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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-04 · 132 added, 131 removed, 445 unchanged (37% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements, including the notes thereto, for the three and six months ended June 30, 2021, and our audited Consolidated Financial Statements, including the notes thereto, for the fiscal year ended December 31, 2020, which are included in our 2020 Annual Report on Form 10-K, filed with the SEC and also available on our website ( www.jll.com ).

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements, including the notes thereto, for the three and nine months ended September 30, 2021, and our audited Consolidated Financial Statements, including the notes thereto, for the fiscal year ended December 31, 2020, which are included in our 2020 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.

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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, 2020.

There have been no material changes to these critical accounting policies and estimates during the six months ended June 30, 2021.

There have been no material changes to these critical accounting policies and estimates during the nine months ended September 30, 2021.

ITEMS AFFECTING COMPARABILITY

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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 2020 and during the six months ended June 30, 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits and may continue to do so during the remainder of 2021.

In 2020 and during the nine months ended September 30, 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits and may continue to do so during the remainder of 2021.

Acquisitions and Dispositions

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Transaction-Based Revenue

Transaction-based fees, that are impacted by the size and timing of our clients' transactions, from real estate investment banking, capital markets activities and other services within our RES businesses, and LaSalle, increase the variability of the revenue we earn.

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 RES businesses, and LaSalle, 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.

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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 June 30, 2021 and 2020, are not fully indicative of the results we expect to realize for the full fiscal year.

Consequently, the results for the periods ended September 30, 2021 and 2020, are not fully indicative of the results we expect to realize for the full fiscal year.

RESULTS OF OPERATIONS

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Consolidated Operating Results

Three Months Ended June 30, Change in % Change in Local Currency

Three Months Ended September 30, Change in % Change in Local Currency

($ in millions) 2021 2020 U.S.

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Total operating expenses, excluding reimbursed expenses $ 2,512.0 1,936.5 575.5 30 % 28 %

Operating income $ 224.3 10.8 213.5 n.m.

Operating income $ 292.9 154.9 138.0 89 % 89 %

Equity earnings $ 17.4 15.0 2.4 16 % 15 %

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Consolidated Operating Results (continued)

Six Months Ended June 30, Change in % Change in Local Currency

Nine Months Ended September 30, Change in % Change in Local Currency

($ in millions) 2021 2020 U.S.

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Operating income $ 597.9 230.3 367.6 160 % 157 %

Equity earnings (losses) $ 89.3 (13.6) 102.9 757 % 753 %

Equity earnings $ 106.7 1.4 105.3 n.m.

Adjusted EBITDA $ 874.5 442.5 432.0 98 % 95 %

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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 a business within Americas in 2021 and the net gain recognized on the sale of property management businesses in continental Europe in 2020.

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, $12.0 million of the activity related to a business disposition within Americas and $0.4 million related to a sold business within EMEA, while activity in 2020 related to the sale of property management businesses in continental Europe.

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2021 2020 2021 2020

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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 before reimbursements), and (iii) the Adjusted EBITDA margin (measured on fee-revenue and presented on a local currency basis).

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2021 2020 2021 2020

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

($ in millions) 2021 % Change 2021 % Change

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Operating income:

At current period exchange rates $ 224.3 n.m.

$ 305.0 305 %

At current period exchange rates $ 292.9 89 % $ 597.9 160 %

Impact of change in exchange rates 0.2 n/a (7.2) n/a

At comparative period exchange rates $ 218.2 n.m.

$ 297.6 295 %

At comparative period exchange rates $ 293.1 89 % $ 590.7 157 %

Adjusted EBITDA:

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At comparative period exchange rates $ 350.7 44 % $ 863.0 95 %

We achieved significant second-quarter increases in consolidated RES revenue, up 18% to $4.4 billion, and fee revenue, up 43% to $1.7 billion.

Growth was broad-based across all service lines, led by Leasing (48% of RES fee revenue growth on a local currency basis) and Capital Markets (44% of RES fee revenue growth on a local currency basis).

We achieved significant third-quarter increases in consolidated RES revenue, up 22% from 2020 to $4.8 billion, and fee revenue, up 47% from last year to $1.9 billion.

Third-quarter RES fee revenue exceeded same-quarter 2019, reflecting the continued recovery of transaction-based revenue.

Growth was broad-based across all service lines and was led by Leasing (49% of RES fee revenue growth on a local currency basis) and Capital Markets (44% of RES fee revenue growth on a local currency basis), while also reflecting stability in annuity-based revenues, particularly in Americas.

In addition, all geographic segments experienced growth, ranging from 15% to 68%.

This follows a prior-year quarter that was meaningfully impacted by the COVID-19 pandemic (the "pandemic").

Geographically across service lines, Americas contributed 75% of the RES fee revenue growth for the second quarter, on a local currency basis, followed by EMEA (14%) and Asia Pacific (11%).

