Lazard, Inc. · NYSE:LAZ

Lazard — Q3 2005 Earnings Presentation

30 slides from Lazard's earnings presentation, November 2005

  1. Slide 1: November 2005

    November 2005

  2. Slide 2: Disclaimer

    Disclaimer This presentation contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are “forward-looking statements”. In some cases, forward- looking statements can be identified by the use of forward-looking term

  3. Slide 3: Overview

    Overview „ Strong performance in third quarter 2005 and first nine months of 2005 „ Prior investments in our business continue to yield positive results „ M&A revenue performance demonstrates that we are effectively executing our plan − Strong growth versus peers − Nine months M&A revenue exceeds fu

  4. Slide 4: What Is Lazard?

    What Is Lazard? „ $970m YTD operating LAZARD revenue1 „ 2,198 employees2 „ Offices in 29 cities Established 1848 in 16 countries2 Financial Advisory Asset Management „ $627m YTD revenue1 „ $327m YTD revenue1 „ M&A, Restructuring, Other „ $87bn in AUM2 Financial Advisory „ 123 MDs, 488 professionals2

  5. Slide 5: Our Simple Financial Model

    Our Simple Financial Model Compensation: Policy targets maximum 57.5% of operating revenue Other Expenses: Targeting relatively constant dollar amount over time yielding a decreasing percentage of operating revenue Capital Required: Minimal If revenue were to grow 22.5% initial EBIT margin 10% annua

  6. Slide 6: Recent Growth Drivers

    Recent Growth Drivers Core Growth Engines M&A Asset Management +57% +25% +1 5% +11% 2003 - 2004 2005 YTD 2003 - 2004 2005 YTD Rev. Growth Rev. Growth 1 Growth in Mgmt. Growth in Mgmt. and Other Fees and Other Fees 1 1 5 Growth over same period in previous year. Year to date as of September 30, 2005.

  7. Slide 7: Business Balanced Across Geography And Product Lines

    Business Balanced Across Geography And Product Lines 2005 YTD 2005 YTD Net Revenue by Geography¹ Net Revenue by Business Line¹ Rest of the World 4% Asset North Management Europe America 34% Financial 47% 49% Advisory 66% 1 Includes net revenue from Financial Advisory and Asset Management segments (e

  8. Slide 8: Growth Opportunities

    Growth Opportunities Financial Advisory Asset Management „ Continued demand for „ Selected international/global independent advice products „ Productivity of recent senior „ Regional products hires „ Hedge funds „ Robust M&A market „ Merchant banking „ Well-positioned for cross- border activity „ St

  9. Slide 9: Financial Advisory

    Financial Advisory 8

  10. Slide 10: What Distinguishes Our Financial Advisory Business?

    What Distinguishes Our Financial Advisory Business? „ Focus: A leading, global independent advisor − Mergers & Acquisitions − Restructurings „ Prominence: MDs known as senior “counselors” to CEOs „ Scale: $627m1 in YTD revenue ranks us among bulge bracket firms „ Scope: Deep industry expertise and g

  11. Slide 11: Differentiated Competitive Position

    Differentiated Competitive Position Boutiques Senior Limited Advisory is Banker Geographic Core Business Focus Focus Minimal Capital Markets Presence Generalist Coverage Industry Sector Independent Expertise Integrated/Universal Banks Proprietary Lending Global Capital Presence/ Principal Markets Mu

  12. Slide 12: Competitive Benchmarking – Recent Performance

    Competitive Benchmarking – Recent Performance 2005 YTD Financial Advisory Revenue Growth1 YTD Fin. Adv. Revenue1 LAZ 56% $572 JPM 34% 922 C 33% 853 MER 23% 533 BSC 1 6% 286 MWD 1 5% 999 LEH 1 0% 490 GHL 8% 91 GS 3% 1,359 0% 10% 20% 30% 40% 50% 60% 1 Represents M&A and Restructuring advisory revenue.

  13. Slide 13: Competitive Benchmarking – PEG Ratios

    Competitive Benchmarking – PEG Ratios Selected Comparable PEG Ratios1 Price / IBES EPS Estimate EPS Long PEG Ratios CY2005E CY2006E Term Growth CY2005E CY2006E Large Cap. Broker/Dealers2 Median 11.8x 11.3x 12.0% 0.98x 0.94x Greenhill 32.4x 27.6x 16.0% 2.03x 1.73x Mid and Small Cap. Asset Managers3 M

  14. Slide 14: M&A Activity Resurging

    M&A Activity Resurging M&A as % of U.S. Market Cap 13% Mean: 8% 12% 12% 12% 11% 10% 10% 9% 9% 8% 8% 8% 7% 6% 6% 6% 6% 4% 4% 4% 3% 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 * 05 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 * 2005 M&A represents annualized year-to-d

  15. Slide 15: Selected Recently Announced M&A Transactions

    Selected Recently Announced M&A Transactions1 Client Origin/ Client Transaction Description Counterparty Origin Size (bn) Potential offer for Endesa € 22.5 Merger with Lincoln Financial $7.5 Merger with WellPoint $6.6 Offer for Skandia £3.3 Sale to Brandywine Realty Trust $3.3 Sale to Whirlpool $2.7

  16. Slide 16: Diversified Across Verticals

    Diversified Across Verticals 2004 - 2005 YTD M&A Advisory Revenue by Industry¹ Consumer Gov't 12% 1% Real Estate 8% TMT 24% Power & Energy 6% Life Sciences Industrials 8% FIG 24% 17% 1 Year to date as of September 30, 2005. 15

