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Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-02-28 · 447 added, 197 removed, 385 unchanged (63% of the section changed)

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(5) Liquidity and capital resources.

In this Item, we discuss results for the years ended December 31, 2021 and 2020 and the comparison between these years.

Discussions of results for the year ended December 31, 2019 and comparisons between 2020 and 2019 results can be found in Item 7.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2020 .

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Revenue Recognition

We earn revenue from the following:

• Capital Markets;

• Property & Facility Management;

• Project & Development Services;

We earn revenue from the following services (segments are bolded).

• Markets Advisory

◦ Property Management

◦ Advisory, Consulting and Other

• Capital Markets

◦ Investment Sales, Debt/Equity Advisory and Other

◦ Loan Servicing

◦ Valuation Advisory

• Work Dynamics

◦ Workplace Management

◦ Project Management

◦ Portfolio Services and Other

• JLL Technologies

Our services are generally earned and billed in the form of transaction commissions, advisory and management fees, and incentive fees.

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instead, we evaluate goodwill for impairment at least annually, or as events or changes in circumstances indicate the carrying value may be impaired.

In conjunction with our new organizational structure described more fully in Note 3, Business Segments, of the Notes to Consolidated Financial Statements, included in Item 8, we reassessed our reporting units as of January 1, 2022, and reassigned goodwill to reflect our new segment structure using a relative fair value allocation approach.

In addition, we may record intangible assets as a result of acquisitions, which are primarily composed of customer relationships, management contracts and customer backlog, and are amortized on a straight-line basis over their estimated useful lives.

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We account for these investments at fair value or under the equity method of accounting.

Second, JLL Technologies invests in proptech funds and early to mid-stage companies to improve our strategic position within the real estate technology landscape, including investments through the JLL Spark Global Venture funds.

Generally, we account for these investments at fair value.

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We account for income taxes under the asset and liability method.

We recognize deferred tax assets and liabilities for the expected future tax consequences attributable to (i) differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and (ii) operating loss and tax credit carryforwards.

We measure deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled.

We recognize deferred tax assets and liabilities for the expected future tax consequences attributable to (i) differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and (ii) operating loss and tax credit carryforwards.

We measure deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in

which we expect those temporary differences to be recovered or settled.

We recognize into income the effect on deferred tax assets and liabilities of a change in tax rates in the period including the enactment date.

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Very low tax rate jurisdictions (those with effective national and local combined tax rates of 25% or lower) providing the most significant contributions to our effective tax rate include:

Hong Kong (16.5%), Singapore (17%), and Saudi Arabia (20%).

Hong Kong (16.5%), Singapore (17%), and the United Kingdom (19%).

Based on our historical experience and future business plans, we do not expect to repatriate our foreign source earnings to the U.S.

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Valuation allowance 120.8 128.8

The increase in gross deferred tax assets in 2021 was primarily the result of (i) the revaluation of existing UK net operating loss carryovers, (ii) net operating losses from acquired companies and (iii) U.S.

capital loss carryovers.

The increase in valuation reserves was primarily the result of new reserves on the acquired net operating losses and the U.S.

capital loss carryovers.

The increase in gross deferred tax assets in 2022 was primarily the result of an increase in the U.K.

net operating loss and interest deduction carryovers.

The decrease in valuation reserves was primarily the result of U.S capital loss carryover utilization.

We evaluate our segment operating performance before tax, and do not consider it meaningful to allocate tax by segment.

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Our statutory legal entity structure generally does not mirror the way we organize, manage, and report our business operations.

For example, the same legal entity may include both LaSalle and RES businesses in a particular country.

For example, the same legal entity may include Capital Markets, Work Dynamics and Markets Advisory businesses in a particular country.

As of December 31, 2022, the amount of unrecognized tax benefits was $75.1 million.

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The recognition of tax benefits, and other changes to the amounts of our unrecognized tax benefits, may occur as the result of ongoing operations, the outcomes of audits or other examinations by tax authorities, or the passing of statutes of limitations.

We do not expect changes to our unrecognized tax benefits to have a significant impact on net income, the financial position, or the cash flows of JLL.

We do not expect changes to our unrecognized tax benefits to have a significant impact on net

income, the financial position, or the cash flows of JLL.

We do not believe we have material tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

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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.

Specifically in 2020 and also into 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted our operations.

In 2020 and early 2021, macroeconomic conditions influenced by the COVID-19 pandemic more notably impacted our operations compared with the current year.

Acquisitions and Dispositions

The timing of acquisitions may impact the comparability of our results on a year-over-year basis.

Our results include incremental revenues and expenses following the completion date of an acquisition.

Relating to dispositions, comparable results will include the revenues and expenses of recent dispositions and results may also include gains (losses) on the disposition.

In addition, there is generally an initial adverse impact on net income from an acquisition as a result of pre-acquisition due diligence expenditures, transaction/deal costs and post-acquisition integration costs, such as fees from third-party advisors engaged to assist with onboarding and process alignment, retention and severance expense, early lease termination costs, and other integration expenses.

For dispositions, we may also incur such incremental costs during the disposition process and these costs could have an adverse impact on net income.

Equity Earnings and Incentive Fees

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Transaction-Based Revenue

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

The timing and the magnitude of these fees can vary significantly from year-to-year and quarter-to-quarter, and from segment-to-segment.

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

The timing and the magnitude of these fees can vary significantly from year to year and quarter to quarter, and from region to region.

The principal market risks we face due to the risk of loss arising from adverse changes in market rates and prices are:

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The Facility consists of revolving credit available for working capital, investments, capital expenditures and acquisitions.

Our average outstanding borrowings under the Facility during 2021 were $432.0 million, with an effective interest rate of 0.9%.

We had $1,213.8 million of outstanding borrowings under the Facility as of December 31, 2022.

The Facility bears a variable rate of interest that fluctuates based on market rates.

Our Notes, $275.0 million face value due in November 2022, bear interest at an annual rate of 4.4%, subject to adjustment if a credit rating assigned to the Notes is downgraded below an investment grade rating (or subsequently upgraded).

Our €350.0 million face value of Euro Notes is split between €175.0 million due in June 2027 and €175.0 million due in June 2029, bearing interest at an annual rate of 1.96% and 2.21%, respectively.

The issuance of the Notes and Euro Notes at fixed interest rates has helped to limit our exposure to future movements in interest rates.

The issuance of the Euro Notes at fixed interest rates has helped to limit our exposure to future movements in interest rates.

We assess interest rate sensitivity to estimate the potential effect of rising interest rates on our variable rate debt.

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Australian dollar 1,183.0 5.7 1,118.7 5.8

Hong Kong dollar 545.6 2.8 512.2 3.1

Chinese yuan 539.1 2.8 473.1 2.9

Canadian dollar 593.8 2.8 508.3 2.6

Indian rupee 591.0 2.8 508.2 2.6

Hong Kong dollar 532.3 2.6 545.6 2.8

Chinese yuan 506.0 2.4 539.1 2.8

Singapore dollar 368.4 1.8 327.4 1.7

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Total revenue $ 20,862.1 100.0 % $ 19,367.0 100.0 %

Had the British pound-to-U.S.

dollar exchange rates been 10% higher throughout the course of 2021, we estimate our reported operating income would have decreased by $2.2 million.

Had British pound-to-U.S.

dollar exchange rates been 10% higher throughout the course of 2022, we estimate our reported operating income would have increased by $10.1 million.

Had euro-to-U.S.

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dollar against other currencies would have on our foreign operations.

Historically, our quarterly revenue and profits have tended to increase from quarter to quarter as the year progresses.

Historically, we have reported a relatively smaller revenue and profit in the first quarter with both measures increasing during each of the following three quarters.

This is a result of a general focus in the real estate industry on completing or documenting transactions by calendar year end and the fact that certain expenses are constant throughout the year.

Historically, we have reported a relatively smaller profit in the first quarter and then increasingly larger profits during each of the following three quarters, excluding the recognition of investment-generated performance fees and realized and unrealized co-investment equity earnings and losses (each of which can be unpredictable).

Generally, we recognize incentives fees when assets are sold or as a result of valuation increases in the portfolio, the timing of which may not be predicable or recurring.

In addition, co-investment equity gains and losses are primarily dependent on underlying valuations, the direction and magnitude of changes to such valuations are not predictable.

Our seasonality excludes the recognition of investment-generated performance fees and realized and unrealized investment equity earnings and losses.

Specifically, we recognize incentives fees when assets are sold or as a result of valuation increases in the portfolio, the timing of which may not be predictable or recurring.

In addition, investment equity gains and losses are primarily dependent on underlying valuations, and the direction and magnitude of changes to such valuations are not predictable.

Non-variable operating expenses, which we treat as expenses when incurred during the year, are relatively constant on a quarterly basis.

In 2020 and 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits.

By the end of 2021, the historical seasonality trends began to return.

Other factors may affect seasonality.

For example, in 2020 and 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits.

In the second half of 2022, we experienced disruption to our historical seasonality trends due to rising interest rates and widespread economic uncertainty.

Our operating expenses fluctuate with our revenue and general economic conditions, including inflation.

However, we do not believe inflation had a material impact on our results of operations during the three-year period ended December 31, 2021.

The impacts of inflation, including wage inflation, have become more noticeable in our 2022 results when compared to prior years.

RESULTS OF OPERATIONS

• We define market volumes for Leasing as gross absorption of office real estate space in square feet for the U.S., Europe and selected markets in Asia Pacific.

We define market volumes for Capital Markets as the U.S.

dollar equivalent value of investment sales transactions globally.

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

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

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

Middle East and North Africa.

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China, Hong Kong, Macau and Taiwan.

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

• We renamed our Corporate Solutions business to "Work Dynamics" effective June 2021.

Year Ended December 31, 2022 compared with Year Ended December 31, 2021

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($ in millions) 2022 2021 U.S.

Leasing $ 2,794.0 1,884.2 909.8 48 % 47 %

Markets Advisory $ 4,415.5 4,188.7 226.8 5 % 8 %

Capital Markets 2,488.2 2,620.5 (132.3) (5) (1)

Property & Facility Management 10,222.7 9,485.4 737.3 8 6

Project & Development Services 2,684.9 2,530.1 154.8 6 4

Advisory, Consulting and Other 971.8 861.0 110.8 13 10

Real Estate Services ("RES") revenue $ 18,866.9 16,168.1 2,698.8 17 % 15 %

Work Dynamics 13,268.5 11,891.5 1,377.0 12 15

JLL Technologies 213.9 166.2 47.7 29 30

LaSalle 476.0 500.1 (24.1) (5) 1

Revenue $ 20,862.1 19,367.0 1,495.1 8 % 11 %

Reimbursements 8,321.4 7,689.8 631.6 8 7

Revenue before reimbursements 11,045.6 8,900.1 2,145.5 24 22

Gross contract costs (12,549.1) (11,290.2) (1,258.9) 11 15

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Fee revenue $ 8,302.0 8,017.5 284.5 4 % 7 %

Leasing 2,712.7 1,817.8 894.9 49 48

Markets Advisory 3,360.2 3,201.7 158.5 5 8

Capital Markets 2,430.2 2,513.2 (83.0) (3) —

Property & Facility Management 1,286.2 1,199.5 86.7 7 5

Project & Development Services 805.9 776.1 29.8 4 2

Advisory, Consulting and Other 727.3 627.0 100.3 16 13

RES fee revenue $ 7,631.6 5,729.6 1,902.0 33 % 31 %

Work Dynamics 1,864.7 1,692.2 172.5 10 15

JLL Technologies 200.2 137.2 63.0 46 47

LaSalle 446.7 473.2 (26.5) (6) 1

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Gross contract costs 12,549.1 11,290.2 1,258.9 11 15

Total operating expenses, excluding reimbursed expenses $ 10,002.1 8,341.0 1,661.1 20 % 18 %

Total operating expenses $ 19,994.0 18,323.5 1,670.5 9 % 13 %

Operating income $ 868.1 1,043.5 (175.4) (17) % (15) %

Equity earnings $ 209.4 8.0 201.4 n.m.

Equity earnings $ 51.0 209.4 (158.4) (76) % (76) %

Adjusted EBITDA $ 1,247.3 1,496.5 (249.2) (17) % (14) %

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(i) Fee revenue and Fee-based operating expenses;

(ii) Adjusted EBITDA and Adjusted EBITDA margin

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

(iii) Percentage changes against prior periods, presented on a local currency basis.

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GAAP, they may not be comparable to similarly titled measures used by other companies.

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

Gross contract costs represent certain costs associated with client-dedicated employees and third-party vendors and subcontractors and are indirectly reimbursed through the fees we receive.

These costs are presented on a gross basis in Operating expenses with the equal amount of corresponding fees in Revenue before reimbursements.

Consistent with our treatment of directly reimbursed expenses, excluding gross contract costs from both Fee revenue and Fee-based operating expenses more accurately reflects how we manage our expense base and operating margins and also enables a more consistent performance assessment across a portfolio of contracts with varying payment terms and structures, including those with direct versus indirect reimbursement of such costs.

Net non-cash mortgage servicing rights ("MSR") and mortgage banking derivative activity consists of the balances presented within Revenue composed of (i) derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity and (ii) gains recognized from the retention of MSR upon origination and sale of mortgage loans, offset by (iii) amortization of MSR intangible assets over the period net servicing income is projected to be received.

Adjustments to U.S.

GAAP Financial Measures Used to Calculate non-GAAP Financial Measures

Gross contract costs represent certain costs associated with client-dedicated employees and third-party vendors and subcontractors and are directly or indirectly reimbursed through the fees we receive.

These costs are presented on a gross basis in Operating expenses with the equal amount of corresponding fees in Revenue.

Excluding gross contract costs from both Fee revenue and Fee-based operating expenses more accurately reflects how we manage our expense base and operating margins and also enables a more consistent performance assessment across a portfolio of contracts with varying payment terms and structures.

Net non-cash MSR and mortgage banking derivative activity consists of the balances presented within Revenue composed of (i) derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity and (ii) gains recognized from the retention of MSR upon origination and sale of mortgage loans, offset by (iii) amortization of MSR intangible assets over the period that net servicing income is projected to be received.

Non-cash derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity are calculated as the estimated fair value of loan commitments and subsequent changes thereof, primarily represented by the estimated net cash flows associated with future servicing rights.

MSR gains and corresponding MSR intangible assets are calculated as the present value of estimated net cash flows over the estimated mortgage servicing periods.

The above activity is reported entirely within Revenue of the Capital Markets service line of the Americas segment.

The above activity is reported entirely within Revenue of the Capital Markets segment.

Excluding net non-cash MSR and mortgage banking derivative activity reflects how we manage and evaluate performance because the excluded activity is non-cash in nature.

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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, $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.

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 2022, the $7.5 million net loss from the second quarter 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, $12.0 million of the activity related to a business disposition within JLL Technologies and $0.4 million related to a sold business within Markets Advisory.

In 2020, the $4.8 million gain related to the sale of a property management business in Markets Advisory.

Interest on Employee Loans, Net reflects interest accrued on employee loans less the amount of accrued interest forgiven.

Certain employees (predominantly in our Leasing and Capital Markets businesses) receive cash payments structured as loans, with interest.

Employees earn forgiveness of the loan based on performance, generally calculated as a percentage of revenue production, annually.

Such forgiven amounts are reflected in Compensation and benefits expense.

Given the interest accrued on these employee loans and subsequent forgiveness are non-cash and the amounts perfectly offset over the life of the loan, the activity is not indicative of core operating performance and is excluded from non-GAAP measures.

Reconciliation of Non-GAAP Financial Measures

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Revenue $ 20,862.1 19,367.0

Reimbursements (8,321.4) (7,689.8)

Revenue before reimbursements 11,045.6 8,900.1

Gross contract costs (12,549.1) (11,290.2)

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Operating expenses $ 19,994.0 18,323.5

Reimbursed expenses (8,321.4) (7,689.8)

Operating expenses, excluding reimbursed expenses 10,002.1 8,341.0

Gross contract costs

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Operating income $ 868.1 1,043.5

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).

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).

Year Ended December 31,

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Restructuring and acquisition charges 104.8 84.7

Gain on disposition (12.4) (4.8)

Net loss (gain) on disposition 7.5 (12.4)

Net non-cash MSR and mortgage banking derivative activity (11.0) (59.3)

Interest on employee loans, net (9.7) —

Adjusted EBITDA $ 1,247.3 1,496.5

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Adjusted EBITDA margin 15.0 % 18.7 %

(1) 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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At comparative period exchange rates $ 1,285.3 (14) %

Consolidated RES revenue increased 15% to $18.9 billion and consolidated RES fee revenue increased 31% to $7.6 billion, compared with 2020, with broad-based growth across all geographic segments and service lines.

Leasing led the consolidated RES revenue and fee revenue growth with increases of 47% and 48%, respectively, versus the prior year.

Revenue and fee revenue increased 11% and 7%, respectively compared with 2021, as outstanding performance in the first half of 2022 across JLL more than offset headwinds experienced in the second half of the year.

These results reflect double-digit growth in Work Dynamics each quarter of 2022 as well as strong contributions during the first half of 2022 from Leasing, within Markets Advisory, and Capital Markets.

More specifically, resilient annuity-based businesses delivered solid fee revenue growth as Workplace Management, within Work Dynamics, grew 18%;

Property Management, within Markets Advisory, grew 9%;

and LaSalle advisory fees grew 17%.

In contrast, transaction-based businesses, notably Investment Sales and Debt Advisory within Capital Markets as well as Leasing within Markets Advisory, experienced challenges from uncertainty in interest rates and degrading economic sentiment, beginning in the third quarter and continuing through the close of 2022.

LaSalle's decrease in revenue, compared with 2021, was driven by lower incentive fees, which more than offset the double-digit advisory fee growth.

Dry powder for future deployment remains strong as LaSalle continues to raise capital and redemption requests have not been significant.

The following highlights the proportion of consolidated top-line growth on a local currency basis, compared with 2021, by business line segment ($ in millions).

Refer to segment operating results for further detail.

Operating Expenses

Operating expenses increased 13% to $20.0 billion in 2022 while fee-based operating expenses were $7.4 billion in 2022, up 10% from prior year.

The higher expenses were primarily attributable to Markets Advisory, which represented 38% of the increase in fee-based operating expenses on a local currency basis, Work Dynamics represented 31%, Capital Markets represented 14%, JLL Technologies 12% and LaSalle 1%.

Refer to segment operating results for additional detail.

In addition to the segment drivers, a net increase in Restructuring and acquisition charges in 2022 contributed to higher operating expenses in 2022 versus 2021;

refer to the following table and commentary below for additional detail.

Year ended December 31,

(in millions) 2022 2021

Severance and other employment-related charges $ 44.5 14.3

Restructuring, pre-acquisition and post-acquisition charges 63.6 67.8

Fair value adjustments that resulted in a net (decrease) increase to earn-out liabilities from prior-period acquisition activity (3.3) 2.6

Total restructuring and acquisition charges $ 104.8 84.7

The increase in severance and other employment-related charges, compared with 2021, reflected notable cost mitigation actions taken across the globe in late 2022.

Interest Expense

Interest expense, net of interest income, for 2022 was $75.2 million, compared to $40.1 million in 2021.

The change was driven by a higher effective interest rate on our credit facilities and a year-over-year increase in the average outstanding borrowings.

The average outstanding borrowings under our credit facilities increased to $1,399.1 million, with an average effective interest rate of 2.9%, in 2022, from $432.0 million, with an average effective interest rate of 0.9%, during 2021.

Equity Earnings

Equity earnings were $51.0 million in 2022, down from $209.4 million in 2021.

Net valuation increases related to JLL Technologies' investments drove $46.6 million of equity earnings this year, compared with $140.7 million in 2021.

Refer to the JLL Technologies segment discussion for additional detail.

LaSalle equity earnings were down $62.3 million.

Refer to the LaSalle segment discussion for additional detail.

The provision for income taxes was $200.8 million and $264.3 million for the years ended December 31, 2022 and 2021, respectively, representing effective tax rates ("ETR") of 20.2% and 21.6%, respectively.

Refer to the Income Tax discussion in the Summary of Critical Accounting Policies and Estimates and Note 8, Income Taxes, of the Notes to Consolidated Financial Statements, included in Item 8, for a further discussion of our effective tax rate.

Net Income and Adjusted EBITDA

Net income attributable to common shareholders was $654.5 million for the year, or $13.27 per diluted common share, compared with $961.6 million for 2021, or $18.47 per diluted common share.

Adjusted EBITDA decreased 14% from the prior year to $1,247.3 million in 2022.

Net income margin attributable to common shareholders was 3.1% in 2022, down from 5.0% in the prior year.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 15.0% in both USD and local currency for 2022, compared with 18.7% in 2021.

The margin contraction was primarily attributable to (i) the $158.4 million decrease in equity earnings, which comprised over 50% of the margin decline, (ii) higher fixed compensation expense, reflecting increased headcount and wage inflation over the trailing twelve months, and (iii) incremental T&E and marketing expenses, and (iv) additional investments in technology.

In addition, the consolidated margin, and all segment margins, reflected comparatively lower annual incentive compensation accruals this year due to business performance.

Segment Operating Results

Effective January 1, 2022, we manage and report our operations as five business segments:

Markets Advisory, Capital Markets, Work Dynamics, JLL Technologies, and LaSalle.

Markets Advisory offers a wide range of real estate services, including agency leasing and tenant representation, property management, and advisory and consulting services.

Our Capital Markets service offerings include investment sales, equity and debt advisory, loan servicing, and valuations.

Our Work Dynamics business provides a broad suite of integrated services to occupiers of real estate, including facility and project management, as well as portfolio and other services.

We consider "Property Management" to be services provided to non-occupying property investors and "Workplace Management" to be services provided to owner-occupiers.

Our JLL Technologies segment offers software products, solutions and services, while LaSalle provides investment management services on a global basis to institutional investors and high-net-worth individuals.

For segment reporting, (i) gross contract costs and (ii) net non-cash MSR and mortgage banking derivative activity are both excluded from revenue in determining Fee revenue.

Gross contract costs are excluded from operating expenses in determining Fee-based operating expenses.

In addition, our measure of segment results also excludes Restructuring and acquisition charges.

Markets Advisory

Year Ended December 31, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 4,415.5 4,188.7 226.8 5 % 8 %

Gross contract costs (1,055.3) (987.0) (68.3) 7 10

Fee revenue $ 3,360.2 3,201.7 158.5 5 % 8 %

Leasing 2,736.7 2,598.5 138.2 5 7

Property Management 500.2 478.7 21.5 4 9

Advisory, Consulting and Other 123.3 124.5 (1.2) (1) 5

Compensation and benefits, excluding gross contract costs 2,433.7 2,299.6 134.1 6 8

Operating, administrative and other expenses, excluding gross contract costs 405.0 361.7 43.3 12 16

Depreciation and amortization 73.5 69.4 4.1 6 9

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 2,912.2 2,730.7 181.5 7 9

Gross contract costs 1,055.3 987.0 68.3 7 10

Segment operating expenses $ 3,967.5 3,717.7 249.8 7 % 10 %

Equity (losses) earnings $ (0.3) 0.7 (1.0) (143) % (138) %

Adjusted EBITDA $ 527.5 546.5 (19.0) (3) % 1 %

The increases in Markets Advisory revenue and fee revenue were primarily due to Leasing, where growth over a record 2021 reflected an outstanding first half of 2022 which more than offset economic challenges impacting transaction-based revenue during the second half of the year.

Leasing performance was driven by an increase in average deal size across all major asset classes, particularly in office and industrial.

This driver was partially offset by the impact of tight supply, notably in the industrial sector, which had lower transaction volume in 2022.

Geographically, the year-over-year increase was led by the U.S.

(which contributed 71% of the growth in Leasing fee revenue on a local currency basis), Canada (11%) and Germany (9%), partially offset by Greater China, which continued to experience significant pandemic-related restrictions.

The uptick in Property Management fee revenue was largely attributable to the U.S.

and Canada, primarily from organic contributions.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were driven primarily by revenue-related expense growth and higher fixed compensation expense, including the impact of additional headcount and wage inflation over the trailing twelve months.

In addition, expense growth was also attributable to increased T&E and marketing expenses and additional investments in technology.

Adjusted EBITDA margin for the year, calculated on a fee revenue basis, was 15.7% in USD (16.0% in local currency) in 2022, compared with 17.1% in 2021.

The margin contraction was primarily due to the expense drivers noted above, partially offset by higher revenue.

Capital Markets

Year Ended December 31, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 2,488.2 2,620.5 (132.3) (5) % (1) %

Gross contract costs (47.0) (48.0) 1.0 (2) 7

Net non-cash MSR and mortgage banking derivative activity (11.0) (59.3) 48.3 (81) (81)

Fee revenue $ 2,430.2 2,513.2 (83.0) (3) % — %

Investment Sales, Debt/Equity Advisory and Other 1,906.7 2,013.2 (106.5) (5) (2)

Valuation Advisory 365.6 359.8 5.8 2 9

Loan Servicing 157.9 140.2 17.7 13 13

Compensation and benefits, excluding gross contract costs 1,727.1 1,767.6 (40.5) (2) 1

Operating, administrative and other expenses, excluding gross contract costs 263.2 204.2 59.0 29 35

Depreciation and amortization 61.6 63.1 (1.5) (2) —

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 2,051.9 2,034.9 17.0 1 5

Gross contract costs 47.0 48.0 (1.0) (2) 7

Segment operating expenses $ 2,098.9 2,082.9 16.0 1 % 5 %

Equity earnings $ 3.1 4.9 (1.8) (37) % (33) %

Adjusted EBITDA $ 444.0 543.2 (99.2) (18) % (16) %

On a local currency basis, higher revenues from Loan Servicing and Valuation Advisory were offset by lower Investment Sales and Debt Advisory fees, as rising interest rates and economic uncertainty adversely impacted market transaction volumes and elongated the deal-cycle time.

This driver was particularly impactful on the second half of 2022, where favorable trends from the first half of 2022 reversed in the third and fourth quarters.

Globally, fourth-quarter market volumes for investment sales were down 58% in USD (56% in local currency) and full-year global market volumes fell 19% in USD (15% in local currency) according to JLL Research.

The top-line increase in Loan Servicing reflected growth of the servicing portfolio in 2022, particularly from loans originated under the Fannie Mae DUS program.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were driven primarily by (i) an increase in T&E, marketing and additional technology-related expenses, (ii) incremental fixed compensation, due to headcount growth and wage inflation over the trailing twelve months, and (iii) higher commission expense, attributable to changes in the variable compensation structures in the U.S.

(partially offset by reductions to annual incentive compensation expense).

In addition, 2021 included a $13.8 million non-cash reduction (benefit) to loan loss credit reserves, versus $2.0 million of net increases (expense) to the reserves this year.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 18.3% in USD (18.2% in local currency) in 2022, compared with 21.6% in 2021.

The margin contraction was primarily due to the expense drivers noted above.

Work Dynamics

Year Ended December 31, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 13,268.5 11,891.5 1,377.0 12 % 15 %

Gross contract costs (11,403.8) (10,199.3) (1,204.5) 12 16

Fee Revenue $ 1,864.7 1,692.2 172.5 10 % 15 %

Workplace Management 752.8 654.9 97.9 15 18

Project Management 850.7 774.2 76.5 10 15

Portfolio Services and Other 261.2 263.1 (1.9) (1) 3

Compensation and benefits, excluding gross contract costs 1,202.3 1,103.4 98.9 9 14

Operating, administrative and other expenses, excluding gross contract costs 432.9 406.8 26.1 6 12

Depreciation and amortization 71.1 66.2 4.9 7 13

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 1,706.3 1,576.4 129.9 8 13

Gross contract costs 11,403.8 10,199.3 1,204.5 12 16

Segment operating expenses $ 13,110.1 11,775.7 1,334.4 11 % 15 %

Equity earnings $ 1.2 0.4 0.8 200 % 266 %

Adjusted EBITDA $ 230.1 182.4 47.7 26 % 24 %

The Work Dynamics revenue and fee revenue increases, compared with 2021, were driven by double-digit growth in Workplace Management and Project Management, which were broad-based across geographies.

New client wins and the expansion of existing global mandates drove the growth in Workplace Management, most notably in the United States.

Project Management experienced continued momentum from the return-to-office movement that, together with fewer pandemic-driven restrictions, contributed to higher project demand this year.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were largely attributable to (i) additional investments in technology, (ii) incremental T&E and marketing expenses, and (iii) higher fixed compensation expense to support business growth, including additional headcount and wage inflation over the trailing twelve months.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 12.3% in USD (11.6% in local currency) in 2022, compared with 10.8% in 2021.

The margin expansion was attributable to the fee revenue growth described above, the impact of cost management strategies executed throughout the year, and the net impact of the expense drivers noted above.

JLL Technologies

Year Ended December 31, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 213.9 166.2 47.7 29 % 30 %

Gross contract costs (13.7) (29.0) 15.3 (53) (53)

Fee revenue $ 200.2 137.2 63.0 46 % 47 %

Compensation and benefits, excluding gross contract costs (1)

240.3 169.2 71.1 42 44

Operating, administrative and other expenses, excluding gross contract costs 57.4 55.4 2.0 4 4

Depreciation and amortization 15.4 10.5 4.9 47 48

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 313.1 235.1 78.0 33 35

Gross contract costs 13.7 29.0 (15.3) (53) (53)

Segment operating expenses $ 326.8 264.1 62.7 24 % 25 %

Equity earnings $ 46.6 140.7 (94.1) (67) % (67) %

Adjusted EBITDA $ (50.9) 53.4 (104.3) (195) % (199) %

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

For the years ended December 31, 2022 and 2021, carried interest expense was $16.6 million and $12.6 million, respectively .

JLL Technologies top-line growth included $32.3 million from acquisitions closed in late 2021.

Organic fee revenue increased 23% for the year, driven by new customers as well as growth from existing customers in software and solutions offerings.

Equity earnings in 2021 were primarily attributable to valuation increases to JLL Technologies' investments in early to mid-stage proptech companies as well as proptech funds, primarily reflecting subsequent financing rounds at increased per-share values.

Lower equity earnings in 2022 were due to more modest valuation increases, compared with 2021, coupled with more notable impairments/valuation declines.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were largely driven by (i) incremental compensation related to businesses acquired in late 2021 and (ii) the ramp up of operations for current and future growth, including T&E and marketing expenses as well as additional headcount and wage inflation over the trailing twelve months.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was negative 25.4% in USD (negative 26.1% in local currency) in 2022, compared with 38.9% in 2021.The change in equity earnings, net of carried interest, drove more than 75% of the net margin contraction.

The remaining margin decline was primarily attributable to the expense drivers noted above, partially offset by higher fee revenue.

Year Ended December 31, Change in in Local

($ in millions) 2022 2021 U.S.

dollars Currency

Revenue $ 476.0 500.1 (24.1) (5) % 1 %

Gross contract costs (29.3) (26.9) (2.4) 9 9

Fee revenue $ 446.7 473.2 (26.5) (6) % 1 %

Advisory fees 380.3 345.7 34.6 10 17

Transaction fees and other 39.8 33.6 6.2 18 27

Incentive fees 26.6 93.9 (67.3) (72) (69)

Compensation and benefits, excluding gross contract costs 290.4 310.1 (19.7) (6) —

Operating, administrative and other expenses, excluding gross contract costs 59.7 53.1 6.6 12 20

Depreciation and amortization 6.5 8.3 (1.8) (22) (18)

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 356.6 371.5 (14.9) (4) 3

Gross contract costs 29.3 26.9 2.4 9 9

Segment operating expenses $ 385.9 398.4 (12.5) (3) % 3 %

Equity earnings $ 0.4 62.7 (62.3) (99) % (99) %

Adjusted EBITDA $ 96.6 171.0 (74.4) (44) % (40) %

Continued momentum in advisory fees more than offset lower incentive fees to drive slight top-line growth for LaSalle on a local currency basis.

The advisory fee growth in 2022 was concentrated in core open-end funds, driven by strong capital raising and increases in the fair value of assets under management (“AUM”) over the trailing twelve months.

Lower incentive fees for the year reflected muted transaction activity given economic uncertainty and lower valuation gains in a U.S.

fund, following an exceptional 2021.

The current year's equity earnings included valuation declines in the co-investment portfolio during latter 2022 coupled with $13.7 million of equity losses due to negative share price movement for a co-investment in a LaSalle-managed publicly-traded REIT in Japan.

Prior-year equity earnings were substantially driven by valuation increases on underlying real estate investments within LaSalle's co-investment portfolio, as estimated fair values recovered from pandemic-era lows in 2020.

The decreases in segment operating expenses and segment fee-based operating expenses, compared with 2021, were primarily driven by lower incentive compensation related to the decline in incentive fees, partially offset by incremental T&E expense and higher fixed compensation expense, including wage inflation over the trailing twelve months.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 21.6% in USD (21.4% in local currency) for 2022, compared with 36.1% in 2021.

The decline in margin was substantially driven by lower equity earnings and incentive fees.

These drivers were partially offset by higher advisory fees and continued scale of the advisory fee platform.

As of December 31, 2022, LaSalle had $79.1 billion of AUM, an increase of 3% in USD (15% in local currency) from $76.6 billion as of December 31, 2021.

The net increase in AUM during the year resulted from (i) $12.2 billion of acquisitions and (ii) $7.2 billion of net valuation increases, partially offset by (iii) $9.2 billion of foreign currency decreases and (iv) $7.7 billion of dispositions and withdrawals.

Year Ended December 31, 2021 compared with Year Ended December 31, 2020

Year Ended December 31, Change in % Change in Local Currency

($ in millions) 2021 2020 U.S.

Markets Advisory $ 4,188.7 3,187.0 1,001.7 31 % 30 %

Capital Markets 2,620.5 1,763.5 857.0 49 47

Work Dynamics 11,891.5 11,061.5 830.0 8 6

JLL Technologies 166.2 156.1 10.1 6 6

LaSalle 500.1 421.8 78.3 19 17

Revenue $ 19,367.0 16,589.9 2,777.1 17 % 15 %

Gross contract costs (11,290.2) (10,464.4) (825.8) 8 6

Net non-cash MSR and mortgage banking derivative activity (59.3) (66.6) 7.3 (11) (11)

Fee revenue $ 8,017.5 6,058.9 1,958.6 32 % 31 %

Markets Advisory 3,201.7 2,297.5 904.2 39 38

Capital Markets 2,513.2 1,654.1 859.1 52 50

Work Dynamics 1,692.2 1,586.8 105.4 7 5

JLL Technologies 137.2 119.8 17.4 15 14

LaSalle 473.2 400.7 72.5 18 17

Compensation and benefits, excluding gross contract costs $ 5,649.9 4,207.9 1,442.0 34 % 33 %

Operating, administrative and other expenses, excluding gross contract costs 1,081.2 989.7 91.5 9 7

Depreciation and amortization 217.5 226.4 (8.9) (4) (5)

Restructuring and acquisition charges 84.7 142.4 (57.7) (41) (40)

Total fee-based operating expenses 7,033.3 5,566.4 1,466.9 26 25

Gross contract costs 11,290.2 10,464.4 825.8 8 6

Total operating expenses $ 18,323.5 16,030.8 2,292.7 14 % 12 %

Operating income $ 1,043.5 559.1 484.4 87 % 86 %

Equity earnings $ 209.4 8.0 201.4 n.m.

Adjusted EBITDA $ 1,496.5 859.6 636.9 74 % 73 %

Reconciliation of Non-GAAP Financial Measures

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

Year Ended December 31,

(in millions) 2021 2020

Revenue $ 19,367.0 16,589.9

Gross contract costs (11,290.2) (10,464.4)

Net non-cash MSR and mortgage banking derivative activity (59.3) (66.6)

Fee revenue $ 8,017.5 6,058.9

Operating expenses $ 18,323.5 16,030.8

Gross contract costs

(11,290.2) (10,464.4)

Fee-based operating expenses $ 7,033.3 5,566.4

Operating income $ 1,043.5 559.1

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).

Year Ended December 31,

($ in millions) 2021 2020

Net income attributable to common shareholders $ 961.6 402.5

Interest expense, net of interest income 40.1 52.8

Provision for income taxes 264.3 106.9

Depreciation and amortization 217.5 226.4

EBITDA $ 1,483.5 788.6

Restructuring and acquisition charges 84.7 142.4

Gain on disposition (12.4) (4.8)

Net non-cash MSR and mortgage banking derivative activity (59.3) (66.6)

Adjusted EBITDA $ 1,496.5 859.6

Net income margin attributable to common shareholders 5.0 % 2.4 %

Adjusted EBITDA margin 18.8 % 14.2 %

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

Year Ended December 31,

($ in millions) 2021 % Change

At current period exchange rates $ 19,367.0 17 %

Impact of change in exchange rates (297.5) n/a

At comparative period exchange rates $ 19,069.5 15 %

At current period exchange rates $ 8,017.5 32 %

Impact of change in exchange rates (96.9) n/a

At comparative period exchange rates $ 7,920.6 31 %

Operating income:

At current period exchange rates $ 1,043.5 87 %

Impact of change in exchange rates (3.8) n/a

At comparative period exchange rates $ 1,039.7 86 %

Adjusted EBITDA:

At current period exchange rates $ 1,496.5 74 %

Impact of change in exchange rates (7.4) n/a

At comparative period exchange rates $ 1,489.1 73 %

Revenue increased 15% to $19.4 billion in 2021 and fee revenue increased 31% to $8.0 billion, compared with 2020, reflecting broad-based growth across all segments.

Markets Advisory led the top-line growth with revenue and fee revenue increases of 30% and 38%, respectively, driven by Leasing.

Capital Markets also experienced significant year-over-year growth, achieving revenue and fee revenue increases of 47% and 50%, respectively.

New wins and expansions of existing client mandates primarily drove the revenue increase in Property & Facility Management, up $737.3 million compared with 2020.

In addition, strong performance by Valuation Advisory drove the growth in Advisory, Consulting and Other.

Geographically across service lines, Americas contributed 78% of the year-over-year RES fee revenue increase on a local currency basis;

EMEA contributed 12% and Asia Pacific 10%.

The following highlights the proportion of RES service line consolidated fee revenue growth, on a local currency basis, compared with 2020, by notable segment.

• Leasing — Americas (82%), EMEA (10%) and Asia Pacific (8%)

• Capital Markets — Americas (75%), EMEA (16%) and Asia Pacific (9%)

• Property & Facility Management — Americas drove 98% of growth

• Project & Development Services — Americas (92%) and Asia Pacific (49%), partially offset by EMEA

• Advisory, Consulting and Other — Americas (48%), Asia Pacific (43%) and EMEA (9%)

New wins and expansions of existing client mandates in 2021 within Workplace Management drove the 6% revenue increase in Work Dynamics.

LaSalle's 17% revenue growth, compared with 2020, was driven by higher incentive and advisory fees.

The following charts highlight the proportion of consolidated top-line growth on a local currency basis, compared with 2020, by segment ($ in millions).

Refer to segment operating results for further detail.

3 unchanged sentences

The spread between U.S.

dollars and local currency was driven by a strengthening of the U.S.

dollars and local currency was driven by a weakening of the U.S.

dollar against most currencies, especially the British pound, euro, Australian dollar, Canadian dollar and Chinese yuan.

Operating Expenses

In 2021, consolidated operating expenses, excluding reimbursed expenses, increased 18% to $10.0 billion.

In 2021, consolidated operating expenses increased 12% to $18.3 billion.

Consolidated fee-based operating expenses were $7.0 billion in 2021, a 25% increase from prior year.

The higher expenses were primarily attributable to Americas, which represented 73% of the increase in fee-based operating expenses on a local currency basis - EMEA represented 14%, Asia Pacific 12% and LaSalle 4%.

The higher expenses were primarily attributable to Markets Advisory and Capital Markets, which drove 49% and 39%, respectively, of the total increase in fee-based operating expenses on a local currency basis.

Refer to segment operating results for additional detail.

The overall expense increase is net of a partial offset from a decrease in Restructuring and acquisition charges;

refer to the following table and commentary below for additional detail.

The overall expense increase is net of lower Restructuring and acquisition charges;

refer to the following table and commentary for additional detail.

Year ended December 31,

2 unchanged sentences

Restructuring, pre-acquisition and post-acquisition charges 67.8 88.2

Fair value adjustments that resulted in a net increase to earn-out liabilities from prior-period acquisition activity 2.6 (14.8)

Total restructuring & acquisition charges $ 84.7 142.4

Portion of total restructuring & acquisition charges related to the acquisition and integration of HFF $ 40.0 75.9

Fair value adjustments that resulted in a net increase (decrease) to earn-out liabilities from prior-period acquisition activity 2.6 (14.8)

Total restructuring and acquisition charges $ 84.7 142.4

Portion of total restructuring and acquisition charges related to the acquisition and integration of HFF $ 40.0 75.9

Charges associated with the acquisition and integration of HFF, Inc.

("HFF") primarily included expenses from retention awards granted to employees upon acquisition as well as other integration expenses, such as early lease termination costs.

The decrease in severance and other employment-related charges, compared with 2020, reflected notable cost mitigation actions taken across the globe in response to the pandemic in 2020.

The decrease in severance and other employment-related charges, compared with the prior year, reflected notable cost mitigation actions taken across the globe in response to the pandemic in 2020.

Interest Expense

4 unchanged sentences

Equity earnings were $209.4 million in 2021, up from $8.0 million in 2020.

Valuation increases related to JLL Technologies' investments resulted in $140.8 million of equity earnings this year, compared with $5.8 million in 2020, reflecting continued progress in the strategy to invest in early-stage proptech companies;

refer to the Americas segment discussion for additional detail.

Valuation increases related to JLL Technologies' investments resulted in $140.7 million of equity earnings in 2021, compared with $5.7 million in 2020, reflecting continued progress in the strategy to invest in early-stage proptech companies;

refer to the JLL Technologies segment discussion for additional detail.

LaSalle recognized $62.7 million of equity earnings in 2021, compared with $12.5 million of equity losses in the prior year.

Refer to the LaSalle segment discussion for additional detail.

In addition, substantially all of the $12.7 million of first-quarter 2020 equity earnings in the Americas segment were attributable to gains by consolidated variable interest entities in which we held no equity interest;

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

The provision for income taxes was $264.3 million and $106.9 million for the years ended December 31, 2021 and 2020, respectively, representing effective tax rates ("ETR") of 21.6% and 20.2%, respectively.

1 unchanged sentence

Net Income and Adjusted EBITDA

Net income attributable to common shareholders was $961.6 million for the year, or $18.47 per diluted common share, compared with $402.5 million for 2020, or $7.70 per diluted common share.

Net income attributable to common shareholders was $961.6 million for 2021, or $18.47 per diluted common share, compared with $402.5 million for 2020, or $7.70 per diluted common share.

Adjusted EBITDA increased 73% from the prior year to $1,496.5 million in 2021.

4 unchanged sentences

Segment Operating Results

Through 2021, we managed and reported our operations as four business segments.

Our three geographic RES segments include Americas, EMEA and Asia Pacific.

Our fourth segment, LaSalle, offers investment management services on a global basis.

Each geographic region offers our full range of real estate services, including agency leasing and tenant representation, capital markets, property management, facility management, project and development services, and advisory, consulting and valuation services, including technology solutions.

We define "property management" to be services we provide to non-occupying property investors and "facility management" to be services we provide to owner-occupiers.

For segment reporting, (i) gross contract costs and (ii) net non-cash MSR and mortgage banking derivative activity are both excluded from revenue in determining Fee revenue.

Gross contract costs are excluded from operating expenses in determining Fee-based operating expenses.

In addition, our measure of segment results, Segment income, excludes Restructuring and acquisition charges.

Americas - Real Estate Services

In addition, our measure of segment results also excludes Restructuring and acquisition charges.

Markets Advisory

Year Ended December 31, Change in in Local

2 unchanged sentences

Revenue $ 4,188.7 3,187.0 1,001.7 31 % 30 %

Reimbursements (6,034.2) (5,643.5) (390.7) 7 7

Revenue before reimbursements $ 5,852.9 4,361.7 1,491.2 34 % 34 %

Gross contract costs (987.0) (889.5) (97.5) 11 9

Net non-cash MSR and mortgage banking derivative activity (59.3) (66.6) 7.3 (11) (11)

Fee revenue $ 3,201.7 2,297.5 904.2 39 % 38 %

Leasing 2,598.5 1,732.3 866.2 50 49

Capital Markets 1,463.4 881.3 582.1 66 66

Property & Facility Management 648.6 592.5 56.1 9 9

Project & Development Services 393.3 376.4 16.9 4 4

Property Management 478.7 453.4 25.3 6 3

Advisory, Consulting and Other 124.5 111.8 12.7 11 8

Compensation, operating and administrative expenses excluding gross contract costs 3,864.8 2,831.9 1,032.9 36 36

Compensation and benefits, excluding gross contract costs 2,299.6 1,649.0 650.6 39 38

Operating, administrative and other expenses, excluding gross contract costs 361.7 317.3 44.4 14 12

Depreciation and amortization 69.4 68.0 1.4 2 1

Segment fee-based operating expenses (excluding restructuring & acquisition charges) 4,003.3 2,983.3 1,020.0 34 34

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 2,730.7 2,034.3 696.4 34 33

Gross contract costs 987.0 889.5 97.5 11 9

Segment operating expenses, excluding reimbursed expenses $ 4,921.3 3,825.8 1,095.5 29 % 28 %

Segment operating expenses $ 3,717.7 2,923.8 793.9 27 % 26 %

Equity earnings $ 0.7 13.7 (13.0) (95) % (93) %

Segment income $ 1,073.8 554.9 518.9 94 % 93 %

Adjusted EBITDA $ 546.5 337.8 208.7 62 % 61 %

Transaction-based service lines led revenue and fee revenue growth in Americas, compared with 2020.

In addition, organic fee revenue exceeded 2019 activity.

Leasing growth was driven by higher transaction volumes and an increase in average deal size in the U.S., with strong performance across all sectors, especially office and industrial.

Capital Markets growth reflected investment sales up over 80% for the year, continued momentum in debt and equity advisory (both up approximately 70% compared with last year), and a 28% increase in servicing revenue from our multi-housing business.

The increase in Property & Facility management was driven by new client wins and expansion of existing client mandates, especially in Work Dynamics, and was particularly notable given the prior year grew 23% compared with 2019.

Equity earnings from JLL Technologies' investments were $140.8 million in 2021, compared with $5.8 million in 2020, primarily due to valuation increases on the investments as a result of subsequent rounds of funding at higher per-share valuations.

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;

Markets Advisory revenue and fee revenue increases were led by Leasing, driven by higher transaction volumes and an increase in average deal size, especially in the U.S., with strong performance across all sectors, highlighted by office and industrial.

Notably, organic Leasing fee revenue exceeded 2019.

Advisory, Consulting and Other largely recovered from pandemic-impacted activity in 2020, especially in Greater China and MENA.

The increases in segment operating expenses and segment fee-based operating expenses compared to 2020 were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from 2020 (including the benefit from pandemic-related government relief programs) and incremental investments in people and technology.

In 2020, substantially all of the $13.7 million 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, excluding reimbursed expenses, and segment fee-based operating expenses, compared with 2020, were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020), incremental investments in people and technology, and $17.6 million of higher medical and dental self-insurance expense compared with the prior year.

Adjusted EBITDA margin for the year, calculated on a fee revenue basis, was 17.1% in USD and local currency in 2021, compared with 14.7% in 2020.

The 560 basis point margin expansion was driven by transaction-based revenue growth and higher equity earnings, partially offset by the above-noted expense drivers.

EMEA - Real Estate Services

The margin expansion was driven by transaction-based revenue growth, partially offset by the above-noted expense drivers.

Capital Markets

Year Ended December 31, Change in in Local

2 unchanged sentences

Revenue $ 2,620.5 1,763.5 857.0 49 % 47 %

Reimbursements (741.2) (708.3) (32.9) 5 —

Revenue before reimbursements $ 2,736.5 2,384.5 352.0 15 % 11 %

Gross contract costs (48.0) (42.8) (5.2) 12 8

Net non-cash MSR and mortgage banking derivative activity (59.3) (66.6) 7.3 (11) (11)

Fee revenue $ 2,513.2 1,654.1 859.1 52 % 50 %

Leasing 331.1 239.2 91.9 38 36

Capital Markets 450.9 313.7 137.2 44 40

Property & Facility Management 321.9 302.8 19.1 6 —

Project & Development Services 276.0 276.0 — — (3)

Advisory, Consulting and Other 264.5 247.8 16.7 7 3

Compensation, operating and administrative expenses excluding gross contract costs 1,607.8 1,355.5 252.3 19 15

Investment Sales, Debt/Equity Advisory and Other 2,013.2 1,240.7 772.5 62 60

Valuation Advisory 359.8 302.1 57.7 19 15

Loan Servicing 140.2 111.3 28.9 26 26

Compensation and benefits, excluding gross contract costs 1,767.6 1,188.2 579.4 49 47

Operating, administrative and other expenses, excluding gross contract costs 204.2 217.6 (13.4) (6) (8)

Depreciation and amortization 63.1 69.8 (6.7) (10) (11)

Segment fee-based operating expenses (excluding restructuring & acquisition charges) 1,650.0 1,395.5 254.5 18 14

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 2,034.9 1,475.6 559.3 38 36

Gross contract costs 48.0 42.8 5.2 12 8

Segment operating expenses, excluding reimbursed expenses $ 2,742.1 2,400.5 341.6 14 % 10 %

Segment operating expenses $ 2,082.9 1,518.4 564.5 37 % 35 %

Equity earnings $ 4.9 1.4 3.5 250 % 236 %

Segment loss $ (5.6) (16.0) 10.4 65 % 81 %

Adjusted EBITDA $ 543.2 247.8 295.4 119 % 115 %

EMEA's revenue and fee revenue growth was led by transaction-based revenue, reflecting a continued recovery in most geographies.

Notably, Capital Markets and Leasing both increased nearly 10% compared with their respective 2019 fee revenues.

The growth in Capital Markets was primarily due to higher deal volumes in investment sales across all sectors, particularly in industrial and office, compared with 2020.

The increase in Leasing revenue was driven by transaction volume increases, primarily in office and industrial, and an increase in average deal size, which in the fourth quarter eclipsed the comparative 2019 quarter for the first time this year.

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

The increases in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020), incremental investments in people and technology, and a $7.5 million greater year-over-year provision for bad debts (a net provision in 2021 compared with a net reduction in 2020).

Adjusted EBITDA margin, calculated on a fee revenue basis, was 2.1% in USD for the year (2.2% in local currency), compared with 2.0% in 2020.

The slight margin improvement was primarily attributable to increased higher margin transaction-based revenue, largely offset by the expense drivers noted above.

Asia Pacific - Real Estate Services

Top-line growth in Capital Markets was led by Investment Sales and Debt Advisory as global market volumes reached a record high in 2021, according to JLL Research.

The increases were broad-based across geographies and asset classes, most notably residential, office and industrial.

The increase in Valuation Advisory was led by organic growth, highlighted by the U.S., Australia and the U.K.

Strong growth in Loan Servicing was driven by an increase in the servicing portfolio, particularly from originations under the Fannie Mae DUS program (approximately half of the increase) as well as incremental prepayment fees.

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

In addition, we recognized a $13.8 million non-cash reduction to our loan loss credit reserves related to our multi-housing business in 2021, compared with a $21.6 million non-cash increase to the credit reserves recognized in 2020.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 21.6% in USD (and 21.5% local currency) in 2021, compared with 15.0% in 2020.

The margin expansion was primarily driven by transaction-based revenue growth and the year-over-year impact of changes to the loan loss credit reserves, partially offset by the additional expense drivers discussed above.

Work Dynamics

Year Ended December 31, Change in in Local

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Revenue $ 11,891.5 11,061.5 830.0 8 % 6 %

Reimbursements (1,538.9) (1,333.2) (205.7) 15 11

Revenue before reimbursements $ 1,963.2 1,736.9 226.3 13 % 10 %

Gross contract costs (10,199.3) (9,474.7) (724.6) 8 6

Fee Revenue $ 1,692.2 1,586.8 105.4 7 % 5 %

Leasing 249.5 174.9 74.6 43 40

Capital Markets 185.2 114.2 71.0 62 57

Property & Facility Management 315.7 304.2 11.5 4 —

Project & Development Services 136.6 123.7 12.9 10 7

Advisory, Consulting and Other 224.6 180.5 44.1 24 19

Compensation, operating and administrative expenses excluding gross contract costs 955.8 754.7 201.1 27 23

Workplace Management 654.9 600.3 54.6 9 7

Project Management 774.2 751.1 23.1 3 1

Portfolio Services and Other 263.1 235.4 27.7 12 11

Compensation and benefits, excluding gross contract costs 1,103.4 984.3 119.1 12 10

Operating, administrative and other expenses, excluding gross contract costs 406.8 374.4 32.4 9 6

Depreciation and amortization 66.2 68.0 (1.8) (3) (4)

Segment fee-based operating expenses (excluding restructuring & acquisition charges) 986.0 782.5 203.5 26 22

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 1,576.4 1,426.7 149.7 10 8

Gross contract costs 10,199.3 9,474.7 724.6 8 6

Segment operating expenses, excluding reimbursed expenses $ 1,837.6 1,621.9 215.7 13 % 10 %

Equity earnings $ 4.6 1.4 3.2 229 % 208 %

Segment income $ 130.2 116.4 13.8 12 % 8 %

Segment operating expenses $ 11,775.7 10,901.4 874.3 8 % 6 %

Equity earnings (losses) $ 0.4 (0.3) 0.7 233 % 297 %

Adjusted EBITDA $ 182.4 227.6 (45.2) (20) % (18) %

Asia Pacific's double-digit revenue and fee revenue increases were primarily due to a rebound in transaction-based revenue.

Growth in Leasing was led by Greater China, Australia and India, reflecting momentum in office and industrial throughout 2021.

Revenue expansion in Capital Markets was driven by a continued increase in large transactions across most asset classes, highlighted by Australia and Singapore and partially offset by Japan.

Significant business growth continued in Valuation Advisory, predominantly in Australia, which primarily drove the fee revenue increase in Advisory, Consulting and Other.

Geographically across service lines, fee revenue growth was led by Australia, Greater China and Singapore.

The increases in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses were primarily attributable to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020), and incremental investments in people and technology.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 14.4% in USD and local currency for 2021, compared with 16.1% in 2020.

The lower margin was attributable to the expense drivers noted above, which more than offset the increase from incremental transaction-based revenue.

Over half of the revenue and fee revenue growth for Work Dynamics was driven by Workplace Management, led by new client wins and the expansion of existing mandates, especially in the United States.

Portfolio Services and Other growth was largely from higher consulting and transaction management services, influenced by client leasing activity during 2021, compared with more significant impacts from COVID during the prior year.

The increases in segment operating expenses and segment fee-based operating expenses, compared with last year, were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from 2020 (including the benefit from pandemic-related government relief programs), incremental investments in people and technology, and higher self-insurance expenses, specifically medical and dental, which were lower than historical experience in 2020.

Adjusted EBITDA margin, calculated on a fee-revenue basis, was 10.8% in USD (11.1% in local currency) for 2021, compared with 14.3% in 2020.

The margin contraction was attributable to the expense drivers noted above, which more than offset the revenue growth.

JLL Technologies

Year Ended December 31, Change in in Local

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Revenue $ 166.2 156.1 10.1 6 % 6 %

Reimbursements (7.1) (4.8) (2.3) 48 40

Revenue before reimbursements $ 493.0 417.0 76.0 18 % 17 %

Gross contract costs (29.0) (36.3) 7.3 (20) (21)

Fee revenue $ 137.2 119.8 17.4 15 % 14 %

Compensation and benefits, excluding gross contract costs 169.2 126.0 43.2 34 33

Operating, administrative and other expenses, excluding gross contract costs 55.4 32.6 22.8 70 69

Depreciation and amortization 10.5 11.3 (0.8) (7) (8)

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 235.1 169.9 65.2 38 38

Gross contract costs 29.0 36.3 (7.3) (20) (21)

Segment operating expenses $ 264.1 206.2 57.9 28 % 27 %

Equity earnings $ 140.7 5.7 135.0 n.m.

Adjusted EBITDA $ 53.4 (33.1) 86.5 261 % 263 %

JLL Technologies top-line growth included $3.3 million of incremental fee revenue from acquisitions closed in late 2021.

Organic fee revenue increased 11%, driven by new customers as well as growth from existing customers in software and solutions offerings.

The higher equity earnings in 2021 were attributable to valuation increases for several of 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 were driven by revenue-related expense growth as well as incremental investments in people and technology to support future growth.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 38.9% in USD (39.5% in local currency), compared with negative 27.6% in 2020.

The margin expansion was driven by higher earnings, partially offset by the above-noted expense drivers.

Year Ended December 31, Change in in Local

($ in millions) 2021 2020 U.S.

dollars Currency

Revenue $ 500.1 421.8 78.3 19 % 17 %

Gross contract costs (26.9) (21.1) (5.8) 27 26

Fee revenue $ 473.2 400.7 72.5 18 % 17 %

Advisory fees 345.7 320.7 25.0 8 6

Transaction fees & other 33.6 38.5 (4.9) (13) (13)

Transaction fees and other 33.6 38.5 (4.9) (13) (13)

Incentive fees 93.9 41.5 52.4 126 128

Compensation, operating and administrative expenses excluding gross contract costs 390.0 326.9 63.1 19 18

Compensation and benefits, excluding gross contract costs 310.1 260.4 49.7 19 18

Operating, administrative and other expenses, excluding gross contract costs 53.1 47.8 5.3 11 9

Depreciation and amortization 8.3 9.3 (1.0) (11) (12)

Segment fee-based operating expenses (excluding restructuring & acquisition charges) 396.6 334.1 62.5 19 17

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 371.5 317.5 54.0 17 16

Gross contract costs 26.9 21.1 5.8 27 26

Segment operating expenses, excluding reimbursed expenses $ 416.4 350.4 66.0 19 % 19 %

Segment operating expenses $ 398.4 338.6 59.8 18 % 16 %

Equity earnings (losses) $ 62.7 (12.5) 75.2 602 % 601 %

Segment income $ 139.2 54.2 85.0 157 % 154 %

Adjusted EBITDA $ 171.0 79.5 91.5 115 % 113 %

LaSalle advisory fee growth 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.

LaSalle advisory fee growth was led by core open-end funds, a result of capital raising and valuation increases in AUM, as well as a newly-launched fund in Asia Pacific.

The increase in incentive fees reflected the strong fund performance in the U.S.

and real estate dispositions on behalf of clients in Asia Pacific and continental Europe.

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

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

In the prior year, equity losses were largely driven by the pandemic's impact on real estate prices, which drove lower estimated fair values within the portfolio.

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As of December 31, 2021, LaSalle had $76.6 billion of AUM, an increase of 11% in USD and local currency from $68.9 billion as of December 31, 2020.

The net increase in AUM during the year resulted from (i) $7.3 billion of acquisitions (ii) $7.6 billion of net valuation increases and (iii) $0.2 billion of foreign currency increases, partially offset by (iv) $7.4 billion of dispositions and withdrawals.

The net increase in AUM during the year resulted from (i) $7.6 billion of net valuation increases, (ii) $7.3 billion of acquisitions and (iii) $0.2 billion of foreign currency increases, partially offset by (iv) $7.4 billion of dispositions and withdrawals.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows from Operating Activities

Operating activities provided $972.4 million of cash in 2021, compared to $1,114.7 million in 2020.

The decrease in cash provided was primarily due to (i) lower cash collections in the first quarter of 2021 compared with the first quarter of 2020 (trade receivables balance was $1,636.1 million as of December 31, 2020 versus $2,034.3 million as of December 31, 2019) and (ii) the timing of payments related to taxes and other government obligations, partially offset by (iii) lower annual incentive compensation paid in early 2021 compared with early 2020 and (iv) higher cash provided by earnings, driven by an increase in net income.

Operating activities provided $199.9 million of cash in 2022, compared with $972.4 million provided in 2021.

The decrease in cash provided was primarily due to (i) higher commission payments in 2022, reflecting greater payments in early 2022 for commissions earned from the strong performance in the prior-year fourth quarter as well as incremental commissions this year, attributable to the full-year Leasing growth and changes to the Capital Markets incentive compensation structure, (ii) higher annual incentive compensation payments, typically paid in the first quarter, compared with 2021, (iii) lower cash provided by earnings, and (iv) an incremental $59.0 million of cash paid for taxes.

These drivers were partially offset by lower prepaid and other expenses, including the net conversion of contract assets.

Cash Flows from Investing Activities

We used $243.1 million of cash for investing activities during 2022, compared with $805.8 million used in 2021.

The increase in cash used was primarily driven by business acquisitions and incremental JLL Technologies investments in early-stage proptech companies.

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

The decrease in cash used was primarily driven by lower business acquisitions volume in the current year and the year-over-year change in net investment activity related to less than wholly-owned entities.

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

Cash Flows from Financing Activities

Financing activities used $13.1 million of cash during 2022, compared with $143.8 million used during 2021.

The reduction in cash flows used by financing activities was largely driven by the year-over-year change in net borrowing activity related to our Facility ($150.0 million of net borrowings in 2021 compared with $525.0 million of net repayments in 2020).

The change in net borrowing activity reflected higher cash outflows from investing activities (discussed elsewhere in this section), $243.3 million of incremental share repurchases this year and lower cash provided by operating activities.

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

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

As of December 31, 2020, we had no outstanding borrowings under the Facility.

The average outstanding borrowings under the Facility were $432.0 million (with an average effective interest rate of 0.9%) and $865.1 million (with an average effective interest rate of 1.6%) during the years ended December 31, 2021 and 2020, respectively.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $147.9 million as of December 31, 2021, including $132.7 million related to overdrawn bank accounts and $9.2 million attributable to local overdraft facilities.

As of December 31, 2020 short-term borrowings was $62.0 million, including $44.8 million related to overdrawn bank accounts and $12.0 million attributable to local overdraft facilities.

As of December 31, 2021, we had the capacity to borrow up to an additional $55.5 million under local overdraft facilities.

In addition, as of December 31, 2021, we had the following outstanding senior notes:

• $275.0 million of Notes due November 2022 (with an fixed interest rate of 4.4%)

• €350.0 million of Euro Notes, evenly divided between maturities of June 2027 (with a fixed interest rate of 1.96%) and June 2029 (with a fixed interest rate of 2.21%).

The increase in net borrowings from our Facility ($1,075.0 million of net borrowings in 2022 versus $150.0 million of net borrowings in 2021) were used to (i) fund the higher annual incentive compensation payments made in the first quarter discussed above, (ii) return an incremental $257.9 million to shareholders via our share repurchase program, and (iii) redeem our 2022 senior notes, as further described below.

In addition, the cash outflow relating to noncontrolling interest distributions in 2022 included a $142.3 million gain by a consolidated variable interest entity in which the company held no equity interest that was also distributed during the year.

The offset to this is included in cash from investing activities, specifically investment activity by less than wholly-owned entities.

On August 31, 2022, we amended our Facility to increase the borrowing capacity from $2.75 billion to $3.35 billion.

Our Facility matures on April 14, 2026 and bears a variable rate of interest.

As of December 31, 2022, we had outstanding borrowings under the Facility of $1,213.8 million, compared with $138.2 million outstanding as of December 31, 2021.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $164.2 million as of December 31, 2022, compared with $147.9 million as of December 31, 2021.

In addition, we had the capacity to borrow up to an additional $52.3 million under local overdraft facilities as of December 31, 2022.

As of December 31, 2022, we had €350.0 million of Euro Notes, evenly divided between maturities of June 2027 (with a fixed interest rate of 1.96%) and June 2029 (with a fixed interest rate of 2.21%).

During 2022, we used proceeds from our Facility to redeem all of our outstanding 4.4% Senior Notes due November 2022.

The redemption price for the notes was equal to the $275.0 million principal amount plus accrued and unpaid interest on the Notes.

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 December 31, 2021, we had a carrying value of $745.7 million in Investments, primarily related to LaSalle co-investments and investments by JLL Technologies in early-stage proptech companies.

As of December 31, 2022, we had a carrying value of $873.8 million in Investments, primarily related to investments by JLL Technologies in early to mid-stage proptech companies and proptech funds as well as LaSalle co-investments.

In 2022 and 2021, funding of investments exceeded returns of capital by $142.9 million and $107.1 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.

In addition, JLL Technologies funded a $45.0 million convertible note 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 Consolidated Balance Sheet.

We have unfunded capital commitments to investment vehicles and direct investments totaling a maximum of $349.1 million as of December 31, 2022.

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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 as of December 31, 2020, from the initial authorization.

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 table below.

Year Ended December 31,

($'s in millions) 2021 2020

($ in millions) 2022 2021

Total number of shares repurchased (in 000's) 2,922.5 1,451.7

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Capital Expenditures

Capital expenditures, excluding those made by a consolidated VIE in which we held no equity interest, were $175.9 and $149.4 million in 2021 and 2020, respectively, were primarily for leased office space improvements, hardware and purchased/developed software.

Capital expenditures, excluding those made by a consolidated VIE in which we held no equity interest, were $205.8 million and $175.9 million in 2022 and 2021, respectively.

Expenditures in both years were primarily related to office leasehold 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 were net acquisitions of $70.9 million in 2021, compared with net proceeds of $1.0 million in 2020, primarily to acquire (and dispose of) real estate.

Net capital additions made by consolidated VIEs in which we held no equity interest were net proceeds of $134.8 million in 2022, compared with net acquisitions of $70.9 million in 2021, primarily to acquire (and dispose of) real estate.

Refer to Note 5, Investments, of the Notes to the Consolidated Financial Statements, included in Item 8, for further information on our consolidated VIE investments.

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These obligations represent the current discounted values of payments to sellers of businesses for which our acquisition has closed as of the balance sheet dates and for which the only remaining condition on those payments is the passage of time.

As of December 31, 2021, we had the potential to make earn-out payments on 19 acquisitions subject to the achievement of certain performance conditions, representing $84.1 million accrued for potential earn-out payments, of a potential maximum of $149.9 million (undiscounted), subject to the achievement of certain performance conditions.

As of December 31, 2022, we had the potential to make earn-out payments on 17 acquisitions subject to the achievement of certain performance conditions, representing $73.3 million accrued for potential earn-out payments, of a potential maximum of $114.6 million (undiscounted).

These earn-outs will come due at various times over the next five years, assuming the achievement of the applicable performance conditions.

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We face regulatory restrictions in certain countries that limit or prevent the transfer of funds to other countries or the exchange of the local currency to other currencies, 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 total assets of these countries in aggregate totaled approximately 4% of our total assets as of both December 31, 2021 and 2020, respectively.

The total assets of these countries in aggregate totaled approximately 4% of our total assets as of both December 31, 2022 and 2021.

Our lease obligations primarily consist of operating leases of office space in various buildings for our own use as well as operating leases for equipment.

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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-K

Item 7. Management’s Discussion and Analysis