Geographically across service lines, Americas contributed 86% of the RES fee revenue growth for the third quarter, on a local currency basis, with EMEA and Asia Pacific each representing approximately 7% of the growth.

The following highlights the proportion of RES service line consolidated fee revenue growth, on a local currency basis, compared with the prior-year quarter, by notable segment.

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• Capital Markets — Americas (80%), EMEA (12%) and Asia Pacific (8%)

• Property & Facility Management — EMEA (59%) and Americas (41%)

• Project & Development Services — Asia Pacific (78%), Americas (12%) and EMEA (10%)

• Advisory, Consulting and Other — Asia Pacific (42%), Americas (33%) and EMEA (24%)

LaSalle revenue increased 12% compared with the prior-year quarter, driven by advisory fee growth.

• Property & Facility Management — Americas drove entire growth, partially offset by EMEA and Asia Pacific

• Project & Development Services — Americas (109%) and Asia Pacific (23%), partially offset by EMEA

• Advisory, Consulting and Other — Americas (62%), Asia Pacific (24%), and EMEA (15%)

LaSalle revenue increased 17% compared with the prior-year quarter, driven by incentive fees and growth in advisory fees, partially offset by lower transaction fees.

Refer to the LaSalle segment discussion for further detail.

For the first half of 2021, consolidated RES revenue and fee revenue increased 7% and 16%, respectively, compared with the prior year.

Capital Markets and Leasing also led the year-to-date growth contributing 45% and 44%, respectively, of the RES fee revenue growth on a local currency basis.

For the first nine months of 2021, consolidated RES revenue and fee revenue increased 12% and 27%, respectively, compared with the prior year.

Leasing and Capital Markets also led the year-to-date growth contributing 48% and 44%, respectively, of the RES fee revenue growth on a local currency basis.

Americas contributed 80% of the RES fee revenue growth for the first nine months, on a local currency basis.

LaSalle revenue increased 4% as higher advisory and incentive fees more than offset the decline in transaction fees.

Our consolidated fee revenue increased 46% in U.S.

dollars (“USD”) and 41% in local currency for the second quarter of 2021, compared with 2020.

dollars (“USD”) and 45% in local currency for the third quarter of 2021, compared with 2020.

Year-to-date, consolidated fee revenue increased 28% in U.S.

dollars (“USD”) and 25% in local currency compared with last year.

The spread was driven by the weakening of the U.S.

dollar against several major currencies, especially the British pound sterling, euro and Australian dollar.

The spreads for the third quarter and year-to-date were driven by the weakening of the U.S.

dollar against several major currencies, especially the British pound sterling, euro, Australian dollar and Chinese yuan.

Operating Expenses

Consolidated operating expenses, excluding reimbursed expenses, were $2.3 billion for the second quarter, up 20% from 2020, and $4.3 billion for the first half of 2021, up 5% from 2020, while consolidated fee-based operating expenses were $1.6 billion for the second quarter, up 24% from the prior-year quarter, and $3.0 billion for the first six months, up 7% from last year.

For the second quarter, the increase in fee-based operating expenses was primarily attributable to the Americas, which represented 74% of the increase on a local currency basis (62% of the year-to-date increase).

Asia Pacific represented 13% of the second-quarter increase (25% year to date) and EMEA also represented 13% of the second-quarter increase (17% year to date).

Consolidated operating expenses, excluding reimbursed expenses, were $2.5 billion for the third quarter, up 28% from 2020, and $6.8 billion for the first nine months of 2021, up 12% from 2020, while consolidated fee-based operating expenses were $1.8 billion for the third quarter, up 39% from the prior-year quarter, and $4.8 billion for the first nine months, up 18% from last year.

For the third quarter, the increase in fee-based operating expenses was primarily attributable to the Americas, which drove 80% of the increase on a local currency basis (also 80% of the year-to-date increase).

Asia Pacific and EMEA represented 12% and 11%, respectively, of the third-quarter increase (16% and 13% year to date, respectively).

Americas year-to-date results reflected a $13.8 million non-cash reduction to loan loss credit reserves, compared with a $30.6 million increase in reserves during the prior year.

For the second quarter and first half of 2021, Restructuring and acquisition charges decreased compared with the prior-year periods;

For the third quarter and first nine months of 2021, Restructuring and acquisition charges decreased compared with the prior-year periods;

refer to following table for further detail.

Charges associated with the acquisition and integration of HFF included retention and severance expense, early lease termination costs, and other integration expenses;

Three Months Ended June 30, Six Months Ended June 30,

since June 30, 2021, such charges have predominantly related to the amortization of retention awards issued in conjunction with the 2019 acquisition.

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2021 2020 2021 2020

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Equity Earnings

For the second quarter of 2021, we recognized equity earnings of $40.8 million, compared with $14.7 million in the prior-year quarter.

For the first half of 2021, we recognized equity earnings of $89.3 million, compared with losses of $13.6 million in 2020.

