Lazard, Inc. · NYSE:LAZ
Lazard — Q2 2006 Earnings Presentation
33 slides from Lazard's earnings presentation, August 2006
Slide 1: Company Overview
Company Overview August 2006
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
Slide 3: What Makes Lazard Special?
What Makes Lazard Special? Preeminent independent, global M&A franchise Asset management business with positive momentum, winning new business with expanded product offerings 150+ year presence in Europe and the U.S. People, people, people - elite MD group with significant equity stakes In
Slide 4: Our Business
Our Business $1,358m 2005 operating revenue1 ($762m 1H06) LAZARD 2,166 employees2,3 Offices in 29 cities Established 1848 in 16 countries2 Financial Advisory Asset Management $865m 2005 revenue1 $464m 2005 revenue1 ⎯ $484m 1H06 revenue ⎯ $249m 1H06 revenue M&A, Restructuring, Corporate
Slide 5: Our Model
Our 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% annually and the targe
Slide 6: Financial Performance Highlights: 1H06
Financial Performance Highlights: 1H06 Achieved record first half operating revenue of $762 million, up 28% from 1H05 Increased operating income by 72% to $163 million Increased pro forma net income on a fully exchanged basis by 82% to $115 million or $1.11 per share (diluted) Financial Adviso
Slide 7: Business Balanced Across Geography And Product Lines
Business Balanced Across Geography And Product Lines 2005 – 2006 YTD Revenue by 2005 – 2006 YTD Revenue by Geography Business Line Rest of World 4% Asset Europe North Management 42% America 35% Financial 54% Advisory 65% Note: 2005 full year through June 30, 2006. Represents operating revenue from F
Slide 8: Growth Opportunities
Growth Opportunities Financial Advisory Asset Management Continued demand for Selected international/global independent advice products Increased productivity of Regional products senior bankers Hedge funds Robust M&A market Merchant banking Well-positioned for cross- High net wort
Slide 9: Competitive Benchmarking – PEG Ratios
Competitive Benchmarking – PEG Ratios Selected Comparable PEG Ratios1 Price / IBES EPS Estimate EPS Long PEG Ratios CY2006E CY2007E Term Growth CY2006E CY2007E 2 Large Cap. Broker/Dealers Median 10.7x 10.3x 12.0% 0.90x 0.86x Greenhill 22.6x 21.4x 17.0% 1.33x 1.26x Mid and Small Cap. Asset Managers3
Slide 10: Financial Advisory
Financial Advisory 9
Slide 11: Financial Advisory: Distinguishing Characteristics
Financial Advisory: Distinguishing Characteristics GLOBAL SCOPE… …Differentiated presence INDEPENDENCE… in major business capitals RELATIONSHIPS… …Objective advice free worldwide combines …Strong and enduring from structural conflicts multinational capabilities relationships built on that can exist
Slide 12: Differentiated Competitive Position
Differentiated Competitive Position Boutiques ital Lim ima l Cap nce s Geo ited Min ets Prese i s o r y i n e ss Foc graphi Mark i A d v e Bu s us c Cor Generalist Senior Coverage Banker Focus Integrated/Universal Banks Industry Independence Sector Expertise al Pro cip Len prieta Prin ding di n r y
Slide 13: Key Highlights
Key Highlights ($ in millions) ($ in millions) Financial Advisory Revenue Highlights M&A core growth engine $600 $484 ⎯ 29% growth in 1H06 500 $369 ⎯ 9% growth in 2Q06 400 $262 Bolstered by significant 300 +31% $212 growth in Private Fund 200 Advisory Group revenue 100 +24% Market leader in re
Slide 14: Selected Recently Announced M&A Transactions
Selected Recently Announced M&A Transactions Client Origin/ Client Transaction Description Counterparty Origin Size Merger with Suez €37.8 Merger of equals with Autostrade €22.9 Sale of its Consumer Healthcare business to J&J $16.6 Cerberus Consortium acquisition of controlling stake in GMAC $14.0 M
Slide 15: Diversified Across Industries and Geographies
Diversified Across Industries and Geographies 2005 – 2006 YTD M&A 2005 – 2006 YTD Fin. Adv. Revenue by Industry Revenue by Geography Power & Energy Gov't Rest of Real 1% 6% World Estate 2% 8% Industrials 24% FIG North 14% Europe America 46% 52% TMT 24% Consumer Life 12% Sciences 11% Note: 2005 full
Slide 16: M&A Activity Poised for Growth
M&A Activity Poised for Growth M&A as % of U.S. Market Cap 15% 13% 13% Mean: 8% 12% 12% 11% 10% 10% 9% 8% 8% 8% 8% 7% 7% 7% 6% 6% 4% 4% 4% 3% 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 Sources: Thomson Financial
Slide 17: Selected Current Restructuring Assignments
