Lazard Ltd (LAZ) Q4 2019 Earnings Report, Transcript and Summary

Good morning and welcome to Lazard's Earning Report Meeting. This call is being recorded. At this time, all participants are in a listen-only mode. Following remarks, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions]. At this time, I will turn the call over to Alexandra Deignan. Please go ahead.

Thank you, Liam. Good morning and welcome to Lazard's earnings call for the full year and fourth quarter of 2019. I am Alexandra Deignan, the company's Head of Investor Relations. In addition to today's audio comments, we have posted our earnings release and an investor presentation, which you can access on our website at www.lazard.com. 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 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, Chief Financial Officer. They will provide opening remarks, and then we will open the call to questions. I'll now turn the call over to Ken.

Thank you, Ale. Good morning. Today we reported record fourth quarter operating revenue reflecting solid performance across our businesses. The quarter was driven by increased M&A revenue and higher management and performance fees and Asset Management. We entered 2020 in a strong position with a global platform that incorporates diverse revenue streams of significant scale, innovative client solutions and growth opportunities in which we continue to invest. In Financial Advisory, full year operating revenue reflected increasing momentum in the second half. Our volume of announced European M&A transactions has risen sharply in the last six months. Our M&A activity has been especially strong in the $1 billion to $10 billion range. In 2019 our number of announced transactions increased by 10% over the prior year, even as the market decreased. We continue to be a leader in global restructuring and debt advisory assignments with significant pockets of opportunity globally. We've been especially active in the retail and energy sectors. All of our financial advisory practices remained active in 2019. Our investments in Shareholder Advisory and data analytics are having a significant impact in our business by helping us identify opportunities faster, and provide innovative advice for clients. Our sovereign capital and private capital advisory businesses continue to advice governments, corporations and partnerships on financing strategy and capital raising around the world. We continue to see growth opportunities across our advisory businesses and have been aligning our professional base accordingly. In 2019 we made leadership transitions including new global heads of Financial Advisory and M&A as well as new country heads in France, UK and Brazil. We also recruited a new Venture and Growth Banking team based in London. Our active management business had a strong fourth quarter with higher management and incentive fees reflecting AUM growth and the performance of our strategies. We achieved modest net inflows during the quarter. Our assets under management increased by $17 billion or 7% during the quarter. We entered 2020 with AUM of $248 billion up 15% from the start of 2019. Overall, our investment performance was strong across most of our platforms in 2019. Our investments in new strategies and product extensions continue to provide new avenues of growth. Our quantitative business achieved net inflows for both the fourth quarter and full year, helping our local equities, and our global and multi-regional fixed income platforms. We continue to invest in growth of Asset Management through investments in people, technology and distribution, as well as the development of new funds and the scaling up of existing platforms. In 2019, we reinforced our ESG expertise with the hiring of a new Global Co-Head in New York and London, and we expanded our quantitative investment platform with the addition of two investment teams in San Francisco. We continue to add to our European and Asian distribution and are gaining new clients across these regions. And we have launched new funds in international and global equities as well as fixed income. Evan will now provide color on our results, then I will comment on our outlook.

