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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-28 · 146 added, 397 removed, 435 unchanged (56% 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, 2023 and 2022 and the comparison between these years.

Discussions of results for the year ended December 31, 2021 and comparisons between 2022 and 2021 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, 202 2 .

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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◦ Loan Servicing

◦ Valuation Advisory

◦ Value and Risk Advisory

• Work Dynamics

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

Some of the contractual terms related to the services we provide, and thus the revenue we recognize, can be complex and so requires us to make judgments about our performance obligations and the timing and extent of revenue to recognize.

Some of the contractual terms related to the services we provide, and thus the revenue we recognize, can be complex, requiring us to make judgments about our performance obligations and the timing and extent of revenue to recognize.

In addition, a significant portion of our revenue represents the reimbursement of costs we incur on behalf of clients.

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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.

We reassessed our reporting units as of January 1, 2022, the effective date of our current organizational structure, 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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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 Ventures Funds.

Generally, we account for these investments at fair value.

We account for these investments at fair value.

Where applicable, we estimate fair value of our investments using the net asset value ("NAV") per share (or its equivalent) our investees provide.

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Subsequent funding rounds or changes in the companies' business strategy/outlook are indicators of a change in fair value.

For all investments reported at fair value, our investment is increased or decreased each reporting period by the difference between the fair value of the investment and the carrying value as of the balance sheet date.

The fair value of certain investments is estimated using significant unobservable inputs which requires judgment due to the absence of market data.

In determining the estimated fair value of these investments, we utilize appropriate valuation techniques including discounted cash flow analyses, scorecard method, Black-Scholes models and other methods as appropriate.

Key inputs include projected cash flows, discount rates, peer group multiples and volatility.

For all investments reported at fair value, other than such investments where the measurement alternative has been elected, our investment is increased or decreased each reporting period by the difference between the fair value of the investment and the carrying value as of the balance sheet date.

We reflect these fair value adjustments as gains or losses on the Consolidated Statements of Comprehensive Income within Equity earnings.

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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 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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Our global effective tax rate is sensitive to the complexity of our operations as well as to changes in the mix of our geographic profitability.

Local statutory tax rates range from 0% to 38.1% in the countries in which we have significant operations.

We evaluate our estimated effective tax rate on a quarterly basis to reflect forecast changes in our geographic mix of income and legislative actions on statutory tax rates.

We provide for the effects of income taxes on interim financial statements based on our estimate of the effective tax rate for the full year.

Our effective tax rate was 20.2%, 21.6% and 20.2% for the year ended December 31, 2022, 2021, and 2020, respectively.

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 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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Alternatively, we reduce valuation allowances upon (i) specific indications the carrying value of the related tax asset is more-likely-than-not recoverable or (ii) the implementation of tax planning strategies which allow an asset we previously determined to be not realizable to be viewed as realizable.

The table below summarizes certain information regarding the gross deferred tax assets and valuation allowance.

(in millions) 2022 2021

Gross deferred tax assets $ 737.1 708.6

Valuation allowance 120.8 128.8

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.

Estimations and judgments relevant to the determination of tax expense, assets, and liabilities require analysis of the tax environment and the future profitability, for tax purposes, of local statutory legal entities rather than business segments.

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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.

We believe it is reasonably possible that matters for which we have recorded $46.2 million of unrecognized tax benefits as of December 31, 2022, will be resolved during 2023.

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.

In situations where we believe that there may be uncertainty with respect to the recognition of tax benefits, we provide reserves for those benefits.

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 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.

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

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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

Transaction-Based Revenues and Equity Earnings

Transaction-based revenues are impacted by the size and timing of our clients' transactions.

Such revenues include investment sales and other capital markets activities, agency and tenant representation leasing transactions, incentive fees, and other services/offerings, increase the variability of the revenue we earn.

Specifically for LaSalle, the magnitude and timing of recognition of incentive fees are driven by one or a combination of the following:

changes in valuations of the underlying investments;

dispositions of managed assets;

and the contractual measurement periods with clients.

The timing and the magnitude of transaction-based revenues can vary significantly from year to year and quarter to quarter, and also vary geographically.

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.

