanged (38% of the section changed)

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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.

All references to “2024,” “2023,” “second quarter,” “first half” or “the period” refer to, as the context requires, the three month and six month periods ended June 30, 2024 and 2023.

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

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These factors include, but are not limited to, those discussed in our Form 10-K under the caption “Risk Factors,” including the following:

• a decline in general economic conditions or the global or regional financial markets;

• adverse general economic conditions or adverse conditions in global or regional financial markets;

• a decline in our revenues, for example due to a decline in overall mergers and acquisitions (“M&A”) activity, our share of the M&A market or our assets under management (“AUM”);

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We operate in cyclical businesses across multiple geographies, industries and asset classes.

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.

In recent years, we have deepened our sector expertise and enhanced our specialized insights in geopolitical advisory, private equity and capital solutions in our financial advisory business and we have invested in our global investment and distribution platform

in our asset management business to further drive performance.

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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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Financial Advisory 60 % 55 % 60 % 53 %

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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.

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.

The global macroeconomic environment is improving though a high degree of geopolitical uncertainty remains .

During the first half of the year, headwinds for activity i n our Financial Advisory business have tapered and deal financing has become more readily available.

At the same time, the fundamental drivers of deal activity have continued including innovations driven by technology and generative AI, the energy transition, the biotech revolution, and shifts in supply chains globally.

For the first half of the year, the “higher for longer” rate environment led to reduced allocations into most active equity strategies by reinforcing the appeal of money market investments and fixed income products.

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

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

• Financial Advisory—M&A announcements for deals greater than $500 million are up year-over-year with 2023 being at their lowest levels in a decade.

We remained actively engaged with our clients.

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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.

Throughout 2024, we continue to 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.

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Financial Advisory

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

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

Three Months Ended

June 30, Six Months Ended

Incr / (Decr) 2024 2023 %

Incr / (Decr)

($ in billions)

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Number 306 264 16 % 562 488 15 %

Completed Restructuring

Transactions:

Value $ 177 $ 101 75 % $ 281 $ 163 72 %

Number 63 88 (28) % 167 175 (5) %

____________________________________

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.

Dealogic as of July 3, 2024.

Another measure of global restructuring activity is the number of corporate defaults, which decreased during the first half of 2024 as compared to the first half of 2023.

The number of defaulting issuers was 72 in the first half of 2024 according to Moody’s Investors Service, Inc., as compared to 86 in the first half 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 March 31, 2024, as compared to such indices at December 31, 2023 and at March 31, 2023, is shown in the table below:

The percentage change in major equity market indices at June 30, 2024, as compared to such indices at March 31, 2024, December 31, 2023 and at June 30, 2023, is shown in the table below:

Percentage Changes

March 31, 2024 vs.

December 31, 2023 March 31, 2023

June 30, 2024 vs.

March 31, 2024 December 31, 2023 June 30, 2023

MSCI World Index 3 % 12 % 20 %

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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.

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.

In 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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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.

Corporate segment total assets represented 50% of Lazard’s consolidated total assets as of June 30, 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

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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.

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.

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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.

To the extent inflation continues to result in a higher interest rate environment or 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 conducted firm-wide cost-saving initiatives over the course of 2023 and during the first quarter of 2024.

The Company conducted firm-wide cost-saving initiatives over the course of 2023, which were completed during the first quarter of 2024.

See Note 15 of Notes to Condensed Consolidated Financial Statements.

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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.

Noncontrolling interests primarily consist of (i) amounts related to Edgewater’s management vehicles that the Company is deemed to control but not own, (ii) profits interest participation rights, (iii) consolidated VIE interests held by employees and (iv) Lazard Growth Acquisition Corp.

I (“LGAC”) interests.

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

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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Net revenue $ 685,349 $ 643,114 $ 1,450,102 $ 1,185,550

Interest expense (a) 20,650 19,410

Distribution fees, reimbursable deal costs, bad

debt expense and other (b) (22,949) (26,681)

Revenue related to noncontrolling interests (a) (4,920) (6,237) (12,023) (17,060)

(Gains) losses related to Lazard Fund Interests

("LFI") and other similar arrangements (b) 1,201 (9,675) (8,172) (26,128)

Distribution fees, reimbursable deal costs,

provision for credit losses and other (c) (19,588) (26,338) (42,537) (53,019)

Interest expense (d) 22,600 19,162 43,250 38,572

Asset impairment charges – – – 19,129

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

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

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

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____________________________________

(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.

