Q1 2025 Lazard Inc Earnings Call
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Please stand by, we're about to begin.
Good morning everyone and welcome to Lazard's first quarter 2025 earnings conference call. This call is being recorded.
Currently, all participants are in a listen-only mode following the remarks. We will conduct a question and answer session.
Instructions will be provided at that time
Speaker Change: If anyone should require assistance during the call today, please press star key followed by zero on your telephone keypad At this time, I will now turn the conference over to Alexander Deignan, Lazard's Head of Investor Relations and Treasury Please go ahead, Ben Thank you very much for your time, and I will now turn the conference over to Alexander Deignan.
Bo: Thank you, though. Good morning, everyone, and welcome to Lazard's earnings call for the first quarter of 2025. I'm Alexandra Deignan, Head of Invest Relations and Treasury.
Bo: In addition to today's audio comments, we have posted our earnings release on our website A replay of this call will also be available on our website later today Before we begin, let me remind you that we may make forward-looking statements about our business and performance
Bo: There are important factors that could cause our actual results the level of activity performance achievements or other events to different materially from those expressed or implied by the forward-looking statements, including but not limited to those factors discussed in the company's SEC violence which you can access on our website.
Bo: Lazard assumes no responsibility for the accuracy or completeness of these forward-looking statements and assumes no duty to update them.
Bo: Today's discussion also includes certain non-GAAP financial measures that we believe are meaningful when evaluating the company's performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measures is providing our earnings release and investor presentation.
Peter Orszag: Seeing our call today, our Peter Orszag, Lazard's Chief Executive Officer, and Chairman, and Mary Ann Betch, Lazard's Chief Financial Officer. After our prepared remarks, Peter and Mary Ann will be joined by Evan Russo, Chief Executive Officer of Asset Management, as they open up the call for questions.
I'll now turn the call over to Peter.
Peter Orszag: Thank you, Allie, and thank you to everyone for joining our call.
Peter Orszag: First quarter performance with solid, with results supported by a high degree of client engagement across the firm, along with our diversified business model.
Peter Orszag: In financial advisory, our global market share of announced transactions increased year over year as the momentum behind our long-term strategy continues to grow.
Peter Orszag: Over the past 12 months, revenue associated with private capital was over 40% of total financial advisory revenue just above our prior peak in 2021. This reflects strong market activity and our successful expansion of coverage in this area.
Peter Orszag: In asset management, we saw substantial improvements in our flows for the first quarter compared to last year. In flows were driven by large winds in our strategic focus areas, including our quantitative platform, Japanese equities, global equities, and international quality.
Peter Orszag: Even with increased growth inflows during the quarter are one but not yet funded mandates or even higher than at the beginning of the year, sales and distribution efforts have successfully generated new business.
Peter Orszag: During the quarter, we continued to execute our Lazard 2030 long-term strategy. We announced a strategic alliance with the Rene Capital Management, expanding Lazard's connectivity to private capital across Europe .
Peter Orszag: This partnership creates opportunities across both of our businesses by providing client access to flexible financing solutions and unique investment strategies.
Peter Orszag: We also announced our expansion in the Middle East, opening a financial advisory office in Abu Dhabi. This office builds on our successful business in Saudi Arabia and complements our presence in Dubai.
Peter Orszag: Finally, last month, we launched our first active ETF product set in the U.S., the introduction of our Japanese equity, equity mega trends, and next-gen technologies ETFs, further expands our capability to meet investor preferences and demand.
Peter Orszag: Looking ahead, while there is substantial unpredictability due to shifting trade policies, corporate balance sheets remain strong, and the preconditions for ongoing economic growth and MAA activity are present.
Peter Orszag: This includes underlying tailwinds for financial advisory activity, with client opportunity driven by technology and generative AI, the biotech revolution, ongoing expansion and energy demand and efforts to de-resk and reposition supply chains.
Peter Orszag: Over the past months, and even with the overhang of heightened uncertainty, our backlog and financial advisory has continued to grow, driven by activity in Europe and in restructuring along with continued growth in M&A and financing and capital solutions.
