Lazard, Inc. Q1 FY2026 Earnings Call

Good morning, and welcome to Lazard's First Quarter 2026 Earnings Conference Call. This call is being recorded. (Operator instructions) At this time, I will turn the call over to Alexandra Deignan, Lazard's Head of Investor Relations and Treasury. Please go ahead.

Thank you, Chelsea. Good morning, everyone, and welcome to Lazard's earnings call for the first quarter of 2026. I'm Alexandra Deignan, Head of Investor Relations and Treasury. In addition to today's audio comments, we've 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, level of activity, performance, achievements, or other events 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 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 measure is provided in our earnings release and investor presentation. Hosting our call today are Peter Orszag, Lazard's Chief Executive Officer and Chairman; and Tracy Farr, Lazard's Chief Financial Officer. After our prepared remarks, Chris Hogbin, Chief Executive Officer of Asset Management, will join us as we open the call for questions. I'll now turn the call over to Peter.

Thank you, Ale, and good morning to everyone. Before turning to our first quarter results and outlook for the year, I want to start with our announcement of the acquisition of Campbell Lutyens, and the future establishment of Lazard CL, a new private capital advisory unit within Lazard that will serve as our third global business closely coordinated with our world-class M&A and other advisory practices. This transaction underscores how Lazard is building on its core advisory franchise while both diversifying our business model and accelerating our growth. Campbell Lutyens is a premier global private markets adviser focused on fund placement, secondary advisory and GP capital advisory services. Along with our existing PCA group, the transaction combines two highly complementary advisory platforms that will create the leading primary and secondary advisory business globally, with approximately $500 million in anticipated combined 2027 revenue. The acquisition marks an important milestone on the path towards Lazard 2030, and an exciting avenue for additional growth. Lazard 2030 is a multiyear plan to build a more productive, resilient, growth-oriented firm. Our focus is on enhancing our long-standing strength in M&A, while also building leading platforms in restructuring and liability management, capital solutions and private capital advisory. Our recent investments have expanded the solutions we provide for clients and diversified our revenue mix. Revenue related to private capital connectivity has increased from approximately 25% of total advisory revenue in 2019 to 40% today. Upon closing the Campbell Lutyens acquisition, we will achieve our 2030 target of approximately 50%, even while delivering total revenue growth. The acquisition of Campbell Lutyens and establishment of Lazard CL strengthens our ability to deliver for clients at a time when fundraising is increasingly competitive and liquidity solutions are more complex. Operating across all major alternative asset classes and in all major global markets, Lazard CL will provide an unparalleled platform for independent differentiated advice that meets the evolving needs of institutional investors, financial sponsors and their portfolio companies. By pairing the combined proprietary data sets of these two businesses with our AI capabilities, we will deliver deeper insights for clients while advancing our goal of becoming a leading AI-enabled independent financial firm. We view this acquisition as strategically disciplined, financially accretive and culturally aligned. We share a commercial mindset, collegial approach and unwavering commitment to our clients. With Lazard's heritage in Europe, including the U.K., where we have had a significant presence for well over a century, we also have a shared respect for Campbell Lutyens' heritage and for the importance of preserving local identity within a global firm. This step highlights our further investment in the U.K. and in growth across our global franchise. Taken together, this transaction reflects how we are positioning Lazard to lead across both public and private markets with exceptional advisory and asset management capabilities, while remaining anchored in the strategic principles that define our firm. We anticipate the transaction closing before the end of the calendar year, and we look forward to welcoming Campbell Lutyens' team to Lazard. Now turning to the quarter. Firm-wide adjusted net revenue was $673 million, up 5% compared to one year ago. In Financial Advisory, our outlook is optimistic despite geopolitical uncertainty with conditions depending in part on the path forward in the Middle East. Client engagement remains very active, and the pace of client interactions continues to accelerate. Total conflict clearances are up significantly, reinforcing our confidence in our deal outlook. As one example, conflict clearances for deals above $5 billion are up 50% year-over-year. The broader underlying dynamics supporting activity also reinforce our constructive outlook. Companies continue to look to achieve scale and focus amid rapid technological change and a regulatory environment that is constructive. Dispersion and corporate performance continues to drive elevated restructuring and liability management alongside M&A. We anticipate ongoing strength in fundraising and the potential for increased private equity activity. These dynamics align with our existing Financial Advisory and future Lazard CL businesses, providing multiple and complementary levers for revenue growth. Financial Advisory activity can admittedly be uneven from quarter-to-quarter. And during the first quarter, we had several transactions moved to later in the year. As a result, revenue from this business was not as strong as we anticipate the rest of the year will be. Robust growth in restructuring and liability management, and private capital advisory along with solid M&A performance in Europe, supported overall results and underscore the benefit of our diversified model. Looking beyond 2026 to the next phase of Lazard 2030, retaining, promoting and recruiting top talent remains a core component of our long-term growth strategy. We more than exceeded our goal of expanding our Financial Advisory team by 10 to 15 net additions from the first quarter of each year, with 28 net additions for 2025. Our recruiting pipeline is strong, and we remain opportunistic about adding new MDs in 2026, while we also focus on integrating Campbell Lutyens following close. In Asset Management, we delivered net inflows of $9 billion this quarter, the highest level of quarterly net flow in almost 20 years. The momentum we see in our results underscores that our strategy is successfully pivoting the business where active asset management has an advantage. While our focus is on areas of the market where information is imperfect and where our systems and research carry a distinct edge, including in quantitative strategies and emerging markets, we continue to see client demand and growth. Even with significant inflows for the quarter, one—not yet funded—pipeline remains strong. While the environment remains uncertain, our business is well positioned for the year ahead as market volatility creates more opportunities for active managers and global diversification is firmly back on the agenda for investors. We continue to believe 2026 will be a year in which investors increasingly reallocate towards emerging and international markets which is where Lazard's presence and capabilities are particularly strong. With a more diversified platform, best-in-class research and investment processes, enhanced global distribution strategy and new leadership, our Asset Management business is well equipped to pursue opportunities aligned with client demand. Overall, client demand continues to grow for independent differentiated advice and investment solutions grounded in deep research, the broad insight and judgment needed to navigate complex macroeconomic and geopolitical dynamics. And that is what Lazard excels at delivering. As we reflected in our annual shareholder letter published last month, Lazard today is a structurally and culturally different organization, more modern, more globally connected across public and private markets and better positioned to deliver long-term growth beyond traditional cycles. Now let me turn the call over to Tracy to discuss our financial results.