(a) 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.

(b) 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.

(c) Represents certain distribution, introducer and management fees paid to third parties, reimbursable deal costs and provision for credit losses 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.

(d) 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.

(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.

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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Total compensation and benefits expense $ 452,560 $ 572,231 $ 1,003,384 $ 1,022,198

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

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

Compensation and benefits expense related to

noncontrolling interests (a) (1,897) (1,851) (4,005) (4,861)

(Charges) credits pertaining to LFI and other similar

arrangements (b) 1,201 (9,675) (8,172) (26,128)

Expenses associated with cost-saving initiatives – (136,608) (46,610) (157,348)

Expenses associated with senior management

transition (c) – – – (10,674)

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

Adjusted compensation and benefits expense (d) $ 451,864 $ 424,097 $ 944,597 $ 823,187

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(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 adjusted net revenue.

(b) Represents changes in the 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 adjusted net revenue.

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

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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Total non-compensation expense $ 169,149 $ 180,956 $ 328,517 $ 350,784

Distribution fees, reimbursable deal costs, bad debt

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

Non-compensation expense related to noncontrolling

interests (a) (881) (749) (1,407) (1,590)

Distribution fees, reimbursable deal costs, provision

for credit losses and other (b) (19,588) (26,338) (42,537) (53,019)

Amortization and other acquisition-related costs (68) (95) (136) (143)

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

Expenses associated with cost-saving initiatives – (10,097) (1,532) (10,097)

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____________________________________

(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.

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

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

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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)

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

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

Adjusted Operating Income:

Operating income (loss) $ 63,640 $ (110,073) $ 118,201 $ (146,997)

Operating income related to noncontrolling

interests (2,142) (3,637) (6,611) (10,609)

Interest expense 22,600 19,162 43,250 38,572

Amortization and other acquisition-related costs 68 95 136 143

Asset impairment charges – – – 19,129

Losses associated with cost-saving initiatives – – 587 –

Expenses associated with cost-saving initiatives – 146,705 48,142 167,445

Expenses associated with senior management

transition – – – 10,674

Benefit pursuant to tax receivable agreement

obligation ("TRA") (a) – – – (40,435)

Adjusted operating income (b) $ 84,166 $ 52,252 $ 203,705 $ 37,922

Adjusted operating income, as a % of adjusted net

revenue 12.3 % 8.4 % 14.2 % 3.3 %

____________________________________

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

(a) 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.

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

Headcount information is set forth below:

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

June 30, 2024 December 31, 2023 June 30, 2023

Managing Directors:

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

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

Three Months Ended June 30, 2024 versus June 30, 2023

The Company reported net income attributable to Lazard of $50 million, as compared to net loss attributable to Lazard of $124 million in the 2023 period.

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Fee revenue from investment banking and other advisory activities increased $59 million, or 17%, as compared to the 2023 period.

Asset management fees, including incentive fees, decreased $4 million, or 1%, as compared to the 2023 period.

In the aggregate, interest income, other revenue and interest expense decreased $13 million as compared to the 2023 period, the majority of which is recorded in the Corporate segment.

Compensation and benefits expense decreased $120 million, or 21%, as compared to the 2023 period which included $137 million associated with the cost-saving initiatives.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for improved comparability between periods, as described above) was $452 million, an increase of $28 million, or 7%, as compared to $424 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 68.4% for the 2023 period.

Non-compensation expense decreased $12 million, or 7%, as compared to the 2023 period which included $10 million associated with the cost-saving initiatives.

Adjusted non-compensation expense increased $5 million, or 3%, as compared to the 2023 period primarily reflecting higher professional services and technology expenses.

The ratio of adjusted non-compensation expense to adjusted net revenue was 21.7% for the 2024 period, as compared to 23.2% for the 2023 period.

The Company reported operating income of $64 million, as compared to an operating loss of $110 million in the 2023 period.