Peter Orszag: Whether this pattern continues and how this backlog evolves in the future will depend, in part, on greater certainty regarding tariffs.
Speaker Change: Overall, client engagement across both of our businesses remains robust. Let me now turn the call over to Mary Ann to discuss our financial results.
Mary Ann: Thank you, Peter. Hermwied adjusted net revenue with $643 million for the first quarter.
Mary Ann: Financial Advisory Adjusted Net Revenue was $370 million for the first quarter of 2025, which is 17% lower than the prior year's record first quarter revenue.
Mary Ann: Our global emanate expertise and our expanded connectivity to private capital are reflected in first quarter results.
Mary Ann: Recently announced transactions include Malencroft Pharmaceuticals $6.7 billion combination with [inaudible]
Mary Ann: Sun communities $5.7 billion sale of safe harmer marinas to Blackstone Infrastructure
Mary Ann: JustEatTakeAway.com's 4.1 billion-year-old recommended public offer by process and assures $2.1 billion recommended cash offer from KKR and Stone Peak.
Mary Ann: Completed transactions include CDNR's $16,000,000 Euro acquisition of a controlling 50% stake in Santa Fe's Consumer Health Unit, O'Pellah.
Mary Ann: Active Evergreen, $6.7 billion acquisition by Nova Lex, a portfolio company of Apollo.
Mary Ann: CSA Food's $1.2 billion acquisition by PepsiCo, and Soft Gen's $1.1 billion Euro sale of its professional equipment financing business to BPCE.
Mary Ann: In addition, large corporate restructuring assignments include company roles with Althes, France, and chiefi [inaudible]
Mary Ann: While creditor and related party roles include Employee Bridge and Oregon Tool.
We also advised on several private capital markets assignments.
Mary Ann: and Bannaker Partners and Crestview Partners on Continuation Funds led by investments from Axel K.K.R. and Apollo's S3 respectively.
[inaudible]
Mary Ann: Turning to Asset Management, adjusted net revenue was $264 million for the first quarter of 2025, a decrease of 4% from the prior year quarter.
Mary Ann: Our revenues reflected management fees of $256 million for the first quarter, down 1% from the prior quarter.
Mary Ann: Incentive fees totaled $9 million and were driven by strong performance in our credit-fixed income and Japanese equities strategies.
Mary Ann: As of March 31st, we reported AUM of $227 billion, up slightly compared to year end and demonstrating improvements in inflows and outflows
Mary Ann: During the quarter, we had market appreciation of 800 million for an exchange appreciation of 3.9 billion and net outflows of 3.7 billion.
Mary Ann: Average AUM for the first quarter was 231 billion, 1% lower than the prior quarter.
[inaudible]
Mary Ann: Recently, one new business for asset management includes an Asian sovereign wealth fund investing 400 million into global equity advantage.
Mary Ann: A Swiss client funding $390 million into emerging markets equity advantage and China equity advantage
Mary Ann: A U.S. public pension funding 300 million into international quality growth and a Japanese financial intermediary investing 175 million into global equity advantage.
Mary Ann: Now turning to Firmwide Expenses, our adjusted compensation expense was $421 million for the quarter of 2025. Resulting in a compensation ratio of 65.5% compared to 66% one year ago.
Mary Ann: Our adjusted non-compensation expense was $148 million for the first quarter of 2025, resulting in a non-compensation ratio of 23%.
Mary Ann: Chifting to taxes are adjusted effective tax rates for the first quarter with negative 13.9% due to a discrete benefit related to stock compensation awards that vested during the quarter.
Mary Ann: We currently expect our effective tax rate for the full year 2025 to be in the high 20% range.
Mary Ann: Turning to capital allocation in the first quarter of 2025, we returned $175 million to shareholders.
Mary Ann: Including a quarterly, quarterly dividend of 45 million, 36 million in repurchases of common stock, and 94 million in satisfaction of employee tax obligations.
