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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 259 added, 107 removed, 315 unchanged (54% 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, 2023, and our audited Consolidated Financial Statements, including the notes thereto, for the fiscal year ended December 31, 2022, which are included in our 2022 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, 2023, and our audited Consolidated Financial Statements, including the notes thereto, for the fiscal year ended December 31, 2022, which are included in our 2022 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, 2022.

There have been no material changes to these critical accounting policies and estimates during the three months ended March 31, 2023.

There have been no material changes to these critical accounting policies and estimates during the six months ended June 30, 2023.

ITEMS AFFECTING COMPARABILITY

10 unchanged sentences

Equity earnings may vary substantially from period to period for a variety of reasons, including as a result of (i) valuation increases (decreases) on investments reported at fair value, (ii) gains (losses) on asset dispositions and (iii) impairment charges.

The timing of recognition of these items may impact comparability between quarters, in any one year, or compared to a prior year.

The timing of recognition of these items may impact comparability between quarters, in any one year, or compared with a prior year.

LaSalle, our investment management business, is in part compensated through incentive fees where performance of underlying funds' investments exceeds agreed-to return hurdles.

19 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, 2023 and 2022 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, 2023 and 2022 are not fully indicative of the results we expect to realize for the full fiscal year.

RESULTS OF OPERATIONS

1 unchanged sentence

Middle East & North Africa

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

not meaningful, represented by a percentage change of greater than 1,000% or a change in margin of greater than 10,000 basis points ("bps"), favorable or unfavorable.

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) 2023 2022 U.S.

23 unchanged sentences

Adjusted EBITDA $ 116.1 359.0 (242.9) (68) % (68) %

Net income margin attributable to common shareholders (USD basis) — % 3.7 % (370) bps n/a

Adjusted EBITDA margin (local currency basis) 6.2 % 16.8 % (1,050) bps (1,060) bps

Adjusted EBITDA margin (USD basis) 6.3 %

Consolidated Operating Results (continued)

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

($ in millions) 2023 2022 U.S.

Markets Advisory $ 1,931.8 2,117.7 (185.9) (9) % (7) %

Capital Markets 805.1 1,285.1 (480.0) (37) (36)

Work Dynamics 6,650.8 6,344.1 306.7 5 7

JLL Technologies 122.0 100.1 21.9 22 22

LaSalle 258.3 232.8 25.5 11 13

Revenue $ 9,768.0 10,079.8 (311.8) (3) % (2) %

Gross contract costs (6,339.1) (6,032.9) (306.2) 5 7

Net non-cash MSR and mortgage banking derivative activity 2.4 (7.6) 10.0 (132) (132)

Fee revenue $ 3,431.3 4,039.3 (608.0) (15) % (14) %

Markets Advisory 1,368.4 1,597.0 (228.6) (14) (13)

Capital Markets 785.1 1,252.2 (467.1) (37) (36)

Work Dynamics 919.8 877.5 42.3 5 7

JLL Technologies 114.3 93.3 21.0 23 23

LaSalle 243.7 219.3 24.4 11 14

Compensation and benefits, excluding gross contract costs $ 2,512.6 2,908.2 (395.6) (14) % (12) %

Operating, administrative and other expenses, excluding gross contract costs 584.4 572.7 11.7 2 4

Depreciation and amortization 117.4 109.8 7.6 7 9

Restructuring and acquisition charges 47.5 45.4 2.1 5 6

Total fee-based operating expenses 3,261.9 3,636.1 (374.2) (10) (9)

Gross contract costs 6,339.1 6,032.9 306.2 5 7

Total operating expenses $ 9,601.0 9,669.0 (68.0) (1) % 1 %

Operating income $ 167.0 410.8 (243.8) (59) % (61) %

Equity (losses) earnings $ (106.1) 72.1 (178.2) (247) % (247) %

Adjusted EBITDA $ 225.1 632.6 (407.5) (64) % (65) %

Net (loss) income margin attributable to common shareholders (USD basis) (0.1) % 3.4 % (350) bps n/a

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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 2023, the $1.8 million loss related to the disposition of a business in Markets Advisory.

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

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

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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) 2023 2022 2023 2022

8 unchanged sentences

Operating income $ 149.2 235.1 $ 167.0 410.8

Below is a reconciliation of Net (loss) income attributable to common shareholders to EBITDA and Adjusted EBITDA.

Three Months Ended March 31,

Below is a reconciliation of Net income (loss) attributable to common shareholders to EBITDA and Adjusted EBITDA.

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

(in millions) 2023 2022 2023 2022

Net (loss) income attributable to common shareholders $ (9.2) 145.6

Net income (loss) attributable to common shareholders $ 2.5 193.9 $ (6.7) 339.5

Interest expense, net of interest income 40.5 15.7 66.8 25.9

Income tax (benefit) provision (2.3) 40.3

Income tax provision (benefit) 0.8 72.8 (1.5) 113.1

Depreciation and amortization (1)

59.0 54.4 115.5 108.8

EBITDA $ 102.8 336.8 $ 174.1 587.3

Restructuring and acquisition charges 11.8 25.9 47.5 45.4

Net loss on disposition 1.8 7.5 1.8 7.5

Net non-cash MSR and mortgage banking derivative activity 0.6 (11.2) 2.4 (7.6)

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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) 2023 % Change

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

($ in millions) 2023 % Change 2023 % Change

At current period exchange rates $ 5,052.5 (4) % $ 9,768.0 (3) %

Impact of change in exchange rates 120.6 n/a

Impact of change in exchange rates 37.5 n/a 158.1 n/a

At comparative period exchange rates $ 5,090.0 (4) % $ 9,926.1 (2) %

At current period exchange rates $ 1,847.3 (14) % $ 3,431.3 (15) %

Impact of change in exchange rates 40.8 n/a

Impact of change in exchange rates 9.5 n/a 50.3 n/a

At comparative period exchange rates $ 1,856.8 (13) % $ 3,481.6 (14) %

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At current period exchange rates $ 149.2 (37) % $ 167.0 (59) %

Impact of change in exchange rates (5.1) n/a

Impact of change in exchange rates (1.5) n/a (6.6) n/a

At comparative period exchange rates $ 147.7 (37) % $ 160.4 (61) %

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At current period exchange rates $ 116.1 (68) % $ 225.1 (64) %

Impact of change in exchange rates (2.5) n/a

Impact of change in exchange rates (1.1) n/a (4.1) n/a

At comparative period exchange rates $ 115.0 (68) % $ 221.0 (65) %

For the first quarter, revenue was up 1% while fee revenue was down 15%, compared with the prior-year quarter.

Economic headwinds and continued interest rate uncertainty continued to adversely impact most of our transaction-based businesses, notably Investment Sales and Debt/Equity Advisory within Capital Markets as well as Leasing within Markets Advisory.

However, continued demand in Project Management, within Work Dynamics, drove its fee revenue growth of 24%.

Our annuity-based businesses continued to demonstrate resilience while delivering fee revenue growth for the quarter, as JLL Technologies grew 29%;

For the second quarter, revenue and fee revenue decreased 4% and 13%, respectively, compared with the prior-year quarter.

Businesses with resilient revenues continued to deliver fee revenue growth for the quarter, as JLL Technologies grew 18%;

Property Management, within Markets Advisory, grew 9%;

LaSalle advisory fees grew 9%;

and Workplace Management, within Work Dynamics, grew 2%.

Consistent with the first quarter, economic headwinds and continued interest rate uncertainty adversely impacted most of our transaction-based businesses, notably Investment Sales and Debt/Equity Advisory within Capital Markets, Leasing within Markets Advisory, and Portfolio Services and Other within Work Dynamics.

However, Project Management, within Work Dynamics, was up 8% due to continued demand in several geographies.

LaSalle's double-digit top-line growth was attributable to higher incentive fees.

For the first half of 2023, consolidated revenue and fee revenue were down 2% and 14%, respectively, compared with 2022.

The year-to-date drivers of change between the two years were similar to the quarter-to-date drivers noted above.

The following highlights revenue and fee revenue by segment, for the current and prior-year quarters ($ in millions).

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Our consolidated fee revenue declined 14% in U.S.

dollars (“USD”) and 15% in local currency for the first quarter of 2023, compared with 2022.

The quarter-to-date spreads were driven by the weakening of the U.S.

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

dollars (“USD”) and 13% in local currency for the second quarter of 2023, compared with 2022.

Year-to-date, consolidated fee revenue declined 15% in USD and 14% in local currency compared with last year.

The quarter-to-date and year-to-date spreads were relatively consistent given the mix of currencies which strengthened or weakened against the U.S.

Operating Expenses

Consolidated operating expenses were $4.7 billion for the first quarter, up 4% from 2022, while consolidated fee-based operating expenses were $1.6 billion, down 6% from the prior-year quarter.

The decrease in fee-based operating expenses were attributable to our Capital Markets and Markets Advisory segments, partially offset by revenue-related expense growth in Work Dynamics.

For the first quarter, Restructuring and acquisition charges increased compared with the prior-year period, driven by incremental severance and other employment-related charges as a result of cost-out actions taken in the current quarter;

Consolidated operating expenses were $4.9 billion for the second quarter, down 2% from 2022, and $9.6 billion for the first half of 2023, up 1% from 2022, while consolidated fee-based operating expenses were $1.7 billion for the second quarter, down 11% from the prior-year quarter, and $3.3 billion for the first six months of 2023, down 9%.

The decrease in expenses was primarily attributable to our Capital Markets and Markets Advisory segments, partially offset by revenue-related expense growth in Work Dynamics and LaSalle.

The decline in JLL Technologies expense was associated with carried interest.

For the second quarter of 2023, Restructuring and acquisition charges decreased compared with the prior-year period, driven by a (i) less expense associated with M&A activities, (ii) lower severance and other employment-related charges from cost-out actions and (iii) expenses in the prior year associated with the disposition of our business in Russia;

refer to following table for further detail.

Three Months Ended March 31,

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

(in millions) 2023 2022 2023 2022

1 unchanged sentence

Restructuring, pre-acquisition and post-acquisition charges 6.6 16.6 16.6 33.5

Fair value adjustments that resulted in a net decrease to earn-out liabilities from prior-period acquisition activity — (0.7)

Fair value adjustments that resulted in a net (decrease) increase to earn-out liabilities from prior-period acquisition activity (0.6) 1.0 (0.6) 0.3

Total restructuring and acquisition charges $ 11.8 25.9 $ 47.5 45.4

Interest Expense

Interest expense, net of interest income, for three months ended March 31, 2023 was $26.3 million compared with $10.2 million in the prior-year quarter.

The increase reflected an increase in the average outstanding borrowings as well as a higher effective interest rate on our Facility.

Refer to the Liquidity and Capital Resources section for additional details on our Facility.

Interest expense, net of interest income, for the three and six months ended June 30, 2023 was $40.5 million and $66.8 million compared with $15.7 million and $25.9 million in the prior-year periods.

The increase reflected a higher effective interest rate on our facilities as well as an increase in the average outstanding borrowings.

Refer to the Liquidity and Capital Resources section for additional details on our debt.

Equity (Losses) Earnings

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Refer to the segment discussions for additional details.

Three Months Ended March 31,

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

(in millions) 2023 2022 2023 2022

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Total equity (losses) earnings $ (103.5) 53.6 $ (106.1) 72.1

The income tax benefit was $2.3 million for the three months ended March 31, 2023, representing an effective tax rate ("ETR") of 21.0%.

For the three months ended March 31, 2022, the income tax provision was $40.3 million, representing an ETR of 21.9%.

Net (Loss) Income and Adjusted EBITDA

Net (loss) income attributable to common shareholders for the three months ended March 31, 2023 was a loss of $9.2 million, compared with income of $145.6 million in the respective prior-year period.

Adjusted EBITDA was $109.0 million for the first quarter of 2023, compared to $273.6 million in the prior-year period.

Net (loss) income margin attributable to common shareholders for the first quarter was (0.2)%, compared with 3.0% in the prior-year quarter.

Adjusted EBITDA margin for the first quarter, calculated on a fee-revenue basis, was 6.9% in USD (6.6% in local currency), compared with 14.4% in 2022.

The lower adjusted EBITDA margin compared with the prior-year quarter was largely driven by the decline in higher-margin transaction-based revenue, specifically Leasing, Investment Sales, and Debt/Equity Advisory, as well as the change in equity earnings.

In addition, run-rate growth in fixed compensation expense over the past few quarters was partially offset by ongoing cost reduction actions.

Other (Expense) Income

Other non-operating expense was $1.2 million and $1.1 million for the three and six months ended June 30, 2023, compared with income of $135.3 million and $135.5 million for the comparable periods in 2022.

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 our Russia business.

The income tax provision was $0.8 million for the three months ended June 30, 2023, while the income tax benefit was $1.5 million for the six months ended June 30, 2023, representing an effective tax rate ("ETR") of 21.0% for both periods.

For the three and six months ended June 30, 2022, the income tax provision was $72.8 million and $113.1 million, representing an ETR of 17.8% and 19.1%, respectively.

Net Income (Loss) and Adjusted EBITDA

Net income attributable to common shareholders was $2.5 million for the three months ended June 30, 2023, compared with $193.9 million in the prior-year quarter.

For the first half of 2023, net loss attributable to common shareholders was $6.7 million, compared with net income of $339.5 million in 2022.

Adjusted EBITDA was $116.1 million and $225.1 million for the second quarter and first half of 2023, compared with $359.0 million and $632.6 million in the respective prior-year periods.

Net income margin attributable to common shareholders for the second quarter was zero, compared with 3.7% in the prior-year quarter.

Adjusted EBITDA margin for the second quarter, calculated on a fee-revenue basis, was 6.3% in USD (6.2% in local currency), compared with 16.8% in 2022.

Approximately 740 basis points, or 70%, of the adjusted EBITDA margin contraction was driven by the change in equity earnings/losses, net of carried interest.

The residual decline was primarily due to lower transaction-based revenue, specifically Investment Sales, Debt/Equity Advisory, and Leasing.

In addition, recent cost reduction actions mostly offset investments to drive future 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) 2023 2022 U.S.

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Depreciation and amortization 17.4 17.3 0.1 1 2

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 657.1 739.6 (82.5) (11) (11)

Gross contract costs 284.3 262.4 21.9 8 10

Segment operating expenses $ 941.4 1,002.0 (60.6) (6) % (5) %

Equity (losses) earnings $ (0.1) 0.4 (0.5) (125) % (97) %

Adjusted EBITDA $ 99.4 134.0 (34.6) (26) % (26) %

Adjusted EBITDA margin (local currency basis) 13.2 % 15.7 % (230) bps (250) bps

Adjusted EBITDA margin (USD basis) 13.4 %

Markets Advisory (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

dollars Currency

Revenue $ 1,931.8 2,117.7 (185.9) (9) % (7) %

Gross contract costs (563.4) (520.7) (42.7) 8 11

Fee revenue $ 1,368.4 1,597.0 (228.6) (14) % (13) %

Leasing 1,070.5 1,300.4 (229.9) (18) (17)

Property Management 258.1 240.8 17.3 7 10

Advisory, Consulting and Other 39.8 55.8 (16.0) (29) (26)

Compensation and benefits, excluding gross contract costs $ 1,007.4 1,159.3 (151.9) (13) % (12) %

Operating, administrative and other expenses, excluding gross contract costs 186.9 195.7 (8.8) (4) (3)

Depreciation and amortization 34.5 34.4 0.1 — 2

Segment fee-based operating expenses 1,228.8 1,389.4 (160.6) (12) (10)

5 unchanged sentences

Adjusted EBITDA margin (USD basis) 12.5 %

The declines in Markets Advisory revenue and fee revenue were predominantly driven by Leasing, the result of lower transaction volume across asset types and a decrease in average deal size, particularly in the office sector, across most geographies.

The lower Leasing fee revenue was in line with global market volumes as global gross absorption fell 19%, according to JLL Research.

The increase in Property Management fee revenue was partially attributable to portfolio expansion in the Americas and also reflected incremental fees from interest-rate sensitive contract terms in the United Kingdom.

The decrease in Advisory, Consulting and Other was primarily due to the absence of revenues associated with exiting a business in the fourth quarter of 2022.

The net decreases in segment operating expenses and segment fee-based operating expenses for the quarter, compared with the prior-year quarter, were almost entirely due to lower commissions expense, correlated with the significant decline in revenue, as well as lower incentive compensation expense, reflecting segment performance.

The adjusted EBITDA margin contraction was substantially due to the lower Leasing fee revenue described above.

The declines in Markets Advisory revenue and fee revenue, both on a year-to-date and quarter-to-date basis, were predominantly driven by Leasing, which continues to reflect (i) lower transaction volume across asset types, particularly in the office and industrial sectors, and (ii) a decrease in average deal size across most asset types, most notably in the U.S.

office sector.

Specific to the office sector, our change in Leasing was in line with trends in global market volumes as gross absorption fell 14% globally, according to JLL Research.

The decreases in Advisory, Consulting and Other, for both the quarter and first half of the year, were substantially driven by the absence of revenues associated with a business exited during the fourth quarter of 2022.

These decreases were partially offset by Property Management growth, which was primarily attributable to portfolio expansion in the Americas and incremental fees from interest-rate sensitive contract terms in the United Kingdom.

The net decreases in segment operating expenses and segment fee-based operating expenses for the quarter, compared with the prior-year quarter, were primarily due to lower commissions expense, correlated with the revenue decline, as well as lower incentive compensation expense, reflecting segment performance.

The second-quarter adjusted EBITDA margin contraction was predominantly attributable to the lower Leasing fee revenue, net of the decreased operating expenses noted above.

Capital Markets

Three Months Ended March 31, Change in in Local

Three Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

10 unchanged sentences

Depreciation and amortization 16.2 15.4 0.8 5 5

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 420.8 550.1 (129.3) (24) (23)

Gross contract costs 13.1 12.6 0.5 4 6

Segment operating expenses $ 433.9 562.7 (128.8) (23) % (23 %)

Equity earnings $ 4.8 0.6 4.2 700 % 761 %

Adjusted EBITDA $ 36.0 126.7 (90.7) (72) % (72) %

Adjusted EBITDA margin (local currency basis) 8.2 % 19.2 % (1,090) bps (1,100) bps

Adjusted EBITDA margin (USD basis) 8.3 %

Capital Markets (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

dollars Currency

Revenue $ 805.1 1,285.1 (480.0) (37) % (36) %

Gross contract costs (22.4) (25.3) 2.9 (11) (9)

Net non-cash MSR and mortgage banking derivative activity 2.4 (7.6) 10.0 (132) (132)

Fee revenue $ 785.1 1,252.2 (467.1) (37) % (36) %

Investment Sales, Debt/Equity Advisory and Other 545.1 996.5 (451.4) (45) (45)

Valuation Advisory 163.6 175.4 (11.8) (7) (4)

Loan Servicing 76.4 80.3 (3.9) (5) (5)

Compensation and benefits, excluding gross contract costs $ 619.3 888.1 (268.8) (30) % (29) %

Operating, administrative and other expenses, excluding gross contract costs 125.3 120.7 4.6 4 6

Depreciation and amortization 32.1 31.0 1.1 4 4

Segment fee-based operating expenses 776.7 1,039.8 (263.1) (25) (24)

5 unchanged sentences

Adjusted EBITDA margin (USD basis) 5.9 %

The declines in Capital Markets revenue and fee revenue reflected uncertainty with interest rates and the macroeconomic outlook as transaction volumes fell and the deal-cycle time remained elongated.

This was most visible in Investment Sales and Debt/Equity Advisory which had declines across asset classes and geographies compared to the prior-year quarter.

This aligned with broader market performance as, Q1 global market volumes for investment sales were down 58% in USD (56% in local currency) according to JLL Research.

Loan Servicing included continued growth in the portfolio originated under the Fannie Mae DUS program.

This growth was overshadowed by a $4.5 million decline in prepayment fees compared to the prior-year quarter, as elevated interest rates continued to dampen refinancing activity.

The adjusted EBITDA margin contraction was predominantly driven by the meaningful decline in fee revenue described above.

The lower Capital Markets revenue and fee revenue for the quarter and first half of the year reflected muted transaction volume compared with 2022.

This impact was most acute in Investment Sales and Debt/Equity Advisory, which experienced declines across all asset classes and most geographies compared with the prior-year quarter.

This outperformed global trends as second-quarter market volumes for investment sales were down 54% in USD (53% in local currency), according to JLL Research.

The net decline in Loan Servicing, both on a year-to-date and quarter-to-date basis, was attributable to lower prepayment fees (down $3.7 million for the quarter and $8.2 million for the first half of the year), as refinancing activity slowed over the last twelve months, mostly offset by continued growth in the portfolio originated under the Fannie Mae DUS program.

The net decreases in segment operating expenses and segment fee-based operating expenses for the quarter and first half of the year, compared with the prior-year periods, were almost entirely due to lower commissions expense, correlated with the decline in revenue, as well as lower incentive compensation expense, reflecting segment performance.

While not as impactful on the year-to-date performance, the change in the loan loss reserve was a $7.0 million negative impact (reflected in Operating, administrative and other expenses) to the current quarter, compared with last year.

The second-quarter adjusted EBITDA margin contraction was predominantly driven by the meaningful decline in fee revenue, net of the expense drivers noted above.

In addition, higher equity earnings, which are not expected to recur in future years, provided a modest performance boost for the current quarter.

Work Dynamics

Three Months Ended March 31, Change in in Local

Three Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

9 unchanged sentences

Depreciation and amortization 19.9 17.0 2.9 17 18

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 442.1 427.3 14.8 3 4

Gross contract costs 2,896.8 2,843.5 53.3 2 3

Segment operating expenses $ 3,338.9 3,270.8 68.1 2 % 3 %

Equity earnings $ 0.8 0.9 (0.1) (11) % (15) %

Adjusted EBITDA $ 56.2 57.6 (1.4) (2) % (3) %

Adjusted EBITDA margin (local currency basis) 11.6 % 12.4 % (60) bps (80) bps

Adjusted EBITDA margin (USD basis) 11.8 %

Work Dynamics (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

dollars Currency

Revenue $ 6,650.8 6,344.1 306.7 5 % 7 %

Gross contract costs (5,731.0) (5,466.6) (264.4) 5 7

Fee revenue $ 919.8 877.5 42.3 5 % 7 %

Workplace Management 371.4 366.9 4.5 1 3

Project Management 440.6 390.6 50.0 13 15

Portfolio Services and Other 107.8 120.0 (12.2) (10) (9)

Compensation and benefits, excluding gross contract costs $ 626.0 585.8 40.2 7 % 9 %

Operating, administrative and other expenses, excluding gross contract costs 212.7 200.1 12.6 6 9

Depreciation and amortization 39.2 33.5 5.7 17 20

Segment fee-based operating expenses 877.9 819.4 58.5 7 10

5 unchanged sentences

Adjusted EBITDA margin (USD basis) 8.9 %

Work Dynamics revenue and fee revenue achieved double-digit growth compared with the prior-year quarter, propelled by the increase in Project Management and continued resilience within Workplace Management.

Project Management's growth was attributable to continued project demand in several geographies, most notably the U.S., France and MENA.

The increases in segment operating expenses and segment fee-based operating expenses for the quarter, compared with the prior-year quarter, were primarily due to (i) revenue-related expense growth over the trailing twelve months and (ii) $9.0 million of contract losses (included in Operating, administrative and other expenses) related to certain Tetris contracts in Europe.

The margin contraction was primarily attributable to the aforementioned contract losses as well as incremental investments in sustainability and technology products.

These margin dilutive impacts were partially offset by the higher revenue described above.

Work Dynamics revenue and fee revenue increases compared with the prior-year quarter were driven by strength in Project Management and modest growth in Workplace Management, partially offset by lower Portfolio Services and Other.

Project Management had continued demand in certain geographies, most notably Australia, France, MENA and the U.K.

for the second quarter (U.S., France, MENA and the U.K.

on a half-year view).

The decline in Portfolio Services revenue reflected the meaningful correlation between Portfolio Services and Leasing activity.

The increases in segment operating expenses and segment fee-based operating expenses for the first half of the year, compared with the prior-year period, were primarily due to revenue-related expense growth over the trailing twelve months and first-quarter 2023 contract losses (included in Operating, administrative and other expenses) related to certain Tetris contracts in Europe.

For the second quarter, compared with the prior-year quarter, continued investments in technology and headcount to support contract wins and a charge related to the final settlement associated with a legal claim drove the increases in segment operating expenses and segment fee-based operating expenses.

The net second-quarter adjusted EBITDA margin contraction was attributable to the decline in higher-margin Portfolio Services revenue and continued investments in technology and headcount to support future growth.

In addition, and partially offsetting these dilutive impacts, the prior-year margin reflected $4.1 million of net contract losses in Europe which did not recur this quarter.

JLL Technologies

Three Months Ended March 31, Change in in Local

Three Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

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Depreciation and amortization 4.1 3.9 0.2 5 6

Segment fee-based operating expenses (excluding restructuring and acquisition charges) 61.9 83.6 (21.7) (26) (26)

Gross contract costs 4.1 2.7 1.4 52 53

Segment operating expenses $ 66.0 86.3 (20.3) (24 %) (23 %)

Equity (losses) earnings $ (103.9) 44.7 (148.6) (332) % (332) %

Adjusted EBITDA $ (105.2) 12.9 (118.1) (916) % (914) %

Adjusted EBITDA margin (local currency basis) (186.9) % 27.0 % n.m.

Adjusted EBITDA margin (USD basis) (186.2) %

JLL Technologies (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

dollars Currency

Revenue $ 122.0 100.1 21.9 22 % 22 %

Gross contract costs (7.7) (6.8) (0.9) 13 13

Fee revenue $ 114.3 93.3 21.0 23 % 23 %

Compensation and benefits, excluding gross contract costs (1)

$ 106.6 128.0 (21.4) (17) % (16 %)

Operating, administrative and other expenses, excluding gross contract costs 27.2 28.1 (0.9) (3) (3)

Depreciation and amortization 8.0 7.7 0.3 4 5

Segment fee-based operating expenses 141.8 163.8 (22.0) (13) (13)

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Segment operating expenses $ 149.5 170.6 (21.1) (12) % (12 %)

Equity earnings $ 4.9 18.8 (13.9) (74) % (74) %

Equity (losses) earnings $ (99.0) 63.5 (162.5) (256) % (256) %

Adjusted EBITDA $ (118.5) 0.6 (119.1) n.m.

Adjusted EBITDA margin (local currency basis) (104.1) % 0.6 % n.m.

Adjusted EBITDA margin (USD basis) (103.7) %

(1) Included in Compensation and benefits expense for JLL Technologies is a reduction in carried interest expense of $10.0 million and $9.3 million for the three and six months ended June 30, 2023, respectively, and a carried interest expense of $9.8 million and $16.0 million for the three and six months ended June 30, 2022, related to Equity earnings of the segment.

The increases in JLL Technologies revenue and fee revenue over the prior-year quarter were primarily driven by growth in solutions and service offerings, largely from existing enterprise clients.

Equity losses for the quarter and first half of the year resulted from current-quarter valuation declines in JLL Technologies' investments due to subsequent financing rounds at decreased per-share values.

These equity losses were predominantly driven by two investments for which we previously recognized significant equity earnings.

A notable driver of the change in Segment operating loss is a $10.0 million reduction in carried interest expense this quarter ($9.3 million for the first half of the year) associated with the equity losses, compared with $9.8 million of incremental expense in the second quarter of 2022 ($16.0 million for the first half of 2022) associated with the equity earnings.

The second-quarter margin decline was entirely driven by the change in equity earnings/losses, net of carried interest, as fee revenue growth with recent cost reductions drove improvement in segment operating loss.

Three Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

dollars Currency

Revenue $ 143.9 114.5 29.4 26 % 26 %

Gross contract costs (7.5) (7.2) (0.3) 4 4

Fee revenue $ 136.4 107.3 29.1 27 % 28 %

Advisory fees 94.4 98.2 (3.8) (4) (3)

Transaction fees and other 6.2 8.1 (1.9) (23) (19)

Incentive fees 35.8 1.0 34.8 n.m.

Compensation and benefits, excluding gross contract costs $ 84.4 72.2 12.2 17 % 18 %

Operating, administrative and other expenses, excluding gross contract costs 17.1 14.4 2.7 19 20

Depreciation and amortization 2.3 1.8 0.5 28 30

Segment fee-based operating expenses (excluding restructuring & acquisition charges) 103.8 88.4 15.4 17 19

Gross contract costs 7.5 7.2 0.3 4 4

Segment operating expenses $ 111.3 95.6 15.7 16 % 17 %

Equity (losses) earnings $ (5.1) 7.0 (12.1) (173) % (172) %

Adjusted EBITDA $ 29.7 27.8 1.9 7 % 7 %

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Adjusted EBITDA margin (USD basis) 21.8 %

(1) Included in Compensation and benefits expense for JLL Technologies is carried interest expense of $0.7 million and $6.2 million for the first quarter of 2023 and 2022, respectively, related to Equity earnings of the segment.

The increases in JLL Technologies revenue and fee revenue over the prior-year quarter were primarily driven by growth from existing customers, led by solutions and services offerings, especially from large enterprise clients.

Equity earnings in both periods were primarily attributable to net valuation increases of JLL Technologies' investments, largely reflecting subsequent financing rounds at increased per-share values.

The net decreases in segment operating expenses and segment fee-based operating expenses for the quarter, compared with the prior-year quarter, were substantially attributable to lower carried interest expense, as a result of reduced equity earnings, largely offset by revenue-related expense growth.

Fee revenue growth with greater operating efficiencies drove the margin improvement, which was tempered by lower equity earnings, net of carried interest.

Three Months Ended March 31, Change in in Local

LaSalle (continued)

Six Months Ended June 30, Change in in Local

($ in millions) 2023 2022 U.S.

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Segment operating expenses $ 203.8 191.8 12.0 6 % 9 %

Equity losses $ (8.8) (1.9) (6.9) (363) % (358) %

Equity (losses) earnings $ (13.9) 5.1 (19.0) (373) % (372) %

Adjusted EBITDA $ 44.0 49.1 (5.1) (10) % (9) %

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Adjusted EBITDA margin (USD basis) 18.1 %

LaSalle advisory fee growth was concentrated in core open-end funds, primarily in North America and Asia Pacific.

This growth was offset by lower transaction fees attributable to muted deal activity, consistent with global trends in transaction volumes.

The current quarter's equity losses were primarily attributable to valuation declines in the co-investment portfolio.

In addition, the co-investment in a LaSalle-managed publicly-traded REIT in Japan experienced a lower negative share price movement compared with the prior-year quarter.

The net decreases in segment operating expenses and segment fee-based operating expenses for the quarter, on a local currency basis and compared with the prior-year quarter, were primarily driven by lower incentive compensation expense.

The adjusted EBITDA margin contraction was largely attributable to higher equity losses, as additional advisory fee platform scale was offset by lower transaction fees.

As of March 31, 2023, LaSalle had $78.5 billion of AUM, a decrease of 1% in USD (decreased 5% in local currency) from $79.1 billion as of December 31, 2022.

The AUM change resulted from (i) $3.3 billion of dispositions and withdrawals and (ii) $1.6 billion of net valuation decreases, partially offset by (iii) $3.0 billion of foreign currency increases and (iv) $1.3 billion of acquisitions.

For both the second quarter and first half of 2023, LaSalle revenue and fee revenue growth was driven by incentive fees earned on assets managed on behalf of clients, specifically in Japan and United States.

Specific to the quarter, the slightly lower advisory fees were the result of recent valuation declines impacting assets under management.

Advisory fees for the first six months were marginally up compared with 2022.

The equity losses on both a quarter-to-date and year-to-date basis were primarily attributable to net valuation declines in the co-investment portfolio.

For the second quarter and first half of 2023, this decline was partially offset by the co-investment in a LaSalle-managed publicly-traded REIT in Japan, which had a notable negative share price movement in the prior-year periods.

The increases in segment operating expenses and segment fee-based operating expenses for the second quarter and first half of 2023, compared with the prior-year periods, were primarily driven by higher variable compensation expense associated with the increased incentive fees.

The second-quarter adjusted EBITDA margin contraction was primarily attributable to the net equity losses, partially offset by higher incentive fees.

As of June 30, 2023, LaSalle had $78.2 billion of AUM, a decrease of less than 1% in both USD and local currency from $78.5 billion as of March 31, 2023.

The AUM change resulted from (i) $0.8 billion of dispositions and withdrawals, (ii) $0.5 billion of net valuation decreases and (iii) $0.1 billion of foreign currency increases, partially offset by (iv) $1.1 billion of acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows from Operating Activities

Operating activities used $716.3 million of cash in the first three months of 2023, compared with $716.4 million of cash used in operating activities during the same period in 2022.

This relatively consistent cash flows used in operating activities was primarily due to lower incentive compensation and commission payments in 2023, compared with 2022, and incremental cash inflow associated with trade receivables, offset by (i) a decline in cash provided by earnings (largely driven by the Capital Markets and Markets Advisory change in business performance), (ii) an additional pay period in the current quarter, and (iii) incremental cash outflow associated with net reimbursables, due to continued growth in Workplace Management over the last four quarters.

Operating activities used $479.3 million of cash in the first six months of 2023, compared with $539.4 million of cash used in operating activities during the same period in 2022.

The year-over-year decrease in cash used in operating activities was primarily due to (i) lower incentive compensation and commission payments in 2023, compared with 2022, (ii) incremental cash inflow associated with trade receivables and (iii) $98.5 million of lower cash taxes paid compared with last year.

This is partially offset by lower cash provided by earnings, largely attributable to the change in business performance for Capital Markets and Markets Advisory.

Cash Flows from Investing Activities

We used $74.0 million of cash for investing activities during the first three months of 2023, as compared to $94.0 million used during the same period in 2022.

The net decrease in cash used for investing activities was primarily due no investment activity in 2023 relating to less than wholly-owned subsidiaries.

In the prior year, we funded $12.0 million net capital additions related to these consolidated VIEs.

We used $160.7 million of cash for investing activities during the first six months of 2023, compared with $63.1 million used during the same period in 2022.

The prior year included $137.0 million of net capital proceeds relating to less than wholly-owned subsidiaries that did not recur in 2023.

In addition, there were less net capital contributions to investments in the first half of 2023 compared with 2022.

Cash Flows from Financing Activities

Financing activities provided $775.3 million of cash during the first three months of 2023, as compared to $806.5 million provided during the same period in 2022.

The net decrease of $31.2 million in cash inflows from financing activities is substantially driven by a decrease in borrowings on our Facility.

This decrease in borrowings was a product of lower cash needed for incentive compensation payments in the first quarter of 2023, as discussed above, as well as no share repurchases in the first quarter of 2023.

In the prior-year quarter, we paid $150.0 million for share repurchases.

Financing activities provided $503.9 million of cash during the first six months of 2023, compared with $601.3 million provided during the same period in 2022.

The net decrease of $97.4 million in cash inflows from financing activities substantially driven by a decrease in net borrowings on our Facility.

This decrease in borrowings against the prior year was a product of lower incentive compensation payments in the first quarter of 2023 as well as less share repurchases in the first half of 2023 (refer to the Share Repurchases section below).

Finally, the 2022 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 in the first half of 2022 (offsetting the net capital proceeds from less than wholly-owned subsidiaries noted in cash flows from investing activities).

Our $3.35 billion Facility matures on April 14, 2026 and bears a variable interest rate.

As of March 31, 2023, we had outstanding borrowings under the Facility of $2,089.7 million versus $1,213.8 million as of December 31, 2022.

The average outstanding borrowings under our credit facilities were $1,719.9 million and $683.2 million (with average effective interest rates of 5.4% and 1.0%) during the three months ended March 31, 2023 and 2022, respectively.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $104.3 million and $164.2 million as of March 31, 2023 and December 31, 2022, respectively.

In addition to our Facility, we had the capacity to borrow up to $54.8 million under local overdraft facilities as of March 31, 2023.

As of June 30, 2023, we had outstanding borrowings under the Facility of $1,840.5 million versus $1,213.8 million as of December 31, 2022.

The average outstanding borrowings under our credit facilities were $2,315.8 million and $1,581.9 million (with average effective interest rates of 5.9% and 1.6%) during the three months ended June 30, 2023 and 2022, respectively, and $2,019.5 million and $1,135.0 million (with average effective interest rates of 5.7% and 1.4%) during the six months ended June 30, 2023 and 2022, respectively.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $112.1 million and $164.2 million as of June 30, 2023 and December 31, 2022, respectively.

In addition to our Facility, we had the capacity to borrow up to $53.8 million under local overdraft facilities as of June 30, 2023.

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.

1 unchanged sentence

Investment Activity

As of March 31, 2023, we had a carrying value of $896.0 million in investments, primarily related to investments by JLL Technologies in early to mid-stage proptech companies as well as proptech funds, and LaSalle co-investments.

For the three months ended March 31, 2023 and 2022, funding of investments exceeded return of capital by $23.6 million and $30.9 million, respectively.

As of June 30, 2023, we had a carrying value of $872.7 million in investments, primarily related to investments by JLL Technologies in early to mid-stage proptech companies as well as proptech funds, and LaSalle co-investments.

For the first half of 2023 and 2022, funding of investments exceeded return of capital by $53.5 million and $108.3 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.

1 unchanged sentence

Capital Expenditures

Net capital additions for the three months ended March 31, 2023 and 2022 were $49.3 million and $46.6 million, respectively.

Net capital additions for the six months ended June 30, 2023 and 2022 were $88.2 million and $86.9 million, respectively.

Our capital expenditures in 2023 were primarily for purchased/developed software and leased office space improvements.

Business Acquisitions

During the three months ended March 31, 2023, we paid $13.8 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.

We completed no business acquisitions in the three months ended March 31, 2023.

During the six months ended June 30, 2023, we paid $35.6 million for business acquisitions.

This included $13.6 million of payments relating to acquisitions in 2023 and $22.0 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 $12.9 million as of March 31, 2023.

Deferred business acquisition obligations totaled $14.9 million as of June 30, 2023.

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, 2023, we had the potential to make earn-out payments for a maximum of $113.2 million on 16 completed acquisitions subject to the achievement of certain performance conditions.

As of June 30, 2023, we had the potential to make earn-out payments for a maximum of $105.0 million on 16 completed acquisitions subject to the achievement of certain performance conditions.

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

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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.

as described above, this repurchase program was suspended in late 2022.

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

Three Months Ended March 31,

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) 2023 2022 2023 2022

1 unchanged sentence

Total paid for shares repurchased $ 20.0 297.7 $ 20.0 447.7

As of March 31, 2023, $1,155.6 million remained authorized for repurchases under our share repurchase program.

As of June 30, 2023, $1,135.6 million remained authorized for repurchases under our share repurchase program.

Repatriation of Foreign Earnings

1 unchanged sentence

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

As of March 31, 2023 and December 31, 2022, we had total cash and cash equivalents of $485.4 million and $519.3 million, respectively, of which approximately $387.9 million and $400.8 million, respectively, was held by foreign subsidiaries.

As of June 30, 2023 and December 31, 2022, we had total cash and cash equivalents of $402.5 million and $519.3 million, respectively, of which approximately $299.6 million and $400.8 million, respectively, was held by foreign subsidiaries.

Restricted Net Assets

1 unchanged sentence

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, 2023 and December 31, 2022.

The assets of these countries aggregated to approximately 4% of our total assets as of both June 30, 2023 and December 31, 2022.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

7 unchanged sentences

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