Adjusted operating income increased $32 million, or 61%, as compared to the 2023 period, and, as a percentage of adjusted net revenue, was 12.3% for the 2024 period, as compared to 8.4% in the 2023 period.

The provision for income taxes reflects an effective tax rate of 18.2%, as compared to (9.4)% 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 in 2023 and the impact of discrete items primarily relating to a favorable court decision in a longstanding tax matter during the second quarter of 2024.

Net income attributable to noncontrolling interests decreased $1 million, or 41% as compared to the 2023 period.

Six Months Ended June 30, 2024 versus June 30, 2023

The Company reported net income attributable to Lazard of $86 million, as compared to net loss attributable to Lazard of $146 million in the 2023 period.

Net revenue increased $265 million, or 22%, with adjusted net revenue increasing $284 million, or 25%, as compared to the 2023 period.

Fee revenue from investment banking and other advisory activities increased $234 million, or 37%, as compared to the 2023 period.

Asset management fees, including incentive fees, increased $12 million, or 2%, as compared to the 2023 period.

In the aggregate, interest income, other revenue and interest expense increased $19 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.

Compensation and benefits expense, which included $47 million associated with the cost-saving initiatives in the 2024 period, decreased $19 million, or 2%, as compared to the 2023 period which included $157 million associated with the cost-saving initiatives.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for improved comparability between periods, as described above) was $945 million, an increase of $121 million, or 15%, as

compared to $823 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 71.8% 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.

Non-compensation expense decreased $22 million, or 6%, as compared to the 2023 period which included $10 million associated with the cost-saving initiatives.

Adjusted non-compensation expense decreased $3 million, or 1%, as compared to the 2023 period.

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The Company reported operating income of $118 million, as compared to an operating loss of $147 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.

Adjusted operating income increased $166 million as compared to the 2023 period, and, as a percentage of adjusted net revenue, was 14.2% for the 2024 period, as compared to 3.3% in the 2023 period.

The provision for income taxes reflects an effective tax rate of 21.9%, as compared to 7.8% 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 in 2023 and the impact of discrete items.

Net income attributable to noncontrolling interests decreased $4 million, or 38% as compared to the 2023 period.

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Lazard Statistics:

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________________________________________

Dealogic as of April 1, 2024.

Dealogic as of July 3, 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

June 30, Six Months Ended

2024 2023 2024 2023

Americas 60 % 59 % 61 % 54 %

EMEA 40 40 39 45

Asia Pacific – 1 – 1

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

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

Three Months Ended June 30, 2024 versus June 30, 2023

Financial Advisory net revenue increased $59 million, or 17%, as compared to the 2023 period, reflecting an increase in the industry-wide value of completed M&A transactions.

Operating expenses decreased $69 million, or 16%, as compared to the 2023 period which included $82 million associated with the cost-saving initiatives.

Financial Advisory operating income was $40 million as compared to an operating loss of $87 million in the 2023 period and, as a percentage of net revenue, was 9.8%, as compared to (24.7)% in the 2023 period.

Six Months Ended June 30, 2024 versus June 30, 2023

Financial Advisory net revenue increased $235 million, or 37%, 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.

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, reflecting an increase in industry-wide completed M&A transactions.

Operating expenses increased $31 million, or 4%, 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.

In addition, operating expenses in the 2024 and 2023 periods include $33 million and $91 million, respectively, associated with the cost-saving initiatives.

Financial Advisory operating income was $66 million as compared to an operating loss of $138 million in the 2023 period and, as a percentage of net revenue, was 7.6%, as compared to (21.9)% in the 2023 period.

Asset Management

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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

June 30, 2024 December 31, 2023

($ in millions)

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Alternative Investments 2,897 3,330

Other Alternative Investments 2,643 2,799

Private Wealth Alternative Investments 3,033 2,799

Private Equity 1,501 1,623

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Total AUM $ 244,670 $ 246,651

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.

Total AUM at June 30, 2024 was $245 billion, a decrease of $2 billion, or 1%, as compared to total AUM of $247 billion at December 31, 2023 due to net outflows and foreign exchange depreciation partially offset by market appreciation.

Average AUM for the three month period ended June 30, 2024 increased 4% as compared to the three month period ended June 30, 2023 and increased 6% as compared to the six month period ended June 30, 2023.