Mary Ann: In addition, yesterday we declared a quarterly dividend of 50 cents per share. Now we'll turn the call back to Peter.
Speaker Change: Thank you, Mary Ann. The current environment is highly uncertain, but Lazard has a long history of combining business insights with geopolitical context which is increasingly valuable to our clients
Mary Ann: Our geopolitical advisory group is in high demand across both of our businesses.
Mary Ann: We also recently announced the addition of Patrick McHenry as Senior Advisor. Patrick's policy expertise as a congressman, including his chair of the House Financial Services Committee, further enhances our advisory capabilities.
Mary Ann: In financial advisory, we provide innovative ways to address a wide array of client needs supported by investments we've made to expand and integrate our restructuring and liability management by the capital advisory and capital solutions groups.
Mary Ann: With nearly two centuries of operating in Europe , our strong presence, deep relationships, and respected expertise, provide us with a competitive advantage in serving those markets.
We continue to actively recruit to increase our client coverage.
Mary Ann: Anchors are attracted to our global reputation and brand, and we achieved their objective to expand our financial advisory MD ranks with 11 net additions over the past 12 months.
Mary Ann: We also have several senior MDs joining our health care, financial sponsors, restructuring and debt advisory groups in the upcoming months.
Mary Ann: In asset management, during times of market volatility, investors historically look to active asset management for solutions.
Mary Ann: Demand for investment products outside of the United States may also expand as investors re-evaluate overweight allocations to the U.S. for more balanced global exposure.
Mary Ann: With our core capabilities in global, international and emerging market strategies, this shift could benefit our platform. In addition, we plan to continue expanding our ETF offerings, creating future opportunities for growth over time.
Mary Ann: Our first quarter performance demonstrates continued progress against our long-term strategy and our focus on delivering excellence as a trusted advisor for our clients at all times.
Speaker Change: I'd also like to take a moment to welcome Peter Harrison to our Board of Directors, which we announced last month.
and I'd like to thank Jane Mandela for her service.
Speaker Change: James served three terms as a board director and has been instrumental in guiding and strengthening Lazard for close to a decade.
Now we'll open the call to questions.
Speaker Change: Thank you very much Mr. Orszag. Ladies and gentlemen, at this time, if you would like to ask a question, please press star one on your telephone keypad. If your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly. We ask that you pick up your handset for best sound quality. We'll go first this morning to Mike Brown of Wells Fargo Securities.
Good morning, great good morning and thanks for taking my questions.
Speaker Change: So, Peter, positive commentary on the backlog that's great to hear. It sounds like it's growing in broad-based.
Speaker Change: Maybe just within the backlog, are you seeing a higher level than normal of M&A deals dropping out so...
Speaker Change: Despite seeing the growth underneath the surface, is there some M&A deals that are actually...
Dropping, and then do you see risk of that picking up at all? Thank you.
Speaker Change: I wouldn't say that we've seen an elevated level of that, but it, you know, there is often bounce, it bounces around from quarter to quarter.
Speaker Change: and I note, as I pointed out, that even within M&A, our backlog continues to expand. I also want to immediately emphasize that the degree to which that will continue is very path dependent and
Speaker Change: hopefully resolve the uncertainty over the tariff regime in particular. So that's point one. Point two is that we have a very diversified business model at this point across
Speaker Change: M&A, Non-M&A across public companies, private companies across the US and Europe , and that ability to, or that, uh...
Speaker Change: Quad set of capabilities and geographic diversification means that we have the ability to skate to where opportunities are with our clients.
Thank you.
Speaker Change: in it, rapidly evolving environment. So point one is the M&A market.
He's continuing but will be subject to... subject to...
Speaker Change: Challenges if the tariff regime is not clarified during this 90-day window and point B is we have a lot of products and strategies and services that we offer to our advisory clients beyond
Speaker Change: Yeah, great, great, well said. Maybe if I just, as a follow, I'm just kind of narrowing on to QQ here. It's off to a good start, based on what we can see in the public data and the deals that are set to close in the quarter, would actually point to a pretty good second quarter here, based on the visibility you have.
