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Lazard Ltd (NYSE:LAZ)

Q2 2013 Earnings Call

July 25, 2013 8:00 am ET

Executives

Judi Frost Mackey - Spokeswoman

Kenneth M. Jacobs - Chairman and Chief Executive Officer

Matthieu Bucaille - Chief Financial Officer

Alexander F. Stern - Chief Operating Officer

Analysts

Howard Chen - Crédit Suisse AG, Research Division

Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division

Brennan Hawken - UBS Investment Bank, Research Division

Steven J. Chubak - Autonomous Research LLP

Kenneth M. Leon - S&P Capital IQ Equity Research

Operator

Good morning, and welcome to the Lazard Second Quarter and Half Year 2013 Earnings Conference Call. This call is being recorded. [Operator Instructions] At this time, I will turn the call over to Judi Frost Mackey, Lazard's Director of Global Communications. Please go ahead.

Judi Frost Mackey

Thank you. Good morning, and thank you for joining our conference call to review Lazard's results for the second quarter of 2013. Hosting the call today are Ken Jacobs, Lazard's Chairman and Chief Executive Officer; Matthieu Bucaille, Chief Financial Officer; and Alex Stern, Chief Operating Officer. A replay of this call will be available on our website at lazard.com beginning today after 10:00 a.m.

Today's call may contain forward-looking statements. These statements are based on our current expectations about future events and are subject to known and unknown risks, uncertainties and assumptions. 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. These factors include, but are not limited to, those discussed in Lazard's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Lazard assumes no responsibility for the accuracy or completeness of any of these forward-looking statements. Investors should not rely upon forward-looking statements as predictions of future events. Lazard is under no duty to update any of these forward-looking statements after the date on which they are made. Today's discussion may also include certain non-GAAP financial measures. A description of these non-GAAP financial measures and their reconciliation to the comparable GAAP measures are contained in our earnings release, which has been issued this morning.

For today's call, we will focus on highlights of our performance. The details of our earnings can be found in our press release issued this morning and in our investor presentation of supplemental information, both of which are posted on our website. Following their remarks, Ken, Matthieu and Alex will be happy to answer your questions. I will now turn the call over to our Chairman and Chief Executive Officer, Ken Jacobs.

Kenneth M. Jacobs

Good morning. Lazard performed well in the second quarter. Our strong results underscore the breadth and depth of our global franchise in both Financial Advisory and Asset Management. In advisory, second quarter operating revenue reflected a wide variety of assignments, including M&A, sovereign, capital structure and capital raising advice. With multiple revenue streams, we are continuing to increase our share of the advisory peephole [ph]. In M&A, we have been advising on 4 of the 10 largest transaction announced in the first half of the year. Our U.S. announced transactions are up substantially from the same period last year. In Capital Structure Advisory, we are advising more large clients on balance sheet matters and raising -- and capital raising. A few examples. Bertelsmann on its offering of shares in RTL Group, the largest fully marketed equity offering in Europe this year. Siemens on its Osram spinoff, the largest ever in Germany. And the U.K. government on its proposed privatization of The Royal Mail. This is an advantage of our advisory business model. We are benefiting from strength in equity markets without putting capital at risk.

Our Sovereign Advisory business also continues to be active throughout the world, with assignments that include restructuring of national banking systems, advising on privatizations and other high-level strategic advice. In Asset Management, we are benefiting from a global franchise that is diversified by investment strategy, region and client type. We had a record second quarter and first half operating revenue. Our average AUM was up 11% from 1 year ago.

In equities, we are seeing demand for our international, emerging markets and local strategies. In the first half of the year, RFP flow remains strong. In Fixed Income, we are seeing demand for our emerging market debt and global fixed income strategies. Emerging market debt is an evolving asset class in which many institutional investors are substantially under invested. We continue to broaden our platforms by launching new investment vehicles.

On the cost side, we have done what we said we would do, and more. In the fourth quarter of last year, we began our cost-saving initiatives with the goal of achieving approximately $125 million in annual savings from our cost base. We've exceeded our goal. We expect minimal impact on revenue growth. From the start, we have said that a key objective of the cost-saving initiatives was to create greater flexibility to retain and attract the best people. We were following through on this. In the past 4 months, we've made high-level additions to the firm in the U.S., U.K., Germany and Australia. Now Matthieu will provide further detail on our financial results.

