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Lazard, Inc. (LAZ)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net revenue was $817M and adjusted net revenue was $812M; diluted EPS was $0.80 and adjusted diluted EPS was $0.78, reflecting sequential margin improvement and strong Financial Advisory performance .
  • Financial Advisory adjusted net revenue rose 6% YoY to $508M with record revenue in Europe for 2024; Asset Management adjusted net revenue increased 5% YoY to $287M, with incentive fees up to $29M in Q4 .
  • Management guided to an adjusted compensation ratio target of 60% in 2025 (from 65.9% in FY24), maintained the adjusted non-compensation ratio target at 16–20%, and filed to launch active ETFs to broaden distribution .
  • Entering 2025, the firm cited ~$10B of “won but not yet funded” Asset Management mandates, strengthening forward flow visibility; management also indicated buybacks should increase over time to offset share-based dilution .
  • S&P Global consensus estimates for Q4 2024 were unavailable at time of writing; we cannot quantify beats/misses versus Street. We will update when accessible.

What Went Well and What Went Wrong

What Went Well

  • Financial Advisory strength: Q4 adjusted FA revenue rose to $508M (+6% YoY), with marquee mandates and record Europe revenue in 2024 (“We achieved record revenue in Europe in 2024...”) .
  • Margin and cost discipline: Q4 adjusted operating margin improved to 15.5% (vs 12.6% in Q3); adjusted comp ratio improved to 65.6% (vs 66.0% in Q3) and non-comp ratio to 19.0% (vs 21.4% in Q3) .
  • Asset Management performance fees: Q4 adjusted incentive fees increased to $29M (vs $16M in Q4 2023), driven by outperformance in global convertible, Japanese equity and quant strategies .

What Went Wrong

  • AUM and flows pressure: Ending AUM fell to $226B (−9% QoQ, −8% YoY) with net outflows of ~$10.1B; management highlighted U.S. sub‑advised funds as more than half of Q4 net outflows .
  • EPS down sequentially: Diluted EPS declined to $0.80 from $1.02 in Q3 on higher comp accruals and taxes; adjusted tax rate was 18.1% vs 16.0% a year ago .
  • Corporate headwind (GAAP): Q4 Corporate GAAP net revenue was −$15.7M, reflecting LFI marks and other items; adjusted Corporate net revenue was $17.6M .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Revenue ($USD Millions)$685 $785 $817
Adjusted Net Revenue ($USD Millions)$685 $646 $812
Diluted EPS (GAAP) ($)$0.49 $1.02 $0.80
Adjusted Diluted EPS ($)$0.52 $0.38 $0.78
Adjusted Operating Margin (%)12.3% 12.6% 15.5%
Adjusted Compensation Ratio (%)66.0% 66.0% 65.6%
Adjusted Non-Comp Ratio (%)21.7% 21.4% 19.0%

Segment revenue breakdown (GAAP vs Adjusted):

Segment Net Revenue ($USD Millions)Q2 2024 GAAPQ2 2024 AdjustedQ3 2024 GAAPQ3 2024 AdjustedQ4 2024 GAAPQ4 2024 Adjusted
Financial Advisory$411 $408 $371 $369 $520 $508
Asset Management$285 $265 $294 $272 $312 $287
Corporate−$11.4 $11.5 $120.1 $5.6 −$15.7 $17.6

Key KPIs (Asset Management):

KPIQ2 2024Q3 2024Q4 2024
Ending AUM ($USD Billions)$245 $248 $226
Average AUM ($USD Billions)$245 $246 $234
Net Flows ($USD Billions)−$6.6 −$12.4 −$10.1
Adjusted Mgmt Fees & Other Revenue ($USD Millions)$263 $269 $258
Adjusted Incentive Fees ($USD Millions)$3 $3 $29

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Compensation RatioFY 2025Mid- to high‑50s over cycle (prior framework) Target ~60% in 2025 Raised specificity/timing (near-term target)
Adjusted Non-Compensation RatioOngoing16%–20% over cycle 16%–20% maintained Maintained
Share Repurchase AuthorizationAs of Q3’24 vs Jan 24, 2025~$356M outstanding (Q3) ~$180M outstanding (Jan 24, 2025) Lower authorization balance post activity
DividendQ4’24$0.50/share declared (Q3 cadence) $0.50/share declared (payable Feb 21, 2025) Maintained
Buyback PaceMedium-termNot specifiedExpect to increase buybacks over time to offset dilution Indicated higher pace over time
MD Net AdditionsAnnual10–15 net additions (2030 plan) Continue 10–15 net additions annually Maintained plan