Speaker Change: How do you think the second quarter can compare to this first quarter? Can it be up sequentially and could are also even be up year over year?
Speaker Change: Thank you. I would say that it is extremely challenging at this point in the quarter to be giving a definitive view about where...
A specific quarter is landing.
Speaker Change: But I'd go back to despite the uncertainty we continue to see a lot of engagement with clients and a lot of activity.
Speaker Change: I'm just not going to give you a definitive answer to that question because even in normal times at this point in the quarter there's still a lot of uncertainty around it and we're not in normal times.
I understood. Thank you for taking my questions.
Speaker Change: Thank you with the next now to James Yaro with Goldman Sachs.
Good morning, and thanks for taking my questions.
Speaker Change: Just firstly, on the sponsor M&A dynamic, I think 225 was supposed to be a much healthier sponsor capital return backdrop across both M&A and IPOs. To what extent are you seeing sponsor M&A slowdown as a result of the macro backdrop in tariffs?
Speaker Change: and then what does this mean for the growth of secondaries for this year?
Speaker Change: So look, within sponsors, I think there are multiple counter-vailing forces on the one hand private equity is built to trade, so there is an incentive, there is a kind of underlying driver deal activity. And in addition, as you know, many portfolio companies have now been held for longer than their private equity owners would normally hold portfolio companies.
Speaker Change: That also pushes towards more deal activity. On the other hand, there are three factors currently that are going in the other direction.
The first is that...
Speaker Change: Lower Consumer Demand for its products, if the tariffs are passed along to the consumer, so that's factor 1, factor 2 is that even though these are private companies, the comparable are often public companies in terms of how they're valued and whenever there's a very sharp
Movement in Market Valuation [inaudible]
You can temporarily have a bid-ass spread.
Between buyer and seller
Speaker Change: and so the market gyrations that we've been experiencing would play to that second factor and the third one is...
Speaker Change: That many private equity transactions are backed by either the leverage loan market or the high yield market and those are both disrupted right now. So those are the sort of counterveiling forces.
Speaker Change: That push and pull will vary across sponsors, it will vary across the type of portfolio company and so what I would say is all three of those kind of counter-failing forces will dissipate if there is clarity or more clarity provided over the tariff regime during this
90-day window. So, there's a good example of how the...
Speaker Change: Policy World is interacting in a quite direct way with that type of activity and then on your second point look we see underlying growth in the secondary market period because the penetration rate of secondaries
Speaker Change: In the marketplace still has room to grow in any market environment
Speaker Change: But layered on top of that, you do have a cyclical force that if more portfolio companies are held for longer and LPs want liquidity, you'll get an additional accelerant to secondary's
Speaker Change: from that tendency also. But the important point on secondaries is, well that may cause some acceleration this year, we see continued growth in the secondaries market, regardless.
Okay, that's very clear. Thank you. Maybe just...
Speaker Change: Could you speak a little bit to the dynamics within restructuring? Could you talk about how trends have evolved in terms of…
Speaker Change: and separately liability management versus chapter 11 and bankruptcy and then the outlook for both of these components. And then finally maybe just how quickly could chapter 11 potentially pick up if we were to see a weaker macro backdrop? Yeah.
Speaker Change: Sure, so I do think this is an important change in the marketplace. We have retooled our group.
to handle both.
Speaker Change: Restructuring through chapter 11 and liability management mandates and also serve both debtors and creditors more evenly and when you look at the mix of our revenue mix within that group, it is a much more diversified debtor, creditor mix.
Speaker Change: and then specifically on your question, as private capital has become more dominant, both private equity and private credit, the tendency to do liability management as opposed to a formal chapter 11 process has increased.
Speaker Change: And so we would anticipate that that will continue because the role of private capital is more dominant today than it was
Speaker Change: Hey, decades or two ago. It's not to say there won't be formal chapter 11 processes for some firms but we do think the mix of business will continue to be disproportionately in the liability management camp.