Thank you, Peter. Financial Advisory adjusted net revenue was $356 million for the first quarter of 2026, 4% lower than the prior year. Building on our momentum in Private Capital Advisory, recent assignments included work with capital partners on continuation funds and advising NOVA Infrastructure on the raise of Infrastructure Fund II. Further reflecting the diversification of our franchise, liability management and restructuring assignments include debtor roles with several companies and Xerox Holdings and creditor roles involving Ampology and DISH. Demonstrating global reach with complex assignments. We completed transactions, including advising on a $23 billion acquisition and the planned subsequent separation into two independent companies. And recently announced transactions include advising Zurich Insurance Group on its £8.2 billion recommended cash offer. Turning to Asset Management. Adjusted net revenue was $309 million for the first quarter of 2026, up 17% from the prior year quarter. Revenues reflected management fees of $296 million for the first quarter, 25% higher than the first quarter of 2025, and up 3% on a sequential basis. Incentive fees totaled $11 million. As of March 31, we reported AUM of $259 billion, up slightly compared to year-end and demonstrating improvements in flows. During the quarter, we had net inflows of $9 billion, market appreciation of $354 million, foreign exchange depreciation of $3 billion and divestitures of $1.5 billion. Average AUM for the first quarter was $266 billion, up 2% compared to the prior quarter, and up 15% compared to one year ago. To highlight ongoing demand for our quantitative, global and fundamental equity capabilities: in the first quarter, we secured several new mandates spanning our Advantage platform, systematic equities, fundamental strategies, fixed income and private markets. Related to a few key transactions during the first quarter, the sale of our State and Edgewater funds was an attractive resolution for our investment in the firm. This resulted in a $78 million noncash gain in our GAAP results, which is excluded from our adjusted reported results. In addition to our organic growth investments, yesterday's announced acquisition of Campbell Lutyens is an important step in the execution of our Lazard 2030 strategy, materially accelerating revenues, scale and the diversity of our platform. Upfront consideration is all stock with optionality on deferred payments to be either stock or cash. The acquisition is expected to be EPS accretive in 2027 with no synergies assumed. Equity ownership is broad-based at Campbell Lutyens. So this transaction creates significant value through retention and performance alignment with long-dated deferrals. It also has the near-term effects of strengthening the balance sheet and adding cash flexibility to the business. Now turning to firmwide expenses. Our adjusted compensation expense was $471 million for the first quarter of 2026, resulting in a compensation ratio of 69.9%. Our adjusted non-comp expense was $149 million for the first quarter of 2026, which equates to a non-compensation ratio of 22.1%. Improving operational efficiency and delivering profitable growth is a top priority. We continue to take a disciplined approach to expenses while investing in the long term. We are committed to achieving efficiency over time as we balance both sides of these trade-offs. Shifting to taxes. Our adjusted effective tax rate for the first quarter reflects discrete tax benefits related to stock-based compensation awards that vested during the quarter. We currently expect our effective tax rate for the full year 2026 to be in the high 20s percent range. Turning to capital allocation. In the first quarter of 2026, we returned $174 million to shareholders, including a quarterly dividend of $47 million. In addition, yesterday, we declared a quarterly dividend of $0.50 per share. Guided by our Lazard 2030 strategy, we are building a stronger and more resilient firm. The addition of Campbell Lutyens and the future establishment of Lazard CL as our third global business will accelerate our strategy and strengthen the scale, relevance and strategic importance of our connectivity to private markets. With ongoing focus on disciplined execution across Financial Advisory and Asset Management, we are positioning Lazard to deliver sustained growth and long-term value across cycles. Now we will open the call to questions.