Valuation increases of JLL Technologies' investments contributed $16.2 million this quarter ($50.9 million year to date), reflecting progress in the strategy to invest in early-stage proptech companies;

For the third quarter of 2021, we recognized equity earnings of $17.4 million, compared with $15.0 million in the prior-year quarter.

For the first nine months of 2021, we recognized equity earnings of $106.7 million, compared with $1.4 million in 2020.

Valuation increases of JLL Technologies' investments contributed $7.3 million this quarter and $58.2 million year to date, reflecting continued progress in the strategy to invest in early-stage proptech companies, compared with $4.3 million and $6.8 million in the respective prior-year periods;

refer to the Americas segment discussion for additional detail.

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these gains are also reflected in net income attributable to noncontrolling interest and, therefore, have no impact to net income attributable to common shareholders.

LaSalle recognized $23.3 million of equity earnings in second-quarter 2021 ($36.3 million year to date), compared with $11.3 million in the prior-year quarter ($0.7 million of equity losses in the first half of 2020).

LaSalle recognized $8.4 million of equity earnings in third-quarter 2021 ($44.7 million of year-to-date equity earnings), compared with $8.5 million in the prior-year quarter ($20.5 million of equity losses in the first nine months of 2020).

Refer to the LaSalle segment discussion for additional detail.

The provision for income taxes was $54.9 million and $83.1 million for the three and six months ended June 30, 2021, respectively, representing an effective tax rate of 21.6% for both periods.

For the three and six months ended June 30, 2020, the provision was $1.5 million and $6.5 million, respectively, representing effective tax rates of 10.0% and 17.1%, respectively.

The lower effective tax rates in 2020 reflected relatively low prior-year pretax earnings as well as the geographic distribution of the earnings.

The provision for income taxes was $65.3 million and $148.4 million for the three and nine months ended September 30, 2021, respectively, representing an effective tax rate of 21.6% for both periods.

For the three and nine months ended September 30, 2020, the provision was $25.7 million and $32.2 million, respectively, representing effective tax rates of 16.0% and 16.2%, respectively.

The lower effective tax rates in 2020 reflected comparatively lower pretax earnings as a result of the impact of the pandemic as well as the geographic distribution of the earnings.

Net Income and Adjusted EBITDA

Net income attributable to common shareholders for the three and six months ended June 30, 2021 was $200.0 million and $303.0 million, respectively, compared with $15.2 million and $20.5 million in the respective prior-year periods.

Adjusted EBITDA was $332.4 million and $522.5 million for the second quarter and first half of 2021, respectively.

Net income attributable to common shareholders for the six months ended June 30, 2021 included a $12.0 million gain recognized on the sale of a business as part of a broader investment made in Roofstock, a marketplace for investing in the dynamic single-family rental sector.

Net income attributable to common shareholders for the three and nine months ended September 30, 2021 was $237.2 million and $540.2 million, respectively, compared with $131.9 million and $152.4 million in the respective prior-year periods.

Adjusted EBITDA was $352.0 million and $874.5 million for the third quarter and first nine months of 2021, respectively.

Net income attributable to common shareholders for the nine months ended September 30, 2021 included a $12.0 million gain recognized on the sale of a business as part of a broader investment made in Roofstock, a marketplace for investing in the single-family rental sector.

This gain on sale is excluded from adjusted measures.

Net income margin attributable to common shareholders for the second quarter (against Revenue before reimbursements) was 8.0%, compared with 0.8% in the prior-year quarter.

Adjusted EBITDA margin for the second quarter, calculated on a fee-revenue basis, was 18.3% in USD (18.5% in local currency), compared with 8.3% in 2020.

Margin expansion was primarily driven by (i) a significant increase in revenue, particularly from higher margin transaction-based service lines and (ii) higher equity earnings, including $16.2 million from valuation increases to JLL Technologies' investments, reflecting continued progress in the strategy to invest in early-stage proptech companies (refer to the equity earnings discussion in the Americas segment highlights for additional detail), and an incremental $12.0 million from LaSalle.

This expansion was partially offset by the impact of temporary cost savings in 2020, including the benefit from government relief programs.

Net income margin attributable to common shareholders for the third quarter (against Revenue before reimbursements) was 8.5%, compared with 6.3% in the prior-year quarter.

Adjusted EBITDA margin for the third quarter, calculated on a fee-revenue basis, was 17.0% in USD (17.1% in local currency), compared with 17.2% in 2020.

The 20 basis point net reduction in margin was primarily due to (i) the expected reduction of certain non-permanent cost savings from 2020 (including government relief programs) and (ii) incremental investments in people and technology, substantially offset by the significant increase in revenue, particularly from higher margin transaction-based service lines.

Segment Operating Results

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Americas - Real Estate Services

Three Months Ended June 30, Change in in Local

Three Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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Americas - Real Estate Services (continued)

Six Months Ended June 30, Change in in Local

Nine Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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Adjusted EBITDA $ 696.6 357.2 339.4 95 % 94 %

Year-to-date and quarter-to-date revenue and fee revenue expansion in the Americas was driven by exceptional performance in transaction-based service lines, with second-quarter organic fee revenue reaching pre-pandemic levels.

