Lazard, Inc. 2026 Q3 Earnings Call

Good morning, and welcome to Lazard's earning call for the third quarter and first nine months of 2026. I am William Murdock, Head of Strategy and Investor Relations. 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. There are important factors that could cause our actual results, level of activity, performance, achievements, or other events to differ materially from those expressed or implied by the forward-looking statements, including but not limited to those factors discussed in our company's SEC filings, which you can access on our website. Lazard assumes no responsibility for the accuracy or completeness of these forward-looking statements and assumes no duty to update them.

Please also note that, unless we state otherwise, all financial measures we discuss today are non-GAAP adjusted financial measures. We believe these non-GAAP financial measures are meaningful when evaluating the company's performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measures is provided in our earnings release and investor presentation. Hosting our call today are Peter Orszag, Lazard's Chief Executive Officer and Chairman, and Tracy Farr, Lazard's Chief Financial Officer. After our prepared remarks, Chris Hogbin, Chief Executive Officer of Asset Management, will join as we open for questions. I will now turn the call over to Peter.

Thank you, William, and thank you to everyone for joining our call today. Our Lazard 2030 strategy continues to progress as we planned, with strong underlying momentum across the firm, very encouraging forward indicators, and high internal morale and cultural alignment. Additionally, now that we have obtained the necessary regulatory approvals, we are planning to close our acquisition of Campbell Lutyens and launch our third global business, Lazard CL, in early November, creating the leading private capital advisory platform globally. Turning to our results, firm-wide adjusted net revenue in the third quarter increased 11% year over year, with increasing client activity across both businesses. In financial advisory, we achieved record third quarter revenue as our investments in the business are starting to translate into results.

Over the past three years, we have hired or promoted 80 Managing Directors in North America across focused areas of opportunity, healthcare, industrials, consumer, media, entertainment, and sports, technology, and power, energy, and infrastructure. As we emerge from the J curve period we have previously described, our existing MDs in the U.S., along with these additions, produced record revenue in the Americas in both the third quarter and first nine months of this year. Our momentum continues to grow in financial advisory, which is reflected in an array of forward indicators. Globally, our announced league table position is the best that it has been in over a decade. Conflict clearances are up over 30% year-over-year on a dollar-weighted basis and up more than 85% for deals above $5 billion.

Significantly, these conflict clearance trends continued to show strength in the third quarter, with year-over-year growth in the third quarter alone. Our weighted pipeline for 2027 is now two times our 2026 pipeline at this time last year. While the pace of adding new MDs in 2026 will be below the exceptional pace of 2025, we see ongoing opportunities to attract talent to our financial advisory platform. Since our last earnings call, we have announced 10 additional top-quality Managing Directors in areas of strategic importance, including a new head of defense and emerging technology, a senior banker returning with his team to Lazard in Paris, and the expansion of our advisory business with a new senior hire in Switzerland.

In private capital advisory, we continue to anticipate Lazard CL will generate approximately $500 million of revenue and will be accretive to earnings in 2027, even before accounting for potential synergies. The Campbell Lutyens business is performing ahead of the assumptions that support of the acquisition, and we already see early signs of synergies with real estate, vendors, and IT. Our private capital advisory group, along with the team at Campbell Lutyens, together will comprise the leading global positions in primary fundraising and secondary advisory. Lazard CL will deliver dedicated fundraising, secondary advisory, and GP capital advisory for clients across all asset classes and all major markets, infrastructure, private credit, private equity, and real estate across the U.S., Europe, the Middle East, and Asia Pacific. The more time our teams spend together, the more excited we become about both the cultural fit and the strategic opportunity.

With that foundation, we expect the broader connectivity between our M&A, restructuring, and capital solutions businesses to compound over time with clear potential for further upside. Conditions remain quite favorable for client activity despite the rise in interest rates and ongoing global uncertainty. In financial advisory, companies continue to pursue scale amid rapid technological change to gain or defend leading sector positions, and vertical integration is increasingly key to addressing supply chain shocks. A more constructive regulatory environment is supporting activity overall, and our forward indicators would be even more encouraging if private equity M&A were to become more active.