Selected Current Restructuring Assignments Automotive Airlines Other 16
Slide 18: Restructuring Opportunity
Restructuring Opportunity ($ 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 $0 84 85 86 87 88 89 90 91 92 93 94 95 96
Slide 19: Asset Management
Asset Management 18
Slide 20: Asset Management: Distinguishing Characteristics
Asset Management: Distinguishing Characteristics GLOBAL REACH WITH LOCAL PRESENCE... …Research, portfolio management, BROADLY DIVERSIFIED mandates, clients and offices in North TALENTED TEAM… PRODUCT MIX... America, Europe, Asia and Australia… …650 employees around the …Equities, fixed income and wo
Slide 21: Key Highlights
Key Highlights ($ in millions) Asset Management Revenue Highlights $300 Steady progress $249 Winning new mandates with $216 expanded product offerings 200 +15% ⎯ Attracting assets in global $130 and regional products $109 100 Forging high profile sub- +19% advisory relationships Additional p
Slide 22: Geographic Mix
Geographic Mix AUM by Office Domicile1 Local Presence Asia-Pacific 9% New York Minneapolis Japan Korea North Australia America Italy 1% < 1% San Francisco 8% 2% Germany London Frankfurt/ Europe 39% 10% Europe Hamburg North Milan Paris America (LFG/FPG) U.K. 52% 15% Tokyo Seoul Asia
Slide 23: Product Mix
Product Mix AUM by Product Alternative Cash Merchant Investments 2% Banking U.S. Fixed 4% 1% Income 2% Global/ International Fixed Income Non-U.S. and 9% Regional Equity U.S. Equity 48% 14% Global Equity 20% $94bn AUM 22
Slide 24: First Half and Second Quarter 2006 Financials
First Half and Second Quarter 2006 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 in the 23 schedu
Slide 25: 1H06 Highlights
1H06 Highlights Net income1 up 82% to $115m or $1.11 per share (diluted) Financial Advisory ⎯ M&A revenue of $392m up 29% from 1H05 (represents best first half performance ever) ⎯ Corporate Finance and Other revenue of $58m up over 2x 1H05 (increase reflects a number of large fund closings in 2Q
Slide 26: Operating Revenue – 1H06 vs. 1H05
Operating Revenue – 1H06 vs. 1H05 ($ in millions) Pro Forma 2006 2005 Increase/(Decrease) Financial Advisory M&A $391.8 $304.3 $87.5 29% Financial Restructuring 34.6 40.4 (5.8) (14%) Corporate Finance & Other 57.8 24.4 33.4 136% Total 484.2 369.1 115.1 31% Asset Management Management Fees 216.0 192.
Slide 27: Net Income Summary – 1H06 vs. 1H05
Net Income Summary – 1H06 vs. 1H05 ($ in millions, except per share figures) Pro Forma 2006 2005 % Increase Operating Revenue $762.0 $595.7 28% Other Interest Expense - net (38.8) 1 (39.2) Net Revenue 723.2 556.5 Operating Expenses: Compensation and Benefits 434.3 342.5 27% Other Operating Expense 1
Slide 28: Operating Expenses – 1H06 vs. 1H05
Operating Expenses – 1H06 vs. 1H05 ($ in millions) Pro Forma % of Operating Revenue 2006 2005 2006 2005 Compensation & Benefits: Total $434.3 $342.5 57.0% 57.5% Other Operating Expense: Premises and Occupancy $34.1 $33.9 Professional Fees 35.4 20.7 Travel & Entertainment 20.0 20.1 Other 36.6 44.8 To
Slide 29: Pro Forma Operating Margin by Business
Pro Forma Operating Margin by Business ($ in millions) FINANCIAL ADVISORY ASSET MANAGEMENT 1H06 FY2005 FY2004 1H06 FY2005 FY2004 Operating Revenue $484.2 $865.3 $655.7 $249.0 $463.7 $417.8 Operating Expenses 355.9 651.8 548.5 191.4 360.4 334.2 Operating Income $128.3 $213.5 $107.2 $57.6 $103.3 $83.6
Slide 30: Operating Revenue – 2Q06 vs. 2Q05
Operating Revenue – 2Q06 vs. 2Q05 ($ in millions) Pro Forma 2006 2005 Increase/(Decrease) Financial Advisory M&A $197.9 $182.0 $15.9 9% Financial Restructuring 21.0 16.3 4.7 29% Corporate Finance & Other 43.2 13.4 29.8 222% Total 262.1 211.7 50.4 24% Asset Management Management Fees 112.2 97.0 15.2
Slide 31: Net Income Summary – 2Q06 vs. 2Q05
Net Income Summary – 2Q06 vs. 2Q05 ($ in millions, except per share figures) Pro Forma 2006 2005 % Increase Operating Revenue $410.8 $330.1 24% Other Interest Expense - net (23.9) 1 (19.8) Net Revenue 386.9 310.3 Operating Expenses: Compensation and Benefits 234.1 189.8 23% Other Operating Expense 6
Slide 32: Operating Expenses – 2Q06 vs. 2Q05
Operating Expenses – 2Q06 vs. 2Q05 ($ in millions) Pro Forma % of Operating Revenue 2006 2005 2006 2005 Compensation & Benefits: Total $234.1 $189.8 57.0% 57.5% Other Operating Expense: Premises and Occupancy $17.5 $17.5 Professional Fees 20.5 11.8 Travel & Entertainment 11.1 11.1 Other 19.0 23.1 To
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