As of June 30, 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 June 30, 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 June 30, 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.

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Dollar weakens, with all other factors held constant.

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

The following is a summary of changes in AUM by asset class for the three month and six month periods ended June 30, 2024 and 2023:

Three Months Ended June 30, 2024

Balance Inflows Outflows Net

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Total $ 250,432 $ 8,963 $ (15,562) $ (6,599) $ 2,532 $ (1,695) $ 244,670

Net flows were primarily driven by outflows across the Global, Local and Multi-Regional platforms within the Equity asset class.

Six Months Ended June 30, 2024

Balance Inflows Outflows Net

Flows Market Value

Appreciation/

(Depreciation) Foreign

Appreciation/

(Depreciation) AUM

($ in millions)

Equity $ 190,138 $ 10,576 $ (23,155) $ (12,579) $ 16,762 $ (3,895) $ 190,426

Fixed Income 48,107 3,876 (3,971) (95) (608) (1,293) 46,111

Other 8,406 595 (1,150) (555) 349 (67) 8,133

Total $ 246,651 $ 15,047 $ (28,276) $ (13,229) $ 16,503 $ (5,255) $ 244,670

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Balance Inflows Outflows Net

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Total $ 232,140 $ 8,745 $ (9,742) $ (997) $ 8,837 $ (640) $ 239,340

Six Months Ended June 30, 2023

Balance Inflows Outflows Net

Flows Market Value

Appreciation/

(Depreciation) Foreign

Appreciation/

(Depreciation) AUM

($ in millions)

Equity $ 167,395 $ 12,841 $ (14,417) $ (1,576) $ 18,847 $ 59 $ 184,725

Fixed Income 43,386 5,110 (4,749) 361 1,429 675 45,851

Other 5,344 4,454 (1,237) 3,217 181 22 8,764

Total $ 216,125 $ 22,405 $ (20,403) $ 2,002 $ 20,457 $ 756 $ 239,340

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

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

Average AUM for the three month and six month periods ended June 30, 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

June 30, Six Months Ended

2024 2023 2024 2023

($ in millions)

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Alternative Investments 3,203 4,074 3,076 4,035

Other Alternative Investments 2,722 826

Private Wealth Alternative Investments 2,789 2,657 2,856 1,772

Private Equity 1,492 963 1,509 933

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Americas 42 % 43 % 42 % 42 %

EMEA 46 45 46 45

Asia Pacific 12 12 12 13

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

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

Three Months Ended June 30, 2024 versus June 30, 2023

Asset Management net revenue decreased $3 million, or 1%, as compared to the 2023 period.

Management fees and other revenue was $282 million for both the 2024 and the 2023 periods.

Incentive fees were $4 million, a decrease of $2 million as compared to $6 million in the 2023 period.

Operating expenses decreased $34 million, or 13%, as compared to the 2023 period which included $37 million associated with the cost-saving initiatives.

Asset Management operating income was $50 million, an increase of $31 million, or 162%, as compared to operating income of $19 million in the 2023 period and, as a percentage of net revenue, was 17.5%, as compared to 6.6% in the 2023 period.

Six Months Ended June 30, 2024 versus June 30, 2023

Asset Management net revenue increased $9 million, or 2%, as compared to the 2023 period.

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Incentive fees were $13 million, an increase of $2 million as compared to $11 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.

Operating expenses, which included $12 million associated with the cost-saving initiatives in the 2024 period, decreased $20 million, or 4%, as compared to the 2023 period which included $48 million associated with the cost-saving initiatives.

Asset Management operating income was $84 million, an increase of $29 million, or 52%, as compared to operating income of $55 million in the 2023 period and, as a percentage of net revenue, was 14.4%, as compared to 9.6% in the 2023 period.

The following table summarizes the reported operating results attributable to the Corporate segment:

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in thousands)

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Net Interest Expense (14,906) (15,825) (28,754) (27,902)

Other Revenue (Loss) 29,618 (7,105)

Other Revenue 3,460 18,149 33,078 11,044

Net Revenue (Loss) (11,446) 2,324 4,324 (16,858)

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

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

Three Months Ended June 30, 2024 versus June 30, 2023

Net interest expense decreased $1 million, or 6%, as compared to the 2023 period.