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

Depending upon performance, disposition activity and the contractual timing of measurement periods with clients, these fees can be significant and may vary substantially from period to period.

The comparability of these items can be seen in Note 3, Business Segments, of the Notes to Consolidated Financial Statements, included in Item 8, and is discussed further in Segment Operating Results included herein.

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Consequently, we provide information about the impact of foreign currencies in the period-to-period comparisons of the reported results of operations in our discussion and analysis of financial condition in the Results of Operations section below.

Transaction-Based Revenue

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

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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Our overall interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.

We are primarily exposed to interest rate risk on our Facility, which had a borrowing capacity of $3.35 billion as of December 31, 2022.

We are primarily exposed to interest rate risk on our Facility, which had a maximum borrowing capacity of $3.30 billion as of December 31, 2023.

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

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

We had $610.6 million of outstanding borrowings, net of debt issuance costs, under the Facility as of December 31, 2023.

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

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

In November 2023, we issued and sold $400.0 million of senior unsecured notes due December 2028 which bear interest at a fixed annual rate of 6.875%.

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 fixed annual rates of 1.96% and 2.21%, respectively.

The issuance of the senior notes and 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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Our revenue from outside of the U.S.

approximated 41% and 42% of our total revenue for 2022 and 2021, respectively, as outlined in the table below.

approximated 41% of our total revenue for both 2023 and 2022, as outlined in the table below.

Operating in international markets means we are exposed to movements in foreign exchange rates, most significantly the British pound and the euro.

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Australian dollar 1,036.9 5.0 1,183.0 5.7

Canadian dollar 593.8 2.8 508.3 2.6

Indian rupee 661.4 3.2 591.0 2.8

Canadian dollar 613.8 3.0 593.8 2.8

Hong Kong dollar 544.8 2.6 532.3 2.6

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Had euro-to-U.S.

dollar exchange rates been 10% higher throughout the course of 2022, we estimate our reported operating income would have increased by $6.1 million.

dollar exchange rates been 10% higher throughout the course of 2023, we estimate our reported operating income would have decreased by $0.3 million.

These hypothetical calculations estimate the impact of translating results into U.S.

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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.

For example, we experienced disruption to our historical seasonality trends due to rising interest rates and widespread economic uncertainty in 2022 and 2023.

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

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

The impacts of inflation, including wage inflation, continue to be noticeable in our results.

RESULTS OF OPERATIONS

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

• 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.

"Greater China":

China, Hong Kong, Macau and Taiwan.

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.

• Net income margin attributable to common shareholders is measured on Revenue and Adjusted EBITDA margin is measured on Fee revenue.

• We define "Resilient" revenue as (i) Property Management, within Markets Advisory, (ii) Value and Risk Advisory, and Loan Servicing, within Capital Markets, (iii) Workplace Management, within Work Dynamics, (iv) JLL Technologies, and (v) Advisory Fees, within LaSalle.

In addition, we define "Transactional" revenue as (i) Leasing and Advisory, Consulting and Other, within Markets Advisory, (ii) Investment Sales, Debt/Equity Advisory and Other, within Capital Markets, (iii) Project Management and Portfolio Services and Other, within Work Dynamics, and (iv) Incentive fees and Transaction fees and other, within LaSalle.

Year Ended December 31, 2023 compared with Year Ended December 31, 2022

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Operating income $ 576.5 868.1 (291.6) (34) % (33) %

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

Equity (losses) earnings $ (194.1) 51.0 (245.1) (481) % (480) %

Adjusted EBITDA $ 736.7 1,247.3 (510.6) (41) % (40) %

Net income margin attributable to common shareholders (USD basis) 1.1 % 3.1 % (200) bps n/a

Adjusted EBITDA margin (local currency basis) 10.0 % 15.0 % (500) bps (500) bps

Adjusted EBITDA margin (USD basis) 10.0 %

Non-GAAP Financial Measures

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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 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.

In 2023, we recorded a $0.5 million net loss, versus a $7.5 million net loss in 2022.

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

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Operating income $ 576.5 868.1

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).