(Operator instructions) We'll take our first question from Devin Ryan with Citizens Bank.

First question, obviously, appreciate the comp ratio dynamic in the first quarter, just this kind of dynamic. But can you just talk about the full year? Do you think you can drive some improvement there just based on what you're seeing right now in the revenue backdrop, appreciating things can change? And then bigger picture, probably for Tracy, just as you've been in the seat here for a bit, are you identifying any opportunities that could maybe drive more leverage as we look out beyond 2026?

I think, Tracy, can take both of those.

I appreciate the question. So first of all, I'd go to Peter's opening comments around our positive outlook for the year, as you can fully expect comp ratio is made up of two different metrics. And so as we gain more and more confidence around the revenue projection, there's leverage there. I want to be careful. I mean, your comment is exactly right. It's effectively a math equation. And the accrual that you'll see of the 69.9%, I think we would still guide you closer to a comp ratio for the full year, similar to what we had last year, around 65.5%. You understand from a GAAP basis, we're required to accrue on a fixed compensation basis, and that has a larger impact in the first quarter. So some of the math, which I understand is complicated, shows that there'll be a higher accrual in the first quarter versus the second. I do think that there are opportunities to be more disciplined. Obviously, me being in this role, one of the things that I stress and that I would focus on is operational efficiency and cost management. I think there's additional ability to be disciplined in the comp ratio itself directly. I think you have seen a relatively strong amount of discipline on non-comp already in the first quarter. To your question about other areas, yes, I think there are opportunities, particularly in our support functions, around streamlining operations between both geographies and businesses that we have a renewed focus on finding efficiencies there. We launched a long-dated program to address some of those costs and cost reductions. I think we'll have more details that we can give on that in the second half of the year. I further believe that there's still opportunities as we see advancement in technology and AI and other parts of our business. But again, I think you'll see a continued focus on my part around operational efficiency.

Great. And then Peter, I won't leave you out here. First off, congratulations on the Campbell Lutyens acquisition, seemingly get you in the top couple of firms in Private Capital Advisory. Obviously, they already had a strong business, but this scales that quite a bit. So the question really is Campbell Lutyens didn't have all the other advisory capabilities that Lazard does, and your existing private capital business was pretty integrated from my sense. So can you just talk about the network effects that you think you can get off of Campbell Lutyens? And then also what that could mean for like productivity uplift of those partners, or just more broadly across the firm as you integrate all those LP and GP relationships with broader Lazard?