That's very clear. Thanks a lot.
Speaker Change: Thank you with the next now to Ben Rubin with UBS.
Hi, good morning. Thank you for taking my questions.
I first wanted to start on the Compratio, so 65.5% slightly below the last years of cruel
Speaker Change: and I know your goal is to get to 60% or below and maybe the hope was to maybe get there this year some just curious what would you need to see in terms of the M&A environment the deal backdrop such that you'd be more comfortable bringing down the accrual rate and then also if you can give us any type of indication on whether or not the 65.5 assumes improvement in the fee revenues throughout the year and if so what type of magnitude. Thank you.
Speaker Change: Thank you. I'll start and then Mary, I will come in. Look, we were always really clear that the 60% target was dependent on market conditions, I think maybe to the annoyance of some of you on the phone. We kept putting in those caveats. That was done on purpose.
Speaker Change: because we recognize that the outlook had some uncertainty surrounding it and that operating leverage that is achievable depends on not only what we do but also on the external environment.
Speaker Change: So, I would just say we, again, put those caveats in, you know, if you look back at the previous transcripts on purpose, and
I'd say that's for-
Events have
Underscored, the wisdom of having done that.
Speaker Change: With regard to this year, we are going to have to see how this plays out. We are going to make every effort we have to
Speaker Change: continue to achieve some operating leverage and have the comparatio come down, but it is very dependent on events beyond our control, and in particular whether there is resolution during this policy period or not.
Speaker Change: because with the heightened uncertainty that currently exists, you're in one scenario and if that uncertainty were resolved pretty quickly, you're in a different scenario and so that there's just there's no way to give.
More assurance when the world is bifurcated in that degree.
Speaker Change: Betsy, Mary Ann. Yeah, I guess the way I might think about it is...
You know it.
We're, and Peter said our backlog is growing
Speaker Change: But it's at a much more modest pace than what we expected when we came into the year and when we were talking about the 60% ratio.
Thank you.
But that's how I would think about it.
Speaker Change: Great. Thank you. I wanted to shift gears, maybe to asset management. Peter, you mentioned previously that you were entering the year with, you know, the 2025 could be an inflection for your asset management business, much like 2024 was for financial advisory, with maybe the potential goal of hitting your net zero flows. And you've been active, obviously as you mentioned in your prepared remarks about launching active ETS in the US, and also the general shift of investor interest going beyond the US should benefit your global strategy
Speaker Change: So just curious, how do you feel about that net flow target today? And then also maybe if you could provide us a mark to market on how the flow picture is looking for April , that would be great. Thank you.
Speaker Change: So, what I would say is two things. First, if you look at the first quarter net outflows were significantly lower than last year, and that occurred despite the fact that our one but not funded mandates.
Increased
Speaker Change: So I think there had been some speculation or commentary that we might have been eating into that one but not yet funded mandate quantum and that's
Speaker Change: It's been the opposite. It's gone. It's it's risen. And I know coming back to the geographic diversification that the majority of that one but not funded mandate.
Speaker Change: comes from investors in Europe in particular, and so that shows the benefits of the diversification and I'll let Evan give an update.
Evan: or any additional color including anything you want to say about April . Sure, yeah, so clearly, you know, we've been trending better than last year as we had expected coming into this year. And we talked about...
Evan: The more balanced flow picture coming into the year based on several factors. One was the strong foundation as you mentioned, the one but not funded sort of that pipeline that we started with this year and as Peter mentioned. And so that's the end of the year.
Evan: We, the elevated pipeline that we started this year with is not only not decline but it's actually been growing steadily a little bit over the course of the first quarter which continues to give us confidence. Also the investments that we've made across our business.
Evan: Both on the investment side, of course, on distribution changes we've made and organizational changes that we've made across the platform on the past year and then importantly it's really was based on the performance that we've had in many of the products that we expect it to be. [inaudible]
Evan: Interesting, focused products for the market this year, the strong performance that we had.
one of them said that.
at the beginning of the year.