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

Year Ended December 31,

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Interest expense, net of interest income 135.4 75.2

Provision for income taxes 200.8 264.3

Income tax provision 25.7 200.8

Depreciation and amortization (1)

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Restructuring and acquisition charges 100.7 104.8

Net loss (gain) on disposition 7.5 (12.4)

Net loss on disposition 0.5 7.5

Net non-cash MSR and mortgage banking derivative activity 18.2 (11.0)

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Adjusted EBITDA $ 736.7 1,247.3

Net income margin attributable to common shareholders 3.1 % 5.0 %

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.

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At comparative period exchange rates $ 744.2 (40) %

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).

For the full year, revenue was flat and fee revenue decreased 11% compared with the prior year, as transaction-based businesses lagged the prior year.

Resilient businesses, collectively, delivered 5% growth for the full year, as Property Management, within Markets Advisory, grew 11%;

Workplace Management, within Work Dynamics, grew 7%;

and JLL Technologies grew 16%.

In contrast, transaction-based businesses, notably Investment Sales and Debt Advisory within Capital Markets as well as Leasing within Markets Advisory, experienced challenges from a rapid increase in interest rates and negative economic sentiment, consistent with performance starting in the second half of 2022.

The following highlights Revenue and fee revenue by segment, for the current and prior year ($ 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%.

Operating expenses increased 1% to $20.2 billion in 2023 while fee-based operating expenses were $6.8 billion in 2023, down 8% from prior year.

The net increase in operating expenses was driven by growth in resilient businesses, such as Workplace Management and Property Management, including associated reimbursed expenses.

The decline in fee-based operating expenses was attributable to Capital Markets, which represented 65% of the decrease on a local currency basis, Markets Advisory, which represented 46% of the decrease, and JLL Technologies, which represented 7% of the decrease.

These were partially offset by Work Dynamics, which had an increase in fee-based operating expenses.

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;

Restructuring and acquisition charges in 2023 were slightly lower than 2022;

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

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Restructuring, pre-acquisition and post-acquisition charges 43.0 63.6

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.

Fair value adjustments that resulted in a net decrease to earn-out liabilities from prior-period acquisition activity (4.4) (3.3)

Restructuring and acquisition charges $ 100.7 104.8

The increase in severance and other employment-related charges, compared with 2022, reflected notable cost mitigation actions taken across the globe in 2023.

The decrease in restructuring and pre- and post-acquisition charges was largely driven by lower retention-related post-acquisition charges and fewer restructuring costs related to business exits in 2023 compared to 2022.

Interest Expense

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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 following details Equity (losses) earnings by relevant segment.

Refer to the segment discussions for additional details.

Year Ended December 31,

(in millions) 2023 2022

JLL Technologies $ (177.0) 46.6

LaSalle (24.7) 0.4

Other 7.6 4.0

Equity (losses) earnings $ (194.1) 51.0

The provision for income taxes was $25.7 million and $200.8 million for the years ended December 31, 2023 and 2022, respectively, representing effective tax rates ("ETR") of 10.2% and 20.2%, respectively.

The meaningfully lower ETR in 2023 was primarily attributable to the significant decline in pre-tax earnings as well as the geographic mix of income.

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.

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Adjusted EBITDA margin, calculated on a fee revenue basis, was 10.0% in both USD and local currency for 2023, compared with 15.0% in 2022.

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.

The full-year margin contraction was primarily attributable to the $245.1 million decrease in equity earnings, which comprised nearly two-thirds of the margin decline, and the impact of lower transaction-based revenue.

Partially offsetting these items were margin accretive drivers including resilient revenue growth and the benefit of cost reduction actions executed in the last year.

Segment Operating Results

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

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 Capital Markets service offerings include investment sales, debt and equity advisory, value and risk advisory, and loan servicing.

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.

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

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Segment operating expenses $ 3,769.7 3,967.5 (197.8) (5) % (4) %

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

Equity losses $ (0.5) (0.3) (0.2) (67) % (51) %

Adjusted EBITDA $ 416.6 527.5 (110.9) (21) % (21) %

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.

Adjusted EBITDA margin (local currency basis) 14.1 % 15.7 % (170) bps (160) bps

Adjusted EBITDA margin (USD basis) 14.0 %

Markets Advisory top-line movements were largely driven by Leasing and reflected a decrease in average deal size and lower transaction volumes across nearly all asset classes, especially the office sector.