Thank you, Ken. Lazard's full year operating revenue for 2019 was $2.55 billion, 8% lower than the record level achieved in 2018. This reflected higher revenue in the second half of the year versus the first half as we anticipated. Our record fourth quarter revenue of $708 million was 3% higher than the prior year period. In Financial Advisory, we completed the year with $1.36 billion in revenue. In the fourth quarter, our advisory revenue was in line with the prior year quarter, reflecting a substantial increase in revenue from Europe and Asia-Pacific. In Asset Management, we generated $1.16 billion in revenue for the year. In the fourth quarter, operating revenue increased by 7% over the prior year's quarter, reflecting higher management fees and incentive fees. Fourth quarter management and other fees increased 2% sequentially from the third quarter, reflecting higher average AUM. For full year 2019 our average fee was 49 basis points, down from 51 basis points in 2018. This reflected a shift in our mix of assets. We had net inflows for the year in our quantitative and fixed income strategies, while at the same time we experienced net outflows in our emerging markets platforms. Incentive fees for the year were $21 million, the same amount as in 2018. Fourth quarter incentive fees were $14 million reflecting strong relative and absolute performance across mix of our equity and fixed income strategies. Key strategies generating incentive fees included quantitative and global equities, and convertibles and emerging markets debt. Average AUM for the fourth quarter was $238 billion up 6% from last year's period, and up 2% sequentially from the third quarter of 2019. The sequential increase was driven by market appreciation of $13 billion, foreign exchange appreciation of $4 billion and net inflows of approximately $500 million. For the full year, we experienced net outflows of $9 billion driven primarily by outflows in emerging markets equity and debt as well as multi-regional equity. Other platform had strong net inflows for the year, including quantitative and local equities and our global and multi-regional fixed income platforms. We finished 2019 with AUM of $248 billion. And as of January 28th, AUM was approximately $247 billion. The decrease reflected foreign exchange depreciation of $2.4 billion and net outflows of $1.1 billion offset by market appreciation of $2.3 billion. Market volatility has been increasing in January and we anticipate additional near-term outflows of approximately $500 million for the month. Looking ahead across our franchise, Asset Management is off to a good start, with AUM well above its average level for 2019. In Financial Advisory, we have momentum entering the first half of the year. Our current level of activity is higher than at this time last year. And we are encouraged by the increase in European M&A where we have a deeply established presence and growing opportunities driven in part by shareholder activism. We are seeing strong demand across our advisory practices globally, including restructuring engagements. Turning to expenses, we continue to demonstrate our cost discipline and ability to manage the firm through cycles. Our compensation ratio for 2019 on an adjusted basis was 57.5% up from a record low of 55.1% in 2018. On an awarded basis, our annual comp ratio 57.7% compared to 55.8% for 2018. Our comp ratio is well within our targeted range. Adjusted non-compensation expense for the year rose 3% to $499 million reflecting our increased investments in the business primarily in our technology infrastructure, which we have highlighted throughout the year. For the full year 2019 our non-comp expense ratio of 19.6% remains within our targeted range. Our effective tax rate for 2019 was 24.1% compared to 22.7% a year ago. This was in-line with our expectation of an annual effective tax rate in the mid-20s. For the coming year 2020, we continue to expect an effective tax rate in the mid 20% range. Turning now to capital allocation. We continue to generate strong cash flow and return capital to our shareholders. In 2019, we returned $850 million, primarily through a combination of share repurchases and dividends. During the year, we repurchased 13.7 million shares, which included 1.7 million in the fourth quarter. As a result, our fourth quarter diluted weighted average share count declined by 9% from the prior year to 115.5 million shares. In 2020, we expect to continue our share repurchase program, at a minimum to offset potential dilution from our year-end equity grant. Our total outstanding repurchase authorization is now $379 million. Ken will now conclude our remarks.

Thank you, Evan. The year is off to a strong start. Overall, the global macroeconomic environment remains disruptive. Fundamentals for global equity markets are steady and credit conditions remain favorable. We are seeing momentum in global M&A, including Europe as business confidence grows. And despite global trade tensions, we've seen an increase in cross-border transactions around the world. The forces driving global strategic activity remain in place. Technology driven disruption continues to be a catalyst for M&A across industries. Shareholder activism has become a global phenomena. Last year, almost half of all activist campaigns had an M&A thesis. In addition, climate risk is becoming increasingly relevant to company valuations and there's an emerging catalyst for strategic activity. Our ESG expertise is well entrenched in our Asset Management business and we're building out this expertise as a firm. In Financial Advisory, we are well positioned. We have the most sophisticated strategic and Shareholder Advisory capability, deep relationships in local markets around the world, and the expertise of global sector and specialty teams. In Asset Management, institutional investors are increasingly dividing the portfolios between low cost passive strategies and high value-added active strategies. We have a world class investing franchise in markets that reward deep fundamental research and our quantitative strategies are competing effectively in the market for low cost products. We see opportunities for growth across our businesses and we are allocating our resources accordingly. We remain focused on serving all of our clients well while we manage the firm for profitable growth and shareholder value over the long-term. Now, let's open the call to questions.

Thank you. [Operator Instructions] We can take our first question from Brennan Hawken from UBS. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking the question. Just wanted to ask on expenses. Non-comp really looked quite good versus at least what I had been expecting. Was there some one-time -- any one-time noise in there that we should adjust or think about when we're considering a baseline on which to build here into 2020?

