Good morning, and welcome to Lazard's Second Quarter and First Half 2017 Earnings Conference Call. This call is being recorded. At this time all participants are in a listen-only-mode. Following the remarks, we will conduct a questions-and-answer session. Instructions will be provided at that time. [Operator Instructions] At this time, I'll turn the call over Judi Frost Mackey, Lazard's Director of Global Communications. Please go ahead.

Thank you. Good morning, and thank you for joining our conference call to review Lazard's results for the second quarter and first half of 2017. Hosting the call today are Kenneth Jacobs, Lazard's Chairman and Chief Executive Officer; and Matthieu Bucaille, Chief Financial Officer. A replay of this call will be available on the Lazard Web site beginning today by 10:00 AM Eastern Time. 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 SEC, 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 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, both of which are posted on our Web site on lazard.com. Following their remarks, Ken and Matthieu will be happy to answer your questions. I'll now turn the call over to our Chairman and Chief Executive Officer, Ken Jacobs.

Thank you, Judi. Good morning. In the second quarter Lazard achieved the highest quarterly operating revenue in its history. The strong quarter contributed to a record first half and a record 12 months period. Over the last four quarters we had achieved more than $2.6 billion in operating revenue. Both the Financial Advisory and Asset Management business has achieved record revenue for the second quarter and first half. Our M&A and strategic advisory revenue increased 50% in the quarter, even as the markets volume of M&A completions decreased 7%. We were especially active in Europe, advising clients on some of the most prominent transactions in the quarter. Lazard's leadership in advising on large complex and cross border matters highlights our competitive advantage, a fully global platform with strong local advisory teams and a deep understanding of shareholder dynamics and regulatory issues. While the pace of M&A announcements has been relatively flat in 2017 compared to last year, there have been pockets of growth, notably in Europe, while Lazard's volume of announcements was up significantly in the first half compared to the same period last year. Our industry leading global restructuring team had another strong quarter with the completion of some large assignments. We’ve won significant new mandates as well including increased activity in the retail sector. Our Shareholder Advisory business continues to grow as we advise on significant assignments relating to corporate activism and shareholder engagement globally. And our sovereign and capital advisory services remain active advising governments and corporations across a range of geographies on financing strategy and capital raising. In Asset Management, all-time record operating revenue reflected the strength and quality of our global franchise. We finished the quarter with assets under management of $226 billion, a record level that is $34 billion higher than one year-ago as of June 30. We achieved record management fees in the quarter and the first half. Incentive fees continue to increase on the strength of our investment performance. Gross inflows have remained strong across our investment platform. Net flows were essentially flat in the second quarter and for the first half of the year we have achieved net inflows of 2.6 -- $2.9 billion. We continue to build our asset management franchise through the developments and scaling up of new strategies. We see investor demand across many of our platforms with significant capacity for organic growth. Matthieu will now provide color on our financial results and capital management and then I'll comment on our outlook.

Thank you, Ken. Lazard's second quarter 2017 operating revenue increased 33% on a reported basis and 35% on a constant currency basis. Second quarter 2017 diluted net income per share on an adjusted basis increased 61% to $0.98. Quarterly operating revenue for Financial Advisory increased 43% to a record level of $411 million. This reflected an elevated number of completions in M&A and strategic advisory as well as some large completions in restructuring. M&A revenue increased 50% in the quarter. Quarterly operating revenue for Asset Management increased 22% to a record level of $307 million. This reflected increases in both our management fees and incentive fees. Management fees increased 16% in line with the increase in average AUM. During the second quarter of 2017 AUM increased by $11 billion from March 31 to $226 billion. This increase was driven almost entirely by market and foreign exchange appreciation. The quarter ended with net inflows which were primarily driven by fixed income strategies and one global equity strategy which we’ve discussed in the past. As of July 25, AUM was approximately $231 billion, driven by market and foreign exchange appreciation of about $6 billion offset by net outflows of about $650 million. Looking ahead for both of our businesses, Asset Management starts the second half of the year in a strong position with AUM about $34 billion higher than one year-ago. In Financial Advisory, last year's backend loaded second half could make comparison a bit more challenging. However, we see healthy activity around the world, especially in Europe which is benefiting from positive macro trends. Turning to expenses. In compensation we continued to accrue compensation at a 56.5% adjusted compensation ratio consistent with our full-year 2016 ratio. In the first half of 2017, a 56.5% ratio compared to 57.6% last year. Our adjusted non-compensation ratio for the second quarter were 16.1% compared to 20.7% in the second quarter of last year. Please note that our adjusted non-compensation expense through certain charges primarily reflecting the implementation of a new global enterprise resource planning system. We expect the total comps of the project to be approximately $25 million, most of which will take place in the 2017 with the remainder in the first half of 2018 upon completion of the project. Our effective tax rate in the second quarter as adjusted was 29.6%. We continue to expect a full-year tax rate in the mid to high 20s range for 2017. Regarding capital management, we returned $493 million to shareholders in the first half of 2017 primarily through dividends and share repurchases. Year-to-date, we have spent $185 million buying back shares. We’ve already exceeded our objective of the setting potential dilution from the 2016 year end equity grant. We continue to generate strong cash flow and expect to continue deploying future excess cash towards share repurchases and dividends. Ken will now conclude our remarks.

