What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-09 · 254 added, 123 removed, 287 unchanged (57% 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 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 ).

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, 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.

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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, 2021.

There have been no material changes to these critical accounting policies and estimates during the three months ended March 31, 2022.

There have been no material changes to these critical accounting policies and estimates during the six months ended June 30, 2022.

ITEMS AFFECTING COMPARABILITY

2 unchanged sentences

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.

In early 2021, macroeconomic conditions influenced by the COVID-19 pandemic more notably impacted our operations compared with the current year.

Acquisitions and Dispositions

31 unchanged sentences

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.

Consequently, the results for the periods ended June 30, 2022 and 2021, are not fully indicative of the results we expect to realize for the full fiscal year.

RESULTS OF OPERATIONS

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

Europe, Middle East and Africa

Consolidated Operating Results

Three Months Ended March 31, Change in % Change in Local Currency

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

($ in millions) 2022 2021 U.S.

23 unchanged sentences

Adjusted EBITDA $ 359.0 332.4 26.6 8 % 10 %

Consolidated Operating Results (continued)

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

($ in millions) 2022 2021 U.S.

Markets Advisory $ 2,117.7 1,744.0 373.7 21 % 24 %

Capital Markets 1,285.1 963.8 321.3 33 37

Work Dynamics 6,344.1 5,534.3 809.8 15 18

JLL Technologies 100.1 83.0 17.1 21 21

LaSalle 232.8 207.0 25.8 12 18

Revenue $ 10,079.8 8,532.1 1,547.7 18 % 21 %

Gross contract costs (6,032.9) (5,297.9) (735.0) 14 17

Net non-cash MSR and mortgage banking derivative activity (7.6) (15.4) 7.8 (51) (51)

Fee revenue $ 4,039.3 3,218.8 820.5 25 % 29 %

Markets Advisory 1,597.0 1,263.6 333.4 26 29

Capital Markets 1,252.2 926.7 325.5 35 39

Work Dynamics 877.5 772.0 105.5 14 17

JLL Technologies 93.3 62.7 30.6 49 50

LaSalle 219.3 193.8 25.5 13 19

Compensation and benefits, excluding gross contract costs $ 2,908.2 2,315.3 592.9 26 % 29 %

Operating, administrative and other expenses, excluding gross contract costs 572.7 471.1 101.6 22 25

Depreciation and amortization 109.8 107.5 2.3 2 4

Restructuring and acquisition charges 45.4 35.3 10.1 28 31

Total fee-based operating expenses 3,636.1 2,929.2 706.9 24 27

Gross contract costs 6,032.9 5,297.9 735.0 14 17

Total operating expenses $ 9,669.0 8,227.1 1,441.9 18 % 21 %

Operating income $ 410.8 305.0 105.8 35 % 37 %

Equity earnings $ 72.1 89.3 (17.2) (19) % (19) %

Adjusted EBITDA $ 632.6 522.5 110.1 21 % 23 %

Non-GAAP Financial Measures

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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 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.

Gain/loss on disposition reflects the gain or loss recognized on the sale or disposition of businesses.

Given the low frequency of business disposals by the company historically, the gain or loss directly associated with such activity is excluded as it is not considered indicative of core operating performance.

In the second quarter of 2022, the $7.5 million net loss on disposition included $10.5 million of loss related to the disposition of our Russia business, partially offset by a $3.0 million gain related to a disposition within JLL Technologies.

In 2021, the $12.0 million gain related to a business disposition within JLL Technologies during the first quarter of 2021.

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,

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

(in millions) 2022 2021 2022 2021

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

Three Months Ended March 31,

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

($ in millions) 2022 2021 2022 2021

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Provision for income taxes 72.8 54.9 113.1 83.1

Depreciation and amortization 54.4 53.0

Depreciation and amortization (a)

54.4 54.5 108.8 107.5

EBITDA $ 336.8 320.0 $ 587.3 514.6

Restructuring and acquisition charges 25.9 18.1 45.4 35.3

Gain on disposition — (12.0)

Net loss (gain) on disposition 7.5 — 7.5 (12.0)

Net non-cash MSR and mortgage banking derivative activity (11.2) (5.7) (7.6) (15.4)

2 unchanged sentences

Adjusted EBITDA margin 16.5 % 18.5 % 15.5 % 16.2 %

(a) This adjustment excludes the noncontrolling interest portion of amortization of acquisition-related intangibles which is not attributable to common shareholders.

In discussing our operating results, we report Adjusted EBITDA margins and refer to percentage changes in local currency, unless otherwise noted.