The power of our renewed investment in our traditional large-cap strategic coverage, alongside our expanded private capital efforts over the past few years, is underscored on a year-to-date basis by our best league table standing in over a decade and our highest share of advisory revenue coming from private capital that we've ever had. We are confident that our ability to play to win for clients in both the largest strategic transactions and across private capital activity is promising for the future growth of our advisory businesses. Turning to asset management. Gross inflows reached a record $54 billion for the first nine months of this year, demonstrating progress from our focused sales and distribution efforts. Our won but not yet funded pipeline is robust, and we remain on track to deliver positive net flows for the year.

The work we've done under our new leadership team to strengthen the platform is reflected in the continued improvement in our investment performance. As of quarter end, 70% of client AUM was outperforming stated benchmarks over one year and 67% over three years, which is our best performance in five years. Strong, consistent performance is the foundation of this business, and this progress positions us well to compete for new mandates in the future. In summary, we remain firmly on track to achieve the objectives of our long-term growth strategy. Our progress is underpinned by our commercial and collegial culture and by our adoption of AI to transform how we work and deliver for clients. Based on a recent survey that we conduct annually, colleagues' pride and happiness working at Lazard and willingness to recommend our firm to others remained at all-time highs.

We are pleased that our employees identified the firm's AI tools training and pace of adoption as significant strengths that are improving productivity and reinforcing confidence in our opportunities ahead. I'd like to thank my colleagues for their commitment and hard work as we advance our Lazard 2030 strategy together. Let me now turn the call over to Tracy, who will cover our financial results and provide details on our operational efforts, and then we will take your questions.

Thank you, Peter Orszag. Financial advisory adjusted net revenue was $465 million for the third quarter and $1.3 billion for the first nine months of 2026. This quarter's revenue includes pull forwards for transactions that closed just after September 30th, that are in line with our two-year average. Our record third quarter revenue was driven primarily by M&A, with record revenue for the third quarter and first nine months of the year in both the Americas and the U.K., reflecting investments we have made in lateral hiring, our exceptional existing talent, and the strength of our franchise across our transatlantic footprint. With sustained client engagement and momentum across the business, completed transactions include Corteva Agriscience on its $50 billion spin-off of Vylor, MasTec's $1.7 billion acquisition of Superior Group, and Geneta Health on its sale to R1.

Recently announced transactions include Emera on its merger with Canadian Utilities for a combined enterprise value of approximately 72 billion Canadian dollars, OCS Group's proposed £3.1 billion acquisition, and Vanguard's acquisition. Liability management and restructuring assignments include Braskem SA, Victoria, and QVC. In private capital advisory, recent assignments include advising Blue Sea Capital, Exponent Private Equity, and M-One Capital on continuation, and Peninsula Capital Management on the closing of its seventh fund. Turning to asset management. Adjusted net revenue was $330 million for the third quarter, $970 million for the first nine months of the year. Management fees were a record $321 million for the quarter, up 18% year-over-year, and $927 million for the first nine months, up 22% compared to the same period last year. Management fees have increased in each quarter this year, and Q3 marks the sixth consecutive quarter of sequential growth.

As of September 30th, we reported AUM of $284 billion, 7% higher than September 2025 and approximately even with the prior quarter. During the quarter, we had market appreciation of $1.9 billion, foreign exchange depreciation of $0.2 billion, and net outflows of $2.3 billion. During the quarter, we had market appreciation of $1.9 billion, foreign exchange depreciation of $0.2 billion, and net outflows of $2.3 billion. Average AUM for the quarter was $287 billion, 11% higher than the third quarter of 2025. Client demand is increasingly visible in the strategies we have prioritized. Lazard Advantage, our quantitative equity platform, continues to attract significant client interest, and we also have ongoing strong flows into our emerging markets and global listed infrastructure strategies.