The growth in Leasing was largely attributable to notably higher second-quarter transaction volume in the U.S.

with strength in office, industrial and retail sectors, despite lower average transaction size and shorter average lease/renewal terms compared with before the pandemic.

The over 100% second-quarter growth in Capital Markets reflected a rebound in deal activity, particularly in investment sales, as well as a double-digit increase in servicing revenue from our multifamily business.

Solid year-to-date revenue and fee revenue growth in Property & Facility Management was attributable to new client wins and expansions of existing Work Dynamics client relationships.

Equity earnings for the second quarter and first half of 2021 were attributable to valuation increases of JLL Technologies' investments in early-stage proptech entities, with half of the current quarter driven by an investment in a company purchased by Procore Technologies, Inc., which went public in May 2021.

Year-to-date and quarter-to-date revenue and fee revenue expansion in the Americas was driven by transaction-based revenues, with third-quarter fee revenue outpacing the same period in 2019.

The growth in Leasing was driven by both higher transaction volumes and an increase in deal size in the U.S., with strong momentum in office, industrial and retail sectors in certain markets.

Capital Markets more than doubled the prior-year quarter's fee revenue for the second consecutive quarter, reflecting increased deal activity across investment sales, debt advisory and equity advisory, as well as a 35% increase in third-quarter servicing revenue from the multifamily business (25% year to date).

Valuation Advisory and JLL Technologies Solutions led the increase in Advisory, Consulting and Other.

Solid growth in Property & Facility Management was driven by new client wins and was particularly notable given the prior-year quarter grew 24% over 2019.

Equity earnings for the third quarter and first nine months of 2021 were attributable to valuation increases of JLL Technologies' investments in early-stage proptech entities.

In the prior year, substantially all of the $12.7 million first-quarter equity earnings were attributable to gains by consolidated variable interest entities in which the company held no equity interest;

therefore, these gains had no net impact to Adjusted EBITDA.

The increases in segment operating expenses and segment fee-based operating expenses for the second quarter and first half of 2021, compared with the prior-year periods, were driven by revenue-related expense growth, partially offset by savings resulting from cost mitigation efforts during the trailing twelve months, especially fixed compensation expense.

The increases in segment operating expenses and segment fee-based operating expenses for the third quarter and first nine months of 2021, compared with the prior-year periods, were driven by revenue-related expense growth and the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020).

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 22.4% in USD and local currency, compared with 20.9% in 2020.

The margin expansion was primarily due to (i) transaction-based revenue growth, (ii) savings from cost mitigation efforts, especially related to fixed compensation costs, as well as continued variable operating and administrative expense containment, and (iii) higher equity earnings (each noted individually above).

The margin expansion was primarily driven by transaction-based revenue growth, mostly offset by the above-noted expected reduction of certain prior-year cost savings, and incremental investments in people and technology.

EMEA - Real Estate Services

Three Months Ended June 30, Change in in Local

Three Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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Equity earnings $ — 0.8 (0.8) (100) % (100) %

Segment income (loss) $ 0.3 (33.4) 33.7 101 % 95 %

Segment loss $ (10.3) (1.9) (8.4) (442) % (411) %

Adjusted EBITDA $ 1.0 7.7 (6.7) (87) % (88) %

EMEA - Real Estate Services (continued)

Six Months Ended June 30, Change in in Local

Nine Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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Adjusted EBITDA $ (12.6) (26.6) 14.0 53 % 43 %

EMEA achieved significant revenue and fee revenue growth for the second quarter of 2021, especially in Capital Markets and Leasing, following a pandemic-impacted prior-year quarter.

While total segment organic fee revenue for the current quarter was nearly on pace with second-quarter 2019, both Leasing and Capital Markets notably eclipsed second-quarter 2019 performance.

The growth in Capital Markets was driven by stronger market sentiment evidenced through deal volumes, particularly in geographies with higher COVID-19 vaccination rates.

The increase in Leasing revenue was primarily driven by transaction volume increases in office and industrial.

A partial rebound in the UK mobile engineering business, partially driven by the easing of government-mandated restrictions compared with the prior-year quarter, contributed to higher Property & Facility Management revenue.

In addition, Valuation Advisory, particularly in the UK, led growth in Advisory, Consulting and Other.

Lower activity in our fit-out business and significant prior-year project activity in MENA that did not recur this year primarily drove the year-to-date decline in Project & Development Services.

Geographically across service lines, quarter-to-date fee revenue growth in EMEA was led by the UK, France and Spain.

Year-to-date, Switzerland also drove fee revenue growth as a result of meaningful first-quarter Capital Markets deal activity.