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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 March 31,

($ in millions) 2022 % Change

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

($ in millions) 2022 % Change 2022 % Change

At current period exchange rates $ 5,278.4 17 % $ 10,079.8 18 %

Impact of change in exchange rates 77.8 n/a

Impact of change in exchange rates 174.3 n/a 252.1 n/a

At comparative period exchange rates $ 5,452.7 21 % $ 10,331.9 21 %

At current period exchange rates $ 2,138.8 19 % $ 4,039.3 25 %

Impact of change in exchange rates 32.6 n/a

Impact of change in exchange rates 67.0 n/a 99.6 n/a

At comparative period exchange rates $ 2,205.8 23 % $ 4,138.9 29 %

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At current period exchange rates $ 235.1 5 % $ 410.8 35 %

Impact of change in exchange rates 3.2 n/a

Impact of change in exchange rates 3.7 n/a 6.9 n/a

At comparative period exchange rates $ 238.8 6 % $ 417.7 37 %

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At current period exchange rates $ 359.0 8 % $ 632.6 21 %

Impact of change in exchange rates 5.0 n/a

Impact of change in exchange rates 5.5 n/a 10.5 n/a

At comparative period exchange rates $ 364.5 10 % $ 643.1 23 %

We achieved significant growth against the prior-year quarter in revenue, up 21% to $4.8 billion, and fee revenue, up 36% to $1.9 billion, substantially all of which was organic.

The prior-year quarter was notably impacted by the COVID-19 pandemic, however, fee revenue increased 27% compared with the first quarter 2020.

Fee revenue growth versus 2021 was broad-based across all segments, led by Capital Markets and Markets Advisory, up 54% and 36%, respectively.

In addition to sustained momentum in transaction-based revenues, our annuity-based revenues continued to demonstrate stability, notably Workplace Management within Work Dynamics, which grew 20%.

The following highlights the proportion of consolidated top-line growth, on a local currency basis, compared with the prior-year quarter, by business line segment ($ in millions).

Year-over-year for the second quarter, we achieved strong revenue and fee revenue growth of 21% and 23%, respectively, substantially all of which was organic.

Fee revenue growth versus the prior-year quarter was broad-based across all segments - most achieved increases of 20% of higher - led by Markets Advisory, up $144.8 million or 23%, and Capital Markets, up $127.2 million or 28%.

In addition, annuity-based businesses continued to deliver solid fee revenue growth as Workplace Management within Work Dynamics, for example, grew 15%.

LaSalle's increase in advisory fees for the quarter was mostly offset by lower incentive fees.

The following highlights the proportion of consolidated top-line growth on a local currency basis, compared with the prior-year periods, by business line segment ($ in millions).

Refer to segment operating results for further detail.

For the first half of 2022, consolidated revenue and fee revenue increased 21% and 29%, respectively, compared with the prior year.

The year-to-date fee revenue growth was also led by Markets Advisory, up $333.4 million or 29%, and Capital Markets, up $325.5 million or 39%.

Work Dynamics delivered solid fee revenue growth of 17%, led by our corporate outsourcing business, Workplace Management.

Higher advisory fees for the first half of 2022 outpaced the decline in incentive fees to drive fee revenue up 19% for LaSalle.

Our consolidated fee revenue increased 19% in U.S.

dollars (“USD”) and 36% in local currency for the first quarter of 2022, compared with 2021.

The spread for the first quarter was driven by the strengthening of the U.S.

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

dollars (“USD”) and 23% in local currency for the second quarter of 2022, compared with 2021.

Year-to-date, consolidated fee revenue increased 25% in U.S.

dollars (“USD”) and 29% in local currency compared with last year.

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

dollar against most major currencies, especially the British pound sterling, euro, Japanese yen and Australian dollar.

Operating Expenses

Consolidated operating expenses were $4.6 billion for the first quarter, up 19% from 2021, while consolidated fee-based operating expenses were $1.7 billion for the first quarter, up 29% from the prior-year quarter.

The aforementioned increase in fee-based operating expenses was primarily attributable to our Markets Advisory and Capital Markets segments, which drove 39% and 37%, respectively, of the overall increase on a local currency basis.

For the first quarter of 2022, Restructuring and acquisition charges increased compared with the prior-year period, primarily due to integration costs associated with business combinations that closed in the second half of 2021;

Consolidated operating expenses were $5.0 billion for the second quarter, up 22% from 2021, and $9.7 billion for the first half of 2022, up 21%, while consolidated fee-based operating expenses were $1.9 billion for the second quarter, up 26% from the prior-year quarter, and $3.6 billion for the first six months, up 27%.

The second quarter and first half of the year increases in fee-based operating expenses were primarily attributable to our Markets Advisory and Capital Markets segments, which each drove 35% of the overall increase on a local currency basis for the quarter (37% and 36%, respectively, year to date).

Refer to the segment discussions for additional details.

For the second quarter and first half of 2022, Restructuring and acquisition charges increased compared with the prior-year period, primarily due to post-acquisition and integration costs associated with business combinations that closed in the second half of 2021;

refer to following table for further detail.

Three Months Ended March 31,

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

(in millions) 2022 2021 2022 2021

1 unchanged sentence

Restructuring, pre-acquisition and post-acquisition charges 16.6 17.9 33.5 33.4

Stock-based compensation expense for HFF retention awards 2.7 6.0

Fair value adjustments that resulted in a net decrease to earn-out liabilities from prior-period acquisition activity 1.0 1.1 0.3 1.0

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Equity Earnings

For the first quarter of 2022, we recognized equity earnings of $18.5 million, compared with $48.5 million in the prior-year quarter.