Great. Thank you for taking my questions.
Ryan Kinney: Thank you. We go next now to Ryan Kenny with Morgan Stanley .
Ryan Kinney: Hi, good morning. Thanks for taking my questions. So follow up on the Comprehitio, understand there's a lot of uncertainty on the revenue side. But is there any framework we should think about in terms of comp dollar range? Is there a floor on comp dollars that we should think about in the scenario where maybe more deals start getting pushed out?
Yeah, so I'll take that one, Ryan.
Ryan Kinney: The largest two components of our fixed compensation are salaries and amortization, and I would expect both of those to be up kind of in the mid-single digits range year over year.
Ryan Kinney: and I think you have that data from our prior disclosure so if you want to you know kind of model the floor I would think about those components.
Ryan Kinney: Salaries, you know, we have every year there's, you know, people are promoted and we have, you know, a cost of living adjustments, et cetera, and then on the amortization side.
Ryan Kinney: Even though we brought our deferral rate down last year, we still had a higher deferral rate than we did in 2021, which is the year that rolls off this year. And so we do see that slight uptick in the amortization as well. So that's how I would think about the fixed pieces, which sort of form your floor on the
Speaker Change: Alright, thanks, that's helpful. And then on the restructuring backlog growing, any sense on how quickly conversations can turn into mandates and then how quickly that can hit the PNL? Is that more of a 2025 pickup story or more of a 2026 story?
Speaker Change: I would say that one feature of restructuring mandates, especially in the liability management category, is that they can translate into revenue faster than many M&A deals, but we also have a mix of other non-M&A businesses, Lazard Capital Solutions.
Speaker Change: PCA, etc. that can translate from, you know, mandate award to actual revenue faster than many M&A deals also. So, it's not just restructuring that has a different time profile.
Thank you.
Devin Ryan: Thank you. We're going next now to Devin Ryan of Citizens.
Speaker Change: Hey, this is Alex Jenkins, cylinder for Devin. Appreciate you guys taking my question. I guess just to follow up on the asset management side, that $10 billion asset management mandate that you highlighted last quarter.
Speaker Change: Well, again, and I'll let Evan elaborate, but that figure was the one but not yet funded mandates overall.
Speaker Change: and as we have noted before the quantum in that category has actually gone up.
Speaker Change: Not down, so there's always things that come, you know, they go ahead and get funded but then there are new mandates that come in and on net it's increased not declined which is what I think there there had been perhaps some confusion about but it's it's risen and I don't know I haven't if you wanted to add it.
Evan: I would just say, Alex, it's not one mandate. It's a series, it's sort of the backlog of things that where we're told we want a mandate but it just hasn't funded yet. So it's just a question of timing until that they decide to actually deploy the capital but we...
Evan: They've chosen us to be their provider for the asset management services.
Evan: and so it's a whole series of things across lots and lots of different products.
Evan: and we're constantly rolling some of those things in. They're constantly funding but as Peter and I've mentioned it's actually grown over the first quarter slightly so it's starting at a very high elevated level relative to where we are historically.
Evan: at the beginning of the year, we were at a higher and elevated level, and that's only continued to grow. But it's a mix of lots of different strategies with several lots of different clients. We expect a lot of that to start to hit, both in the second quarter, probably into the third quarter of this year, but it's constantly being replenished. And so it's a question of how fast that gets, you know, we continue to win new mandates in this environment. Those things, you know, sometimes can move around quarter to quarter, because if there's volatility and institutions may decide, let's not invest, let's not put the capital to work for a new mandate. And that's what we're going to do.
in over the next 12 to 15 months or so.
Thanks for watching!
Speaker Change: Okay, yeah, thank you for that clarification. I appreciate it. I guess it's a quick follow up on capital and growth.
Speaker Change: You've continued a bolster of platform, your announced expansion plans in Europe . I guess just how are you prioritizing capital allocation between organic growth, strategic partnerships and just shareholder returns?
