Lazard, Inc. · NYSE:LAZ

Lazard — Q2 2005 Earnings Presentation

31 slides from Lazard's earnings presentation, August 2005

  1. Slide 1: Lazard August 2005

    LAZARD August 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 „ The investments we have made in our Financial Advisory business are yielding positive results − Total operating revenue up 21% and M&A revenue up 46% in first half of 20051 − Increasing productivity of recent senior banking hires − Several recent new restructuring assignments „ We continu

  4. Slide 4: What is Lazard?

    What is Lazard? „ $1.1bn net revenue1 LAZARD „ 2,250 employees2 „ Offices in 29 cities Established 1848 in 16 countries2 Financial Advisory Asset Management „ $655m revenue1 „ $417m revenue1 „ M&A, Restructuring, Other „ $83bn in AUM2 Financial Advisory „ 132 MDs, 510 professionals2 „ 39 MDs, 271 pr

  5. Slide 5: Our Simple Financial Model

    Our Simple Financial Model Compensation: Policy targets maximum 57.5% of operating revenue Other Expenses: Targeting 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

  6. Slide 6: Recent Growth Drivers

    Recent Growth Drivers Core Growth Engines M&A Asset Management +46% +25% +1 5% +8% 2003 - 2004 2005 YTD 2003 - 2004 2005 YTD 1 Rev. Growth Rev. G rowth Growth in Mgmt. G rowth in Mgmt. and Other Fees and Other Fees 1 1 Growth over same period in previous year. 5 Year to date as of June 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 5% Asset North Management America Financial Europe 37% 46% Advisory 49% 63% 1 Includes net revenue from Financial Advisory and Asset Management segments (e

  8. Slide 8: Growth Opportunities

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

  9. Slide 9: Financial Advisory

    LAZARD Financial Advisoty

  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: $655m1 in revenue ranks us among bulge bracket firms „ Scope: Deep industry expertise and globa

  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 JPM 49.5% LAZ 43.3% MER 22.7% C 1 9.3% MWD 9.9% BSC 5.5% GHL 4.6% GS (8.3%) LEH (1 0.1 %) (15%) (5%) 5% 15% 25% 35% 45% 55% 1 Growth over same period in previous year. Includes M&A and Restructuring advisory re

  13. Slide 13: Competitive Benchmarking – PEG Ratios

    Competitive Benchmarking – PEG Ratios Selected Comparable PEG Ratios1 Price / IBES EPS Estimate IBES Long PEG Ratios CY2005E CY2006E Term Growth CY2005E CY2006E Large Cap Broker/Dealers2 Median 11.7x 10.6x 12.0% 0.98x 0.88x Greenhill 27.6x 22.1x 16.0% 1.73x 1.38x Mid and Small Cap Asset Managers3 Me

  14. Slide 14: M&A Resurging But Activity Still Well Below Historical Levels

    M&A Resurging But Activity Still Well Below Historical Levels M&A as % of US Market Cap 1 3% 1 2% Mean: 8% 11% 11% 11% 1 0% 9% 9% 9% 8% 8% 7% 7% 6% 7% 6% 5% 4% 4% 3% 3% 84 85 86 87 88 93 94 89 90 91 92 95 96 97 98 99 00 01 02 03 04 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 Sourc

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

    Selected Recently Announced M&A Transactions1 Client Origin/ Client Transaction Description Counterparty Origin Size (bn) Acquisition of UFJ Holdings $41.1 Merger with Cinergy $14.3 Sale to consortium $11.8 Merger with Verizon $10.3 Sale of ClearWave to Vodafone $4.4 Sale of stake in Basell to Acces

  16. Slide 16: Diversified Across Verticals

    Diversified Across Verticals 2004 - 2005 YTD M&A Advisory Revenue by Industry¹ Consumer Gov't 1 3% 1% Real Estate 9% TMT 22% Power & Energy 6% Industrials 23% Life Sciences FIG 7% 1 9% 1 Year to date as of June 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 95 96 84 85 86 7 8 9 90 91 92 93 94 97

  19. Slide 19: Asset Management

    LAZARD Asset Management 18

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

    What Distinguishes Our Asset Management Business? „ AUM: $83 bn; LAM ($73 bn), LFG ($9 bn) and FPG ($1 bn) „ Scope: Global reach with local presence − Research, portfolio management, mandates, clients and offices in North America, Europe, Asia & Australia „ Diversification: Broadly diversified produ