The 2022 activity comprised $18.8 million of equity earnings from JLL Technologies, partially offset by $1.9 million of equity losses from LaSalle.

In the prior-year quarter, JLL Technologies and LaSalle recognized $34.6 million and $13.0 million of equity earnings, respectively.

Refer to the associated segment discussions for additional detail.

The provision for income taxes was $40.3 million for the first quarter 2022, representing an effective tax rate of 21.9%.

For the prior-year quarter, the provision was $28.2 million, representing an effective tax rate of 21.6%.

The following details equity earnings by relevant segment.

Refer to the segment discussions for additional details.

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

(in millions) 2022 2021 2022 2021

JLL Technologies $ 44.7 16.2 $ 63.5 50.8

LaSalle 7.0 23.4 5.1 36.4

Other 1.9 1.2 3.5 2.1

Total equity earnings $ 53.6 40.8 $ 72.1 89.3

Other Income (Expense)

Other income was $135.3 million and $135.5 million for the quarter and year ended June 30, 2022, compared with an expense of $0.2 million and income of $11.6 million for the comparable periods in 2021.

During the second quarter of 2022, Other income included a $142.3 million gain by a consolidated variable interest entity in which we held no equity interest.

This gain, therefore, is also included in net income attributable to noncontrolling interest, and as a result, there is no net impact to Net income attributable to common shareholders (or other measures like Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share).

Also in the second quarter of 2022, we recognized a $10.5 million loss related to the disposition of the Russia business.

In 2021, a $12.0 million gain related to a business disposition within JLL Technologies during the first quarter.

The provision for income taxes was $72.8 million and $113.1 million for the three and six months ended June 30, 2022, respectively, representing effective tax rates ("ETRs") of 17.8% and 19.1%, respectively.

For the three and six months ended June 30, 2021, the provision was $54.9 million and $83.1 million, respectively, representing an ETR of 21.6% for both periods.

The lower ETR, for both the second quarter and first half of 2022, resulted from (1) a reduction of a valuation reserve related to a capital loss carryover for which the full effect was recognized in the second quarter as a discrete item and (2) the removal of pass-through income from noncontrolling interests which is included in Income before income taxes and noncontrolling interest on the Statements of Comprehensive Income but excluded from the tax computation.

Net Income and Adjusted EBITDA

Net income attributable to common shareholders for the three months ended March 31, 2022 was $145.6 million, compared with $103.0 million in the prior-year period.

Adjusted EBITDA was $273.6 million for the first quarter of 2022, compared to $190.1 million in the prior-year period.

Net income attributable to common shareholders for the three months ended March 31, 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 first quarter (against Revenue) was 3.0%, compared with 2.6% in the prior-year quarter.

Adjusted EBITDA margin for the first quarter, calculated on a fee-revenue basis, was 14.4% in USD and local currency, compared with 13.3% in 2021.

The 110 basis points increase was primarily due to (i) the meaningful increase in fee revenue, especially from higher margin transaction-based businesses, and (ii) the timing of incentive compensation accruals reflecting changes in compensation plans from 2021 to 2022, which resulted in a lower percentage of expected full-year incentive compensation accrued this quarter compared with the prior year, partially offset by (iii) lower equity earnings and (iv) incremental expenditures to drive future growth, primarily compensation, T&E and marketing, as business operations continue to trend towards pre-pandemic levels.

Net income attributable to common shareholders for the three and six months ended June 30, 2022 was $193.9 million and $339.5 million, respectively, compared with $200.0 million and $303.0 million in the respective prior periods.

Adjusted EBITDA was $359.0 million and $632.6 million for the second quarter and first half of 2022, compared to $332.4 million and $522.5 million in the prior-year periods.

Net income attributable to common shareholders for the six months ended June 30, 2021 included a $3.0 million gain recognized on an asset sale within JLL Technologies and a $10.5 million loss on the disposition of our Russia businesses.

This gain/loss on disposition activity is excluded from adjusted measures.

Net income margin attributable to common shareholders for the second quarter (against Revenue) was 3.7%, compared with 4.4% in the prior-year quarter.

Adjusted EBITDA margin for the second quarter, calculated on a fee-revenue basis, was 16.8% in USD (16.5% in local currency), compared with 18.5% in 2021.

The net decrease in margin was primarily due to higher compensation expense - including higher commissions and increased headcount - as well as increased T&E and marketing expenses as business normalizes compared to a more heavily impacted prior-year quarter.

These drivers more than offset the fee revenue growth.

Segment Operating Results

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Markets Advisory

Three Months Ended March 31, Change in in Local

Three Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

13 unchanged sentences

Adjusted EBITDA $ 134.0 113.9 20.1 18 % 20 %

Markets Advisory fee revenue grew 36% compared with the prior year and 26% compared with the first quarter of 2020, which was only nominally impacted by the COVID-19 pandemic.

Leasing drove the revenue and fee revenue growth versus 2021, led by the U.S.

as both transaction size and volume increased.

Globally, all major asset classes in Leasing experienced double-digit growth compared with the prior year, with continued strength in industrial and strong momentum in the office sector.