Speaker Change: and maybe can you speak to anything in terms of investments or acquisitions in the pipeline to support the 2030 strategic plan. Thank you.
Speaker Change: Sure, so look, we, I think we've been clear about our capital allocation priorities, which is, you know,
Speaker Change: Hi, back. Shares to offset part or all of our deferred compensation and then with regard to that free cash flow over and above those priorities.
We are
considering a variety of inorganic options.
Speaker Change: Judicious with regard to making sure that the match is right, that Cheryl DeValue was enhanced and that it fits our strategic priority. So we remain in active dialogue on lots of and organic options, disproportionately on the asset management side of the business, but
Speaker Change: We are going to be very disciplined about preserving capital for its highest and best use and to protect our, you know, to make sure that whatever we do is enhancing Cheryl DeValue.
Okay, thank you very much.
Speaker Change: Thank you. We'll go next now to Brennan O'Brien of Wolf Research
Brendan O'brien: Good morning and thanks for taking my questions. I guess the start I just wanted to touch on Europe . You know, we've been hearing a lot more positivity on the MA backdrop in the region, relative to the US of late. So this one gets a sense as to how conversations in Europe compare those in the US.
Speaker Change: Also, Peter, you were constructive on cross-border activity, potentially improving if we were to see more protectionist regime in the U.S. But we've also seen some governments be fairly aggressive in discouraging U.S. investment in response to more significant tariffs that were implemented. So I just wanted to get a sense as to how, how look there has changed this at all as well.
Brendan O'brien: Sure. So, I mean, as I mentioned, our backlog in Europe continues to expand disproportionately to the United States.
Brendan O'brien: I think it's one of the benefits of this diversification in our long history in Europe and the local roots that we have there, with regard to the cross-border activity, I mean first I think there is
Brendan O'brien: There are two things that I would note. One is that-
Brendan O'brien: Cross-border activity doesn't necessarily mean going directly into the United States, it can also mean taking a new look at entities that are in lower-tariff regimes, and there was a note that this morning involving a major...
Technology firm.
Brendan O'brien: Announcing some relocation of where its production will occur as an example, and that is one of the phenomenon that we could...
Brendan O'brien: We could see where it's not just interest in locating inside the tariff wall of the United States but rather relocating to another country that has a lowered tariff.
with the United States.
Brendan O'brien: We'll have to see, but just to point that out, I would note there is, the second thing I noticed, there's also increased interest in Europe Europe transaction, so things that
You know, don't touch the United States, so...
Brendan O'brien: Are Deep Local Roots, maybe the way I would put it is? Are Deep Local Roots in Europe are a benefit?
Brendan O'brien: Not just because if European firms want to locate inside the U.S.
Brendan O'brien: That's an advantage, but rather because by being close to the European...
Brendan O'brien: Clients that we are. Whatever they want to do, whether it's Europe , Europe , or Europe to XUS transactions. We can be there for them in a way that reflects our bond history with many of these clients. [inaudible]
Speaker Change: That's a hopeful color, and I guess for my follow up, you know, you alluded to this a bit and answered to a prior question, but it was just hoping you can give it a bit more.
Speaker Change: Colour on what you're seeing in terms of credit availability at the moment and specifically whether you believe that growth in private credit will result in financing being more readily available in a down cycle relative to what we've seen in the past.
[inaudible]
Speaker Change: Yeah, it's a great question. One of the reasons why we have built out a wide array of different ways of serving our clients is precisely because...
Speaker Change: The world is evolving and the growth of private credit in particular is something that is different today than it was a decade ago. So our Lazard Capital Solutions group is extremely active in helping.
Speaker Change: Corporate Figure Out Innovative Financing Solutions, and that demand for that goes up as...
Speaker Change: The Leverage Loan Market and the High Yield Market become more challenging.
Speaker Change: just naturally. I mean, it's always present, has a competitive force, but it becomes yet more attractive when the other source is of financing.