  17. Slide 17: Selected Active Restructuring Assignments

    Selected Active Restructuring Assignments Air Transportation Stabilization Board 16

  18. Slide 18: Restructuring Opportunity

    Restructuring Opportunity ($ in millions) Global High Yield Issuance versus Corporate Defaults Issuance Defaults $300,000 $180,000 High Yield Issuance $250,000 $150,000 Corporate Defaults $200,000 $120,000 $150,000 $90,000 $100,000 $60,000 $50,000 $30,000 $0 $0 84 85 86 87 88 89 90 91 92 93 94 95 96

  19. Slide 19: Asset Management

    Asset Management 18

  20. Slide 20: What Distinguishes Our Asset Management Business?

    What Distinguishes Our Asset Management Business? „ AUM: $87bn; LAM ($76bn), LFG ($10bn) and FPG ($1bn) „ Scope: Global reach with local presence − Research, portfolio management, mandates, clients and offices in North America, Europe, Asia and Australia „ Diversification: Broadly diversified produc

  21. Slide 21: What Is The Geographic Mix Of Our $87bn AUM?

    What Is The Geographic Mix Of Our $87bn AUM? AUM by Office Domicile1 Local Presence Asia-Pacific 10% „ New York „ Minneapolis North Japan Korea Australia America 2% < 1% „ San Francisco Italy 8% 1% Germany „ London „ Frankfurt/ Europe 34% 10% Europe Hamburg „ Milan „ Paris (LFG) U.K. North 11% Ameri

  22. Slide 22: What Is The Mix Of Our $87bn AUM by Product?

    What Is The Mix Of Our $87bn AUM by Product? AUM by Product1 Alternative Cash Investments 2% U.S. Fixed Merchant 4% Income Banking 3% 1% Global/ International Fixed Income Non-U.S. and 10% Regional Equity 46% U.S. Equity 15% Global Equity 19% 1 Breakdown as of September 30, 2005. 21

  23. Slide 23: Pro Forma Third Quarter and First Nine Months 2005 Financials

    Pro Forma Third Quarter and First Nine Months 2005 Financials Note: Lazard believes that pro forma results assuming full exchange of outstanding exchangeable interests provide the most meaningful basis for comparison among present, historical and future periods. A reconciliation to GAAP is provided

  24. Slide 24: Pro Forma Q3 2005 and First Nine Months 2005 Highlights

    Pro Forma Q3 2005 and First Nine Months 2005 Highlights „ EPS1 up 210% to $0.52 in Q3; up 132% to $1.15 YTD „ Financial Advisory − M&A revenue up 78% 3Q; up 57% YTD − Financial Restructuring revenue up significantly in 3Q and YTD „ Asset Management − AUM of $86.6bn up 4% from end of 2Q 2005 − Averag

  25. Slide 25: Pro Forma Operating Revenues – 3Q 2005 vs. 3Q 2004

    Pro Forma Operating Revenues – 3Q 2005 vs. 3Q 2004 ($ in millions) 2004 2005 Increase/(Decrease) Financial Advisory M&A $105.1 $187.2 $82.1 78% Financial Restructuring 20.8 40.0 19.2 92% Corporate Finance & Other 5.8 30.6 24.8 432% Total 131.7 257.8 126.1 96% Asset Management Management & Other Fees

  26. Slide 26: Pro Forma Net Income Summary – 3Q 2005 vs. 3Q 2004

    Pro Forma Net Income Summary – 3Q 2005 vs. 3Q 2004 ($ in millions, except per share figures) 2004 2005 % Increase Operating Revenues $229.3 $374.3 63% Other Interest Expense - Net (19.3) (17.4) 1 Net Revenues 210.0 356.9 Operating Expenses: Compensation and Benefits 131.9 215.2 63% Non-Compensation

  27. Slide 27: Pro Forma Operating Revenues – 9 Mos. 05 vs. 9 Mos. 04

    Pro Forma Operating Revenues – 9 Mos. 05 vs. 9 Mos. 04 ($ in millions) 2004 2005 Increase/(Decrease) Financial Advisory M&A $314.1 $491.6 $177.5 57% Financial Restructuring 52.5 80.4 27.9 53% Corporate Finance & Other 40.7 54.6 13.9 34% Total 407.3 626.6 219.3 54% Asset Management Management & Other

  28. Slide 28: Pro Forma Net Income Summary – 9 Mos. 05 vs. 9 Mos. 04

    Pro Forma Net Income Summary – 9 Mos. 05 vs. 9 Mos. 04 ($ in millions, except per share figures) 2004 2005 % Increase Operating Revenues $720.4 $969.9 35% Other Interest Expense - Net (58.3) (56.5) 1 Net Revenues 662.1 913.4 Operating Expenses: Compensation and Benefits 414.2 557.7 35% Non-Compensat

  29. Slide 29: Pro Forma Operating Expenses – 9 Mos. 05 vs. 9 Mos. 04

    Pro Forma Operating Expenses – 9 Mos. 05 vs. 9 Mos. 04 ($ in millions) % of Operating Revenues 2004 2005 2004 2005 Compensation & Benefits: Total with MD Compensation $591.3 $557.7 82.1% 57.5% Reduction (177.1) - 1 Total $414.2 $557.7 57.5% 57.5% Non-Compensation: Premises and Occupancy $54.4 $50.5

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