Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time please press star zero and a member of our team will be happy to help you.

. . . . . .

.

Holtzman, Michael Holtzman, Michael Holtzman, Michael Holtzman . . . . . . . Thank you for your continued patience. Our meeting will begin shortly.

If you need assistance at any time, please press star zero and a member of our team will be happy to help you.

and many, many more. and many, many more. and many more. . . . Please stand by. Your program is about to begin.

Good morning and welcome to Lazard's third quarter and first nine months 2026 earnings conference call. This call is being recorded. Currently, all participants are in listen-only mode. Following the prepared remarks, we will conduct a question and answer session. Instructions will be provided at that time. If you should require assistance during the call, please press the star key followed by zero on your telephone keypad. At this time, I will turn the call over to William Murdoch, Lazard's head strategy and investor relations. Please go ahead.

William Murdoch Thanks, Chelsea. Good morning and welcome to Lazard's earning call for the third quarter and first nine months of 2026. I'm William Murdoch, 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, Lezard 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, Lizard's Chief Executive Officer and Chairman, and Tracy Farr, Lizard's Chief Financial Officer. After our prepared remarks, Chris Hogbin, Chief Executive Officer of Asset Management, will join as we open for questions. I'll now turn the call over to you.

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 jade nerve period we have previously described, our existing MDs in the U.S., along with these additions, produce record revenue in the Americas in both the third quarter and first nine months of this year. And 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's 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 continue 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 supported 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. Lizard 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 set and the strategic opportunities. 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 tables 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 one 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 remain 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. 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 close 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 UK, 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 AgroScience on its $50 billion spinoff of Barlore, MassTech's $1.7 billion acquisition of Superior Group, and Humana Help on its sale to R1. Recently announced transactions included Neuron on its merger with Kikian Utilities for a combined enterprise value of approximately $72 billion Canadian dollars. OCS Groups, O's, 3.1 Billion Pound Acquisition Groups, and Vanguard's Acquisition Groups. Liability Management and Restructuring Assignments includes Washington, El Paso, Nebraska, Mississauga, Victoria, and QVC. And in Private Capital Advisory, recent assignments include advising QVC Capital, Expo on Shared Equity, and M1 Capital on Continuation. And points with Capital Management on the closing of its fund pool. 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 and the Executive Order 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. Management fees, sorry, during the quarter, During the quarter, we had market appreciation of $1.9 billion, foreign exchange appreciation 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. Those are an advantage. Our quantitative equity platform continues to attract significant client interest, and we also have ongoing strong flows into our emerging markets and global infrastructure strategies. IDEQ, and our international quant ETF has grown to nearly $2 billion in AUM since launching last year, and we plan to expand our ETF platform with the launch of our first actively managed fixed income ETFs next month. Turning to firm-wide expenses, our adjusted non-compensation expense was $156 million for the third quarter, resulting in a non-compensation ratio of 19.3%. Our adjusted compensation expense was $562 million for the third quarter, resulting in a compensation ratio of 69.9%. Based on a constant deferral rate, we continued to take a conservative view to accruing compensation in the third quarter, and consistent with prior years, this quarter's accrual was unchanged from the first two quarters of this year. We continued to design our compensation programs to remain competitive and aligned with the long-term interests of our employees and our shareholders. Earlier this year, and as we previously discussed, we updated our vesting structure, and we are currently reviewing our deferral practices to reflect evolution in the market for our professionals and to enhance transparency for investors around awarded and recognized compensation. As part of our year-end process, we are considering a potential reduction in our deferral rate. This would accelerate the timing of compensation expense recognition on an accounting base, without altering the total compensation awarded, raising the reported compensation ratio by a few percentage points this year and reducing it thereafter. Our growth investments are paired with efforts to improve productivity and operating leverage across the firm. Let me share more detail on two initiatives underway to simplify our corporate and support functions and further embed AI across our work. First, we launched a project earlier this year to modernize and simplify how the firm operates Across our corporate and support groups globally, we have completed a broad survey of workflows and organizational structures. We are now reviewing vendors to advance implementation, which includes process automation and centralization of certain activities, shifting how work is delivered and staffed with a long-term objective to decouple expense from revenue growth. As we progress, we expect to provide specifics on how this effort will reduce expenses beginning in 2027. Next, we are increasingly embedding AI across the firm to augment our productivity and expand our market. In financial advisory, AI is helping us create more opportunities for junior bankers to take on expanded responsibilities. As we continue to increase our number of senior bankers over time, this higher productivity will be reflected in a decline in our total associate equivalent to MD ratio. In asset management, we have accelerated the implementation of agentic workflows, client servicing, and reporting, with plans to increase the use of AI and automation across the business. We see ongoing opportunity firm-wide with AI to deliver better outcomes for our clients. We see more opportunities for upward mobility for our people and improve our margin over time. Turning now to taxes, our adjusted effective tax rate for the third quarter was 38.1%. We expect the full year effective tax rate to be in the high 20% range. Regarding capital allocation in the third quarter of 2026, we returned $88 million to shareholders, including a quarterly dividend of $49 million and share repurchases of $33 million. We expect to continue buybacks throughout the remainder of the year, balancing investment and growth with further offsetting share issuances from compensation. In addition, yesterday we declared a quarterly dividend of $0.50 per share. Overall, we are confident in our outlook for long-term growth, and we are encouraged by the strong levels of client activity and the progress we are seeing across the firm, as highlighted in this quarter's results. Now we'll open the call for any questions.

Thank you. If you would like to ask a question at this time, please press star 1 on your telephone keypad. We ask that you please limit yourself to one question and one follow-up. If your question has been answered, you may remove yourself from the queue by pressing star 2. So that others may hear your questions clearly, we ask that you please pick up your handset for optimal sound quality. We'll take our first question from Jim Mitchell with Seaport. Please go ahead.

Good morning. Tracy, I can't help but ask about the comp ratio commentary. So when we think about shortening some of the accruals, I think you mentioned that that could affect this year's comp ratio, but should help next year. It seems like shorter deferrals would increase amortization even next year. So I just want to understand how you're thinking about the comp ratio trajectory, both in the fourth quarter and how that impacts both fourth quarter and next year. Thanks. Yeah, I want to answer this with actually making three points. First, when we think about this, keep in mind that the huge incentive here is to align this from an employee retention and attraction perspective. So I want to reiterate that first, that this is really what it is. It's using more cash in the year and lowering the amount of deferral that you're granting. That helps on a number of fronts. That helps effectively similar to a share buyback. It helps from a shared dilution perspective, and it also improves the quality of that ratio over time, as I think I've had some conversations with a host of the participants on this call. Regarding the impact like year to year, in the year of, without changing your total compensation on an awarded basis, that can remain the same, but on an accounting basis, you're accelerating some of the recognition into the current year. Now, what you're probably noting is that if you maintain that same deferral level, the impact of that isn't necessarily seen immediately, but it happens over a period of time. But that acceleration does come from somewhere, and that reverses over a period of time. Our current deferral policies, it probably reverses fully over a period of three years. But what that really does is it allows your comp ratio to decline more naturally over time, and, as I mentioned before, the real benefit is an improved quality of the ratio itself, greater ability for management to manage the comp ratio within a particular year, and a more attractive compensation policy for your employees. Does that make sense? No, that's very helpful. And maybe just on a broader point, I think, Peter, you mentioned Campbell Elections deal is a little bit ahead of what you were expecting when you announced the deal, still on track for $500 million next year. Can you just maybe dive into a little deeper on what you're seeing as the biggest synergy opportunities with Campbell Elections, whether revenue or expenses or both?

Yeah, so I think it is both. And I mentioned some of the areas, vendors, IT, et cetera, in the script on the cost side with a little extra scale. But on the revenue side, there is a significant amount of opportunity for in one direction M&A referrals, so from Lazard CL to our M&A bankers. and then in the opposite direction from our private capital coverage efforts into the fundraising business. So there is a there is a flywheel or circularity there that's very positive. Campbell-Lutchins in its prior instance did have a JV with a different investment bank that produced a notable level of M&A referrals. We anticipate even though we didn't assume that in underwriting the deal that we will be able to at least match and in all likelihood significantly beat that level of M&A referrals and that would be a significant uplift to the business.

Thank you. Our next question will come from Steven Chupak with Wolf Research. Please go ahead.

Hi, good morning and thanks for taking my questions. Maybe to start, just given the constructive public backlog and forward indicators you alluded to with the weighted pipeline being more than double year-ago levels, so we could clarify whether that backlog commentaries on a revenue or volume adjusted baseline and speak to any impacts on MIX and how that informs the revenue growth outlook for next year.

Sure. So let's separate the – well, actually, they're both on a revenue base, but the weighted pipeline being double what it is, slightly more than double what it is for next year, what it was for last year – for this year after this time last year, sorry, so just to be precise. Pipeline as of today, October 22nd for 2027 is slightly more than double what the 2026 pipeline was, weighted pipeline as of October 2026, 2025. October 22nd, 2025, sorry about that. But hopefully that's perfectly clear. And that's a revenue basis weighted by the probability of each fee being collected. So to give a hypothetical example, you have a deal that will pay, you know, to make it up $100, and, you know, we estimate the odds that it will close at various different points, that it will close during 2027 at 50%. Then for that metric, it would be counted as $50 on a probability-weighted basis. So that's that indicator. And then we've also provided numbers on the C-weighted conflict clearance trends. and those fee-weighted ones are revenue-based. In other words, a new mandate comes in and it's for $100, that would get counted at $100 as opposed to just counting new conflict clearance. On a count basis, we're also seeing very, very significant increases in conflict clearances that are especially in the larger transactions. But I think the more relevant thing is the weighted pipeline that I gave you and then the fee-weighted conflict clearances because obviously a conflict clearance at a $5 million fee is a much different thing than a conflict clearance at a $50 million fee.

Thanks for clarifying all that, Peter. And just for my follow-up, I did want to ask on the impact of higher rates both on conversations with sponsors and strategics. You know that you're seeing good pipeline momentum, but to what extent is that impacting the willingness of some of those clients to initiate deal processes here?

Yeah, look, I think let's just start with obviously in theory, higher rates should discourage deal flow. In practice, we're just not seeing that being a very significant factor right now. And I think the reason is that most of the imperative for transactions on the strategic side, especially on the alternative private equity in a second, is coming from the need for scale in this rapidly changing technology space. The desire to secure your supply chain vertically when you're subject to this new supply side era that we have spoken about. and the desire to reconfigure your geographic footprint in the wake of the fracturing of the global economy. Those are all such powerful forces that an increase of 20, 30, 40, whatever number of basis points on the long end of the The yield curve doesn't really materially affect your desire to get those transactions done, especially when you realize that the regulatory environment, particularly in the United States, may never be more auspicious to acting on what you've always wanted to do. I think that explains, along with the investments that we've been making and our emergence from the J-curve period, why the forward indicators are so, so strong. And again, I've been reading some of the commentary about deal slowing. That is not what we're seeing, for whatever it's worth. On the private equity side, the situation is a little bit different. We've all been waiting for the M&A from private equity to pick up. And I think that's just the interplay of two things, one of which is exacerbated by the rise in interest rates, which is a disconnect on valuation. The owners of the portfolio companies continue to await better valuations. Obviously, a rise in rates doesn't help on that front. But against that, you've got ongoing pressure from LTs, from investors to get some cash back and to have liquidity events. and truly the interplay of those two phenomenon that will drive when we see a significant uptick in private equity M&A. I would say that would only, that has to happen at some point and that would only further accelerate the forward indicators that we've shared with you. I'd also note that in the meanwhile, while we're all waiting for Godot a little bit on that private equity M&A moment, it is helping to drive additional activity in our secondaries business. So the Lazard CL leg of Lazard is further spurred during this moment in which the valuation disconnect component of the M&A seesaw is causing some degree of continued delay in significant private equity M&A activity.

Thank you. Our next question will come from Alex Bond with KBW. Please go ahead.

Hey, good morning, everyone. Thanks for taking the questions. Wanted to follow up around the large cap strategic outlook and activity levels there. So as you mentioned, Peter, it sounds like the industry expectation there is for volume to remain strong heading into 2027. But maybe if you could just expand upon what you view as driving your recent progress in this area. You spoke again to elevated conflict clearances for deals above $5 billion. But maybe how are you thinking about the opportunity to grow share here further in this area? and also how you think the ramping of the newer cohort of MDs can impact growth in this area specifically.

Let me back up for a second. One of the things that we wanted to do over the past three years, we've already talked about the J curve, but the other component of that that we needed to address is the business model, especially in the U.S., having a duality to it that often was not the case in the past. In the past, the U.S. business was very geared to only the large cap you know, public company M&A. And what we saw was an opportunity for to be able to walk and chew gum, and not only continue that excellence in large cap work, but also really significantly expand our private capital coverage and be able to do both. And so what you're now seeing is that we're emerging from the Jay Kirk period, and you are seeing that duality of the excellence in large cap and our private capital coverage coexisting. So we're walking and chewing gum, which was always possible, but we just had not We had not been doing that as a strategic matter. I gave you some of the statistics, but I think it's underscored by best year-to-date league table positioning, which really speaks to the large cap side of things, in over a decade. And also, in the third quarter and year-to-date, but in the third quarter, our... share of revenue coming from private capital is at an all-time high. So it shows that duality. What's driving the large cap side in league table positioning? It is, I think, a combination of renewed efforts at client networking and expansion of our network, so out with clients incessantly, and the additional talent that we've been bringing on to supplement the world-class MDs we already have. We said that this would take a little bit of time to ramp, but we can see it in our internal data in terms of new meetings, then showing up in conflict clearances, then showing up in announced transactions, and so on. And you're starting to see the progress that we had been anticipating manifest itself. The first stage really does show up in those lead table results because those are the forward indicators of future revenue from the large cap side of things. And what we're pleased by and why I think this is why I want to go into a little bit more detail is that that's happening at the same moment that we've got a lot of muscle on the private capital side of things. So the lead table progress is not at the expense of our private capital coverage. I've heard it's set in conjunction with it.

Okay, great. All makes sense there. And then maybe just as a follow-up, I believe last quarter you all had spoken to the expectation for higher than normal favorable seasonality for advisory in the second half of the year. Is that still the expectation? And then also, I'm not sure if I missed this earlier, but if you could just speak to what percentage of revenue is coming from the non-M&A side of the advisory in 3Q, that would also be helpful. Thank you.

Sure. So with regard to the first question, we continue to expect the second half to be stronger than the first half, and the ratio of the second half this year to the first half will be stronger than in 2025, which I think is what we said on the prior call. And then I will get the exact statistics, but I believe it's approximately 60% M&A and 40% non-M&A in this quarter. And if that's a little bit off, but I believe that's right, we will get you that exact number.

Thank you. Our next question will come from .

Hold on a second. I can do that precisely. I'm sorry. I was a little bit off. That's approximately correct for year-to-date, but you asked about the third quarter alone. And in the third quarter alone, it was 61 and 39, so it's still approximately correct. 60-40. That was my memory. Sorry. I was a little off.

All right. Thank you. Next, we have Devin Ryan with Citizens Bank. Please go ahead.

Devin Ryan Great. Thanks. Good morning, Peter and Tracy. I want to start with a broader expense question. So, appreciate some of the moving parts on areas like the deferred comp schedules you talked about. So, I know some of that's still evolving. And then, Tracy, you talked about some of the incremental work you're doing on just broader kind of expense savings, and I expect we'll hear more about that. Soon here. But as we think about all the work you're doing, is all this necessary just to get to the Lazard kind of 2030 goals that you've laid out here? Or does this create even more capacity? So, you know, I know some are kind of like 6% or better. It could be something better. But, like, is this necessary just to reach those levels?

Yeah, happy to address that question. No, I think the answer directly is no. When we look at Lazard 2030, remember that the vast majority of what Lazard 2030 is about is growth. We are so focused on investing in high growth, high profitable areas of the business. And you see that with the complexions, you see that with the inflection that you're seeing in asset management, you see this with the investment that's been made over the last three years in the financial advisory business that We talked a lot about last quarter with the J curve. The points that I'm making on the margin and these programs around comp expense and others is really a companion to that focus on growth. And here's where I want to go with this. The real theme is that when Peter and I looked at the business, we saw that there was more ability to drive operating leverage in the business. And when you are focused on revenue growth, You have to be careful that your organization is ready to achieve that revenue growth while maintaining discipline around margin. And that's what I'm really focused on is trying to augment the way that we work, where we work, how we work in the back so that as that revenue is delivered, we're not, I mentioned in my prepared remarks, this decoupling of expense from revenue growth. That's what those initiatives are focused on. So to answer your question more broadly, no, it's not required to achieve 2030, but I guess I would agree with you that as we decouple expense from revenue growth and that revenue growth is delivered, I actually think there's greater margin potential than what we've necessarily embedded into the 2030 expectations. 2030 remains a revenue growth story, but we're trying to prepare structurally the business to deliver enhanced margin as that growth materializes.

I appreciate that Tracy very helpful and then maybe bigger picture for Pierre just on the M&A backdrop and try to kind of connect the regulatory environment to what you're seeing with clients and obviously heading into midterms here but I think bigger kind of questions around what potentially could change in 2028 and so how much is that playing into conversations in an urgency to get deals into the market over the next year just because something may change. And clearly there's a window now, and that window may not be there on the other side of 2028, which I would think in theory may be kind of get people over the hurdle of some of the macro uncertainties just because they know don't move now, they may not be able to move. So is that playing in at all? If it is, where are you seeing that? Is that intensifying in any areas? I'd love to just get some thoughts on that piece as well.

I think that is a factor. I think even without that, the technology piece and the need for scale that I mentioned and the vertical integration and the geography would be driving a lot of transactions. But I think that is a factor, and I think it's one reason why you're seeing disproportionate activity in the largest deals, the big deals, because this is a moment where you can plausibly get those through that may be more challenging in the future. Now, with regard to hypothetical future environments that could come into place in early 2029, just two or three comments on that. The first is that, I mean, obviously there's an election, you have to see what happens, so that's the obvious point. But the second is that historically we've seen larger shifts from administration to administration in the Department of Justice wing of the antitrust and so forth. And then finally, perhaps most importantly, The world is changing, and in Europe, you see a shift in the antitrust environment towards promoting European champions in this new world order. And I think even in an administration shift in 2029, if that hypothetically happened, this You know, new perspective that you need to weigh the traditional antitrust concerns using Kerfindale indices or whatever against the desire to have frontier firms in each sector that are of a sufficient scale to be globally relevant might change things going forward. But in the meanwhile, people do see this window that is certain as opposed to the interplay of those various factors that I was just mentioning that are hypothetical for 2029. And the seizing the moment factor, I guess, reinforces the underlying motivations that I think are primarily the ones that I mentioned.

Thank you. Our next question will come from James Yarrow with Goldman Sachs. Please go ahead.

Good morning, or actually I guess it's good afternoon for you. Could you just help us think through the restructuring outlook from here and whether there could be upside optionality to growth given the more challenging economic backdrop as well as higher interest rates globally and perhaps also over what timeframe? If you do think this will happen, that could occur.

Sure, I guess I could take that. Look, I do think we've seen on a year-to-date basis growth in our restructuring practice. We think that will continue. And then when you look at the environment, I have said before, I think the risk of financial distress among the independent frontier labs and or some of the neocloud providers in the AI ecosystem is elevated. And that would have and many others. So there are ripple effects in the need for restructuring throughout at least a significant part of that ecosystem. And even apart from that, higher rates does tend to induce additional and so forth, performing parts of the marketplace. But what I'd say, so yes, I'm not going to give you precise timing because that's a fool's errand in terms of trying to predict exactly when and this is not a high-frequency business where we're kind of playing underlying trends. But I would also say I think one of the things that's different today than was maybe the case 20 years ago is everything I just said is true, but it will disproportionately affect, maybe outside of the AI world, disproportionately affect the sort and many more. you know significant restructuring activity coincided coincidental with significant M&A activity because those leading firms want to continue being at the frontier and inorganic growth is one vector to do that and and yet at the you know down at the bottom of the distribution there's a lot of distress and need for restructuring so I would just highlight that I think that's a little bit different than prior cycles that's very clear Peter

I think you have a bit of a unique lens on Europe, and so I hoped perhaps you could comment on the European backdrop for your business and how this is or has evolved more recently, especially in light of the, again, increase in rate structures in countries in France as well as the geopolitical questions in near proximity to that continent.

Sure. First, we are sitting in the UK, and so I would just note, since the UK is part of Europe even though it's not part of the EU, that we had a record third quarter and a record first nine months of the year in UK advisory, so that speaks to the strength of our franchise here where we sit right now doing this call. More broadly across Europe, obviously the macro backdrop is challenging. The political and many more. and other activity. And the reason for that is that you have to distinguish the macro and the micro. Macro backdrop, not so great. We could talk more about that if you wanted to, but it's not overwhelmingly auspicious. But most European companies that we're dealing with have the majority of their activity and the majority of their sales outside of Europe. So they happen to be headquartered in Europe, but they're global firms. And I think that explains the disconnect between a lot of activity that we're seeing out of Europe and the macro backdrop in Europe that's less promising because the firms that we're dealing with are operating on a global basis.

Thank you. Our next question will come from Mike Brown with UBS. Please go ahead.

Okay, great. Good morning. Thanks for taking my questions. So, Peter, just looking at the industry data, we can see that the software M&A has been challenged this year, unsurprisingly, given a lot of the AI uncertainty and disruption potential there. We've seen a few deals coming through, so maybe can you just provide a pulse check on this sector specifically, and maybe just if you could kind of dissect the large versus small end of the space, the strategic versus the sponsor-backed deals, and maybe just talk a little bit about how you see that progressing now that we've been living in this kind of AI world for a while. Is it kind of a better outlook from here, say maybe where you would have thought last quarter?

Thank you. In software specifically? Yes.

Yes, exactly. Thank you.

I would say I kind of agree with your characterization, which is I think things are better than when the shock hit the software system. As you know, we have a leading franchise out of Boston with the head of our tech group, Mark Dolan, in exactly this space. I think he would say it's There's more pockets of activity relative to the absolute bottom, but I would not characterize this as being an extremely active area. And so the tech group as a whole continues to cover that space, but is partially pivoting to other areas in the meanwhile. One of the benefits is we can skate to where the puck is or is going within our sectors. and I'd say with regard to private equity in the space, the same forces that I mentioned before are at play with the push and pull of challenging valuation causing a delay in liquidity events, coupled with The desire for LPs to see some cash on the back end, that's probably more severe in the software space than elsewhere because the valuation disconnects relative to what maybe had been expected a year ago are more severe. And admittedly, the rise in interest rates further exacerbates that. But it's not all dark. There is some activity in that space, and we continue to operate actively.

Okay, great, well said. We'll just pivot over to the asset management side of the business. Fundamentals there continue to really progress in the right direction, and it does seem like there has been increased strategic interest in scaled asset management platforms really across the industry. Can you just talk a little bit about how you think about the business continuing to create value for Lazard shareholders today? If these advantages aren't really getting full market appreciation, maybe can you talk about how you think about the alternatives here to unlock some of that value for shareholders?

Sure. I'll take that, and then maybe Chris can weigh in on some of the underlying trends and performance. On the structural question, I'm going to repeat what I've said before, but I think it is worth repeating, which is we have a great new leadership team, including Chris and also our chief operating officer and our chief investment officer, very strong, by the way, that also came across in our internal survey appreciation for the quality of that leadership team. We believe we can add a lot of value as we continue to focus our products and strategy on where we think we have a right to win and where we can scale the strategy and get operating leverage out of that scaled strategy rather than having it a long, long tail of subscale products and strategies, continuing to expand the number of active ETFs we have where we've had very successful launches of roughly a half dozen and there are more to come. and the investment performance that I already mentioned on a one and three year basis being the best in five years, which I think reflects this renewed rigor under our chief investment officer and our excellent portfolio managers. But I've also said we're a public company and there's no and many others. We have absolute blind insistence on the current structure. We will do what is in our shareholders' best interest. And as a public company, that means being open to whatever the best or the most value-added approach would be on behalf of our shareholders. So it's a question of value and math, and we believe that we can continue to improve The performance of this business, and that's what we're focused on doing for right now. Chris, anything you wanted to add?

Thanks, Peter. I might just add in, look, we're really focused on trying to strengthen this business. That is, you'll have seen a number of the changes we've made in the leadership team with a chief investment officer, a new chief operating officer, a head of AI. Ahead of Product, Ahead of Corporate Development, Risk Leadership. So really trying to strengthen the team. The bedrock and foundation has to be around our investment platform and delivering consistently strong performance. So it's good to see that coming through with the numbers, Peter. Sited. And then that, you know, if we can deliver that and as we deliver that, you start to see that in client flows. And for the first nine months of the year, we had record flows of $54 billion to give you a bit of flavor around that. It's really in the areas where we're delivering strong, consistent performance. So that's our advantage platform, the quantitative equities. It's our emerging markets platform. It's our Japanese equity capabilities, a number of our fixed income strategies, some of our alternative strategies like our convertible arbitrage strategies. So there's a real sort of breadth around that. And then, look, we also see a lot of white space around our business. We are largely a public markets active manager, but there's a lot of white space. That's exactly why we hired in a head of product and head of corporate development for the business to really help us chart that course ahead. and we see a lot of upside potential from here. Meanwhile, continuing to operate the business as effectively and efficiently as we can so that we can deliver better margin for our shareholders as well.

Just to reinforce this, I'm going to again repeat other things I've said. I think perhaps sometimes in the past people had the perception that there was a dogmatic insistence about these two businesses being together. We believe that we can continue to create significant value as Chris was suggesting with these two legs and then with the third leg of Lazard, but it's not a dogmatic It's an empirical question, as they put it, math, on where the value is the highest for our shareholders. But we're very excited about the pathway forward and all the things that Chris and team are doing, and then we're also very excited about the new third leg of Lazard that will come into existence in early November.

Thank you. Our next question will come from Gabriel Angelini with Bank of America. Please go ahead.

Hi, good afternoon. Peter, I think we're about three years into LeVard 2030 now. And when I look at the valuation, I don't think the stock is reflecting the progress and the optimism that we heard in your prepared remarks. And when I speak to investors, we're hearing some skepticism around whether the turnaround is taking longer than maybe you'd expected, or whether LeVard might have missed part of the current M&A cycle. So how would you respond to that? And what would you say that view is missing?

Well, I would agree with you that I don't think we're getting credit for the progress, but both CEOs would probably say that. I would say the following. I think the changes that we had to make, both in terms of our managing director bench, which was essential to improving the commercial and collegial duality that we talked about, and the business strategy, especially in North America, to cover both large cap and private capital. was going to take time. Relative to our internal plans, relative to the Lizard 2030 plan that we laid out internally, we are, if anything, a little ahead of schedule, but definitely on track. So there's been no, this has not taken longer than at least we expected. Obviously, we I can't speak to any outside expectations, but I think emerging from a J-curve where we had upgraded 40% of our managing directors over roughly a three-year period is actually pretty good, but I understand others may have and many others. So, you know, different expectations about the timetable. We can't control that. All I can say is we are emerging from the J curve period, seeing lots of very positive forward indicators. And relative to our internal planning, we are definitively on schedule and we intend to remain so. And then with regard to missing the M&A market, I also just don't really see that. I mean, again, our weighted pipeline for next year is twice what it was as of this time last year. not consistent with missing any window.

Perfect. And maybe as a follow-up to that second point, I think when we look at industry-wide data, it does look like volumes are decelerating, but you've mentioned several times now that you're not seeing that same deceleration. Is it fair to think about this as overarching back to your more natural market share and those MDs that you've brought on are ramping, or would you argue that the industry backdrop remains as constructive as it was, say, three to six months ago?

I'd say it's probably the former but I don't really know because obviously we have insight into our own deal flow and we're reading the same reports about the overall market that you are so I don't have anything differentiated to say outside of our own experience but I think our own experience is suggesting significant momentum you know again on schedule and whether that shows up as a constant share of We're really focused on our internal operations and tracking and accountability and client coverage and all the things that go into continuing momentum, and that's what we're seeing. It may well be the hypothesis that you suggested, which is we take a larger share of a market that's not growing as rapidly as it was in the past. I don't know.

Thank you. Our next question will come from Vernon Hawkin with BMO Capital Markets. Please go ahead.

Vernon Hawkin Good morning. Thanks for taking my questions. Tracy, you spoke to the shift to greater cash. It's consistent with some comments that we've heard you make more recently, so not surprising. But when we think about it from a framework perspective and we think about those few percentage points that we'd be adding to the ratio, What should be our starting point? Do we take the year-to-date comp ratio as the starting point, or do we take last year's ratio and add a few percentage points to that? What's like the best frame of reference?

Yeah, it's a fair question, Brian, and thank you. I think you understand the dynamic well, and I understand your question. Well, the way I would answer this is on a like-for-like, no change in the deferral policy to date. Our remarks throughout the year would be consistent, that we would have expected a decline towards the end of the year on an adjusted gap comp ratio. I think that would have been modest, a few points, but that would have been modest. And then I would reiterate what we said before, which is that If we were to make a deferral change, and I'll come back to that in a minute just on magnitude, but it would accelerate. And again, I want to make sure this is really clear. I know you understand this, but for others on the call, this is purely an accounting recognition concept. I've mentioned before to you and to others that I'm very focused on comp discipline on an awarded basis, on an actual economic basis. This is an accounting concept that would accelerate some of that today. and would help us by managing, again, that shared dilution concept. And the impact of that would be a few points. And you can think of that on kind of a year-to-date accrual basis. I think that's a good basis. I would just reiterate that were we not making that change or if we didn't, you would still see that kind of contraction or decline in the fourth quarter on a lot of spaces. Does that answer the question? And the only other thing I would add to that is this is one of those situations where we've talked about wanting to manage share dilution and we've talked about share buybacks and wanting to continue that into the end of the year. And so as far as the total magnitude, it's hard to comment now and so I won't. I'll just flag that duality of like focusing on both whether it's share buybacks or whether it's decreased Higgins, and many more. We're trying to solve more than one opportunity with this, and we see it as a great opportunity and the right time to make that change. Does that answer the question, Brendan?

I think so. Why don't I paraphrase, and you can confirm that I'm understanding. It sounds like what you said is, and totally get you, yes, when you increase cash, you are increasing the expense in the year in which it is earned. as opposed to amortizing it later. So totally understand. It sounds like what you're saying is like-for-like basis, not changing the methodology. We would have seen, I think what you've characterized it as modest improvement in the year-to-date ratio as we come in the year end. However, given the change that you guys are making, no change to award it understood, but on an adjusted comparational basis, there's going to be an offset to that improvement that you guys would see from the accounting change. Is that fair?

I would just note, it's Peter, that we have not finally decided to do this. I think Tracy said we're considering it, so we'll have more to say about that in the coming weeks before year end.

But otherwise, directionally, Bert, I think it's accurate with Peter's caveat.

Understood. Understood. And of course, you don't know the revenue that's going to come in the fourth quarter. So that's a to be determined also.

Okay, thanks.

So appreciate that. Thank you. One more, Tracy, because you had some interesting comments on efficiency efforts that we're going to learn more about, I think, in the coming months here, it sounds. Can you give us some texture on where you believe there is the most wood to chop? We've discussed this since you've taken the reins. I know you are very excited about this opportunity to make the organization more sort of lean and mean. But when you think about some of the areas where you think low-hanging fruit is always a bad term, but maybe the most ripe opportunities would be for these efficiency efforts.

Fair question. I'd characterize it in a number of ways. Part of it is thinking about where and how we can serve. And part of that is centralization. I think that's probably centralization and standardization of the workflow is probably one of the most, using your term, the lowest hanging fruit. Lazard has this amazing global presence. And not only is it global, but it's local. So where we operate, we have amazing connectivity to our clients. That said, historically that geared itself in kind of corporate functionality and that's not necessary to superb client delivery. And so I think some of the centralization and uniformity that we can deliver delivers a lot of cost savings and frankly delivers better delivery to our front offices and frankly to our clients. So I'd say that's one. Another is vendor rationalization. We see a lot of opportunity in that area. That's partly, you know, I think you're already seeing a little bit of that in our non-comp expense accrual relative to some of the expectations around inflation. So I would say those are probably two of the biggest areas. Technology remains a huge opportunity, but it probably lacks some of the process and workflow redesign.

Thank you. Our next question will come from Connell Schmitz with Morgan Stanley. Please go ahead.

Hey, thanks for taking my question. So, Peter, I know this is largely addressed, but for more clarity, I'd like to dig more into the potential for the upcoming U.S. midterms to catalyze M&A, given your expertise here. Can you speak to the credibility behind the notion that a Democratic sweep could ultimately act as a near-term propellant to large transformative deals ahead of a potential shift in the reg environment in 28? Or is this just not much of an impact given you've already described a pretty robust deal-making environment and deals really aren't waiting for the midterms? And then, Tracy, as a quick follow-up, can you help quantify the level of pull forward in the advisory this quarter versus last quarter?

Sure. My question, I'd say the following. I don't think that the midterms will have any effect on the existing regulatory environment, and I know this is not what you were suggesting. Some people, however, have thought that, so I just want to clarify that. I think your question is kind of one layer beyond that, which is, if a blue wave happens, does it and many more. as of now that the White House would switch parties in 2028. In other words, if this blue wave doesn't happen at all, which is an unlikely scenario at this point, it may take some of the timing off of when the White House may switch, and a massive blue wave would probably reinforce the perceived odds that the White House would switch, then leading us to that next stage that I've already talked about with regard to the DOJ, FTC, et cetera. I would say, though, a couple factors make this kind of why I said at the margin. One is the desire to get deals done now is pretty strong, and so a little bit of extra emphasis there I think is an accentuating factor but doesn't materially change things all that much. We're still pretty far out from a presidential election, so while the midterm outcome may affect the perceived odds of the White House moving one way or another in 2028, it probably doesn't move it that much. And that's why I think it's a great question, and it's a subtle question, but I think it's probably pretty marginal.

And on your point about pull-forwards, I would say pull-forwards for the quarter, I'd make a couple of points. They were broad-based, not really as concentrated as I think people might expect, frankly. not concentrated in any one transaction. I've reinforced this concept that sometimes fees associated with a particular transaction can be spread across multiple periods, so I think that sometimes can be difficult to get a read through on. But to help on the quantification, I would just say that Q3 pull forward, it was really below what it was year over year on a quarter basis, and very, very much in line with the $2 or $3 million of Thank you. We'll take our last question from James Yarrow with Goldman Sachs. Please go ahead. Thanks for the follow-up.

So Tracy, I think we are getting a couple of additional comp deferral questions, so just two more clarifying ones here. I know you've said that you have not made a final decision on changing the deferrals, but is this part of the explanation for the persistent 69.9% comp ratio each quarter of the year so far, or is there something else? And then number two, could you just speak to the The timing and magnitude, if you decide to make the deferral impact in light of your three-year comment, in other words, would that potential change only impact 2026 or would there be impacts in 2027 and 2028 as well?

Okay, I understand the follow-up question. So the definitive answer is no on it factoring into kind of the 69% accrual draft here. On that explanation, I would just guide you to our, frankly, our last quarter's comments around J-curve, revenue growth, the comp expense line, and the investment spending.

So that doesn't drive any of that.

I've reinforced what Brennan's question was, that on a like-for-like basis, we would have otherwise expected a modest decrease in the portfolio. Your point around it's timing in, I can't speak to magnitude for the reasons that Peter mentioned. You have not made that definitive decision. I'll give you some framework to think about it, though. I can't answer the timing question. So timing, we would naturally go through that in our normal compensation year-end process. That has yet to happen, which is why we can't exactly Over the next quarter, we will be able to get that color. On timing and impact, should we do it? Regardless of magnitude, when does it show up? It accelerates some of that. The amount of increased cash or the amount that you otherwise would have deferred, that you're now paying in cash, that is an immediate recognition on a GAAP basis in the current year. It doesn't, in fact, impact the total award cost. That The way to think about that is each year when you eventually roll off of the prior amortization, prior deferral periods in the past, each year you're recognizing kind of a third of prior year's amortization. And so it's kind of this vintage of amortization that happens. Where this will really benefit the firm in the future is One, the ratio itself, the quality improves. But two to three years from now, what will happen is your amortization bill includes much lower deferrals from the current year next year. And so it creates this kind of embedded approval in your comp expense line over effectively the next two to three years. So that's when it manifests, the reversal of that effectively is as future periods require less amortization of current year deferrals, if it makes sense that way. The only framework I'll give you around magnitude is, again, I go back to the purpose of this, is to improve the quality of the ratio and to attract better talent and improve the overall quality of our compensation program for our employees. One of the metrics that we look at is just where are our deferrals relative to market. and you can do a little bit of research on this and I'm happy to talk about it, but one estimate of magnitude is if we were to get our gross consolidated referrals closer to average market participants, that would be the target over a period of time to try to achieve.

Thank you. Ladies and gentlemen, this now concludes Lazard's third quarter and first nine months 2026 earnings conference call. You may now disconnect.