Speaker Change: We are more challenging. So we are, this is one area in which we are very, very active and have deployed our bank in teams across the globe to help clients explore.
Speaker Change: Innovative Financing Solutions, and we're very pleased to have expanded in this area and be able to help our clients with this.
Speaker Change: with this new vector. So, how much of an offset it is, we'll have to see, I think the more important point is...
Speaker Change: As I said before, I would expect that the challenges in the high yield market and the leverage loan market will dissipate if there is more certainty provided to the tariff regime and now that there is a little bit more certainty.
Speaker Change: for the foreseeable future. It's very dependent on why governments across the globe deal.
Thank you for taking my questions.
Mike Brown: Thank you. And we'll take a follow-up question now from Mike Brown at Wells Fargo.
Mike Brown: Great, thanks for taking my follow-up. I just want to ask on the D-rate.
Mike Brown: I kicked up nicely here in the first quarter and just in light of that how should we think about the whole year fee rate guide is the 1Q, the right level to consider for the next couple of quarters like is that the right jumping off point or does the mid shift from
Mike Brown: The mandates that are set to fund actually start to bring the fee rate down as those flow in. Thank you.
Mike Brown: Yeah, hey, Mike, it's Evan. I'll take this one. I mean, yeah, the average b-rate for the quarter was up obviously increased from Q1.
and Versus Last Year as well.
Disgust in past quarters.
Mike Brown: The last couple of quarters, we had a couple of larger outflows that were in lower fee mandates, that were larger mandates, which helped to mix this quarter. Also, some of the new flows we had this quarter into some of the global EM Japan and others came in at higher fees.
Mike Brown: And I'd say, look, the pipeline that we keep talking about, the one but not funded, is a mix of products and some of the larger mandates. So depending on the timing of when those things come in, you could have some movement. And the next couple of quarters could have a smaller impact, but overall, you know, p-rate stability, which what we've seen over the last several quarters. [inaudible]
Mike Brown: Has been a positive story for us across the platform and the newer products and newer vehicles that you know from a strategic planning perspective that we've been putting in there should continue to support this over time as to the jumping off point because of some of that movement.
Mike Brown: and some of the idiosyncratic timing of some of the flows. I would say you're probably better to assume the average of 2024 is probably where we average for 2025 as a jumping off point, but it's going to move around a little bit quarter to quarter as it has, and so far it's been a positive story in Q1.
Speaker Change: Thank you, and ladies and gentlemen, that is our last question for this morning, so that we'll bring us to the conclusion of today's conference call. Mr. Orszag, I'd like to turn things back to you for any closing comments.
A moment in which our clients seek out our advice.
Disproportionately
Speaker Change: The first is that we have always had, and it's in our DNA
Speaker Change: This ability to combine business and financial decision-making with insight into what governments are doing, that skill set is more important than ever.
because it is I think increased from the obvious to everyone.
Speaker Change: You can't make a decision just within the four corners of the Excel spreadsheet. You need to take into account the policy and government backdrop to that, and that is a core competency of Lazard. And the second is that our diversified business model.
Speaker Change: So geographically and with regard to what products and services and other ways of helping clients were able to offer and to shine in moments like this because it allows us to skate to where the client needs to are very quickly.
Speaker Change: and so we all hope that uncertainty is resolved sooner rather than later but Lazard's business model is resilient to all the various scenarios that we may be playing through in the coming months and quarters. Thank you very much for joining us.
Speaker Change: Thank you, Mr. Orszag. Again, ladies and gentlemen, that will conclude today's Lazard's first quarter, 2025 earnings conference call. Again, thanks so much for joining us, everyone. And we wish you all a great day. Goodbye.
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And Peter Orszag
Deignan & Betsch Music
Heyyyy Hey
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Speaker Change: Betts Rabbi Andrew Scaff Mette on tape As Rabbi Betsch worked for the Church of the Most Holy Trinity he visited several churches and studyings here in北朝鮮 for his high priestess and as the father of many, many good people he knew