  21. Slide 21: What Is The Geographic Mix Of Our $83 billion AUM?

    What Is The Geographic Mix Of Our $83 billion AUM? AUM by Office Domicile1 Local Presence Asia-Pacific 10% „ New York „ Minneapolis Japan Korea North Australia 3% America <1 % „ San Francisco Italy 7% 1% Germany „ London „ Frankfurt/ Europe 34% 1 0% Europe Hamburg „ Milan „ Paris (LFG) North U.K. Am

  22. Slide 22: What Is The Mix Of Our $83 billion AUM by Product?

    What Is The Mix Of Our $83 billion AUM by Product? AUM by Product1 Alternative Cash Investments U.S. Fixed 2% 4% Merchant Income Banking 3% Global/ 1% International Fixed Income 1 0% Non-U.S. and Regional Equity 45% U.S. Equity 1 5% Global Equity 20% 1 Breakdown as of June 30, 2005. 21

  23. Slide 23: Pro Forma 1H 2005 Financials

    Pro Forma 1H 2005 Financials 22

  24. Slide 24: 1H 2005 Highlights

    1H 2005 Highlights „ We believe that prior investments in our Financial Advisory business have positioned the firm for long-term growth „ M&A revenue benefiting from cyclical upturn in transactions − Strong M&A revenue growth versus peers „ Restructuring revenue stable − Several notable announced as

  25. Slide 25: How Will We Achieve Our Target 57.5% Compensation Expense Ratio?

    How Will We Achieve Our Target 57.5% Compensation Expense Ratio? ($ in millions) „ Reduction from historical compensation expense to meet target − $55m from non-recurring items − $45m from pension plan restructuring and 2004 headcount reduction − Any remaining reductions needed will be from MD discr

  26. Slide 26: Pro Forma Net Income Summary – 2Q 2005 vs. 2Q 2004

    Pro Forma Net Income Summary – 2Q 2005 vs. 2Q 2004 ($ in millions, except per share figures) 2004 2005 % Increase Operating Revenue $282.1 $330.1 17% Other Interest Expense (19.5) (19.8) Net Revenue $262.6 $310.3 Operating Expenses: Compensation and Benefits $162.2 $189.8 17% Non-Compensation 61.0 6

  27. Slide 27: Pro Forma Net Income Summary – 1H 2005 vs. 1H 2004

    Pro Forma Net Income Summary – 1H 2005 vs. 1H 2004 ($ in millions, except per share figures) 2004 2005 % Increase Operating Revenue $491.0 $595.7 21% Other Interest Expense (39.0) (39.2) Net Revenue $452.1 $556.5 Operating Expenses: Compensation and Benefits $282.3 $342.5 21% Non-Compensation 124.2

  28. Slide 28: Pro Forma Operating Revenue – 2Q 2005 vs. 2Q 2004

    Pro Forma Operating Revenue – 2Q 2005 vs. 2Q 2004 ($ in millions, except per share figures) 2004 2005 Increase / (Decrease) Financial Advisory: M&A $135.1 $182.0 $46.9 35% Financial Restructuring 13.5 16.3 2.8 20% Corporate Finance and Other 21.5 13.3 (8.2) (38%) Total $170.1 $211.6 $41.5 24% Asset

  29. Slide 29: Pro Forma Operating Revenue – 1H 2005 vs. 1H 2004

    Pro Forma Operating Revenue – 1H 2005 vs. 1H 2004 ($ in millions, except per share figures) 2004 2005 Increase / (Decrease) Financial Advisory: M&A $208.9 $304.3 $95.4 46% Financial Restructuring 31.7 40.4 8.7 27% Corporate Finance and Other 34.9 24.1 (10.8) (31%) Total $275.6 $368.8 $93.3 34% Asset

  30. Slide 30: Pro Forma Operating Expenses – 1H 2005 vs. 1H 2004

    Pro Forma Operating Expenses – 1H 2005 vs. 1H 2004 ($ in millions, except per share figures) % of Operating Revenue 2004 2005 2004 2005 Compensation and Benefits: Total with MD Compensation $391.0 $342.5 79.6% 57.5% Reduction (108.7) Pro Forma $282.3 $342.5 57.5% 57.5% Non-Compensation: Premises and

  31. Slide 31: Lazard

    LAZARD

Lazard — Q2 2005 Earnings Presentation on 6ix