Lazard LTD.

Good morning and welcome to the Lazard's third quarter and nine-month 2021 earnings conference call. This call is being recorded. Currently, all participants are in a listen-only mode. Following the marks, we will conduct a question and answer session. Instructions will be provided at that time. If anyone should require assistance during the call, please press the star key followed by the zero on your touchtone phone. At this time, I would like to turn the call over to Alexandra Dragman. Lazard's Head of Investor Relations and Corporate Sustainability. Please go ahead.

Thank you, and good morning. Welcome to Lazard's earnings call for the third quarter and first nine months of 2021. I'm Alexandra Degnan, the company's Head of Investor Relations and Corporate Sustainability. In addition to today's audio comments, we have posted our earnings release and an investor presentation, which you can access 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, or achievements to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, those factors discussed in the company's SEC filings, which you can access on our website. Lazard assumes no responsibility for the accuracy or completeness of forward-looking statements and assumes no duties to update these forms. In today's discussion, it also includes certain non-GAAP financial measures that we believe are meaningful when evaluating the company's performance. The 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 Kenneth Jacobs, Lazard's Chairman and Chief Executive Officer, and Evan Russo, our Chief Financial Officer. Evan will start the discussion with an overview of our financial results, then Ken will provide his perspective on the outlook for our business. After that, we will open the call to questions. Now I'll turn the call over to Evan.

Good morning. Today we reported record operating revenue for the third quarter and first nine months of 2021, reflecting strong results across the firm. Third quarter revenue was a record $702 million, up 23% from a year ago. Revenue for the first nine months was a record $2.2 billion, up 30% year over year. In financial advisory, record third quarter revenue of $381 million increased 24% from last year's period, reflecting broad-based activity across sectors, market cap, and regions. Advisory revenue was driven primarily by M&A completion in the Americas and in Europe. A high percentage of these were in the $1 billion to $10 billion range. Private equity-related activity is increasing. Here to date, our advisory revenue from transactions involving financial sponsors has more than doubled. Our private capital advisory franchise continues to show strength as we advise financial sponsors globally on fundraising and innovative secondary market solutions. As we've noted on previous calls, restructuring activity has been relatively subdued, reflecting the high level of liquidity across markets. Our sovereign and capital markets advisory businesses remain active, advising governments and corporations on financing, capital structure, and shareholder strategy. Overall, our advisory activity is at an all-time high, and we currently expect record fourth-quarter revenue for financial advisory, with strong momentum going into 2022. Asset management third-quarter operating revenue of $311 million is increased 19% from last year's period, reflecting a larger base of assets under management. Average AUM reached a record high of $278 billion for the third quarter, 23% higher than a year ago and 1% higher on a sequential basis. As of September 30th, we reported AUM at quarter end of $273 billion, 20% higher than last year's period and 2% lower on a sequential basis. The decrease was primarily driven by negative foreign exchange movement of $3.3 billion and net outflows of $2.3 billion, partly offset by market appreciation of $0.8 billion. The quarter's net outflows were primarily from equities, partly offset by net inflows in fixed income and alternatives. Gross inflows continue to be healthy across our platforms. As of October 22nd, AUM increased to approximately $279 billion, driven primarily by market appreciation of $6.6 billion and positive foreign exchange movement of $0.9 billion, partly offset by net outflows of $1.1 billion. Our pattern of investment performance has been good this year. Approximately two-thirds of our composite strategies are outperforming their benchmarks on a one-year basis. Our recent investments in thematic, fixed income, and alternative platforms, as well as their performance, position them well for growth. We see significant opportunities for growth in both of our businesses. In asset management, we continue to invest in people, technology, and our distribution effort, as well as the development of new and existing funds and the scaling up of our platforms. These include The recent addition of a long-short equity team focused on the technology, media, and telecom sector, the launch of a global investment-grade convertible bond fund, and a new quantitative small-cap fund. In addition, we have recently made senior hires in global marketing, in ESG and sustainability, and to support the expansion of U.S. and European distribution. We continue to see substantial opportunities to recruit talented investment teams adding strategies that are complementary to our existing platforms. In financial advisory, we are executing on our growth strategy with an elevated pace of strategic recruiting, especially in high-growth sectors such as biopharma, fintech, alternative energy, and private capital. While we continue to focus on internal promotes, year-to-date we have made more than 20 senior hires, including MDs and senior advisors. Now turning to expenses. Even as we invest for growth, we remain focused on cost discipline. Our adjusted non-compensation ratio for the third quarter was 16.6% compared to 18.1% in last year's third quarter. Non-compensation expenses were 13% higher than the same period last year, reflecting increased business activity and technology investments. We continue to accrue compensation expense at a 59.5% adjusted compensation ratio in the third quarter. Regarding taxes, our adjusted effective tax rate in the third quarter was 25.1%. For the first nine months of the year, it was 26.2%. We continue to expect this year's annual effective tax rate to be in the mid-20% range. Lazard continues to generate strong cash flow, which supports return of capital to shareholders. In the third quarter, we returned $103 million, which included $52 million in share repurchases. During the quarter, we bought back 1.1 million shares of our common stock at an average price of $46.01 per share. As of September 30th, our total outstanding share repurchase authorization was $314 million. Penn will now provide perspective on our outlook.