Other revenue decreased $15 million as compared to the 2023 period primarily due to losses in the 2024 period as compared to gains in the 2023 period attributable to investments held in connection with LFI.

Operating expenses decreased $29 million, or 65%, as compared to the 2023 period which included $28 million associated with the cost-saving initiatives.

Results also reflect a decrease in charges pertaining to LFI in the 2024 period as compared to the 2023 period.

Six Months Ended June 30, 2024 versus June 30, 2023

Net interest expense increased $1 million, or 3%, as compared to the 2023 period.

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.

Other revenue increased $22 million as compared to the 2023 period.

The 2023 period included losses from the impairment of equity method investments and the liquidation of LGAC which did not recur.

Additionally, there were lower gains in the 2024 period as compared to the 2023 period attributable to investments held in connection with LFI.

Operating expenses excluding the benefit pursuant to TRA, decreased $52 million, or 59%, as compared to the 2023 period reflecting $28 million associated with the cost-saving initiatives in the 2023 period and a decrease in charges pertaining to LFI in the 2024 period.

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.

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Summary of Cash Flows:

Three Months Ended

Six Months Ended

($ in millions)

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(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, 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.

(c) Consists primarily of purchases of shares of common stock, tax withholdings related to the settlement of vested RSUs 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.

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While cash flow from Asset Management activities is relatively stable, in the case of Financial Advisory, fee receipts are generally dependent upon the successful completion of client transactions, the occurrence and timing of which is irregular and not subject to Lazard’s control.

On July 22, 2024, the Company completed the sale of an owned office building for gross proceeds of approximately $193 million, subject to payment of taxes and other expenses.

The resulting net proceeds will be used for general corporate purposes.

Liquidity is significantly impacted by cash payments for incentive compensation, a significant portion of which are made during the first three months of the year.

As a consequence, cash on hand generally declines in the beginning of the year and gradually builds over the remainder of the year.

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 the first quarter of 2024 relating to severance and other employee termination costs associated with the cost-saving initiatives.

We also make payments during the year on behalf of certain managing directors for their estimated taxes, which serve to reduce their respective incentive compensation payments.

Additionally, we made payments in the first half 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).

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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.

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, compensation and matters relating to liquidity and to compliance with regulatory net capital requirements.

At June 30, 2024, Lazard had approximately $848 million of cash and cash equivalents, including approximately $434 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 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.

As of June 30, 2024, the Company’s remaining lease obligations were $41 million for 2024 (July 1 through December 31), $140 million from 2025 through 2026, $138 million from 2027 through 2028 and $325 million from 2029 through 2039.

As of June 30, 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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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.

No amounts were outstanding under the Second Amended and Restated Credit Agreement as of June 30, 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 March 31, 2024, the Company was in compliance with all of these provisions.

At June 30, 2024, the Company was in compliance with all financial and nonfinancial provisions.

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

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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 table below sets forth our corporate indebtedness as of June 30, 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

March 31, 2024 December 31, 2023

Senior Debt Maturity Principal Unamortized

June 30, 2024 December 31, 2023

Senior Debt Annual Interest Rate Principal Unamortized

Debt Costs Carrying

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$ 1,864.3 $ 12.2 $ 1,852.1 $ 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.

In the first quarter of 2024, Lazard Group 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.

We invested the net proceeds in U.S.

Treasury securities which are included in cash and cash equivalents and investments on the condensed consolidated statements of financial condition as of June 30, 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 March 31, 2024, the Company was in compliance with all of these provisions.

At June 30, 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 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.

At June 30, 2024, total stockholders’ equity was $514 million, as compared to $482 million at December 31, 2023, including $459 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):

The net activity in stockholders’ equity during the six month period ended June 30, 2024 is reflected in the table below (in millions of dollars):

Stockholders’ Equity - January 1, 2024 $ 482

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Other - net (9)

Stockholders’ Equity - March 31, 2024 $ 449

Stockholders’ Equity - June 30, 2024 $ 514

________________________________________

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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 over time.

