Lazard LTD.

Good morning and welcome to Lazard's full year and fourth quarter 2022 earnings conference call. This call is being recorded. Currently, all participants are in a listen-only mode. Following the remarks, 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 telephone keypad. At this time, I will turn the call over to Alexandra Dagan, Lazard's Head of Investor Relations and Corporate Sustainability. Please go ahead.

Thank you, Gretchen. Good morning, and welcome to Lazard's earnings call for the fourth quarter and full year of 2022. I'm Alexandra Degnan, head of investor relations and corporate sustainability. In addition to today's audio comments, we've hosted our earnings release and an investor presentation 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 these forward-looking statements and assumes no duty to update these forward-looking statements. Today's discussion also includes certain non-GAAP financial measures that we believe are meaningful when evaluating the company's performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measure is provided in our earnings release and investor presentations. Hosting our call today are Kenneth Jacobs, Lizard's Chairman and Chief Executive Officer, and Marianne Vetsch, Lizard's Chief Financial Officer. Marianne 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, Ken and Mary Ann will be joined by Peter Orszag, Chief Executive Officer of Financial Advisory, and Evan Russo, Chief Executive Officer of Asset Management, as they open the call for questions. If you are currently on the call, please make sure your line is on mute. I'll now turn the call over to Mary Ann. Thanks, Sally, and good morning, everyone.

Today we reported fourth quarter 2022 operating revenue of $671 million. a 31% decrease from record revenue of $968 million in the fourth quarter of 2021. Operating revenue for full year 2022 was $2.8 billion, 12% lower than full year 2021. For context, this represents the second highest annual operating revenue in Lazard's history, following the firm's record operating revenue in 2021. In financial advisory, we've reported fourth quarter revenue of $404 million, down 34% from last year's fourth quarter. For the full year, operating revenue was $1.7 billion, 7% lower than record revenue in 2021. Despite the challenging market conditions of 2022, robust strategic M&A activity drove financial advisory to a record first nine months, with activity slowing during the final months of the year. While the pace of announcements and completions moderated amid rising macroeconomic uncertainty, our client engagement remains active across geographies. In restructuring, our discussions with clients are increasing as a result of rising interest rates and demand for liability management, and we are currently engaged on a number of assignments in both the U.S. and Europe. In asset management, fourth quarter operating revenue was $259 million 25% lower than the fourth quarter of 2021. Annual operating revenue was $1.1 billion, 17% lower than 2021, primarily reflecting lower average assets under management and lower incentive fees. Management fees and other revenue was $245 million for the fourth quarter, 18% lower than the prior year period, reflecting a 21% decrease in assets under management year over year, partly offset by a slight increase in the average fee rate. Management fees and other revenue was $1 billion for full year 2022, a 15% decrease from the prior year. 2022 was a year of significant market volatility, geopolitical tensions, and quantitative tightening, which manifested in lower valuations across asset classes globally. Although markets showed signs of improvement in the fourth quarter, investors reallocated portfolios at year-end to de-risk assets and increase liquidity. The strength of the U.S. dollar was also a sustained headwind for our asset management business, as approximately two-thirds of our AUM is held in non-U.S. dollar-denominated assets. As of December 31, 2022, we reported AUM of $216 billion, up 9% from September 30th. This increase was driven by market appreciation of $14.4 billion, foreign currency appreciation of $7.7 billion, and net outflows of $3.7 billion. Net outflows in the fourth quarter moderated significantly from the $6.7 billion in net outflows during the fourth quarter of 2021. Average AUM for the fourth quarter was $211 billion, a decrease of 23% from a year earlier. On a sequential basis, average AUM was essentially flat compared to the third quarter of 2022, reflecting stabilizing market conditions and the weaker U.S. dollar. As of January 27th, our AUM was approximately $230 billion, driven by market appreciation of $11 billion foreign currency appreciation of $2 billion, and net inflows of $200 million. Now turning to expenses. We accrued compensation and benefits expense at a 59.8% full-year adjusted ratio in 2022 compared to 58.5% in 2021. The 2022 ratio primarily reflects lower than anticipated advisory revenues in the fourth quarter along with investments to expand our businesses and to ensure we are well positioned to capitalize on market conditions when they improve. Our adjusted non-compensation expense for 2022 was $518 million, 10% higher than the prior year, reflecting the impact of increased travel and investments in technology. Our effective tax rate for full year 2022, as adjusted, was 25.7%, versus 23.9% in 2021. The year-over-year increase was primarily due to the geographic mix of our earnings. We expect our annual effective tax rate in 2023 to be in the mid-20% range. We generated strong cash flow in 2022, returning a record $936 million to shareholders, including $182 million in dividends AND 692 MILLION IN SHARE REPURCHASES. ADDITIONALLY, YESTERDAY WE DECLARED A QUARTERLY DIVIDEND OF 50 CENTS PER SHARE. DURING THE FOURTH QUARTER, WE BOUGHT BACK 2.4 MILLION SHARES AT AN AVERAGE PRICE OF $32.91 PER SHARE. DURING THE FULL YEAR 2022, WE REPURCHASED A RECORD 19.7 MILLION SHARES AT AN AVERAGE PRICE OF $35.17 PER SHARE. Our weighted average share count as of the fourth quarter was 97 million shares, a reduction of 14% from the prior year quarter. Our total outstanding share repurchase authorization as of December 31st was $302 million. Ken will now provide his perspective on our performance and outlook.