Sure. Thanks so much for the question. First, I'd note, we believe, and I think the data show that we're a pro forma market leader, not one of the leaders in primary and secondary fundraising business as a whole—on a pro forma basis for Lazard CL post close. Second, there is a network effect, a flywheel effect in both directions from M&A, restructuring and liability management to the fundraising business and vice versa. This is one of the major motivations that Campbell Lutyens had for joining Lazard, which was the recognition that they needed more of those capabilities in order to compete in the fundraising business. And that was a big part of the discussion, which is the ways in which there was a business flow in both directions. So we're very excited about the opportunities for enhanced productivity from not just the base business, but from referrals in both directions. And this was a core part of the strategic logic of the transaction. In addition to that, I don't want to discount the data piece of this. As you know, information and data on both GPs and LPs is difficult for most people to obtain. This combined business will have a data-rich environment that will be coupled with our AI systems that will help facilitate that flywheel effect that I was mentioning earlier, in addition to helping on the core primary and secondary fundraising business itself. So there's a lot of opportunities for uplift here that we're excited about.

Our next question will come from Alex Bond with KBW.

Another question on the deal, and congrats there again. Can you help us think about the business mix at Campbell Lutyens just in terms of, maybe, secondary advisory-related revenues versus the primaries business relative to your existing in-house units currently and also in a similar sense in a geographical split of their business compared to yours? And essentially, just trying to determine where do you think their business will fill in the most white space relative to your existing offerings?

Yes. I appreciate that. And what was attractive for us about this transaction is the Lego-like nature of it in terms of very little overlap and a lot of places where they're strong, we were weaker and vice versa. So I would highlight, in particular, their strength in LP-focused secondaries and our strength in GP transactions, balancing our presence in the secondaries market. We're adding complementarity across asset classes like real estate, private credit and infrastructure. And so that's fitting very nicely. And then on the fundraising piece, they bring strength in North America complementing our strength in Europe and in Asia. As we went deeper into the business, the entire ecosystem comes together in a comprehensive way. Having seen many potential transactions, the degree to which the pieces fit together to form a coherent whole is exceptional. We also have additional information on the mix of activities and what Lazard CL would look like in the supplemental deck that we posted yesterday on our website.

Great. And then maybe for my follow-up and going back to the comp and I guess just want to drill down on maybe the impact of last year's above trend hiring there. You obviously added the 28 net MDs last year, well above the 10 to 15 target that you have out there. But maybe if you could just help us quantify maybe how much the hiring last year impacted the comp in 1Q relative to the full year '25 rate? And then also maybe how we should think about those hires last year, maybe trickling through and impacting higher trends into '26, if at all?

Sure. Let me take that question and then Tracy can take the mechanical part. Obviously, last year, we added a lot of talent and well above our 10 to 15 net add per year target. We have added some bankers this year. Healthcare services is a good example. We're interviewing others. And by the way, I would note, an aside, one of the people I interviewed earlier this week before this transaction was announced highlighted the importance of the secondaries business to his M&A franchise. So just coming back to the flywheel effect. We think that with Lazard CL we'll have even expanded ability to recruit and attract top talent. But bottom line, I think that we will be within our range this year in terms of net adds rather than above it. So 2025 was an unusual year because we had a lot of talent that we thought was productive and valuable. I'd also note, on timetables here, that means if you look back over time at the separations we've done to help modernize our culture and then when the net adds have been, a lot of the future productivity is still to come as the bankers that we've been hiring ramp up on our platform. If you look at the year-by-year net adds and subtractions, and then add a lag of one to three years depending on the ramp, the vast majority of the productivity gain from the hiring we've done is yet to come.

Yes. And I think the only thing I'd add to that are the mechanics. I mean you talked about the hiring and the expectation around hiring this year. Naturally, we've talked about the ramping and we've talked about that percentage of MDs that are still in that ramping period. Keep in mind that that still remains at a relatively high level of around 40%. And so again, as that number were to come down, which would be effectuated by, for example, Peter's comment of us being in the middle of that range, you'll see a little bit of leverage as that matures. I guess, mechanically, maybe what I'd point you to is when you think about total fixed comp, which obviously has a component to that of guarantees as you're bringing in MDs from external places, total fixed comp, if you were to compare the first quarter this year versus last year, was up kind of low double digits. And so when you think about the total adjusted net revenue being up effectively 5%, there's naturally going to be a higher accrual rate in the first quarter. Again, I think that that math and that mechanic probably paints a tougher picture in the first quarter than what I believe the full year will look like. We think that through both a more positive outlook on the revenue front and a much more disciplined approach on comp this year than maybe what has existed in the past, given my involvement in that process, I think that the guidance that I gave you around comp coming down closer to where it was last year is important.