Economic uncertainty has delayed commercial real estate decision making, particularly for large-scale leasing actions where JLL has a greater presence.

Property Management continued to achieve top-line growth, primarily attributable to portfolio expansions, predominantly in the Americas, and incremental fees from interest-rate-sensitive contract terms in the U.K.

The decrease in Advisory, Consulting and Other was substantially driven by the absence of revenues associated with a business exited at the end of the fourth quarter of 2022.

The decreases in segment operating expenses and segment fee-based operating expenses in 2023 were driven primarily by (i) lower commissions, commensurate with the top-line performance, (ii) the absence of operating costs associated with the business exited at the end of 2022 (referenced in the revenue narrative above) and (iii) the benefit associated with cost management actions executed over the last year to reduce expenses.

These decreases were partially offset by higher annual incentive compensation expense this year as the prior-year results reflected a company-wide discretionary reduction to annual incentive compensation accruals.

Adjusted EBITDA margin contraction was predominantly driven by the lower Leasing revenue (net of lower commissions) and higher incentive compensation accruals in the current year, which overshadowed the revenue growth in Property Management and benefit associated with cost management actions discussed above.

Capital Markets

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Investment Sales, Debt/Equity Advisory and Other 1,245.0 1,906.7 (661.7) (35) (35)

Valuation Advisory 365.6 359.8 5.8 2 9

Value and Risk Advisory 351.1 365.6 (14.5) (4) (3)

Loan Servicing 152.6 157.9 (5.3) (3) (3)

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Adjusted EBITDA $ 173.1 444.0 (270.9) (61) % (61) %

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.

Adjusted EBITDA margin (local currency basis) 9.9 % 18.3 % (840) bps (840) bps

Adjusted EBITDA margin (USD basis) 9.9 %

Lower Capital Markets revenue and fee revenue reflected the meaningful drop in transaction volumes compared with 2022.

The rapid rise in interest rates and elevated uncertainty prolonged investor decision making and drove wide bid-ask spreads.

This impact was most pronounced in Investment Sales and Debt/Equity Advisory, which experienced declines across all asset classes and geographies.

Globally, fourth-quarter market volumes for investment sales were down 23% in USD (24% in local currency) according to JLL Research, the lowest fourth quarter since 2011.

Loan Servicing continued to achieve growth in fees generated by the Fannie Mae DUS portfolio as core servicing fees were up 6%, more than offset by $13.4 million of lower prepayment fees as refinancing activity remained suppressed.

The net decreases in segment operating expenses and segment fee-based operating expenses in 2023 were driven primarily by lower commissions, commensurate with the top-line performance, and to the benefit of cost management strategies actioned in the last year.

These decreases were partially offset by higher incentive bonus expense in 2023, primarily reflecting the benefit to the prior year associated with the company-wide discretionary reduction to annual incentive compensation accruals.

The margin contraction was predominantly driven by the decline in Investment Sales and Debt/Equity Advisory revenue, net of lower commissions expense, as well as incentive compensation accruals, as described above.

Work Dynamics

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Adjusted EBITDA $ 264.0 230.1 33.9 15 % 14 %

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.

Adjusted EBITDA margin (local currency basis) 13.1 % 12.3 % 90 bps 80 bps

Adjusted EBITDA margin (USD basis) 13.2 %

Work Dynamics revenue and fee revenue growth was broad-based across service lines and geographies, led by strong performance in Workplace Management as recent wins and mandate expansions ramped up in the second half of the year.

Momentum from increased project demand drove Project Management top-line expansion throughout 2023, though the pace of growth decelerated in the fourth quarter.

The net increases in segment operating expenses and segment fee-based operating expenses in 2023 were primarily due to higher revenue-related expenses, which correlated to the overall growth in revenue as the benefit of cost management actions executed over the last year largely offset other operating expense increases.

Margin expansion was driven by the Workplace Management and Project Management revenue growth and the reduction of certain expenses associated with cost management actions over the last year.

JLL Technologies

12 unchanged sentences

Segment operating expenses $ 281.4 326.8 (45.4) (14) % (14) %

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

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 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.