The increases in segment operating expenses and segment fee-based operating expenses for the first quarter of 2022, compared with the prior-year period, were driven by higher T&E and compensation expenses, the latter of which was driven by additional headcount and wage inflation to meet increased business demand.

Markets Advisory (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 2,117.7 1,744.0 373.7 21 % 24 %

Gross contract costs (520.7) (480.4) (40.3) 8 11

Fee revenue $ 1,597.0 1,263.6 333.4 26 % 29 %

Leasing 1,300.4 980.8 319.6 33 35

Property Management 240.8 229.0 11.8 5 8

Advisory, Consulting and Other 55.8 53.8 2.0 4 8

Compensation, operating and administrative expenses, excluding gross contract costs 1,355.0 1,086.1 268.9 25 27

Depreciation and amortization 34.4 32.6 1.8 6 8

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 1,389.4 1,118.7 270.7 24 26

Gross contract costs 520.7 480.4 40.3 8 11

Segment operating expenses $ 1,910.1 1,599.1 311.0 19 % 22 %

Equity earnings $ 0.9 0.5 0.4 80 % 60 %

Adjusted EBITDA $ 245.2 179.9 65.3 36 % 38 %

Markets Advisory revenue and fee revenue growth was led by Leasing, both on a year-to-date and quarter-to-date basis.

Globally in Leasing, most major asset classes achieved double-digit growth compared with the comparable periods, with continued strength in industrial and strong momentum in the office sector.

contributed most significantly to the growth in Leasing, propelled by increases in deal size and volume.

The increases in segment operating expenses and segment fee-based operating expenses for both the second quarter and first half of 2022, compared with the prior-year periods, were driven primarily by higher compensation costs.

These incremental expenses were primarily due to revenue producers achieving higher commission tiers earlier in 2022 compared to 2021, which is a direct result of the 2022 revenue increases described above, as well as additional headcount to meet increased business demand.

In addition, higher expenses were, in part, due to increased T&E and marketing costs as business activities normalize following the past couple years which were more heavily impacted by the pandemic.

These drivers were partially offset by the timing of incentive compensation accruals, reflecting changes in annual incentive compensation plans from 2021 to 2022, which resulted in a lower percentage of expected full-year incentive compensation accrued this quarter compared with the prior year.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 15.7% in USD (15.6% in local currency), compared with 16.0% in 2021.

The margin expansion was primarily due to the growth in Leasing revenue, which more than offset the expense drivers noted above.

The lower margin was largely attributable to the expense drivers noted above, which more than offset the increased revenue.

Capital Markets

Three Months Ended March 31, Change in in Local

Three Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

14 unchanged sentences

Adjusted EBITDA $ 126.7 120.8 5.9 5 % 8 %

Capital Markets fee revenue increased 54% compared with the prior-year quarter and 42% compared with the first quarter of 2020, which was only nominally impacted by the pandemic.

This fee revenue growth was highlighted by substantially higher investment sales and debt advisory transaction volumes in many geographies across the globe.

Further, nearly all asset classes experienced growth compared with 2021, most meaningfully in residential and office.

Higher Loan Servicing revenue was due to continued growth of the servicing portfolio over the trailing twelve months, particularly from loans originated under the Fannie Mae Delegated Underwriting and Servicing ("DUS") program.

The increases in segment operating expenses and segment fee-based operating expenses for the first quarter of 2022, compared with the prior-year period, were driven by higher T&E and compensation expenses, the latter driven by additional headcount and wage inflation to meet increased business demand.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 20.0% in both USD and local currency, compared with 15.0% in 2021.

The increase in margin was driven by the above-noted revenue growth drivers, which more than offset the increase in expenses.

In addition, the increase was partially due to the timing of incentive compensation accruals as noted in the consolidated margin discussion.

Capital Markets (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 1,285.1 963.8 321.3 33 % 37 %

Gross contract costs (25.3) (21.7) (3.6) 17 26

Net non-cash MSR and mortgage banking derivative activity (7.6) (15.4) 7.8 (51) (51)

Fee revenue $ 1,252.2 926.7 325.5 35 % 39 %

Investment Sales, Debt/Equity Advisory and Other 996.5 699.4 297.1 42 46

Valuation Advisory 175.4 166.7 8.7 5 11

Loan Servicing 80.3 60.6 19.7 33 32

Compensation, operating and administrative expenses, excluding gross contract costs 1,008.8 748.0 260.8 35 39

Depreciation and amortization 31.0 32.6 (1.6) (5) (4)

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 1,039.8 780.6 259.2 33 37

Gross contract costs 25.3 21.7 3.6 17 26

Segment operating expenses $ 1,065.1 802.3 262.8 33 % 37 %

Equity earnings $ 1.4 1.8 (0.4) (22 %) (20 %)

Adjusted EBITDA $ 244.9 179.9 65.0 36 % 39 %

Capital Markets fee revenue growth for the quarter and first half of the year were broad-based, led by increases in debt advisory and investment sales.

Within Investment Sales, Debt/Equity Advisory and Other, revenue from nearly all major asset classes grew compared with prior-year quarter, notably in the retail and residential sectors.