Our next question will come from James Yaro with Goldman Sachs.

Congrats on the deal. I did want to touch, Peter, on the sponsor backdrop right now. It remains the weaker part of M&A once again so far this year. You did sound a constructive tone on this part of the market. Maybe you could just expand a little bit on the timing and speed of sponsor M&A recovery and the ingredients associated with that as you look ahead?

Sure. Look, I struck a constructive tone on the market as a whole. I don't think I struck a constructive tone on the private equity piece of that. And in fact, for example, the conflict clearances above $5 billion are largely related to public transactions. Those are much less likely in the private capital sphere as an example. But I agree with you. There's a bit of a waiting-for-a-moment phenomenon with regard to private equity activity, where we've all been waiting for that pickup. I'd say if you listen to the heads of the large alternative asset managers who are going to drive a lot of this activity, they are still saying that 2026 will be the year in which they're going to be selling and buying a lot of firms. So we will see how that plays out. But the other point I wanted to make is that our connectivity in private capital, the reason that our revenue share on the advisory side has gone from 25% to 40%, extends well beyond private equity M&A and involves restructuring and liability management engagements with these firms. It involves the Private Capital Advisory business, which is growing rapidly. It involves our capital solutions business. So I think the piece that you're focused on appropriately is a subset of the overall private capital activity. And I agree with you that we've been waiting for a substantial uptick in private equity activity. We'll have to see how the year turns out. We are seeing a significant number of processes that we're involved in. So that's promising in private equity M&A. And then the second thing I'd say is, again, listen to the public comments of the leaders of these firms about what they say they're going to be doing in this calendar year. But we all have to wait to see it actually manifest itself.

Okay. I apologize for mischaracterizing your comments. Maybe just a little bit on Asset Management here. I was hoping you might be able to expand a little bit on the flow outlook from here. Do you expect to be able to continue at the recent level of inflows? And perhaps if you could also just unpack a little bit the fee rate dynamics in the quarter in Asset Management and how we should think about the fee rate going forward as well?

Chris Hogbin is going to take that for us.

Sure. Thank you for those questions. So look, on the flows, we obviously enjoyed a strong first quarter with $9 billion of net inflows. I think that reflects a deliberate focus in our distribution efforts, strong investment performance and growth in a number of strategies, and client demand in areas where we have very strong offerings. As Peter mentioned in his remarks, we've seen clients looking to diversify into international, emerging markets and global strategies. And as a reminder, two-thirds of the AUM we manage is nondollar-denominated. So we benefit from that. In terms of the flow dynamic going forward, we still have a very strong funded and not-yet-funded pipeline. We see a lot of commercial activity. But I would not straight-line the Q1 number through the year. In fact, in the next couple of months, we might see a little bit more of a moderation in the net flow level. As a reminder, net flows is the difference between two big numbers, gross inflows and outflows. So we think that while we continue to see very strong gross flows, there are some areas of our business where we may see some level of redemption. But we still remain very confident that we will deliver net inflows for the full year. So we're very confident at that level. Secondly, to your question on fees: average management fee in the quarter was 44.6 basis points. That's actually up sequentially from 43.9 in the fourth quarter and up meaningfully from 41.2 from a year ago. Obviously, the fee rate a lot depends on the evolution and the mix of the business going forward. But we feel comfortable as we see the business today that the fee rate should stay around this level through the remainder of the year.

Our next question will come from Brennan Hawken with BMO.

Congrats on the Campbell Lutyens deal. Could you help us understand the price paid for Campbell Lutyens? And thanks for the clarity on the equity financing, Tracy. When was the deal price struck? Could you help us understand that, too? As far as the pricing details?