The increases in segment operating expenses and segment fee-based operating expenses, compared with the prior-year quarter, were primarily due to revenue-related expense growth and the absence of temporary cost savings (specifically the benefit related to government relief programs recognized in 2020), partially offset by savings resulting from cost mitigation efforts during the last 12 months, especially related to fixed compensation costs.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 3.0% in USD (2.4% in local currency), compared with negative 8.8% in the prior-year quarter.

The margin improvement was primarily driven by higher transaction-based revenue and fixed compensation expense savings, partially offset by the prior-year impact of temporary cost savings (each discussed above).

EMEA's revenue and fee revenue growth for the third quarter was led by transaction-based revenue, reflecting the continued recovery in several geographies, particularly those with higher COVID-19 vaccination rates.

Notably, Capital Markets and Leasing together exceeded same-quarter 2019 fee revenue performance for the second consecutive quarter.

The continued growth in Capital Markets reflected higher deal volumes, particularly in industrial, residential and office sectors, compared with the prior-year quarter.

The increase in Leasing revenue was driven by transaction volume increases primarily in office and industrial as average deal size for office remains below pre-pandemic levels.

In addition, Valuation Advisory again led the growth in Advisory, Consulting and Other.

Geographically across service lines, EMEA fee revenue growth for the quarter was led by the UK and Germany.

Year-to-date revenue and fee revenue growth for EMEA was also driven by transaction-based revenues and the service lines had drivers consistent with the quarterly commentary above.

Geographically across service lines, EMEA year-to-date fee revenue growth was led by the UK, France, Switzerland and Spain.

The increases in segment operating expenses and segment fee-based operating expenses, compared with the prior-year quarter, were primarily due to revenue-related expense growth and the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020).

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 0.3% in USD (0.2% in local currency), compared with 2.4% in the prior-year quarter.

The decline in margin was driven by the above-noted impact of prior-year cost savings as well as incremental investments in people and technology, partially offset by the increase in higher margin transaction-based revenue.

Asia Pacific - Real Estate Services

Three Months Ended June 30, Change in in Local

Three Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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Asia Pacific - Real Estate Services (continued)

Six Months Ended June 30, Change in in Local

Nine Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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Segment operating expenses (excluding reimbursed expenses) $ 1,294.7 1,154.8 139.9 12 % 7 %

Equity earnings (losses) $ 2.0 (0.2) 2.2 n.m.

Equity earnings $ 3.4 0.7 2.7 386 % 334 %

Segment income $ 75.2 57.4 17.8 31 % 20 %

Adjusted EBITDA $ 97.5 78.2 19.3 25 % 15 %

Asia Pacific's double-digit fee revenue increase for the second quarter and first half of 2021 reflected a rebound in transaction-based revenue.

An increase in large-deal transactions, especially in Australia (which included an outsized deal this quarter) and Singapore, drove fee revenue expansion in Capital Markets for the second quarter and first half of the year.

Leasing fee revenue growth for the current quarter and first half of 2021 was led by Australia, Greater China and India, primarily due to a pick-up in office volumes and ongoing strength in industrial.

Significant business growth continued in Valuation Advisory, notably in Australia, which led the revenue increase in Advisory, Consulting and Other.

Higher segment operating expenses for the second quarter of 2021 and fee-based operating expenses for the second quarter and first half of 2021, compared with respective prior-year periods, were primarily attributable to revenue-related expense increases and the absence of temporary cost savings (specifically the benefit related to government relief programs recognized in 2020), partially offset by savings resulting from cost mitigation efforts during the trailing twelve months.

Lower year-to-date segment operating expenses (on a local currency basis), compared with last year, was due to a decrease in first-quarter gross contract costs.

Adjusted EBITDA margin for the second quarter, calculated on a fee-revenue basis, was 16.3% in USD (16.1% in local currency), compared with 13.1% last year.

The margin expansion was attributable to growth in transaction-based revenue, partially offset by the benefit from government relief programs in the prior year.

Three Months Ended June 30, Change in in Local

Asia Pacific's double-digit fee revenue increase for the third quarter and first nine months of 2021 reflected the ongoing rebound in transaction-based revenue.

A continued increase in large-deal transactions across nearly all asset classes, most notably in Australia (for the quarter and year to date), Japan (for the quarter) and Singapore (for the first nine months), drove revenue expansion in Capital Markets.

Growth in Leasing for the quarter and first nine months was led by Greater China and Australia, extending the momentum in office and industrial.

Significant business growth continued in Valuation Advisory, predominantly in Australia, which led to the fee revenue increase in Advisory, Consulting and Other for both the third quarter and year to date.

Higher segment operating expenses for the third quarter and first nine months of 2021 and fee-based operating expenses for the third quarter and first nine months of 2021, compared with respective prior-year periods, were primarily attributable to revenue-related expense increases and the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020).

Adjusted EBITDA margin for the third quarter, calculated on a fee-revenue basis, was 10.8% in USD (10.7% in local currency), compared with 20.0% last year.