Thank you, Matthieu. I'll provide some perspective on our outlook and we'll open-up the call to questions. Overall, the global macroeconomic outlook for the year to midterm remained positive. The U.S economy is healthy and Europe's recovery is gaining momentum. Emerging markets continue to improve. Global M&A activity has declined slightly compared to the past two years in part because of uncertainties regarding U.S policy, but the environment remains stable though. [Indiscernible] sentiments continues to be constructive on [indiscernible] around the world, financing is widely available at historically cheap rates for investment grade credits and while valuations are high, they’re potentially supported by continued macroeconomic growth. Our Advisory business is in excellent competitive position to maintain a significant share of the market. In Asset Management we are well positioned for continued growth. We were building from a record base of AUM. We’ve a broadly diversified set of investment strategy serving a global, primarily institutional client base. And our quantitative strategies are continuing effectively against demand for [indiscernible] products. To conclude, some takeaways from the quarter. We achieved our highest ever quarterly operating revenue based on strong performance in both our businesses. On a 12-month basis, operating revenue was at a record level. Asset Management achieved record fees and AUM with net inflows for the year. Financial Advisory continues to be active across our practices globally with significant increase in European transaction. We are maintaining our cost discipline and cash flow remains strong. We expect to continue deploying cash towards share repurchases and dividends. We remain focused on serving our clients well, while we manage the Firm for profitable growth and shareholder value over the long-term. Before we go to questions, yesterday we announced senior level appointments, including a new Chief Financial Officer effective October 1st, Evan Russo, who is sitting in with us today and will transition into that role and will be active on our next earnings call. I also want to take this opportunity to thank Matthieu Bucaille for his service as CFO. Matthieu Bucaille and I have been in the tranches together at Lazard now for almost 30 years. To say that Lazard is in our blood is an understatement. Matthieu stepped into the CFO role almost seven years ago at a time of tremendous turmoil change and opportunity for the firm. He has more than fulfilled all of our expectations. He is a great friend, a great colleague and a true professional. And I look forward to working with him in his new and significant role at the Firm and in Paris. Now let's open the call to questions.

Thank you. [Operator Instructions] And we will go first to Brennan Hawken with UBS.

Hi. This is Brent Dilts on for Brennan actually.

Hi, Brennan.

Its Brent on for Brennan actually, sorry. Wondering first if you could just touch on a little bit more color on Europe. You said you’re seeing a pretty good pick up. I know you only give outlook, but just anything you provide there [indiscernible] little more specific?

Okay. So big picture, obviously there has been some favorable political changes on the continents over the last several months. The elections in Holland, followed by the elections in France, and the expectation of a stable outcome in Germany has, I think, resulted in a much more stable climate for the continent at least. Brexit continues to be a challenge. The uncertainty around Brexit, but overall the macroeconomic environment, particularly again on the continents have improved pretty significantly over the last several months or so. And as a result of that, we’re seeing a real pick up in CEO [ph] confidence and that seems to be translating at least in the activity for us. In addition, there has been a lot of discussions and actual activity around the area of corporate activism or shareholder activism in Europe. And that’s also led to a pickup in activity for us, helping corporates and many of our clients prepare and deal with that.

Okay, great. Thanks for that. And then on restructuring, you mentioned energy is falling down and we see that just across the industry. So wondering if you could give us a little bit of color just around the retail. You’ve had a couple of big wins there. It looks like that you’re on just kind of what you think the play out there and just maybe how we should think -- again I know you don’t like to give outlook, but just if after the retail, if there is nothing else, if we should expect like maybe more trough levels or it's just too hard to tell at this point?