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
AI/Technology investmentQ2: rising technology spend in non-comp; cost initiatives Investing in AI and cybersecurity; mid-single-digit non-comp growth expected Increasing targeted investment
Macro/Regulatory (antitrust)Q3: improving environment; office sale one-time More constructive antitrust (esp. vertical deals) aiding M&A confidence More supportive backdrop
Private Capital connectivityQ2: active PCA assignments ~40% of FA revenue from private capital; aiming ~50% over time Rising mix
Regional (Europe)Q3: strong performance in EMEA Record Europe revenue in 2024; strong cross-border interest into U.S. Stronger
Asset Mgmt flows/productsQ2/Q3: net outflows; low incentive fees $10B won-but-not-funded mandates; incentive fees up; filing active ETFs Improving flows pipeline

Management Commentary

  • “2024 demonstrated Lazard’s inflection towards growth, as business conditions improve and the momentum of our long-term strategy delivers strong results.” — Peter R. Orszag .
  • “We achieved record revenue in Europe in 2024... cooperation across sectors and geographies are working well.” — Peter R. Orszag .
  • “Revenue per MD was $8.6 million for the full year 2024, 1 year ahead of our target to achieve $8.5 million this year.” — Peter R. Orszag .
  • “We aim to deliver an adjusted compensation ratio of 60% in 2025, with further improvements in subsequent years.” — Management .
  • “We... enter this year with $10 billion of... not yet funded mandates... substantially higher than other recent years.” — Peter R. Orszag .

Q&A Highlights

  • Compensation ratio pathway: Management detailed drivers (MD productivity mix, hiring), reaffirming 60% 2025 target while allowing temporary elevation if exceptional hires accelerate; deferral rates decreased (more cash) without structural comp changes .
  • Share count and buybacks: Buybacks expected to increase to offset dilution over time; share count rise in 2024 driven by higher amortization and share price under treasury method .
  • Europe vs U.S. M&A outlook: Despite a soft macro 2024, Lazard saw record Europe advisory revenue and expects strong cross-border activity into the U.S. given supply-chain diversification and unique local roots in both regions .
  • Secondaries market: Continued expansion expected; Lazard’s PCA has shifted more toward secondaries with strong positioning, especially in Europe (Paris) .
  • Asset Management fee rate/mix: Average fee rate stable/slightly higher; pipeline mandates concentrated in higher-fee strategies (Japan/EM/quant), while U.S. sub-advised outflows weighed in Q4 .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS and revenue was unavailable due to API limits; as a result, we cannot quantify beats/misses versus Street at this time. We will update this section when access is restored.

Key Takeaways for Investors

  • Financial Advisory momentum and Europe strength suggest continued revenue growth into 2025, with operating leverage from MD productivity and minimum fee discipline driving margin expansion .
  • Near-term margin catalyst: Adjusted comp ratio targeted at ~60% for 2025 and non-comp ratio back in the 16–20% target range improve earnings visibility if FA growth persists .
  • Asset Management headwinds from U.S. sub-advised outflows were offset by $10B in won-but-not-funded mandates, higher incentive fees, and forthcoming active ETFs—watch funding cadence and ETF launches as flow catalysts .
  • Capital returns: Dividend maintained at $0.50/share; management signals a higher buyback pace over time to offset dilution—monitor authorization usage and share count trajectory .
  • Watch AUM trajectory: Ending AUM fell to $226B with net outflows; mix shifts toward higher-fee strategies could support revenue resilience despite headline AUM pressure .
  • Trading setup: Strong FA pipeline, improving margins, and ETF catalysts vs. AM flow volatility and tax rate normalization; multiple expansion could hinge on evidence of sustained FA share gains and compensation discipline .
  • Medium-term thesis: Execution of Lazard 2030 plan—raising MD productivity beyond $10M per MD, expanding private capital connectivity toward ~50% of FA revenue, and scaling new AM vectors (ETFs, wealth)—supports durable multi-year earnings power .