The margin decline was attributable to the above-noted impact of prior-year cost savings as well as incremental investments in people and technology, partially offset by the increase in higher-margin transaction-based revenue.

Three Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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LaSalle (continued)

Six Months Ended June 30, Change in in Local

Nine Months Ended September 30, Change in in Local

($ in millions) 2021 2020 U.S.

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Equity earnings (losses) $ 44.7 (20.5) 65.2 318 % 316 %

Segment income (loss) $ 59.2 (0.7) 59.9 n.m.

Adjusted EBITDA $ 62.0 2.4 59.6 n.m.

LaSalle's second-quarter advisory fee growth, compared with 2020, was concentrated in our core open-end funds and was partially due to recent valuation increases in assets under management ("AUM").

Year-to-date, this growth was offset by pandemic-driven valuation declines in AUM during the second half of 2020.

Equity earnings in the second quarter and first half of 2021 were driven by increases to the estimated fair value of underlying real estate investments within LaSalle's co-investment portfolio across asset classes and geographies.

For the first half of 2020, equity losses were largely driven by the pandemic's impact on real estate prices which drove lower estimated fair values within the portfolio.

The increases in segment operating expenses and segment fee-based operating expenses for the current quarter, compared with the prior-year quarter, was driven by deferred variable compensation expenses from the legacy compensation program.

Adjusted EBITDA margin for the second quarter was 37.9% in USD (38.7% local currency), compared with 28.2% last year.

Margin improvement was driven by higher equity earnings as well as an increase in the productivity of the asset management platform, partially offset by the impact from deferred compensation expense relating to incentive fees from prior years.

AUM reached a record $73.4 billion as of June 30, 2021, an increase of 4% in USD (6% in local currency) from $70.9 billion as of March 31, 2021.

The AUM increase resulted from (i) $3.3 billion of net valuation increases, and (ii) $1.9 billion of acquisitions, partially offset by (iii) $1.6 billion of dispositions and withdrawals, and $1.1 billion of foreign currency decreases.

Segment income $ 88.9 28.8 60.1 209 % 206 %

Adjusted EBITDA $ 93.0 33.7 59.3 176 % 174 %

LaSalle advisory fee growth for the third quarter and first nine months of 2021 was led by core open-end funds, a result of recent capital raising and valuation increases in assets under management ("AUM"), as well as a recently launched fund in Asia Pacific.

Fees related to a secondary offering for a LaSalle-managed publicly traded REIT in Japan in the third quarter of 2020, which did not recur this year, primarily drove the decline in transaction fees.

The increase in incentive fees was due to real estate dispositions on behalf of clients in Asia Pacific and continental Europe.

Equity earnings in the first nine months of 2021 were driven by increases to the estimated fair value of underlying real estate investments within LaSalle's co-investment portfolio across asset classes and geographies.

For the first nine months of 2020, equity losses were largely driven by the pandemic's impact on real estate prices which drove lower estimated fair values within the portfolio.

The increases in segment operating expenses and segment fee-based operating expenses for the current quarter, compared with the prior-year quarter, were primarily driven by compensation expense related to the higher incentive fees and deferred variable compensation expenses associated with the run-off of a previous compensation program.

Adjusted EBITDA margin for the third quarter was 25.1% in USD (25.4% local currency), compared with 29.5% last year.

The decline in margin was primarily attributable to incremental investments in people and technology as well as the deferred compensation impact noted above, partially offset by higher incentive fees.

AUM reached a record $74.7 billion as of September 30, 2021, an increase of 2% in both USD and local currency from $73.4 billion as of June 30, 2021.

The AUM increase resulted from (i) $1.7 billion of net valuation increases, (ii) $1.5 billion of acquisitions and (iii) $0.2 billion of foreign currency increases, partially offset by (iv) $2.1 billion of dispositions and withdrawals.

LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows from Operating Activities

Operating activities used $246.1 million of cash in the first six months of 2021, compared with $44.7 million of cash used during the same period in 2020.

The increase in cash used was primarily due to a significant increase in trade receivables, reflecting higher year-over-year second-quarter revenue this year.

Operating activities provided $210.3 million of cash in the first nine months of 2021, compared with $363.1 million of cash provided by operating activities during the same period in 2020.

The decrease in cash provided was primarily due to a significant increase in trade receivables, reflecting higher year-over-year third-quarter revenue this year, as well as the timing of payments related to taxes and other government obligations.

This was partially offset by (i) less incentive compensation paid in 2021 compared with 2020, reflecting our performance in 2020 compared with 2019, and (ii) higher cash provided by earnings in 2021, driven by a substantial increase in net income.

Cash Flows from Investing Activities

We used $213.8 million of cash for investing activities during the first six months of 2021, as compared to $109.4 million used during the same period in 2020.

The increase in cash used was driven by (i) incremental JLL Technologies investments in early-stage proptech companies, (ii) an increase in net capital contributions to real estate ventures, and (iii) acquisitions in investment properties (less than wholly-owned), partially offset by (iv) lower capital expenditures in 2021.

