LAZARD INC earnings calls

compensation deferral and effects

Q (Jim Mitchell · Seaport): Analyst asked how shortening accruals (shorter deferrals) will affect the comp ratio this year and next, and asked about Campbell Lutyens synergies (revenue and cost).

A: Management said the main goal is to align compensation for retention and attraction and that accelerating recognition is an accounting change that reverses over about three years and improves the quality of the comp ratio over time. They also said Campbell Lutyens offers both cost synergies (vendors, IT) and revenue synergies via M&A and fundraising referrals.

"Our current deferral policies, it probably reverses fully over a period of three years." — Tracy Farr (CFO)

backlog and pipeline measurement

Q (Steven Chubak · Wolfe): Analyst asked whether the backlog comment is revenue-based or volume-adjusted and how mix affects next year's revenue outlook. Also asked how higher rates affect sponsor and strategic deal willingness.

A: Management said the weighted pipeline and fee-weighted conflict clearances are measured on a revenue basis, probability-weighted by the odds of fees being collected. They said higher rates in theory discourage deals but they are not seeing meaningful slowing; strategic drivers like technology, supply chain and geography are stronger factors, while private equity is more affected by valuation disconnects.

"And that is a revenue basis weighted by the probability of each fee being collected." — Peter Orszag (CEO·CHAIR)

large-cap strategy and MD ramp

Q (Alex Bond · KBW): Analyst asked what is driving recent progress in large-cap strategic deals, how Lazard can grow share there, and how new MDs ramp will affect growth. Also asked about seasonality and percent of revenue from non-M&A in 3Q.

A: Management said they deliberately expanded private capital coverage while keeping large-cap strength, creating dual capability that is now delivering better league-table results and private capital revenue simultaneously. They said progress reflects more client networking and added talent, and they expect second half stronger than first; about 60% of revenue was M&A and 40% non-M&A in the quarter (they will confirm exacts).

"So we're walking and chewing gum, which was always possible, but we had not been doing that as a strategic matter." — Peter Orszag (CEO·CHAIR)

expenses, margins, Lazard 2030

Q (Devin Ryan · Citizens JMP): Analyst asked if expense and comp moves are needed to reach Lazard 2030 goals or create extra capacity, and how regulation and midterms affect deal urgency into 2028.

A: Management said the 2030 plan is primarily a growth plan and these expense and comp initiatives are a companion to protect margin as revenue grows, focusing on operating leverage and decoupling expense from revenue growth. On regulation and midterms, they said the political/regulatory outlook is a marginal factor that may add urgency for big deals, but underlying strategic drivers (tech, vertical integration, geography) are the main catalysts.

"When you are focused on revenue growth, you have to be careful that your organization is ready to achieve that revenue growth while maintaining discipline around margin." — Tracy Farr (CFO)

restructuring demand and Europe outlook

Q (James Yaro · Goldman Sachs): Analyst asked about the outlook for restructuring activity and whether economic stress could increase deal opportunities and timing, and also asked about Europe business trends amid rate and political issues.

A: Management said they have seen year-to-date growth in their restructuring practice and expect that to continue, noting risk of distress among some AI-related and lower-performing firms. For Europe, they said the U.K. had record results and that although macro and politics are challenging, many European companies are global and activity remains significant.

"I do think we've seen on a year-to-date basis, growth in our restructuring practice." — Peter Orszag (CEO·CHAIR)

software M&A and asset management value

Q (Mike Brown · UBS): Analyst asked for a pulse on software M&A (large vs small, strategic vs sponsor) and whether outlook improved, and also how asset management can create/realize more shareholder value.

A: Management said software is better than at the low point with pockets of activity but not extremely active; private equity valuation disconnects and higher rates still constrain liquidity events. On asset management, they said new leadership and focusing on scalable, high-conviction products should improve performance and flows, and they remain open to whatever structure best creates shareholder value.

"We have a great new leadership team, including Chris, and also our Chief Operating Officer and our Chief Investment Officer." — Peter Orszag (CEO·CHAIR)

asset management performance and product focus

Q (Chris Hogbin): Analyst asked how asset management is being strengthened and which products drove flows, and what else management sees as upside.

A: Management said they are strengthening leadership and focusing on delivering consistent investment performance, which is already driving record flows in areas with strong results like Advantage, quantitative equities, emerging markets, Japan, fixed income and some alternatives. They also said they see white space to expand beyond public active management and hired product and corporate development heads to chart that path.

turnaround progress and market share

Q (Gabriel Angelini · BofA): Analyst said stock doesn't reflect progress and asked if turnaround is slower or if Lazard missed part of M&A cycle; asked what that view misses and whether Lazard is gaining share or market staying constructive.

A: Management said they believe they are on or slightly ahead of internal Lazard 2030 plans after upgrading many MDs and that forward indicators (weighted pipeline) do not show missing the market; they think their experience may reflect regaining natural market share as new MDs ramp. They said they don't see evidence they've missed the market.

"Relative to our internal plans, relative to the Lazard 2030 plan that we laid out internally, we are, if anything, a little ahead of schedule, but definitely on track." — Peter Orszag (CEO·CHAIR)

comp ratio framing and efficiency targets

Q (Brennan Hawken · BMO): Analyst asked whether to use year-to-date or prior year comp ratio as starting point for impact of increased cash, and asked where most efficiency gains can be found.

A: Management said on a like-for-like basis they would have expected a modest decline in the adjusted GAAP comp ratio in the fourth quarter, and that accelerating cash vs. deferrals would add a few points in the year of change; they also said the most immediate efficiency opportunities are centralization/standardization and vendor rationalization, with technology and workflow redesign also important.

"I think some of the centralization and uniformity that we can deliver, delivers a lot of cost savings, and frankly, delivers better delivery to our front offices and frankly, to our clients." — Tracy Farr (CFO)

midterms and near-term deal timing

Q (Connell Schmitz · Morgan Stanley): Analyst asked whether a Democratic sweep in the midterms could push more deals to happen before a possible 2028 regulatory shift, and asked Tracy to quantify pull-forward in advisory this quarter versus last.

A: Management said the midterms are unlikely to change the current regulatory environment and would at most marginally increase urgency to complete deals before a potential 2028 shift, since the desire to do deals now is already strong. On pull-forwards, they said Q3 pull-forwards were broad-based, slightly below year-ago quarter levels and in line with an average of $2 million to $3 million—nothing exceptional or concentrated in one transaction.

"I don't think that the midterms will have any effect on the existing regulatory environment," — Peter Orszag (CEO·CHAIR)

comp deferrals: timing and multi-year effect

Q (James Yaro · Goldman Sachs): Analyst followed up whether deferral changes explain the persistent 69.9% comp ratio and asked timing/magnitude and whether impacts would affect 2026–2028 given three-year amortization comments.

A: Management said the deferral consideration is not the reason for the 69% accrual this year and pointed to J-curve, revenue growth and investment spend as drivers; they said they have not made a final decision, timing will be set in the normal year-end compensation process, and any shift to more cash accelerates GAAP recognition this year but improves the comp ratio quality over the next two to three years as amortization vintages decline.

"The definitive answer is no on it factoring into the 69% accrual throughout the year." — Tracy Farr (CFO)