Yes, I think, look we said a lot of times thinking about what’s happening here. Obviously, the backdrop is a pretty good macroeconomic environment with very low rate and obviously tremendous financing availability. So you think yourself if that’s not a particularly right climate for restructuring. But I think what we witnessed at least in oil and gas is now in retail is enormous disruption coming from technological change. In the case of oil and gas, it was really the introduction of the revolutionary technologies around drilling which has led to the significant discoveries in shale gas and shale oil, and then obviously the disruption that caused in terms of pricing with the oil and gas markets and the effect on that industry. And I think we’re witnessing effectively the same kind of disruptive effective technology on retail right now. You’re seeing obviously the -- a tipping point perhaps in retail driven by the growth of Amazon and the resurgence of Walmart through its e-commerce activities and that had a real impact on the -- that’s having a real impact on the retail sector. And I think there will be some knock-on effects perhaps in the real estate sector as a result of that. But I think the theme here is really disruption caused by technological change and we used to think of technology as something limited to technology, but what we’re witnessing now is the enablement of technology in different industries and that has the potential to be disruptive and in certain cases it really forces restructuring of those industries, and I think that’s what’s happened in oil and gas and in retail.

Okay, great. Thanks for the color, and congratulations Matthieu and Evan.

Thank you.

Thank you.

And we will take our next question from Devin Ryan with JMP Securities.

Okay, great. I guess, first one here, just maybe come to that last point on restructuring and trying to take that question a little bit further. It sounds like the backdrop has been a little better than maybe budgets coming into the year, but you’ve had a couple -- great quarters of closings and so, that’s reflected in results. So just trying to think about how that base of routine has been trending, so just kind of taking out the lumpiness of the closings and trying to parse through that, how that retainer level is right now?

It's okay. I mean, I think I'd say that look we’re shifting from a very high-level of activity in oil and gas to at increasing level of activity in the retail sector. And as I said, I think we’re little surprised by the continued activity -- that this level of restructuring activity over the last 12 or 18 months, given the strength of the economy, but we see some large trends at play that probably will propel it for the foreseeable future now. Will it propel at the levels we seen in the first half, I mean, those are -- I’m not predicting the future, but we’ve a -- obviously one of the leading franchises in the world, if not the leading franchise and I think we’re pretty quick to react to what’s going on in the marketplace as you can see with some of our recent assignments. So we feel pretty good about it.

Got it. Okay. That’s great. And then, obviously some really nice results within Asset Management. It seems like that momentum is continued here. Just with respect to flows, outside of the global semantics fund which all kind of understand the dynamic there. Can you just speak to what you’re seeing? And then maybe within emerging markets, specifically how much more capacity you have in the equities in that strategies and then the last part of that is where the global semantics AUM stands now, but it sounds like there were some more outflow.

[Indiscernible] you want to comment on the global semantics?

Yes. So global semantics as of the end of the quarter was at $3.2 billion AUM, and we’ve experienced again this quarter some outflows, net outflows of about a $1 billion in global semantics. But overall I’d say the following. First is that with regard to flows for the first half they were positive with regard to and essentially flattish for the quarter, this quarter, which I think is pretty good given the backdrop of the massive money going into Index Funds. In terms of capacity, I think we’re fine across a range of strategies, including the ones you mentioned. And in terms of outlook, we look at the unfunded commitments, and we feel pretty good right now. I think it's always challenging when markets hit peak levels, institutions in particular are thoughtful about when timing around commitments. When they’re going to fund commitments, but overall the pipeline feels okay.

Yes. Okay. All right. Terrific. And then just last quick one here on expenses, the $25 million expense item, can you just -- I kind of miss some of the detail there, what that was and just thinking about how that should be reflected? Is it a just kind of pro rata over the quarter or just how to kind of think about modeling that through?

So the comment there in twofold. Number one, with respect to the quarter you see in the earnings release in the footnote, we have excluded the charge of approximately $8.9 million associated with the cost of the implementation of this new financial systems in particular a new ERP system, okay. So that’s for the quarter. What I said in my remarks is that the overall costs of implementation of that new system is approximately $25 million. So $9 million of which was expensed already in the first part of the year. The rest is going to come for the remainder of the year and maybe a little bit in 2018 as we’re planning to be done with the implementation in the first half of 2018.

Got it. Okay. And those expenses are going to run through the operating line or they get adjusted out?

