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Text: I'm Alexandra Deignan, the Company's Head of Investor Relations and Corporate Sustainability.
Today's discussion, it also includes certain non-GAAP financial measures that we believe are meaningful when evaluating the Company's performance.
Hosting our call today are Kenneth Jacobs, Lazard's Chairman and Chief Executive Officer; and Evan Russo, our Chief Financial Officer.
Evan will start the discussion with an overview of our financial results.
Then Ken will provide his perspective on the outlook for our business.
After that, we will open the call to questions.
Third quarter revenue was a record $702 million, up 23% from a year ago.
Revenue for the first nine months was a record $2.2 billion, up 30% year-over-year.
In Financial Advisory, record third quarter revenue of $381 million increased 24% from last year's period, reflecting broad-based activity across sectors, market cap and regions.
Advisory revenue was driven primarily by M&A completions in the Americas and in Europe.
A high percentage of these were in the $1 billion to $10 billion range.
Private equity-related activity is increasing.
Year-to-date, our advisory revenue from transactions involving financial sponsors has more than doubled.
Our Private Capital Advisory franchise continues to show strength, as we advise financial sponsors globally on fundraising and innovative secondary market solutions.
As we've noted on previous calls, restructuring activity has been relatively subdued, reflecting the high level of liquidity across markets.
Our sovereign and capital markets advisory businesses remain active, advising governments and corporations on financing, capital structure and shareholder strategy.
Overall, our advisory activity is at an all-time high, and we currently expect record fourth quarter revenue for Financial Advisory, with strong momentum going into 2022.
Asset Management third quarter operating revenue of $311 million increased 19% from last year's period, reflecting a larger base of assets under management.
Average AUM reached a record high of $278 billion for the third quarter, 23% higher than a year ago and 1% higher on a sequential basis.
As of September 30, we reported AUM at quarter-end of $273 billion, 20% higher than last year's period and 2% lower on a sequential basis.
The decrease was primarily driven by negative foreign exchange movement of $3.3 billion and net outflows of $2.3 billion, partly offset by market appreciation of $0.8 billion.
The quarter's net outflows were primarily from equities, partly offset by net inflows in fixed income and alternatives.
Gross inflows continue to be healthy across our platforms.
As of October 22, AUM increased to approximately $279 billion, driven primarily by market appreciation of $6.6 billion and positive foreign exchange movement of $0.9 billion, partly offset by net outflows of $1.1 billion.
Our pattern of investment performance has been good this year.
Approximately two-thirds of our composite strategies are outperforming their benchmarks on a one-year basis.
Our recent investments in thematic, fixed income and alternative platforms, as well as their performance position them well for growth.
We see significant opportunities for growth in both of our businesses.
In Asset Management, we continue to invest in people, technology and our distribution effort, as well as the development of new and existing funds and the scaling up of our platforms.
These include the recent addition of a long/short equity team focused on the technology, media and telecom sector; the launch of a global investment-grade convertible bond fund; and a new quantitative small cap fund.
In addition, we have recently made senior hires in global marketing, in ESG and sustainability, and to support the expansion of US and European distribution.
We continue to see substantial opportunities to recruit talented investment teams, adding strategies that are complementary to our existing platforms.
In Financial Advisory, we are executing on our growth strategy with an elevated pace of strategic recruiting, especially in high-growth sectors such as biopharma, fintech, alternative energy and private capital.
While we continue to focus on internal promotes, year-to-date, we have made more than 20 senior hires, including MDs and senior advisors.
Now, turning to expenses.
Even as we invest for growth, we remain focused on cost discipline.
Our adjusted non-compensation ratio for the third quarter was 16.6% compared to 18.1% in last year's third quarter.
Non-compensation expenses were 13% higher than the same period last year, reflecting increased business activity and technology investments.
We continue to accrue compensation expense at a 59.5% adjusted compensation ratio in the third quarter.
Regarding taxes, our adjusted effective tax rate in the third quarter was 25.1%.
For the first nine months of the year, it was 26.2%.
We continue to expect this year's annual effective tax rate to be in the mid-20% range.
Lazard continues to generate strong cash flow, which supports return of capital to shareholders.
In the third quarter, we returned $103 million, which included $52 million in share repurchases.
During the quarter, we bought back 1.1 million shares of our common stock at an average price of $46.01 per share.
As of September 30, our total outstanding share repurchase authorization was $314 million.
Ken will now provide perspective on our outlook.
Market conditions remain excellent for both of our businesses.
In the US, economic growth is generally robust and a strong recovery appears likely to continue into next year.
In Europe, recovery remains on track as business conditions normalize.
The strength of economic demand, combined with pandemic-related labor shortages, is leading to supply chain disruptions and growing concerns about inflation, and these developments are driving a new set of discussions with CEOs, boards and institutional investors.
As travel restrictions ease, we are having more in-person meetings and reinforcing the personal engagement that's so important to both sides of our business.
The M&A environment continues to be as good as we've seen, and we are as active as we've ever been.
The forces driving global strategic activity remain in place.
Technology-driven disruption continues to be a catalyst for M&A across industries.
The global drive to reduce carbon emissions is an emerging catalyst.
And an abundance of private capital, alongside strategic capital, continues to drive activity.
On the investor side, demand for risk assets with a growing focus on sustainability continues to create opportunities for active managements to drive alpha.
Our Asset Management franchise is providing clients with a growing and innovative array of investment strategies and customized solutions.
The investments we've been making in both our businesses position us well for further growth.
We continue to invest in people, resources and technology to enhance our market capabilities, geographic reach and sector-specific expertise.
We remain focused on serving our clients well, while managing the firm for profitable growth and shareholder value over the long run.
Now, let's open the call to questions.

user
compname reports q3 revenue rose 23% to $702 mln.
q3 revenue rose 23 percent to $702 million.
record financial advisory third-quarter revenue; high levels of activity globally.
record average assets under management of $278 billion in q3.
well positioned with unprecedented advisory activity.

assistant