Matthieu Bucaille

Thank you, Ken. Lazard's operating revenue was a record second quarter, reflecting a 9% increase in Financial Advisory and an 18% increase in Asset Management over the same period last year. Quarterly M&A and Other Advisory operating revenue increased 12% from 1 year ago. We performed well, both in the U.S. and Europe. Operating revenue from capital raising advice, increased 26%. These increases were partially offset by 23% decrease in restructuring operating revenue, reflecting the industry-wide low level of corporate restructuring activity. We continue to be the global leader in enhanced [ph] restructuring.

In Asset Management, record second quarter operating revenue increased 18% from 1 year ago, driven by an 11% increase in average AUM and higher incentive fees. On a sequential basis, Asset Management operating revenue was up 1% from the first quarter, reflecting a 2% decrease in average AUM.

The sequential decrease in AUM was driven primarily by market depreciation, and $4 billion of net outflow in the quarter which were largely related to one strategy in global equities and the loss of a sub-advised mandate in local equities.

As of July 22, our AUM has increased to an estimated $170 billion. This reflects $6 billion of market appreciation since June 30, and an estimated $0.7 billion of net inflow in the month of July.

Turning to expenses. In the second quarter, adjusted GAAP compensation and benefit expenses increased 8% from 1 year ago, a slower pace than the 12% increase in operating revenue. For the first half of this year, adjusted GAAP compensation and benefit expense decreased 7% from the 2012 period compared to a 3% decrease in operating revenue. Our adjusted GAAP compensation ratio remains at 60% in the second quarter. This compares to 62.7% 1 year ago, and 61.8% for the full year of 2012.

The second quarter GAAP compensation ratio assumes, based on current market conditions, a full year awarded compensation ratio of 58.5%, down from 59.4% for the full year of 2012. Adjusted non-compensation expense declined slightly despite the 12% increase in operating revenue. This reflects the earlier result of our cost-saving initiatives, offset in part by deal-related third-party fees and expenses from increased business activity.

Finally, regarding capital management, we returned $54 million to shareholders in the quarter, primarily through a dividend and share repurchases. This brings total return of capital to $230 million in the first half of this year. As of June 30, our share repurchases have directly offset about 75% of the potential dilution from our 2012 year-end breadth. Alex will now provide more details on our cost-saving initiatives.

Alexander F. Stern

Thank you, Matthieu. When we announced our cost-saving initiatives in October 2012, we expected they would result in approximately $125 million in annual savings from Lazard's cost base. In the first and second quarter of this year, we identified additional savings. And now we expect total annual savings will be approximately $160 million, partially offset by continued investment in our business. Of the total expected savings, approximately $120 million relates to compensation expense associated with the firm's headcount, and approximately $40 million to non-compensation expense. We anticipate that more than 2/3 of these savings will be realized in 2013, with the full impact of all the savings reflected in our 2014 results.

Although we continue to implement the cost savings initiatives, associated expenses are complete and have been reflected in our financial results. Second quarter's charge of $38 million, bringing the total expenses associated with the cost-saving initiatives to approximately $167 million. As we anticipated, approximately 75% of these expenses are expected to be paid in cash. The additional savings we identified were primarily compensation related. Upon completion of the cost-saving initiatives, we will have reduced the firm's headcount by approximately 250 people, although this number will be somewhat offset by hiring in growth areas of our business. We are confident that our cost-saving initiatives will provide Lazard with greater operational leverage and increased flexibility. We continue to believe our initiatives put us on track to achieving an operating margin of approximately 21% or 22% in 2013, assuming 2012 activity levels. This should help create a path toward achieving our target of a 25% operating margin in 2014, also in 2012 activity levels. Ken will now conclude our remarks.

Kenneth M. Jacobs

Thank you, Alex. We're cautiously optimistic about the environment and we're confident in our model. The global economic environment is uneven, but there are pockets of activity and improving trends. The U.S. market is the leading -- is leading the world's economic recovery. The rest of the Western Hemisphere has promising growth prospects. Europe still has issues but the fear of a tail-risk event has receded. Some of the developing markets are experiencing growing pains but they continue to grow. They're increasingly involved in cross-border M&A activity. Globally, all the factors continue to be in place for an upturn in M&A. Corporations, sovereign wealth funds, private equity sponsors are flushed with cash. Confidence is improving and while the evaluations are rising, primarily in the U.S., they are still reasonable.