The Company aims to repurchase shares to offset dilution from the shares 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:

Three Months Ended March 31:

Six Months Ended June 30:

Shares Purchased Average

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2024 1,055,913 $ 38.66

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.

As of June 30, 2024, a total of $159 million of share repurchase authorization remaining available under Lazard, Inc.’s share repurchase program will expire on December 31, 2024.

In addition, on July 24, 2024, the Board of Directors authorized the repurchase of up to $200 million of additional shares of common stock, which authorization will expire on December 31, 2026, bringing the total share repurchase authorization as of July 24, 2024 to approximately $360 million.

During the six month period ended June 30, 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.

On July 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 August 16, 2024 to stockholders of record on August 5, 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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These regulatory requirements may restrict the flow of funds to and from affiliates.

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

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

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

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

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;

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

(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;

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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.

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

When assessing risk characteristics of individual clients, we considered the macroeconomic environment in the local market, our collection experience and recent communication with the client, as well as any potential future engagement with the client.

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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.

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Accordingly, we recognize liabilities for certain unrecognized tax benefits based on the amounts that are more likely than not to be settled with the relevant taxing authority.

Such liabilities are evaluated periodically as new information becomes available and any changes in the amounts of such liabilities are recorded as adjustments to “income tax expense.” Liabilities for unrecognized tax benefits involve significant judgment and the ultimate resolution of such matters may be materially different from our estimates.

Such liabilities are evaluated periodically as new information becomes available and any changes in the amounts of such liabilities are recorded as adjustments to “income tax expense”.

Liabilities for unrecognized tax benefits involve significant judgment and the ultimate resolution of such matters may be materially different from our estimates.

In addition to the discussion above regarding deferred tax assets and associated valuation allowances, as well as unrecognized tax benefit liability estimates, other factors affect our provision for income taxes, including changes in the geographic mix of our business, the level of our annual pre-tax income, transfer pricing and intercompany transactions.

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

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.

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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).

Seed investments held in entities in which the Company maintained a controlling financial interest were $107 million in eleven entities as of June 30, 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 $96 million in nine entities as of June 30, 2024, as compared to $144 million in nine entities as of December 31, 2023.

As of June 30, 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.

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Data relating to investments is set forth below:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

($ in thousands)

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Private equity 11,076 10,963

Treasury securities 98,350 –

Fixed income and other 2,254 2,119

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_______________________

(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

(a) At June 30, 2024 and December 31, 2023, seed investments in directly owned equity securities were invested as follows:

June 30, 2024 December 31, 2023

Percentage invested in:

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

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.

Equity Market Price Risk—At June 30, 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 $149 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 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 estimates that a hypothetical 10% adverse change in market prices would result in a net decrease of approximately $0.7 million as of June 30, 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 June 30, 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 $118 million and $18 million, respectively.

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 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.

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 $0.3 million as of June 30, 2024 and would not result in a net change in the carrying value of such investments as of December 31, 2023, including the effect of the hedging transactions.

Foreign Exchange Rate Risk—At June 30, 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 $63 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 $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.

Dollar would result in a net decrease of approximately $2.0 million in the carrying value of such investments as of both June 30, 2024 and December 31, 2023, 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 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.

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

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.

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

At June 30, 2024, total receivables amounted to $725 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 76% and 24% 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 4 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 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.

At June 30, 2024 and December 31, 2023, customers and other receivables included $92 million and $86 million, respectively, of such LFB loans which are fully collateralized and monitored for counterparty creditworthiness, with such collateral having a fair value in excess of the carrying amount of the loans.

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

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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.

Net derivative assets amounted to $5 million and $3 million at June 30, 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 June 30, 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 $282 million and $365 million at March 31, 2024 and December 31, 2023, respectively.

Derivative liabilities relating to LFI amounted to $270 million and $365 million at June 30, 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 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.

Based on account balances as of June 30, 2024, Lazard estimates that its annual operating income relating to cash and cash equivalents would increase by approximately $8 million in the event interest rates were to increase by 1% and decrease by approximately $8 million if rates were to decrease by 1%.

As of June 30, 2024, the Company’s cash and cash equivalents totaled approximately $848 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, (iii) in short-term certificates of deposit from such banks and (iv) short-term U.S.

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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.

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