Yes. Hey, Brennan, good morning. Yes, look, as we said, the non-comp came in about $130 million in Q4. We continue to focus on maintaining the cost discipline as we talked about throughout the year. This year, non-comp increases reflected a couple of things. One is the continued rolling in of our technology investments, as well as some additional marketing and business development as we started ramping up more marketing in the middle of this year. It was offset, and as we mentioned, by a couple of other items, most notably, lower pension costs in this year versus last year. Last year, Q4, we had some higher pension costs that got accrued in that quarter. And this year, we had less pension costs that accrued. So I guess that's one component. But I'd say it's a combination of the cost discipline that we've been working through throughout the year. But on an ongoing basis, I think we expect to remain at elevated levels for the next few quarters, as we've mentioned, as we continue to roll in our technology projects, we expand hiring and continue to grow our real estate, our footprint or grow our real estate footprint for the expansion as we invest in the future. I think, look, Brennan, it's always important to remember our spending in our non-comp, the way we think about it is, it’s very much strategic spending. We're creating a stronger platform, a stronger more vibrant platform to accelerate growth. So I think this quarter was a good quarter. We got a couple of components in there that were helpful. But I think it's sort of in-line with the way we've been managing costs throughout the year.

Thank you. We can take our next question from Chris Walsh of Wolfe Research. Please go ahead. Your line is open.

Just wanted to ask one quick one on the share count, recognizing that amortization has historical stock accruals, generally higher in the first half of each year, and that 2019 may have seen elevated net buybacks. After the net debt issuance and lower the stock price, how should we think about appetite for buyback and kind of the cadence of buyback over the course of 2020?

Sure. Hey Chris, I'll take that one. I mean look, we continue to focus on as we've been saying focus on returning the excess cash to our shareholders. As you mentioned, we had accelerated a lot of buybacks earlier in this year. And as we mentioned, we bought back 13.7 million shares over the course of the year, frankly, almost 20 million shares over the last 15 months. So, I mean, at a minimum, as we always say, we're going to offset the dilution we get. This quarter we bought back enough shares, offset the amortization of shares, effectively keeping the weighted average share count flat. I think if you think out into 2020, we're going to continue to use the excess cash flow to buy back shares. The first couple of quarters we focus on buying back the dilution. And then as we get later into the year, we see what kind of excess cash we have when we’re putting it to work to reduce the share count as best we can.

And then just one more on flows in the Asset Management business. We saw much better flows in December and I don't want to read it too much into one data point and I heard your color around expectations for negative flows within January. So, just kind of wanted to see if anything has changed in your outlook there at all, can you speak to the uptake of some of your newer launches and comment on any allocation trends you're seeing across your client base?

Sure. So, look, I think when you think about flows, as you said, we had positive net flows in Q4. And we've had some outflows, net outflows at the beginning of this year as well. Look, you have to remember, as we always say, we are in -- a lot of -- most of our assets -- 85% of our assets are in the institutional side, it’s pretty lumpy. So you're going to get some movement from time-to-time. So it's important to remember, I mean we had over $13 billion of gross inflows just in Q4. So inflows and outflows, there's always material movements in every given quarter. So, I think our outlook remains the same it has been. We've seen some absent outflows as we called out in the EM platform in the quarter and the full year. I think specifically as we said in the past, specifically in the value part of our platform, we've talked about value underperforming growth and quality, value has been under pressure out of favor as you well know. The growth part of our platform is performing really well. We're having great performance there. And indeed performance is pretty strong across most of the AUM that we have, over 70% of our funds are outperforming on a one year basis. And so I think, our trends will continue. I think we expect to see some muted outflows, some additional outflows, as we said in some of the emerging markets products in this quarter. But I think our outlook for the business continues to remain the same, are focusing on performance and we expect the flows will follow.

Thank you. We can now take our next question from Devin Ryan of JMP Securities. Please go ahead.

First one here just on operating leverage in the model and just expectations on how we should think about margins, just given some of the moving parts with some of the headcount changes late last year, but then also your commentary around your investment into the business continuing and then hopefully there's some revenue growth in 2020 as well. So just trying to put that all together and get an update on any moving parts that we should be thinking about for incremental margins?

Sure, so I'll take the first part of it and then if there's follow-up with Evan on some of the specifics. What I'd say is, look, it's pretty straightforward. When there's revenue growth, we tend to get pretty good operating leverage in the business. And revenue declines, it's more difficult to get that kind of operating leverage. And I think we do a pretty good job in the revenue decline to manage the real cost of compensation which were reflected in the awarded comp on both sides of the business. So what I'd say is, this year feels better than last year at the start. We got strong momentum going into 2020. It feels a lot better than we did at the same time last year. So we’ll get revenue growth this year and you should expect to see improved operating leverage in the business.