In Asset Management, the long-term trend that make this a great business are intact. Our clients continue to look for investment solutions on a global basis. Despite recent volatility in the emerging markets, we have had net inflows in our emerging market platforms, and continue to see demand. With Lazard's global scale and the breadth and depth of our services, we are better positioned than ever to serve our clients well. We are building from strength, and we are creating value for our clients, our shareholders and our employees.

Let's open the call to questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] We'll go first to Howard Chen with Crédit Suisse.

Howard Chen - Crédit Suisse AG, Research Division

Ken, just picking up where you left off in your commentary, we can certainly feel the contributions from businesses such as capital and Sovereign Advisory which you've built over the last few years and expanded, but we're just hoping to get a little bit more thoughts from you, when you speak to boards and managements on what we need to see to kind of get back in a more traditional M&A upswing?

Kenneth M. Jacobs

Okay. Well, I'm sort of a broken record on this, there's 3 things we tend to look at: valuation, financing, confidence, when we assess the M&A markets. And let me kind of go through those 3. Valuations, they're a little richer than they've been but relative to organic growth opportunities, they're still pretty favorable. Financing, again, rates have moved up a little bit but probably, for good reasons, that is the economy -- macroeconomic environment's improving, and they're still at or around historic lows. And then with regards to confidence, a couple of observations. First, in Europe, it feels to us like there's been a lessening of any tail risk. It doesn't mean it's gone away completely, but it seems less, and it feels like we've bottomed out in most places. And the little signs of activity here and there. I wouldn't bank too much on it, but it feels better certainly than it did 1 year ago or 2 years ago at this time. Second, with regards to the U.S., clearly, the macroeconomic environment is improving. And with an improvement in the real economy, you get real confidence. So while we're not seeing a bursting of activity of big deals in the U.S., there's been some, I think we've done our fair share of those. There seems to be a steady level of activity and assuming this macroeconomic environment continues to improve and the recovery stays intact, I think you're going to see confidence levels follow that, and that's been the big issue around M&A for some time.

Howard Chen - Crédit Suisse AG, Research Division

Two sleeves of the business I didn't hear you comment on as much were sort of the middle market business and restructuring. I was hoping you could give a bit of update on your outlooks there.

Kenneth M. Jacobs

Okay. I think I said in the last conference call, we had -- in the fourth quarter call, we had a very strong performance in the middle market last year, particularly in the fourth quarter, a lot of it driven by, not only our position in the market but also by what was happening on the tax front and the first quarter was weak, I think in part because people want to get a lot of things done in the fourth quarter. And we've seen a nice pick-up in business in that -- nice pick-up in activity in that business over the course of the last few months or so, both in terms of new assignments, as well as announcements. So we feel pretty good about it. I don't think we'll get to the levels we were at last year, but it feels like it's a pretty healthy environment for the middle market business. And then with regards to restructuring, I think this -- I think we're bouncing along -- we've been bouncing along the bottom now just in terms of announcements and new activity for a while here. I think the increase in rates -- the increase in rates isn't as relevant as the increase in spread, and that may have a little bit of an impact. We didn't expect too much in the U.S., because the macroeconomic environment in the U.S. is improving and it probably offsets that. But probably a little bit in Europe, in part, because of the spreads and also because I think some of the banks in Europe are starting to get a little bit more forward thinking about the west side of their balance sheet, which is actually probably going to lead to a few more restructuring assignments here and there.

Howard Chen - Crédit Suisse AG, Research Division

Great. And then finally for me on Asset Management. I heard you loud and clear about the longer-term trends being intact and the mindset of your largely, institutional client base, but just given the choppier environment for interest rates in the emerging markets, can you just speak to how complex performance, whether that bumpiness and specific to the 2 things that you called out, that the global equities, outflows and the loss of the sub-advisory mandate in local equities, any near-term expectations in the back half on things we should be watching?