We used $316.0 million of cash for investing activities during the first nine months of 2021, as compared to $124.2 million used during the same period in 2020.

The increase in cash used was driven by (i) incremental JLL Technologies investments in early-stage proptech companies, (ii) an increase in net capital contributions to real estate ventures, (iii) acquisitions in investment properties (less than wholly-owned), and (iv) business acquisitions.

We discuss these key drivers individually below in further detail.

Cash Flows from Financing Activities

Financing activities provided $314.7 million of cash during the first six months of 2021, as compared to $114.1 million provided by financing activities during the same period in 2020.

The net increase of $200.6 million in cash flows from financing activities is substantially driven by an increase in borrowings on our Facility.

The increase in borrowings resulted from higher cash outflows for operating and investing activities as discussed above, incremental share repurchases, and an increase in payments of acquisition-related obligations.

On April 14, 2021, we amended our $2.75 billion Facility, which extended the maturity date from May 17, 2023 to April 14, 2026.

As of June 30, 2021, we had outstanding borrowings under the Facility of $350.0 million and outstanding letters of credit of $0.7 million.

Financing activities provided $39.3 million of cash during the first nine months of 2021, as compared to $243.8 million used by financing activities during the same period in 2020.

The net increase of $283.1 million in cash inflows from financing activities is substantially driven by an increase in borrowings on our Facility.

This increase resulted from lower cash inflows for operating activities and higher cash outflows from investing activities as discussed above, as well as incremental share repurchases and higher payments of deferred acquisition-related obligations.

Our $2.75 billion Facility matures on April 14, 2026.

As of September 30, 2021, we had outstanding borrowings under the Facility of $225.0 million and outstanding letters of credit of $0.7 million.

As of December 31, 2020, we had no outstanding borrowings under the Facility and outstanding letters of credit of $0.7 million.

The average outstanding borrowings under the Facility were $612.5 million and $1,351.5 million during the three months ended June 30, 2021 and 2020, respectively, and $399.6 million and $1,143.4 million during the six months ended June 30, 2021 and 2020.

In addition to our Facility, we had the capacity to borrow up to $64.9 million under local overdraft facilities as of June 30, 2021.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $102.5 million and $62.0 million as of June 30, 2021 and December 31, 2020, respectively, of which $8.0 million and $12.0 million, respectively, were attributable to local overdraft facilities.

The average outstanding borrowings under the Facility were $497.1 million and $758.9 million during the three months ended September 30, 2021 and 2020, respectively, and $432.5 million and $1,014.3 million during the nine months ended September 30, 2021 and 2020.

In addition to our Facility, we had the capacity to borrow up to $57.0 million under local overdraft facilities as of September 30, 2021.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $117.6 million and $62.0 million as of September 30, 2021 and December 31, 2020, respectively, of which $13.0 million and $12.0 million, respectively, were attributable to local overdraft facilities.

We will continue to use the Facility for working capital needs (including payment of accrued incentive compensation), co-investment activities, share repurchases, capital expenditures and acquisitions.

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Investment Activity

As of June 30, 2021, we had a carrying value of $614.0 million in investments, primarily related to LaSalle co-investments in real estate ventures and investments by JLL Technologies in early-stage proptech companies.

For the six months ended June 30, 2021, and 2020, funding of investments exceeded return of capital by $63.9 million, and $30.2 million, respectively.

We expect to continue to pursue strategic co-investment opportunities with our investment management clients globally as co-investment remains an important foundation to the continued growth of LaSalle's business.

In addition, we expect continued investments by JLL Technologies.

As of September 30, 2021, we had a carrying value of $646.6 million in investments, primarily related to LaSalle co-investments in real estate ventures and investments by JLL Technologies in early-stage proptech companies.

For the nine months ended September 30, 2021, and 2020, funding of investments exceeded return of capital by $93.2 million and $32.7 million, respectively.

We expect continued investments by JLL Technologies as well as strategic co-investment opportunities with our investment management clients globally as co-investment remains an important foundation to the continued growth of LaSalle's business.

See Note 6, Investments in Real Estate Ventures, in the Notes to Condensed Consolidated Financial Statements for additional information on our investment activity.

In addition, JLL Technologies funded a $45 million convertible note to Turntide Technologies.

This activity is included within "Other" in the cash flow from investing activities and primarily included in Long-term receivables on the Condensed Consolidated Balance Sheet.

In addition, JLL Technologies funded a $45.0 million convertible note to Turntide Technologies in the second quarter of 2021.

This activity is included within "Other" in the cash flows from investing activities and primarily included in Long-term receivables on the Condensed Consolidated Balance Sheet.

Share Repurchase and Dividend Programs

On February 21, 2021, our Board of Directors authorized an additional $500.0 million for the repurchase of our common stock in the open market and privately negotiated transactions in addition to the $100.0 million remaining from the initial authorization.