Yes, I can take both of those. So you'll have hopefully seen that the reference share price was $46.50. As you can imagine, we had, throughout the process, a long set of negotiations between the heads of terms and the ultimate pricing. It was based on kind of a medium-range reference during the period. On the questions on the equity financing, and maybe it's just helpful to walk through this for everyone: the $575 million total noncontingent consideration, $460 million of that is paid upfront. So that $460 million is based on that $46.50 reference share price. A significant portion of that, about half of it, is effectively released upon issuance and not locked up; about another half of it is locked up over a period of three years. There's also $115 million of a deferred payment, which would be priced at issuance, which is two years from close, also subject to then a further one-year lockup on that. As was noted in the materials that Peter referenced, there was another $85 million of performance-based earnout. On both the deferred and the earnout, we have the ability to settle in either a cash-like security or stock, which gives us some opportunity to manage dilution depending on where the share price is. That was important to us. But we thought that the all-stock nature of the transaction was attractive for a number of reasons. First and foremost, the alignment of incentives between the people that are joining our firm and our existing employees. The nature of the deferral has strong retention dynamics between just the long-dated nature of the deferral and the grant dates, but also forfeitures associated with it. So we thought that was powerful from a retention perspective. And then lastly, as was mentioned, we think it's a powerful tool in just further enhancing the balance sheet and providing future strategic flexibility. This would be a deleveraging transaction naturally. But as we continue to think about other organic or inorganic investments that we want to make, increasing our strategic flexibility was important.

Thanks for highlighting all that. Another angle that I was interested in pursuing Tracy was the sort of getting an understanding of the price paid on the actual earnings that you are acquiring. Could you maybe help us understand the earnings that is embedded either in your 2027 revenue base where you have the combined entity? And importantly, what kind of profit margins CL had, or anything that we can kind of get a little clarity on the underlying metrics?

Yes, it's a great question. When you think about it from an acquisition multiple perspective, and we talked about it being accretive in 2027, the way that I would think about it is it was effectively acquired at a multiple similar to our total consolidated weighted average multiple, which is why it's effectively breakeven in the first year and likely accretive in the second year. So that gives you a bit of a sense on just the earnings multiple related to it. The revenue of the business is slightly larger than our own PCA business, but with operating margins in the mid-20s percent range. So this was both a high-growing and high-performing asset. So it was a chance to invest in both revenue growth but also profitability. You didn't ask it, but I also think that this is an opportunity, going back to the comp ratio perspective, not only to help from a scale perspective, which always helps accomplish leverage, but I also think when you look at respective comp margins in respective businesses, this is another area where our consolidated comp ratio could benefit over the medium term.

Our next question will come from Ryan Kenny with Morgan Stanley.

Just want to clarify, as you focus on integrating Campbell Lutyens, does it rule out additional M&A near term in areas like asset management?

I'll take that. The short answer is that I think we've been disciplined in the acquisition targets that we have been looking at. Campbell Lutyens, I think, is right down the fairway in terms of type of business that we find attractive. It's not—we've talked before about avoiding advisory firms that are a roll-up type of thing where you're putting a premium on something with very little to no terminal value. We will continue to pursue acquisitions where it makes strategic sense and avoids those pitfalls. And then on the asset side, we were disciplined. Obviously, we were being pitched a lot of private credit opportunities early in my tenure. We decided not to pursue those in part because we did anticipate that the valuations looked high and we anticipated there might be a wobble in the market at some point, which is exactly what has occurred. That having been said, there may well be teams within Asset Management that we find interesting, not necessarily major acquisitions. And then the only other thing I'd say is we are taking a very active look at our wealth management opportunities, and we believe that there may be pathways for growth in that arena. So I'll leave it at that, which is on the advisory side, I think we've been pretty clear about the criteria that we would apply to acquisitions. And on the asset side of the business, I don't think you should anticipate anything in the traditional large-scale asset management space, but we may be looking at growth opportunities in our Wealth Management business. And in addition, we are always looking at adding talent and teams in our core Asset Management business, where we believe that it's differentiated. And obviously—one other thing as we look at any opportunity, it's got to fit strategically, from a valuation and shareholder value perspective, and culturally. We're really pleased with Campbell Lutyens from that perspective, but those are the only transactions that we're going to be doing where you hit all three. And we will continue to be quite disciplined in terms of what we look at.

All right. And then separately, Peter, what are your thoughts on the new proposed merger rules in Europe? Is it meaningful to your Advisory business there?

It could be. I think the backdrop in Europe is that there are lots of great European companies, but the macro backdrop has been stymied and to some degree corporate dynamism has been impeded. You don't have as many frontier firms in Europe as you do in the United States. I think going back to the recommendations of various policy reviews, some of these merger rule recommendations were included. In addition to potential opportunity created by moving in this direction, I'm also glad that Europe is moving on some of the recommendations because I think that's important not just to M&A in Europe, but also to European economic growth more broadly.

Our next question will come from Mike Brown with UBS.

So Peter, you noted that several large transactions slipped out of Q1, but the conflict clearance is above $5 billion or up 50% year-over-year. Can you maybe just talk about that pipeline to revenue conversion timing here? Is this potentially coming through in Q2? Or is it really going to imply kind of a heavy second half skew? And is there risk here that some of these deals ultimately don't reach the finish line? Just maybe some color there about what drove that slippage this quarter?

Sure. I mean, I think the short answer is this is not a quarterly business. It's lumpy, and you have to look at underlying trend because quarters can bounce around. That is what we're very excited about. We are, if anything, ahead of schedule relative to our 2030 plan on all of the indicators that we're tracking to achieve that plan. But quarter-to-quarter, things can move around. It's not that there's one explanation for the various slippages. A lot of them are idiosyncratic to specific deals, regulatory approvals, or timing. Things do move around. With regard to the outlook from here and the conflict clearances, what I would say is again that there's no guarantee that a conflict clearance turns into an announcement, and an announcement turns into revenue. But it is encouraging and an indication of the increasing traction that we're getting as a firm. I see this in a more qualitative way in terms of the board rooms that we're now in, the CEO relationships we now have that did not exist a couple of years ago. The frustrating part of this business is that it takes a long time to mature and it takes a long time to convert into revenue. But it's happening and the conflict clearances, I think, are an indication of that. So I don't want to provide precise timing on exact conversion timing. But I do want to give some encouragement about the underlying momentum that the business is creating in terms of our relationships, and those relationships turning into mandates and then ultimately mandates turning into revenue.

Okay. Great. Appreciate the color there. And then I just wanted to ask about Campbell here. A lot of good color. I like the way you frame the Lego building blocks here. So it doesn't seem like there's much overlap. But if you were to think about some of the synergies, clearly, there's some network effects. You talked a little bit about that. Maybe expand on that a little bit? Is this an opportunity to continue to, kind of, find ways to get paid more from sponsors if ultimately, there's less deal activity coming through? And then maybe on the expense side, is there any opportunities that could come through there, Tracy, maybe touch on any shared services, or other expense opportunities here?

Sure. What I would say is I do think that there is a benefit to being the market leader. The responses we've gotten over the past 24 hours from some of our major clients underscores how excited they are that we will be able to offer the full suite of services that they may need in primary and secondary with a global fundraising practice that fills in the holes and therefore, if anything, be even more effective on their behalf. And so I'd say the past 24 hours has been encouraging on the additional revenue that will come to the combined business precisely from the combination. And then I've already highlighted the data point: in private markets, the more insight you can have across a wider array of private market participants, the more effective you're going to be for any given client. And then third, the scale itself opens up a whole array of new opportunities which we'll have more to say about in the future, but the scale opens up opportunities in distribution, product and other client offerings. On the cost side, the accretion in 2027 that Tracy mentioned does not assume cost synergies. We view the transaction as attractive even without synergies. As we move through the integration process, undoubtedly there will be ways in which we can be more efficient together than separately. I have confidence those synergies will be possible; we simply did not assume any in our initial analysis.

Thanks, Peter, and it's a great question. I think maybe one point I would add on the revenue front: in the negotiations that we had with Campbell Lutyens, keep in mind this was a bilateral negotiation. One of the things that they found very attractive about Lazard itself was our preeminent M&A practice. In their own revenue pipeline, there's a lot of opportunities where they collaborate with other advisory partners where that now could be a revenue synergy within our existing business. So I would say that that is more of a revenue synergy. On the cost side, you're exactly right. I appreciate you using the shared services concept. As you know, I've shared my views around legacy Lazard not having kind of a shared service mentality in corporate. I continue to believe that there are significant synergies there. Naturally, they have a lot of support functions that will come across that can complement that analysis. So that's an area. Peter already mentioned the geographical compatibility with our business in addition to the client and the service offering; there's a geographical component that is beneficial. So from a real estate perspective, I think there are also some synergies which we did not include. The last one I would say is, I'd be remiss if I didn't complement the talent at Campbell Lutyens, both in their corporate and within the business. I spent significant time with their finance, legal and other support functions. And I think simply, as we evaluate other cost efficiencies throughout Lazard, the talent that we're able to bring over from Campbell Lutyens will be an important component to that strategy.

Our next question will come from Daniel Cocchiara with Bank of America.

Came into the year with a lot of emerging market excitement, but the war and energy price spike has kind of thrown that into question. I was wondering if you could just talk about how these developments have impacted your near-term outlook just for the Asset Management business?

Chris will take that.

Yes. I mean it's interesting. If you look through the first quarter, the flows picture was actually very consistent from January to February to March and the gross flows remained steady — we didn't really see any impact in the flows in our business as the Middle East conflict began. As a reminder, institutional investors tend to be a little more long-term. And if anything, some of those market movements present an opportunity to achieve their longer-term asset allocation. So it really hasn't changed much in the outlook for our business at this point.

Our next question will come from Brendan O'Brien with Wolfe Research.

To start, there's been a lot of noise on the private credit space at the moment where there's growing concerns on the outlook for credit performance, given greater exposure to software companies. Just want to get a sense as to whether you're seeing any signs of building stress in both sponsored portfolio companies broadly, as well as within their software holdings specifically. And just as we think through the timing of this opportunity, is this more of a 2026 kind of fee event, or more of a long-term one in your view? And just how does the private credit loans, or the fact that there will be more private credit concentrated potentially impact the opportunity from a liability management versus Chapter 11 perspective?

I'll take a little bit of that, and then Tracy can come in also. Look, I'd say the following. In the parts of our business that deal with sponsors who are in the software space, you're seeing an effect. It's not universal. It's idiosyncratic firm by firm, but that is a relatively small share of our overall advisory practice. In general, the private credit challenges are concentrated in the software sector. They are also more pronounced among alternative asset managers or private credit players that have turned to retail investors. The reason for that is retail investors are more used to having the ability to withdraw money whenever they want to, and there is a tension between that expectation and the relatively illiquid nature of many of these investments. Institutional investors who account for the vast majority of funding of the private credit market overall understand that point, but it's somewhat awkward when retail investors want money back and don't get it immediately. That is exactly why these private credit funds have gating constraints on the size of withdrawals that are possible at any point in time. It's still somewhat awkward when someone wants money back and they don't get it back immediately. Anything else you wanted to add, Tracy?

I would just go back to a couple of points. We noted earlier the restructuring practice having a broader mandate between creditor and debtor. I think there's a lot of opportunity there. I actually came out of the capital solutions business within Lazard, where I spent the majority of my career. Keep in mind that practice is really a very bespoke capital advisory business, where frankly, as some of these challenges emerge, that business actually performs better as it's dealing with bespoke credit or private capital solutions. And then I go back to part of the rationale around PCA and Campbell Lutyens: as much as any of the complexities in private credit manifest, challenges in whether it's M&A, IPOs or other financing solutions that enable transactions, the ability to pivot towards continuation vehicles and secondaries is, again, a natural hedge within the business and a high-growth area.

That's helpful color. And then for my follow-up, I just wanted to touch on the cross-border environment at the moment. With the conflict in the Middle East once again highlighting the fragility of global supply chains, I just want to get a sense to the extent of which some of your larger multinational clients are rethinking their respective footprints and whether you see this as spurring more cross-border M&A activity once we're past the conflict?

I would say that large multinational firms are definitely rethinking their supply chain footprint across many sectors. I would not say that the end of the hostilities will be the single breakpoint for those changes, because I think the risks associated with various global chokepoints are better appreciated now than a decade ago. Leadership teams and boards are responding by trying to create more resilience. The trade-off is it's expensive to create redundancy and geographic dispersion, so firms are balancing cost and resilience. I think that's what you're seeing, and clients increasingly look to a firm like Lazard to help guide those choices. Our geopolitical insight integrated with our banking teams and our investment professionals positions us well to advise clients on those decisions in what I call an era of contextual alpha.

We have a final question from Alex Bond with KBW. Alex please make sure that you're unmuted. All right. This does conclude Lazard's First Quarter 2026 Earnings Conference Call. You may now disconnect.