Kenneth M. Jacobs

That's quite a question. Okay, let me take it in pieces. First on the emerging markets. Look, generally speaking, obviously, it was not an easy quarter for the emerging markets, although there's been quite a bit of improvement over the last few weeks or so in those markets. For us, we've actually in our emerging markets platform, had net inflows over this period of time. RFP activity remains healthy and our performance is also been -- has been strong during this period of time in our emerging markets' platform. So we feel pretty good about it. The long-term trends in the emerging markets still are very good, it's kind of double the growth rate of the developed world, ROEs for these companies tend to be higher than in the developed world, and the balance sheets are strong, most of the policy, policies of these -- of the countries are actually pretty reasonable, good balance sheets, healthy approaches towards monetary policy and the like. So we feel pretty good about that. On the institutional side, generally, the allocations have been increased towards global investing in emerging markets, again, 2 areas we're quite strong in. And people are under allocated to their new allocations. And so we expect over time, that, that will take place. And the entry point today in the emerging markets is obviously more attractive than it's been in a while. So overall, this continues, we think, to be an area of interest and growth. On the global platform, we continue to have outflows in the thematics business and we lost 1 sub-advisory mandate. The 2 together, account for the bulk of any of the net outflows that we've had. And I think, generally speaking, when you look at our platform, it's sort of the right place, right time, with right product and fortunately, pretty good performance.

Operator

And your next question comes from Patrick O'Shaughnessy with Raymond James.

Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division

First question, if I could. Can you talk about the gross inflows that you had in the Asset Management business in the second quarter? I know it's actually pretty strong in the first quarter, and I suspect it was still elevated in the second quarter but just offset by the outflows, but are you able to provide that information?

Kenneth M. Jacobs

We don't break it out by strategy, but I think generally, your assessment is right, it was pretty good in the first quarter, pretty good in the second quarter. Importantly, in the emerging market platform where there was a lot of noise in the May, early June period of time, it's remained healthy.

Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division

All right. And if I heard you correctly, you said net inflows are positive to start the third quarter, is that correct?

Kenneth M. Jacobs

Yes.

Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division

Question on the cost saves, so you kind of increased what you think your achieved cost saves are from your cost reduction plan. I don't think there is a corresponding increase to, or change in your margin guidance. So if I understand correctly, is that basically because you're reinvesting some of these extra saves in growth initiatives? And if so, can you talk about what some of those growth areas are?

Kenneth M. Jacobs

Okay. I think you're spot on. Look, we've obviously done better than we set out to do on the -- on the cost savings. And I think, as Alex pointed out, it gives us more -- it gives us additional operating leverage. In the business, over time, it gives us more leverage in the event that we have shortfalls in different parts of the business, to hit our targets over time. And then the third thing, it gives us more ammunition for investment in the business, both on the asset, as well as on the advisory side of the business. On the advisory side, I think it's kind of -- look, number one is, whenever we see the ability to get someone that could really be additive to the Lazard platform and make a difference on this platform, it's something that we consider very carefully and we've made a few additions like that, we've made several additions like that already this year. Second, the United States is going to be a growth market and has been a growth market for us for some time. So we continue to look at opportunities here, both in our core large-cap M&A business, as well as in the middle market business. We obviously have seen a lot of success on the capital structure advisory area, and we continue to build into that. Our presence, for instance, in the Sovereign Advisory business has been quite strong now for quite some time. And also, in the capital raising advisory business, we've had a really nice run for the first part of this year in Europe, as an example. So those would be some of the areas we're focused on, on the advisory side. On Asset Management, it really comes down to putting in place the teams and the marketing resources to really roll out and take advantage of the performance we have in several of our new products, and that's going to be one of the key focuses of the firm over the next couple of years.

Operator

And our next question comes from Brennan Hawken with UBS.

Brennan Hawken - UBS Investment Bank, Research Division

So just a follow-up on that last question. And you can let me know whether I'm coming to the right conclusions here. But it seems as though you, at this stage, are sort of hesitant to indicate how much of this incremental cost saves are going to bottom line, because you want to invent some flexibility based on how things develop? Is that right, or am I reading too much into that?

Kenneth M. Jacobs

I think what you should focus on is we put out some targets for 2014 and for 2013, and we're focused on achieving those targets, and we're also focused on continuing to invest in and grow the business. And we're going to use these cost savings to achieve our targets, and use these cost savings to continue to grow and invest in our business and we're going to balance between the two.

Brennan Hawken - UBS Investment Bank, Research Division

Okay. And then on the cost saves, I think you guys -- does the 2/3 that you've realized here in 2013 or intend to realize, does that apply both on the compensation side of the equation, as well as the non-comp expenses?

Alexander F. Stern

It's Alex. That's in aggregate, what you'll find is that the non-comp will be a little bit more back-end loaded, just because those initiatives take a little bit longer to implement.

Brennan Hawken - UBS Investment Bank, Research Division

Okay, that's helpful. And then shifting over to revenue. On the -- thinking about the quarter and certainly, the revenue was impressive, better than I was looking for. Was there some pull forward from views that you had previously expected to close from 3Q? Or were there certain dynamics that we should be aware of when we're thinking about the outlook? And also, if you could add, maybe how you feel about your outlook for the back half of the year at this stage?

Kenneth M. Jacobs

Okay. So as I said, after the first quarter and the fourth quarter, and I think every quarter that we've ever had that I've reported, you can't read too much into any one quarter, as good as they get, or as bad as they get. And it's up -- on the advisory side, it's kind of a lumpy business. There are always surprises to the upside or to the downside. So I think you want to look at trends. Number one, this was a good quarter. That's a good thing. Two, it is that, there's a lot of things in Lazard's advisory business, which are not apparent from M&A. In other words, the Capital Structure Advisory business, the Sovereign Advisory business, the fact that we have a global platform, where statistics aren't as evident and readily available as they may be, for instance, in the U.S. And so that helps us because of the breadth of the franchise. Third is, I think on the call, after the first quarter, I said that we expected that as a result of the first quarter on the advisory side, it would be a little soft for the first half, and it is on a half-year basis, we've made up some ground in the second quarter, clearly. And generally speaking, in the second half of the year on a seasonal basis, is better than the first half of the year. And so that's basically, I think where we are.

Brennan Hawken - UBS Investment Bank, Research Division

Okay. When we look at -- and as you highlight, it's not a terrific measure, but when we look at the announced but not yet closed deals for you as sort of a proxy for revenue outlook, it's been sort of steadily declining here. Can you help us get some comfort that, in the revenue outlook, and the fact that we might be missing some things there, or can you help add some color to that, that's additional? Because you guys have a decent comp, a reasonably high comp to overcome as far as a hurdle, back half 2012 versus the back half of the coming year here?

Kenneth M. Jacobs

Look, I can only repeat what I've said, which is that on a seasonal basis, second half is usually better than first half. Second of all, our share of the advisory market is -- has improved over the course of time. Third, there's a lot of breadth in our business, but it is a lumpy business and we'll see how the year evolves, a lot of it depends on markets. If they're good and strong then you tend to get a lot of good things happening, if they suddenly turn negative, the opposite happens. But right now, the environment feels okay. It's not terrible.

Operator

And our next question comes from Steven Chubak with Autonomous.

Steven J. Chubak - Autonomous Research LLP

All right, perfect. So one of the things that I did see in the quarter is that the incentive fees actually rose in Asset Management, and I was just curious as to what contributed to that step-up in the quarter?

Kenneth M. Jacobs

It was one particular fund where we had great performance that built up over time. I think we've tried to give a little bit of guidance around incentive fees. It's hard, because it can be unexpected, it can be lumpy, and things like that. And generally, what we've been telling people is to sort of think about it on a historical basis, look back a couple of years and kind of average it out and that's probably as good a measure as you're going to find on those fees.

Steven J. Chubak - Autonomous Research LLP

Okay, that's helpful. And I suppose to which it's -- I guess more of a follow-up as it relates to the question that Howard had asked earlier, but on the restructuring side, you certainly provided some helpful guidance as it relates to the sustained slow down that we've seen in that business. But this particular quarter, was the weakest quarter, I think than we've seen since the first quarter of 2007. And I didn't know, and I know that some of the, I guess, the outlook items that you provided was a bit more constructive, just given the move that we've seen in rates and maybe some of the credit volatility. But should we be thinking about a potential pickup or, I guess, gradual improvement in activity off the current base, which appears to be, I guess, a bit lower than what we've seen in past quarters, or should we be thinking about more in the context of the $35 million to $50 million run rate that we've been seeing over the last 8?

Kenneth M. Jacobs

I think this was a particularly low quarter. I'm not sure that I used this quarter as your base. But I think generally, the restructuring markets, particularly in the U.S., are not likely to pick up all that much even though there's been -- as I said before, there's been some increase in spread and some increase -- there's obviously been, spreads have widened out and rates have increased a bit, but you've got a better macroeconomic environment. Europe, could get a little bit better, because of the activity in the banks to recognize some of the issues on their balance sheets sooner now and also, the spreads have widened. So net-net, I think this is a particularly low quarter, and there might be a little improvement as a result of what's going on in Europe, but I wouldn't expect we're going to see a booming restructuring market while the macroeconomic environment is improving.

Operator

And our next question comes from Ken Leon from S&P Capital.

Kenneth M. Leon - S&P Capital IQ Equity Research

So Ken, we talked about the drivers for the corporate market for M&A and I don't recall over the last several calls, whether we've ever addressed private equity and whether Lazard has any toehold in that market for transactions.

Kenneth M. Jacobs

Well, we play it kind of 3 or 4 ways. Obviously, the private equity universe is an important client base to us. We do quite a bit of large cap M&A, either directly for private equity firms or alternatively on the other side of the private equity activity taking a company private and such, and that's a core part of the M&A franchise. The middle market business, actually is primarily -- their primary client base is medium-sized sponsors. So that's a direct play on private equity there and it's very important client base to us, and that's where the focus of the business is. And then, of course, we have the lead -- one of the leading platforms of fund raising for private equity group. So this is a very important client base for us.

Kenneth M. Leon - S&P Capital IQ Equity Research

And restructuring, obviously, has kind of a ho-hum outlook. But I recall as well that how much flexibility you have with your talent to move them, or relationship bankers to other areas. Is that true and is that in some way, inhibits -- limits you or your desire for new hires at the senior managing director level?

Kenneth M. Jacobs

No. The magic of our restructuring business is the ability to mix senior bankers, whether industry or industrialist or country bankers with restructuring expertise and then taking talent from different parts of the firm to really focus on those transactions. When the restructuring markets are active, we're utilizing, usually, the M&A or the bank -- the general banking people to assist on those transaction because usually, they are countercyclical and the reverse. And I think that's been one of the great benefits of having the kind of firm that we have.

Kenneth M. Leon - S&P Capital IQ Equity Research

I just wonder why is it separately reported, because sometimes it feels as a drag to growth, and other times, it seems peculiar as something that's a windfall. But I wonder why it's broken out separately while other investment banks don't.

Kenneth M. Jacobs

Because everybody wanted it when we went public. And we've been doing it ever since. And I think everybody else just kind of threw it all together, and that was the reason.

Kenneth M. Leon - S&P Capital IQ Equity Research

So that's fair. And then just one mechanical question, any help on guidance for tax rates?

Kenneth M. Jacobs

Tax rates. I think we've been talking about a 25% tax rate for a while on the -- for this year, and guiding people towards that. I think that's it.

Operator

[Operator Instructions] We'll take our next question from Howard Chen with Crédit Suisse.

Howard Chen - Crédit Suisse AG, Research Division

Ken, I just wanted to revisit the ability to achieve a 21% to 22% operating margin target for '13, just realizing this business as lumpy, I'm just trying to get some color, to what extent do you need to see new M&A deal formation or new asset management wins in the back half to achieve that target Alex reiterated?

Kenneth M. Jacobs

So look, what we've done is, we've been very clear about this. We premised the targets on the 2012 activity levels, which generally speaking, and I've been pretty direct about this, usually means revenue, to the extent that we achieved those revenue targets. Then I think -- or those revenue levels, and I think we'll get our targets. To the extent we fall short, than the -- your [indiscernible] of operating margin target is easier to achieve because that's comp this year and we control comp this year. The gap -- as long as we maintain it -- as long as we are disciplined about deferrals or stay disciplined about deferrals in a declining revenue environment because a lot of the compensation is reflective of past periods, the gap becomes more challenging, but I've been consistent about that from the beginning when we announced the targets.

Operator

We have no further questions at this time. This concludes our Lazard call for today. Thank you for your participation.

Kenneth M. Jacobs

Great, thank you.

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