Yes. So on the -- exactly. It's been expensed every quarter on a U.S GAAP basis. And in our adjusted numbers, the non-compensation is going to be excluding this charge every quarter as we’re incurring the expense.

Understood. Got it. Okay. Terrific. Thanks so much and congratulations on the nice quarter by the way.

Thank you, Devin.

Thank you.

And we will go next to Steven Chubak. We will go next to Steven Chubak with Nomura.

Yes, good morning. Hi. Ken, I was hoping to dig into some of the commentary that had given in terms of the restructuring outlook. It certainly been a topic that’s going through a lot of attention from investors and even the price more broadly in terms of the challenges impacting the retail space. I suppose that my understanding was that, relative to energy that those restructurings were much less involved? And certainly less complex and even though that certainly feels like there was a [indiscernible] trend that could persist, the fee opportunity would ultimately be less. I didn’t know if you could at least clarify whether at least that take is mistaken or how are you thinking about the longer tail for the potential restructuring opportunity within retail.

Yes, look, I would say that every restructuring [indiscernible] generate, each one is -- its like an independent exercise. It depends enormously on state of the Company, the state of the capital structure or the state of the alternatives and state of the outside environment. So I’m not sure you can generalize that restructuring in the retail sector as simpler or less of a opportunity or the opportunity plus or minus and you could any other sector. At least that’s not our experience. Historically, everyone in these is unique. And then the second question on the size of the opportunity, look, part of it is just a function of how impacted companies are by shift in consumer sentiment or consumer case changes and also what’s happening in terms of disruption from technology. I think we’re seeing a massive amount of disruption to the retail sector right now. You’ve seen it in the department store space. You increasingly seen it in the supermarket space and there is -- and then you’re also seeing it in some of the specialty stores as some of the traffic in the malls declined. So the sector as a whole is really facing challenges, we never had to deal with before, number one. And then, number two is, there is an obvious knock-on effect in retail that goes to real estate, which I think we're all keeping a careful eye on, because that’s some of the fortunes of the retail stores change so do some of the underlying value of the real estate and therefore what happened to some of the real estate operators. So we’re keeping a careful eye on that as well. But I think the theme …

Thanks.

… is really one of disruption from technology and it really -- which are the sectors that are getting hit? We saw that at oil and gas, we see it retail. I think over time we will likely to see it elsewhere.

Got it. And it's very helpful color, Ken. I appreciate it. And just switching gears to the advisory side, certainly the backdrop it remains fairly favorable. Can you say that, the ingredients, again that’s a part relatively favorable as M&A backdrop from here. At the same time you did note that you have pretty tough second half comparison. I’m just wondering how we should think about the revenue outlook for the second half? And more specifically should we expect to see typical back half seasonality which is historically been a very powerful thing within the M&A space?

Well, first we really commented on pipeline and outlook or I don’t think we’ve ever really commented on pipeline and outlook. What I would say is, yes, you noted it, we -- mathematical we’ve a very strong second half last year, which by definition means that whatever we’re going to compare against is harder than what we were comparing against last year compared to the year before. So that’s just math. I think in terms of the environment, what happens in the third and fourth quarter is usually a function of what happened in the market, 6 to 18 months before as well as the momentum in the market at that particular point in time. We feel pretty good about our market position. But this is a business which has its ups and downs from quarter-to-quarter, but overall I think our competitive position is never been stronger. We’ve sort of being hitting on all cylinders in at the Firm, the advisory, restructuring, within advisory, the shareholder activism business or what we call shareholder advisory business, and then obviously asset management. And so feel pretty good about the franchise and, because [indiscernible] at that.

Thanks very much.

[Operator Instructions] And we will go next to Patrick O'Shaughnessy with Raymond James.

Hey, good morning. So despite your capital returns to date, your cash position is up about $300 million versus where it was a year-ago. Would you guys contemplate any change to your capital return strategy, maybe in ASR, maybe boosting your share repurchases to reflect that strong cash position?

Look we’ve been very disciplined about making sure that at year-end when we see our full-year results, we are very clear about returning cash to shareholders. We’ve been a disciplined, aggressive buyer of our shares for the first half of this year. I think we continued to be disciplined about it in the second half of this year. And then obviously when we get to year end, we still see full-year results. We clear the cash and give it back to shareholders, if we haven't done through buybacks, then we will continue with our special dividend in a good policy for us, makes it very simple.

All right. Thank you,

This now concludes the Lazard's conference call. We thank you for your participation. You may now disconnect.