During the three and six months ended June 30, 2021 we repurchased 200,000 shares for $41.1 million.

Du ring the three months ended June 30, 2020 we did not repurchase any shares;

during the six months ended June 30, 2020 we repurchased nearly 188,000 shares for $25.0 million.

As of June 30, 2021, $558.9 million remained authorized for repurchases under our share repurchase program.

The number of shares repurchased and cash paid for repurchases is noted in the following table.

Three Months Ended September 30, Nine Months Ended September 30,

($'s in millions) 2021 2020 2021 2020

Total number of shares repurchased (in 000's) 658.9 258.0 858.9 446.0

Total paid for shares repurchased $ 149.9 25.0 $ 191.0 50.0

As of September 30, 2021, $409.0 million remained authorized for repurchases under our share repurchase program.

Capital Expenditures

Net capital additions for the six months ended June 30, 2021 and 2020, were $69.8 million and $77.3 million, respectively.

Our capital expenditures in 2021 were primarily for leased office spaces improvements and purchased/developed software.

Net capital additions for the nine months ended September 30, 2021 and 2020, were $111.6 million and $112.5 million, respectively.

Our capital expenditures in 2021 were primarily for leased office space improvements, purchased/developed software and hardware.

Investment Asset Activity of Consolidated Less Than Wholly-Owned Entities

Net capital additions made by consolidated VIEs in which we held no equity interest for the six months ended June 30, 2021 and 2020, were $41.8 million and $7.7 million, respectively, primarily to acquire real estate (net of real estate sales).

Net capital additions made by consolidated VIEs in which we held no equity interest for the nine months ended September 30, 2021 and 2020, were $53.8 million and $10.2 million, respectively, primarily to acquire real estate (net of real estate sales).

The funding for these investments (largely from employee-investors and related third-party debt) is included within financing activities.

Business Acquisitions

During the six months ended June 30, 2021, we paid $78.6 million for business acquisitions.

During the nine months ended September 30, 2021, we paid $104.7 million for business acquisitions.

This included $22.2 million of payments relating to acquisitions in 2021 and $82.5 million for deferred business acquisition and earn-out obligations related to acquisitions completed in prior years, which are primarily reflected in cash flows from financing activities.

Terms for many of our past acquisitions have typically included cash paid at closing with provisions for additional deferred consideration and earn-out payments subject to certain contract requirements, including the passage of time and performance, respectively.

Deferred business acquisition obligations totaled $26.4 million as of June 30, 2021.

Deferred business acquisition obligations totaled $22.1 million as of September 30, 2021.

These obligations represent the current discounted values of payments due to sellers of businesses for which our acquisition had been completed as of the balance sheet date and for which the only remaining condition on those payments is the passage of time.

As of June 30, 2021, we had the potential to make earn-out payments for a maximum of $106.7 million on 22 completed acquisitions subject to the achievement of certain performance conditions.

As of September 30, 2021, we had the potential to make earn-out payments for a maximum of $119.1 million on 21 completed acquisitions subject to the achievement of certain performance conditions.

Refer to Note 5, Business Combinations, Goodwill and Other Intangible Assets, in the Notes to the Condensed Consolidated Financial Statements for further information on Business Acquisitions.

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We believe our policy of permanently investing earnings of foreign subsidiaries does not significantly impact our liquidity.

As of June 30, 2021 and December 31, 2020, we had total cash and cash equivalents of $494.0 million and $574.3 million, respectively, of which approximately $403.9 million and $445.2 million, respectively, was held by foreign subsidiaries.

As of September 30, 2021 and December 31, 2020, we had total cash and cash equivalents of $535.9 million and $574.3 million, respectively, of which approximately $422.3 million and $445.2 million, respectively, was held by foreign subsidiaries.

Restricted Net Assets

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However, we generally face no such restrictions with regard to the use or application of funds for ordinary course business activities within such countries.

The assets of these countries aggregated to approximately 4% of our total assets as of both June 30, 2021 and December 31, 2020.

The assets of these countries aggregated to approximately 4% of our total assets as of both September 30, 2021 and December 31, 2020.

Off-Balance Sheet Arrangements

We have unfunded capital commitments to investment vehicles and direct investments for future co-investments, totaling a maximum of $315.5 million as of June 30, 2021.

We have unfunded capital commitments to investment vehicles and direct investments for future co-investments, totaling a maximum of $315.9 million as of September 30, 2021.

See our discussion of unfunded commitments in Note 6, Investments in Real Estate Ventures, in the Notes to Condensed Consolidated Financial Statements.

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These risks and uncertainties are described in our Annual Report on Form 10-K for the year ended December 31, 2020 in Part I, Item 1A.

Risk Factors and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and may also be described from time to time in our subsequent filings with the Securities and Exchange Commission.

Risk Factors and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and may also be described from time to time in our subsequent filings with the Securities and Exchange Commission.

You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis