JONES LANG LASALLE INCORPORATED

(JLL)
  Report
Delayed Nyse  -  04:00 2022-06-29 pm EDT
176.63 USD   -0.13%
06/29JONES LANG LASALLE INCORPORATED : Assisted living community near San Francisco trades for $39.2M
PU
06/29JONES LANG LASALLE INCORPORATED : JLL closes $235.25M sale of and arranged $117.63M financing for SoCal office campus
PU
06/29JONES LANG LASALLE INCORPORATED : JLL Retail Corporate Services hires new franchise growth lead
PU
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

JONES LANG LASALLE INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/09/2022 | 01:52pm EDT
The following discussion and analysis should be read in conjunction with the
Condensed Consolidated Financial Statements, including the notes thereto, for
the three months ended March 31, 2022, and our audited Consolidated Financial
Statements, including the notes thereto, for the fiscal year ended December 31,
2021, which are included in our 2021 Annual Report on Form 10-K, filed with the
SEC and also available on our website (www.jll.com). You should also refer to
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations contained in our 2021 Annual Report on Form 10-K.

The following discussion and analysis contains certain forward-looking
statements generally identified by the words anticipates, believes, estimates,
expects, forecasts, plans, intends and other similar expressions. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause JLL's actual results, performance, achievements,
plans and objectives to be materially different from any future results,
performance, achievements, plans and objectives expressed or implied by such
forward-looking statements. See the Cautionary Note Regarding Forward-Looking
Statements included within this section for further information.

We present our quarterly Management's Discussion and Analysis in the following sections:

(1)A summary of our critical accounting policies and estimates;

(2)Certain items affecting the comparability of results and certain market and other risks we face;

(3)The results of our operations, first on a consolidated basis and then for each of our business segments; and

(4)Liquidity and capital resources.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES


An understanding of our accounting policies is necessary for a complete analysis
of our results, financial position, liquidity and trends. See Note 2, Summary of
Significant Accounting Policies, of the Notes to Consolidated Financial
Statements in our 2021 Annual Report on Form 10-K for a complete summary of our
significant accounting policies.

The preparation of our financial statements requires management to make certain
critical accounting estimates and judgments that impact (1) the stated amount of
assets and liabilities, (2) disclosure of contingent assets and liabilities at
the date of the financial statements, and (3) the reported amount of revenue and
expenses during the reporting periods. These accounting estimates are based on
management's judgment. We consider them to be critical because of their
significance to the financial statements and the possibility that future events
may differ from current judgments or that the use of different assumptions could
result in materially different estimates. We review these estimates on a
periodic basis to ensure reasonableness. Although actual amounts likely differ
from such estimated amounts, we believe such differences are not likely to be
material.

A discussion of our critical accounting policies and estimates used in the
preparation of our Condensed Consolidated Financial Statements included in Part
I, Item 1 of this Quarterly Report on Form 10-Q can be found in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of our Annual Report on Form 10-K for the year ended December 31,
2021. There have been no material changes to these critical accounting policies
and estimates during the three months ended March 31, 2022.

ITEMS AFFECTING COMPARABILITY

Macroeconomic Conditions


Our results of operations and the variability of these results are significantly
influenced by (1) macroeconomic trends, (2) the geopolitical environment, (3)
the global and regional real estate markets, and (4) the financial and credit
markets. These macroeconomic and other conditions have had, and we expect will
continue to have, a significant impact on the variability of our results of
operations. In 2021, macroeconomic conditions influenced by the COVID-19
pandemic more notably impacted our operations compared with the current year.

                                       25

--------------------------------------------------------------------------------

Table of Contents

Acquisitions and Dispositions


The timing of acquisitions and dispositions may impact the comparability of our
results on a year-over-year basis. Our results include incremental revenues and
expenses following the completion date of an acquisition. Relating to
dispositions, comparable results will include the revenues and expenses of
recent dispositions and results may also include gains (losses) on the
disposition. In addition, there is generally an initial adverse impact on net
income from an acquisition as a result of pre-acquisition due diligence
expenditures, transaction/deal costs and post-acquisition integration costs,
such as fees from third-party advisors engaged to assist with onboarding and
process alignment, retention and severance expense, early lease termination
costs, and other integration expenses. For dispositions, we may also incur such
incremental costs during the disposition process and these costs could have an
adverse impact on net income.

Equity Earnings and Incentive Fees


Equity earnings may vary substantially from period to period for a variety of
reasons, including as a result of: (1) gains (losses) on investments reported at
fair value, (2) gains (losses) on asset dispositions, and (3) impairment
charges. The timing of recognition of these items may impact comparability
between quarters, in any one year, or compared to a prior year.

LaSalle, our investment management business, is in part compensated through
incentive fees where performance of underlying funds' investments exceeds
agreed-to return hurdles. Depending upon performance, disposition activity and
the contractual timing of measurement periods with clients, these fees can be
significant and may vary substantially from period to period.

The comparability of these items can be seen in Note 3, Business Segments, of the Notes to Condensed Consolidated Financial Statements and is discussed further in Segment Operating Results included herein.

Foreign Currency


We conduct business using a variety of currencies, but we report our results in
U.S. dollars. As a result, the volatility of currencies against the U.S. dollar
may positively or negatively impact our results. This volatility can make it
more difficult to perform period-to-period comparisons of the reported U.S.
dollar results of operations, because such results may indicate a growth or
decline rate that might not have been consistent with the real underlying growth
or decline rates in the local operations. Consequently, we provide information
about the impact of foreign currencies in the period-to-period comparisons of
the reported results of operations in our discussion and analysis of financial
condition in the Results of Operations section below.

Transaction-Based Revenue


Transaction-based fees, which are impacted by the size and timing of our
clients' transactions, from real estate investment banking, capital markets
activities and other services within our segments, increase the variability of
the revenue we earn. Specifically for LaSalle, we are compensated through
incentive fees where performance of underlying funds' investments exceeds
agreed-to benchmark levels. Depending upon performance, disposition activity,
and the contractual timing of measurement periods with clients, these fees can
be significant and vary substantially from period to period. The timing and the
magnitude of these fees can vary significantly from year to year and quarter to
quarter, and from region to region.

Seasonality


Historically, our quarterly revenue and profits have tended to increase from
quarter to quarter as the year progresses. This is a result of a general focus
in the real estate industry on completing or documenting transactions by
calendar year end and the fact that certain expenses are constant through the
year. In addition, this seasonality excludes the recognition of
investment-generated performance fees as well as realized and unrealized
co-investment equity earnings and losses (the timing of each of these can
fluctuate based on a variety of factors). Generally, we recognize incentive fees
when assets are sold, the timing of which is geared toward the benefit of our
clients. In addition, co-investment equity gains and losses are primarily
dependent on valuations of underlying investments, the direction and magnitude
of changes to such valuations fluctuate based on a variety of factors.
Non-variable operating expenses, which we treat as expenses when incurred during
the year, are relatively constant on a quarterly basis.

A significant portion of our Compensation and benefits expense is from incentive
compensation plans, which we generally accrue throughout the year based on
progress toward annual performance targets. This quarterly estimation can result
in significant fluctuations in quarterly Compensation and benefits expense from
period to period. Consequently, the results for the periods ended March 31, 2022
and 2021, are not fully indicative of the results we expect to realize for the
full fiscal year.

                                       26

--------------------------------------------------------------------------------

Table of Contents

RESULTS OF OPERATIONS

In conjunction with our change in reporting segments, effective January 1, 2022, comparable period information has been recast to conform with current presentation.

Definitions

•Assets under management data for LaSalle is reported on a one-quarter lag.

•n.m.: not meaningful, represented by a percentage change of greater than 1,000% favorable or unfavorable.

Consolidated Operating Results

                                                          Three Months Ended March 31,             Change in            % Change in Local
($ in millions)                                               2022            2021                U.S. dollars              Currency
Markets Advisory                                         $      999.5           792.7               206.8         26  %             28  %
Capital Markets                                                 600.6           411.7               188.9         46                49
Work Dynamics                                                 3,033.6         2,698.1               335.5         12                14
JLL Technologies                                                 49.4            43.4                 6.0         14                14
LaSalle                                                         118.3            91.2                27.1         30                34

Revenue                                                  $    4,801.4         4,037.1               764.3         19  %             21  %

Gross contract costs                                         (2,904.5)       (2,602.9)             (301.6)        12                13

Net non-cash MSR and mortgage banking derivative
activity                                                          3.6            (9.7)               13.3       (137)             (137)
Fee revenue                                              $    1,900.5         1,424.5               476.0         33  %             36  %
Markets Advisory                                                741.2           552.6               188.6         34                36
Capital Markets                                                 591.5           393.2               198.3         50                54
Work Dynamics                                                   410.5           363.5                47.0         13                15
JLL Technologies                                                 45.3            29.9                15.4         52                52

LaSalle                                                         112.0            85.3                26.7         31                36

Compensation and benefits, excluding gross contract costs

                                                    $    1,377.8         1,055.4               322.4         31  %             33  %

Operating, administrative and other expenses, excluding gross contract costs

                                            269.5           227.9                41.6         18                20
Depreciation and amortization                                    54.4            53.0                 1.4          3                 4
Restructuring and acquisition charges                            19.5            17.2                 2.3         13                19
Total fee-based operating expenses                            1,721.2         1,353.5               367.7         27                29
Gross contract costs                                          2,904.5         2,602.9               301.6         12                13

Total operating expenses                                 $    4,625.7         3,956.4               669.3         17  %             19  %
Operating income                                         $      175.7            80.7                95.0        118  %            122  %
Equity earnings                                          $       18.5            48.5               (30.0)       (62) %            (62) %
Adjusted EBITDA                                          $      273.6           190.1                83.5         44  %             47  %


                                       27

--------------------------------------------------------------------------------

Table of Contents

Non-GAAP Financial Measures


Management uses certain non-GAAP financial measures to develop budgets and
forecasts, measure and reward performance against those budgets and forecasts,
and enhance comparability to prior periods. These measures are believed to be
useful to investors and other external stakeholders as supplemental measures of
core operating performance and include the following:

•Fee revenue and Fee-based operating expenses;

•Adjusted EBITDA attributable to common shareholders ("Adjusted EBITDA") and Adjusted EBITDA margin; and

•Percentage changes against prior periods, presented on a local currency basis.


However, non-GAAP financial measures should not be considered alternatives to
measures determined in accordance with U.S. generally accepted accounting
principles ("GAAP"). Any measure that eliminates components of a company's
capital structure, cost of operations or investment, or other results has
limitations as a performance measure. In light of these limitations, management
also considers GAAP financial measures and does not rely solely on non-GAAP
financial measures. Because our non-GAAP financial measures are not calculated
in accordance with GAAP, they may not be comparable to similarly titled measures
used by other companies.

Adjustments to GAAP Financial Measures Used to Calculate non-GAAP Financial Measures


Gross contract costs represent certain costs associated with client-dedicated
employees and third-party vendors and subcontractors and are directly or
indirectly reimbursed through the fees we receive. These costs are presented on
a gross basis in Operating expenses with the equal amount of corresponding fees
in Revenue. Excluding gross contract costs from both Fee revenue and Fee-based
operating expenses more accurately reflects how we manage our expense base and
operating margins and also enables a more consistent performance assessment
across a portfolio of contracts with varying payment terms and structures.

Net non-cash MSR and mortgage banking derivative activity consists of the
balances presented within Revenue composed of (i) derivative gains/losses
resulting from mortgage banking loan commitment and warehousing activity and
(ii) gains recognized from the retention of MSR upon origination and sale of
mortgage loans, offset by (iii) amortization of MSR intangible assets over the
period that net servicing income is projected to be received. Non-cash
derivative gains/losses resulting from mortgage banking loan commitment and
warehousing activity are calculated as the estimated fair value of loan
commitments and subsequent changes thereof, primarily represented by the
estimated net cash flows associated with future servicing rights. MSR gains and
corresponding MSR intangible assets are calculated as the present value of
estimated net cash flows over the estimated mortgage servicing periods. The
above activity is reported entirely within Revenue of the Capital Markets
segment. Excluding net non-cash MSR and mortgage banking derivative activity
reflects how we manage and evaluate performance because the excluded activity is
non-cash in nature.

Restructuring and acquisition charges primarily consist of (i) severance and
employment-related charges, including those related to external service
providers, incurred in conjunction with a structural business shift, which can
be represented by a notable change in headcount, change in leadership or
transformation of business processes; (ii) acquisition, transaction and
integration-related charges, including fair value adjustments, which are
generally non-cash in the periods such adjustments are made, to assets and
liabilities recorded in purchase accounting such as earn-out liabilities and
intangible assets; and (iii) other restructuring, including lease exit charges.
Such activity is excluded as the amounts are generally either non-cash in nature
or the anticipated benefits from the expenditures would not likely be fully
realized until future periods. Restructuring and acquisition charges are
excluded from segment operating results and therefore not a line item in the
segments' reconciliation to Adjusted EBITDA.

Gain on disposition reflects the gain recognized on the sale of businesses.
Given the low frequency of business disposals by the company historically, the
gain directly associated with such activity is excluded as it is not considered
indicative of core operating performance. In 2021, the activity related to a
business disposition within JLL Technologies.

                                       28

--------------------------------------------------------------------------------

Table of Contents

Reconciliation of Non-GAAP Financial Measures

Below are reconciliations of (i) Revenue to Fee revenue and (ii) Operating expenses to Fee-based operating expenses.

                                                                 Three Months Ended
                                                                      March 31,
(in millions)                                                             2022               2021
Revenue                                                             $     4,801.4              4,037.1

Adjustments:
Gross contract costs                                                     (2,904.5)            (2,602.9)
Net non-cash MSR and mortgage banking derivative activity                     3.6                 (9.7)
Fee revenue                                                         $     1,900.5              1,424.5

Operating expenses                                                  $     4,625.7              3,956.4

Less: Gross contract costs                                               (2,904.5)            (2,602.9)
Fee-based operating expenses                                        $     1,721.2              1,353.5

Operating income                                                    $       175.7                 80.7


Below is (i) a reconciliation of Net income attributable to common shareholders
to EBITDA and Adjusted EBITDA, (ii) the Net income margin attributable to common
shareholders (measured on Revenue), and (iii) the Adjusted EBITDA margin
(measured on fee-revenue and presented on a local currency basis).

                                                                  Three Months Ended
                                                                       March 31,
($ in millions)                                                            2022               2021
Net income attributable to common shareholders                       $       145.6                 103.0

Add:

Interest expense, net of interest income                                      10.2                  10.4
Provision for income taxes                                                    40.3                  28.2
Depreciation and amortization                                                 54.4                  53.0
EBITDA                                                               $       250.5                 194.6

Adjustments:

Restructuring and acquisition charges                                         19.5                  17.2
Gain on disposition                                                              -                 (12.0)
Net non-cash MSR and mortgage banking derivative activity                      3.6                  (9.7)
Adjusted EBITDA                                                      $       273.6                 190.1

Net income margin attributable to common shareholders                          3.0  %                2.6  %

Adjusted EBITDA margin                                                        14.4  %               13.3  %



                                       29

--------------------------------------------------------------------------------

Table of Contents


In discussing our operating results, we report Adjusted EBITDA margins and refer
to percentage changes in local currency, unless otherwise noted. Amounts
presented on a local currency basis are calculated by translating the current
period results of our foreign operations to U.S. dollars using the foreign
currency exchange rates from the comparative period. We believe this methodology
provides a framework for assessing performance and operations excluding the
effect of foreign currency fluctuations.

The following table reflects the reconciliation to local currency amounts for
consolidated (i) Revenue, (ii) Fee revenue, (iii) Operating income, and (iv)
Adjusted EBITDA.

© Edgar Online, source Glimpses

All news about JONES LANG LASALLE INCORPORATED
06/29JONES LANG LASALLE INCORPORATED : Assisted living community near San Francisco trades for ..
PU
06/29JONES LANG LASALLE INCORPORATED : JLL closes $235.25M sale of and arranged $117.63M financ..
PU
06/29JONES LANG LASALLE INCORPORATED : JLL Retail Corporate Services hires new franchise growth..
PU
06/29JONES LANG LASALLE INCORPORATED : Sale of two newly constructed medical office buildings i..
PU
06/29JONES LANG LASALLE INCORPORATED : Premiere Dallas-Fort Worth industrial park in sought-aft..
PU
06/29JONES LANG LASALLE INCORPORATED : Self-storage facility in Houston-area sells
PU
06/29JONES LANG LASALLE INCORPORATED : Fully leased Pensacola retail center sells for $16M
PU
06/23JONES LANG LASALLE INCORPORATED : Seven-building Manhattan multi-housing portfolio trades ..
PU
06/23JONES LANG LASALLE INCORPORATED : $36.465M financing lined up for the Original Rainer Brew..
PU
06/23JONES LANG LASALLE INCORPORATED : $210M loan secured for Inland Empire industrial developm..
PU
More news
Analyst Recommendations on JONES LANG LASALLE INCORPORATED
More recommendations