Higher Loan Servicing revenue was attributable to (i) continued growth of the servicing portfolio, particularly under our Fannie Mae DUS license (comprising approximately 55% and 50% of the second quarter and first half of 2022 increases, respectively) and (ii) incremental prepayment fees.

The increases in segment operating expenses and segment fee-based operating expenses for the second quarter and first half of 2022, compared with the comparable prior-year periods, were driven primarily by incremental headcount and higher commissions and an increase in T&E and marketing expenses.

This was partially offset by reductions to other variable compensation plans as a result of changes to the commission structures.

While not as impactful on the quarter-to-date performance, expenses for the first half of 2021 included a $13.8 million non-cash reduction to loan loss credit reserves, versus a comparable reduction of $2.8 million recorded this year.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 19.2% in USD (and 19.1% local currency), compared with 22.6% in 2021.

The reduction in margin was primarily due to the expense drivers noted above, partially offset by incremental fee revenue.

Work Dynamics

Three Months Ended March 31, Change in in Local

Three Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

11 unchanged sentences

Segment operating expenses $ 3,270.8 2,801.5 469.3 17 % 21 %

Equity earnings $ 0.3 0.1 0.2 200 % 346 %

Equity earnings (losses) $ 0.9 (0.3) 1.2 400 % 467 %

Adjusted EBITDA $ 57.6 51.2 6.4 13 % 13 %

The increases in Work Dynamics revenue and fee revenue were led by Workplace Management, primarily from new client wins but also expansions of existing client relationships and particularly in the technology and public institutions sectors in the United States.

Project Management growth was driven by the return to office movement and fewer pandemic restrictions in several geographies across the globe which drove increased project demand.

The increases in segment operating expenses and segment fee-based operating expenses for the first quarter of 2022, compared with the prior-year period, were driven by investments in people, via additional headcount and increased wages, to support planned future growth.

Work Dynamics (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 6,344.1 5,534.3 809.8 15 % 18 %

Gross contract costs (5,466.6) (4,762.3) (704.3) 15 18

Fee revenue $ 877.5 772.0 105.5 14 % 17 %

Workplace Management 366.9 318.3 48.6 15 18

Project Management 390.6 347.7 42.9 12 17

Portfolio Services and Other 120.0 106.0 14.0 13 16

Compensation, operating and administrative expenses, excluding gross contract costs 785.9 695.7 90.2 13 17

Depreciation and amortization 33.5 33.0 0.5 2 5

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 819.4 728.7 90.7 12 16

Gross contract costs 5,466.6 4,762.3 704.3 15 18

Segment operating expenses $ 6,286.0 5,491.0 795.0 14 % 18 %

Equity earnings (losses) $ 1.2 (0.2) 1.4 700 % 673 %

Adjusted EBITDA $ 92.8 76.1 16.7 22 % 21 %

The revenue and fee revenue growth for Work Dynamics was led by the commencement of Workplace Management services for new client wins and expansion of existing mandates, predominantly in the United States.

Project Management also meaningfully contributed to quarter and year-to-date growth and led second-quarter fee revenue growth for the segment, largely from higher project demand which is approaching pre-pandemic levels.

The increases in segment operating expenses and segment fee-based operating expenses for the second quarter and first half of 2022, compared with the prior-year periods, were a product of incremental investments in people, specifically additional headcount and wage increases, to support current and future growth.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 12.4% in USD (11.9% in local currency), compared with 12.5% in 2021.

The margin increase was attributable to (i) the incremental revenue described above, (ii) the timing of incentive compensation accruals as noted in the consolidated margin discussion, and (iii) the absence of certain contract losses recognized in the prior-year quarter that did not reoccur in the current period.

These drivers outpaced the aforementioned investment in people.

The slight margin contraction was attributable to the expense drivers noted above, partially offset by revenue increases, both discussed above.

JLL Technologies

Three Months Ended March 31, Change in in Local

Three Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

11 unchanged sentences

Adjusted EBITDA $ 12.9 (1.5) 14.4 960 % 906 %

(1) Included in Compensation, operating and administrative expenses for JLL Technologies is carried interest expense of $6.2 million and $4.2 million for the first quarter of 2022 and 2021, respectively, related to equity earnings of the segment.

JLL Technologies top-line growth included $8.5 million of incremental fee revenue from acquisitions closed in the second half of 2021.

Organic fee revenue increased 24%, driven by new customers as well as growth from existing customers in our software and solutions offerings.

Equity earnings in both years were due to valuation increases to our investments in proptech funds and early to mid-stage proptech companies, primarily reflecting subsequent financing rounds at increased per-share values.

The increases in segment operating expenses and segment fee-based operating expenses for the first quarter of 2022, compared with the prior-year period, were driven by the ramp up of operations for future growth, including incremental compensation, T&E and marketing expenses.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was a negative 27.2% in USD (negative 26.0% in local currency), compared with 46.8% in 2021.

Approximately half of the margin contraction was attributable to lower equity earnings.

The remaining margin dilution was largely driven by the expense drivers noted above, partially offset by higher fee revenue.

Three Months Ended March 31, Change in in Local

JLL Technologies (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

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Fee revenue $ 93.3 62.7 30.6 49 % 50 %

Compensation, operating and administrative expenses, excluding gross contract costs (1)

156.1 101.0 55.1 55 55

Depreciation and amortization 7.7 5.1 2.6 51 52

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 163.8 106.1 57.7 54 52

Gross contract costs 6.8 20.3 (13.5) (67) (67)

Segment operating expenses $ 170.6 126.4 44.2 35 % 36 %

Equity earnings $ 63.5 50.8 12.7 25 % 25 %

Adjusted EBITDA $ 0.6 12.5 (11.9) (95) % (95) %

(1) Included in Compensation, operating and administrative expenses for JLL Technologies is carried interest expense related to equity earnings of the segment.

Such amounts were $9.8 million and $16.0 million for the three and six months ended June 30, 2022, respectively, and $4.6 million and $8.8 million for the three and six months ended June 30, 2021.

For the second quarter and first half of 2022, JLL Technologies top-line growth included $8.3 million and $16.8 million, respectively, of incremental fee revenue from acquisitions closed in late 2021.

Organic fee revenue against the comparable quarter and first six months increased approximately 22% and 24%, respectively, driven by new customers as well as growth from existing customers in software and solutions offerings.

Equity earnings in both years were attributable to valuation increases to our investments in proptech funds and early to mid-stage proptech companies, primarily reflecting subsequent financing rounds at increased per-share values.

The increases in segment operating expenses and segment fee-based operating expenses for the second quarter and first half of 2022, compared with the prior-year periods, were driven by incremental compensation related to recent acquisitions and the ramp up of operations for future growth, and higher T&E and marketing expenses.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 27.0% in USD (25.7% in local currency), compared with negative 4.6% in 2021.

The margin expansion was due to higher equity earnings, partially offset by expense drivers noted above.

Three Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 114.5 115.8 (1.3) (1) % 5 %

Gross contract costs (7.2) (7.3) 0.1 (1) —

Fee revenue $ 107.3 108.5 (1.2) (1) % 5 %

Advisory fees 98.2 84.9 13.3 16 23

Transaction fees and other 8.1 8.4 (0.3) (4) 1

Incentive fees 4.2 — 4.2 n.m.

Incentive fees 1.0 15.2 (14.2) (93) (93)

Compensation, operating and administrative expenses, excluding gross contract costs 86.6 83.6 3.0 4 12

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Segment operating expenses $ 95.6 93.0 2.6 3 % 10 %

Equity (losses) earnings $ (1.9) 13.0 (14.9) (115) % (114) %

Equity earnings $ 7.0 23.4 (16.4) (70) % (70) %

Adjusted EBITDA $ 27.8 48.0 (20.2) (42) % (42) %

LaSalle advisory fee growth was driven by strong capital raising over the trailing twelve months as well as valuation increases in assets under management ("AUM").

The increase in transaction fees was primarily due to a higher volume of asset acquisitions in Asia and Europe.

Equity losses in the current quarter included a $10.6 million equity loss due to negative share price movement for a co-investment in a LaSalle-managed publicly-traded REIT in Japan.

Equity earnings in the prior-year quarter were substantially driven by valuation increases on underlying real estate investments within LaSalle's co-investment portfolio as the estimated fair values improved following a notable decline in conjunction with the onset of the pandemic in 2020.

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, increased headcount, and wage inflation.

LaSalle (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 232.8 207.0 25.8 12 % 18 %

Gross contract costs (13.5) (13.2) (0.3) 2 3

Fee revenue $ 219.3 193.8 25.5 13 % 19 %

Advisory fees 188.9 164.2 24.7 15 21

Transaction fees and other 25.2 14.4 10.8 75 85

Incentive fees 5.2 15.2 (10.0) (66) (65)

Compensation, operating and administrative expenses, excluding gross contract costs 175.1 155.6 19.5 13 18

Depreciation and amortization 3.2 4.2 (1.0) (24) (21)

Segment fee-based operating expenses (excluding restructuring & acquisition charges) 178.3 159.8 18.5 12 17

Gross contract costs 13.5 13.2 0.3 2 3

Segment operating expenses $ 191.8 173.0 18.8 11 % 16 %

Equity earnings $ 5.1 36.4 (31.3) (86) % (86) %

Adjusted EBITDA $ 49.1 74.1 (25.0) (34) % (31) %

For both the second quarter and first half of 2022, LaSalle advisory fee growth was concentrated in core open-end funds, driven by strong capital raising and increases in fair value of assets under management over the trailing twelve months.

Prior-year incentive fees, which did not reoccur in 2022, related to real estate dispositions on behalf of clients, predominantly in Asia Pacific.

Current-quarter equity earnings included a loss of $1.9 million ($12.5 million loss year-to-date) due to negative share price movement for a co-investment in a LaSalle-managed publicly traded REIT in Japan, whereas the prior-year quarter reflected a $9.5 million gain ($10.1 million gain year-to-date) related to the same investment.

In addition, equity earnings in the second quarter and first half of 2021 were meaningfully driven by the recovery of pandemic-driven valuation declines in 2020.

The increases in segment operating expenses and segment fee-based operating expenses for the second quarter and first half of 2022, compared with the prior-year comparable periods, were primarily driven by incremental fixed compensation expense, partially offset by lower variable compensation expense associated with the decline in incentive fees.

Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 26.0% in USD (24.3% in local currency), compared with 44.2% in 2021.

The margin contraction was attributable to the change in equity earnings, partially offset by higher advisory and transaction fees.

As of March 31, 2022, LaSalle had $77.8 billion of AUM, an increase of 2% in USD and local currency from $76.6 billion as of December 31, 2021.

The AUM increase resulted from (i) $3.1 billion of acquisitions, (ii) $3.0 billion of net valuation increases, partially offset by (iii) $4.4 billion of dispositions and withdrawals and (iv) $0.5 billion of foreign currency decreases.

The margin contraction was primarily attributable to the decrease in equity earnings, which drove over 80% of the margin contraction, and lower incentive fees, partially offset by higher advisory fees and incremental advisory fee platform scale.

As of June 30, 2022, LaSalle had $82.1 billion of AUM, an increase of 6% in USD (8% local currency) from $77.8 billion as of March 31, 2022.

The AUM increase resulted from (i) $3.9 billion of acquisitions and (ii) $3.1 billion of net valuation increases, partially offset by (iii) $1.1 billion of dispositions and withdrawals and (iv) $1.6 billion of foreign currency decreases.

LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows from Operating Activities

Operating activities used $716.4 million of cash in the first quarter of 2022, compared with $461.8 million of cash used in operating activities during the same period in 2021.

The increase in cash used in operating activities was primarily due to greater incentive compensation paid in 2022 compared with 2021, reflecting our performance in 2021 compared with 2020.

This was partially offset by higher cash provided by earnings, driven by an increase in net income.

Operating activities used $539.4 million of cash in the first six months of 2022, compared with $246.1 million of cash used in operating activities during the same period in 2021.

The increase in cash used in operating activities was primarily due to greater incentive compensation paid in 2022, compared with 2021.

This was partially offset by higher cash provided by earnings.

Cash Flows from Investing Activities

We used $94.0 million of cash for investing activities during the first quarter of 2022, as compared to $97.8 million used during the same period in 2021.

The slight decrease in cash used was driven by lower investment activity in less than wholly-owned entities, partially offset by higher net capital additions.

We used $63.1 million of cash for investing activities during the first six months of 2022, as compared to $213.8 million used during the same period in 2021.

The decrease in cash used was driven by lower investment activity in less than wholly-owned entities as the year-over-year change in net investment activity (JLL Technologies and LaSalle) was largely flat.

We discuss these drivers, along with other investing activities, individually below in further detail.

Cash Flows from Financing Activities

Financing activities provided $806.5 million of cash during the first quarter of 2022, as compared to $376.7 million provided by financing activities during the same period in 2021.

Financing activities provided $601.3 million of cash during the first six months of 2022, as compared to $314.7 million provided by financing activities during the same period in 2021.

The net increase of $286.6 million in cash inflows from financing activities is substantially driven by an increase in borrowings on our Facility.

This increase resulted from higher cash outflows for operating activities, as discussed above, as well as incremental share repurchases compared with the prior year.

This increase resulted from higher cash outflows for operating activities, as discussed above, as well as over $400 million of incremental share repurchases compared with the 2021.

In addition, the cash outflow relating to noncontrolling interest distributions included a $142.3 million gain by a consolidated variable interest entity in which the company held no equity interest that was also distributed this quarter (The offset to this is included in cash provided by earnings).

Our $2.75 billion Facility matures on April 14, 2026 and bears a variable interest rate.

As of March 31, 2022, we had outstanding borrowings under the Facility of $1,113.7 million.

As of June 30, 2022, we had outstanding borrowings under the Facility of $1,364.3 million.

As of December 31, 2021, we had outstanding borrowings under the Facility of $138.2 million.

The average outstanding borrowings under the Facility were $683.2 million (with an average effective interest rate of 1.0%) and $184.4 million (with an average effective interest rate of 1.0%) during the three months ended March 31, 2022 and 2021.

In addition to our Facility, we had the capacity to borrow up to $55.0 million under local overdraft facilities as of March 31, 2022.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $118.2 million and $147.9 million as of March 31, 2022 and December 31, 2021, respectively, of which $7.7 million and $9.2 million, respectively, were attributable to local overdraft facilities.

The average outstanding borrowings under the Facility were $1,581.9 million and $612.5 million (with average effective interest rates of 1.6% and 1.0%) during the three months ended June 30, 2022 and 2021, respectively, and $1,135.0 million and $399.6 million (with average effective interest rates of 1.4% and 1.0%) during the six months ended June 30, 2022 and 2021, respectively.

In addition to our Facility, we had the capacity to borrow up to $52.1 million under local overdraft facilities as of June 30, 2022.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $128.3 million and $147.9 million as of June 30, 2022 and December 31, 2021, respectively, of which $4.1 million and $9.2 million, respectively, were attributable to local overdraft facilities.

Refer to Note 8, Debt, in the Notes to Condensed Consolidated Financial Statements for additional information on our debt.

Investment Activity

As of March 31, 2022, we had a carrying value of $785.3 million in investments, primarily related to investments by JLL Technologies in proptech funds and early to mid-stage proptech companies, and LaSalle co-investments.

For the first quarter of 2022 and 2021, funding of investments exceeded return of capital by $30.9 million and $29.8 million, respectively.

As of June 30, 2022, we had a carrying value of $901.9 million in investments, primarily related to investments by JLL Technologies in proptech funds and early to mid-stage proptech companies, and LaSalle co-investments.

For the first half of 2022 and 2021, funding of investments exceeded return of capital by $108.3 million and $63.9 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 5, Investments, in the Notes to Condensed Consolidated Financial Statements for additional information on our investment activity.

Share Repurchase and Dividend Programs

In February 2022, our Board of Directors authorized an additional $1.5 billion for the repurchase of our common stock in the open market and privately negotiated transactions.

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

Three Months Ended March 31,

($ in millions) 2022 2021

Total number of shares repurchased (in 000's) 615.3 —

Total paid for shares repurchased $ 150.0 —

As of March 31, 2022, $1,606.8 million remained authorized for repurchases under our share repurchase program.

In the prior year, JLL technologies funded a $45 million convertible note to Turntide Technologies.

This activity was included within "Other" in the cash flow from investing activities.

Capital Expenditures

Net capital additions for the three months ended March 31, 2022 and 2021, were $46.6 million and $34.6 million, respectively.

Net capital additions for the six months ended June 30, 2022 and 2021 were $86.9 million and $69.8 million, respectively.

Our capital expenditures in 2022 were primarily for leased office space improvements, hardware, and purchased/developed software.

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 three months ended March 31, 2022 and 2021 were $12.0 million and $37.2 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.

Net capital proceeds related to consolidated VIEs in which we held no equity interest for the six months ended June 30, 2022 were $137.0 million, compared with net capital additions of $41.8 million during the prior-year period.

The activity primarily relates to the acquisition of real estate (net of sales).

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

Business Acquisitions

During the three months ended March 31, 2022, we paid $10.5 million for business acquisitions.

During the six months ended June 30, 2022, we paid $15.9 million for business acquisitions.

This included $2.0 million of payments relating to acquisitions in 2022 and $13.9 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 $27.1 million as of March 31, 2022.

Deferred business acquisition obligations totaled $26.9 million as of June 30, 2022.

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 March 31, 2022, we had the potential to make earn-out payments for a maximum of $143.0 million on 20 completed acquisitions subject to the achievement of certain performance conditions.

As of June 30, 2022, we had the potential to make earn-out payments for a maximum of $134.6 million on 18 completed acquisitions subject to the achievement of certain performance conditions.

Refer to Note 4, Business Combinations, Goodwill and Other Intangible Assets, in the Notes to the Condensed Consolidated Financial Statements for further information on Business Acquisitions.

We will continue to consider acquisitions that we believe will strengthen our market position, increase our profitability, and supplement our organic growth.

Share Repurchase and Dividend Programs

In February 2022, our Board of Directors authorized an additional $1.5 billion for the repurchase of our common stock in the open market and privately negotiated transactions.

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

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

($ in millions) 2022 2021 2022 2021

Total number of shares repurchased (in 000's) 1,397.9 172.5 2,013.2 172.5

Total paid for shares repurchased $ 297.7 37.9 $ 447.7 37.9

As of June 30, 2022, $1,309.1 million remained authorized for repurchases under our share repurchase program.

Repatriation of Foreign Earnings

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

As of March 31, 2022 and December 31, 2021, we had total cash and cash equivalents of $575.8 million and $593.7 million, respectively, of which approximately $473.2 million and $487.9 million, respectively, was held by foreign subsidiaries.

As of June 30, 2022 and December 31, 2021, we had total cash and cash equivalents of $568.0 million and $593.7 million, respectively, of which approximately $446.8 million and $487.9 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 March 31, 2022 and December 31, 2021.

The assets of these countries aggregated to approximately 4% of our total assets as of both June 30, 2022 and December 31, 2021.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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Such statements do not relate strictly to historical or current facts as they relate to our intent, belief and current expectations about our strategic direction, prospects and future results, and give our current expectations or forecasts of future events.

This includes, but is not limited to, our expectations regarding the continuing impact of the COVID-19 pandemic on the economy as a whole, and/or related government and regulatory restrictions issued to combat the global pandemic, including any adverse changes in such restrictions that may impact us.

Management believes that these forward-looking statements are reasonable as and when made.

However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results.

These risks and uncertainties are described in our Annual Report on Form 10-K for the year ended December 31, 2021 in Part I, Item 1A.

Risk Factors 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.

The forward-looking statements in this report represent our estimates and assumptions only as of the date of this report.

We do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations or the occurrence of unanticipated events after the date of those statements.

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