Okay. And then just one on the advisory backdrop. And great to see the improved momentum relative to a year ago. When I talk to investors, one thing that continues to come up is just how U.S. elections could start to affect the market if at all. And I don't think there is some concern that as we get closer it could start to create paralysis. And so I'm curious if you're hearing about that at all from clients, if you have a view whether it feels like that's going to be a big factor or the trend that are driving conversations today both in the U.S. and outside the U.S. kind of stronger than potential disruption from that?

Well, I think right now, the drivers of the market are related to the macro environment, the economy as a whole, which just remains pretty robust in the U.S. and is stabilizing, probably improving in parts of Europe. And if you look at the traditional factors that drive activity, credit valuation, competence levels, credit remains widely available. Rates are at historic lows, spreads are reasonable. Financing, again, widely available. Valuations, probably a little rich in parts of the market, a little more reasonable in other parts of the market. I think in terms of competence levels, trade tensions have been reduced with the phase one of the China trade agreement and the Mexico and Canada agreements now signed. I think that helps. And the election itself as we get closer perhaps there's volatility around that. But again I think one of the lessons in the last 12 years is often times less gets done after election than people expected because of the nature of majorities in -- super majorities in Congress and the inability to get that much through. So I think in some ways, there obviously could be concerns around election but there are also issues that kind of moderate that. And I think as we get closer to the election, we'll see. But for the moment, we don't see much commentary around the elections affecting deal activity.

Thank you. We can now take our next question from Richard Ramsden of Goldman Sachs. Please go ahead.

Good morning, guys. I was hoping that you could expand a bit on some of the momentum that you're seeing in the European business. And I guess specifically the question is, now there's a clearer path for Brexit, do you think activity is going to accelerate from here or do you think that's being one of the drivers of the strength that you've seen over the last six months?

Sure. So, I think we saw a pickup in activity in Europe in the first half of '19, that was reflected in closings in -- our completions in the fourth quarter for us and things feel a little more robust right now than they did a year ago, even in Europe, and obviously for us as a whole for a firm, right now. In terms of Brexit, clearly having more certainty around Brexit is helping the investment clients and the decision making climate in the UK in particular, and I would expect -- we expect that there'll be a pickup activity in the UK, I think we've already seen some of it starting and dialogues are increasing. And I think with the credit conditions the way they are and such, I think we will see a pickup there.

And perhaps as a follow on, have you seen any shifts between strategic versus financial sponsor activity over the course of the last few months and how do you think that’s going to track in 2020?

Well, I think with the amount of capital that's going into private equity, activity levels in private equity is going to remain high, credit conditions is robust as I said before. And that the need to invest and also the need to find realizations on portfolios keep that to be a very robust market. And the strategic market remains active. So I think overall, both markets are healthy.

Thank you. We will now take our next question from Michael Brown of KBW.

So I appreciate the color on the activity levels and additional color on Europe. You had mentioned that cross-border has kind of improved as well. Just was looking to get a little more color as to kind of what -- which regions you're kind of seeing that? And would also appreciate some additional color on what you're seeing in some of the other regions outside of kind of Europe but what are you seeing in Latin America, Canada, other parts of Asia as well?

Okay. I think, there's been, for us at least some pickup in cross-border activity within Europe. Cross-border into the U.S. we had a couple of nice transactions announced in the second half of the year. And some activity on the part of some of the large Chinese companies into Latin America. I think activity in Asia has been more muted and activity from Asia into the U.S. obviously much more muted, particularly China into U.S. much more muted, and China into Europe still some transactions, I think we will see a little bit of a pickup into the UK perhaps over the course of the year, but not at the levels they were a few years back. But overall it's okay.

Okay. Thanks. And maybe just a follow-up on the capital return question. I appreciate that you're probably going to reevaluate as you get to the second half of the year. But I guess as we think about kind of your current valuation, at what level would you look to maybe do less buybacks and shift back to more of a special dividend to return any excess cash to investors?

Sure. So, I think we've been pretty clear all year about the way we've been thinking about it. Shifting our focus a little bit more towards the share repurchases, after some discussions with shareholders and obviously looking at the value we've been trading at. But I don't think we have a hard value that we would say "Hey, we trigger one to the other." I think we're in this mode where we can see significant value in the shares, and we're going to continue to use our excess cash flow for share repurchases over that period. And I think that served us well. I think what we're going to continue to do as we've always done have a balanced approach to our capital management strategy, which starts obviously with our common dividend. And we have been gradually increasing it over the year. And I think we would expect to continue to gradually increase it to match the growth rate of the business and of course to offset any compensation dilution. After that after we figure out whatever cash we need in the business, the rest will be returned to shareholders. And we’ll make those decisions as we go throughout the year. But right now we're very -- we feel good about the business. And as Ken said, we feel good about the outlook as we go into this coming year. And I think that our goals will be to continue on our current plan of repurchasing shares. I would say our capital management strategy as a whole -- our goal is very clear, to be prudent as well as opportunistic in capital structure and capital management, and I think we've been doing that.

Thank you. We'll take our next question from Jeff Harte of Piper Sandler. Please go ahead. Your line is open.

A couple of from me. Looking at non-comp expense, I mean really only being up 3% year-over-year in 2018 despite all the investments, it is I think pretty good. Should we be thinking about a similar growth rate in 2020 given that you're still investing?

Yes, so look, as we said that we expect the non-comp to come out even a little higher than it did. I think we focused as we got through the beginning of this year with revenues falling to really tighten up a little bit. I think some of the benefits came from putting out some of the expenses into next year. And so I think we're expecting to see additional growth in non-comp. We expect it to remain at elevated levels over the coming quarters as more of a technology projects that we've really started over the last 18 months start to roll in into the non-comp line and we start amortizing those expenses. So I think we would expect to see continue to grow probably at or above that level, and going back to sort of near the averages we’ve been for most of this year.

Okay. And something I don't tend to ask much about, the corporate segment. Revenues were pretty strong there relative to at least what we were expecting. Are there items to highlight there? And is there also kind of a starting point as far as the run rate that we should think about for that line?

Sure. So, look, we had higher corporate revenues this year. As you know, there's lots of components that go into the corporate line for us. It’s everything that doesn't really go into the businesses. And there's just a lot of components, everything from the cash and returns that we get on cash. As you know that that's been changing as rates have gone up around the world and our cash position starts to earn some benefits, FX revaluations, any insurance proceeds. But most importantly, it's related to other investments, the legacy private equity that we have on the balance sheet, as well as all of our seed portfolio that we have for Asset Management business, any of the hedged and unhedged components, any gains or losses go through the corporate revenue line. So as you know, it can be a little bit of volatility from quarter-to-quarter. This quarter, I think a lot of those things kind of moved in our direction. And so we have about $12 million of corporate revenue. I would say for the year $29 million is certainly the higher end of where we've been historically. I think from a framework and when we start at the beginning of the year, we kind of think on average if you go back over the last two or three years, $3 million to $5 million is probably the right area. But again, there's going to be a lot of volatility because there's a lot of components there that move and they're just not controllable in many cases.

Okay. And it’s a little kind of deeper thought, I guess, you mentioned earlier and you have been mentioning about systems and kind of data and investments there and the ability to identify opportunities early. I get that in Asset Management. Can you talk a little bit about how that may be helping the advisory business, which I kind of historically thought of as more pure relational?

Yes, so I think -- let me step back. I mean the advisory business, you're right, relationships matter enormously. But if you sort of think about what we're effectively doing in the advisory business, on one hand, that we're helping guide boards, senior management in making big strategic decisions and then helping execute those decisions. And in many respects, we're trying to predict the outcomes before they happen. And one of the key outcomes we're trying to predict is stock price performance around specific events and those events can be anything from a scale, a spinoff, an acquisition of an asset or of a company, a repurchase program, changing allocation of capital among other things. And a big part of that is prediction, an event prediction, what's going to happen around this event. And part of that is predicting shareholder behavior. And so a lot of our efforts are going into seeing if we can develop tools that better predict what is going to happen, what is going to happen around these events. And if you think many of the advances in data science and machine learning and AI it’s really to improve your capacity and to predict better, and that's what we're focusing our energy.

Thank you. We'll now take our next question from Jim Mitchell of Buckingham Research.

Ken, maybe just a bigger picture question on -- I know you feel obviously a little bit better about the environment going into the year. I guess given all the different pockets of revenue, whether it’s Capital Advisory, Sovereign Advisory, M&A, what do are you I guess most excited about in terms of the growth prospects from here over the next 12 to 24 months? Where do you see the greatest opportunity, where you’re investing the most?

Good question. So one of the great things about our franchise in the advisory side is we have enormous whitespace. So there's a plethora of places where there's opportunity to invest. And so part of our challenge is drilling down on the places where we think there is the most opportunity and the best chance for success. I think a few areas that sort of jump out or following the trends of where the capital is going. And one of the things that's happening is obviously an enormous amount of capital is going towards alternative investments, private equity, private investments. And one of the things which we are really focused on is making sure that we're well positioned to capitalize on that trend. On the advisory side, that means making sure that we are really well positioned with what we described as the crosscut market, what we think of as private owners of assets that could be the sponsor universe, but increasingly it’s families and many of the large pension funds and position ourselves in net flow of capital is very important and also helps drive our PCA business. So that's another area, which is very important. And of course, making sure that we're really focused on the things that drive our business as a whole, which are relationships with big important companies doing the most important things they do. And then also making sure that we’re sort of on the cutting edge in terms of capabilities around advice, which we’ve demonstrated I think in making sure that our shareholder activism practice is on the cutting edge, both in the United States and now especially in Europe, where I think we're usually the market leader there.

And is there any long-term opportunity -- or in China as they open up their markets, is that something you think you need to start positioning or feel well positioned for if that happens?

Well I think on the advisory side, we're very well positioned for that. We have an outstanding team in China that I think is probably one of the handful of best advisory practices in China, with a full team built out based in mix of Beijing and Hong Kong. And then on the Asset Management side of the business, I think some of the changes in the regulatory environment in China open up some significant opportunities for all asset managers in terms of distribution. And that's something we're keeping our eye on.

Thank you. We'll take our next question from Manan Gosalia of Morgan Stanley. Please go ahead. Your line is open.

I was wondering if you can just give us an update on the business realignment that you undertook last quarter. So on the Asset Management side, I think you previously mentioned that there would be a $300 million to $400 million drag on AUM growth associated with the strategies that you were closing down. So is that already in the run-rate now? And maybe separately you can also talk about how you're thinking about reinvesting some of your dry powder that you created from that realignment?

Sure. So as you mentioned, we announced in Q3 business realignment, we expected it to go through Q3 and Q4. We completed our program in Q4. As we said, it impacted approximately 200 employees split between Financial Advisory, Asset Management and corporate. I think as you mentioned given the current environment for the first half of this year we saw the business performance. We wanted to get ahead of the curve. We thought it was a good opportunity to take a hard look and identify areas of business strategies. Some of the best we've made that were performing slower or had less opportunity in the future, to take the initiative to kind of take those off the table and redeploy them in other areas. Now we've been continuously reinvesting throughout the year. And you can see that in the fact that our -- even with the impacted employees relating to business realignment, accounts roughly flat within 1%, of where we started the year. So we've been continuously reinvesting this into the areas that we continue to see as bigger opportunities. So this is more -- for us it’s sort of self-funding some of the growth opportunities on the investments we wanted to make. And I think a lot of that has to relate to areas where Ken had mentioned that we see bigger opportunities in the future. Some of the components of Financial Advisory where we think the biggest opportunities from a whitespace perspective, as we've talked about in the past. And also on the Asset Management making sure we're putting resources in areas of growth, such as alternatives and others and just redeploying on a consistent basis into the areas that are doing well and have greatest opportunity.

Got it. And then just a quick one from me on the non-comp side. You mentioned the increased marketing and business development this quarter. Where are you spending the incremental dollars and is that a change in strategy at the margin or is that just normal quarter-to-quarter volatility?

Yes. It's normal quarter-to-quarter volatility. I mean it's really marketing and business development throughout this year. It was a little bit higher than it's been in the past as we saw the slowdown in revenue specifically in the Financial Advisory business. We had higher marketing costs as we spent more time on the road engaging with clients. And that's just natural into business there. I don't think there's any material change in the way in which we're managing the business or seeing the type of spend we're doing. This always kind of goes up and down, depending on business activity, depending on closing, depending on the types of reimbursements we get from clients. So I think it's sort of in that range. And I don't think there's anything specific there that I would call out.

This now concludes the Lazard conference call. Thank you for your participation.