Our consolidated revenue increased 17% in U.S.

dollars and 15% on a local currency basis, compared with 2020, while consolidated fee revenue increased 32% in U.S.

dollars and 31% on a local currency basis, compared with 2020.

The spread between 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 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 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 lower Restructuring and acquisition charges;

refer to the following table and commentary for additional detail.

Year ended December 31,

(in millions) 2021 2020

Severance and other employment-related charges $ 14.3 69.0

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

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 the prior year, reflected notable cost mitigation actions taken across the globe in response to the pandemic in 2020.

Interest Expense

Interest expense, net of interest income, for 2021 was $40.1 million, down from $52.8 million in 2020.

The decrease was driven by a lower effective interest rate on our Facility and a year-over-year reduction in the average outstanding borrowings.

The average outstanding borrowings under our Facility decreased to $432.0 million, with an average effective interest rate of 0.94% in 2021, from $865.1 million, with an average effective interest rate of 1.60% during 2020.

Equity Earnings

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

Valuation increases related to JLL Technologies' investments resulted in $140.7 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.

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.

Net Income and Adjusted EBITDA

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.

Net income margin attributable to common shareholders was 5.0% in 2021 up from 2.4% in the prior year.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 18.7% in USD for 2021 (18.8% in local currency), compared with 14.2% last year.

The 450 basis point margin expansion was primarily driven by the significant increase in revenue, particularly from higher margin transaction-based service lines, as well as higher equity earnings, as noted above.

These drivers were partially offset by the expected reduction of certain non-permanent cost savings from 2020 and incremental investments in people and technology.

Segment Operating Results

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) 2021 2020 U.S.

dollars Currency

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

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

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

Leasing 2,598.5 1,732.3 866.2 50 49

Property Management 478.7 453.4 25.3 6 3

Advisory, Consulting and Other 124.5 111.8 12.7 11 8

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 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 $ 3,717.7 2,923.8 793.9 27 % 26 %

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

Adjusted EBITDA $ 546.5 337.8 208.7 62 % 61 %

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.

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 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

($ in millions) 2021 2020 U.S.

dollars Currency

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

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 %

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 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 $ 2,082.9 1,518.4 564.5 37 % 35 %

Equity earnings $ 4.9 1.4 3.5 250 % 236 %

Adjusted EBITDA $ 543.2 247.8 295.4 119 % 115 %

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

($ in millions) 2021 2020 U.S.

dollars Currency

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

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 %

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 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 $ 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) %

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

($ in millions) 2021 2020 U.S.

dollars Currency

Revenue $ 166.2 156.1 10.1 6 % 6 %

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.

Equity (losses) earnings $ (177.0) 46.6 (223.6) (480) % (480) %

Adjusted EBITDA $ (196.1) (50.9) (145.2) (285) % (286) %

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.

Adjusted EBITDA margin (local currency basis) (84.9) % (25.4) % (5,920) bps (5,950) bps

Adjusted EBITDA margin (USD basis) (84.6) %

(1) Included in Compensation and benefits expenses for JLL Technologies is a reduction in carried interest expense of $13.8 million for the twelve months ended December 31, 2023, and carried interest expense of $16.6 million for the twelve months ended December 31, 2022, related to Equity earnings of the segment.

The full-year increases in JLL Technologies revenue and fee revenue were primarily due to growth in services and software solutions, largely from existing enterprise clients, as well as a modest increase from subscriptions.

Equity losses in 2023 were largely driven by fair value declines and reflected the particularly challenging economic environment for venture capital companies.

Equity earnings in 2022 were attributable to modest valuation increases across several investments, offset by less significant impairments/valuation declines compared with 2023.

Lower segment operating expenses and segment fee-based operating expenses in 2023 were largely driven by (i) a $30.4 million year-over-year difference associated with carried interest expense (which broadly correlates to equity earnings/losses), given the reduction in carried interest expense in 2023 compared with incremental expense in 2022 and (ii) the reduction of certain expenses associated with cost management actions over the last year.

The full-year margin contraction was entirely driven by the equity losses, partially offset by (i) fee revenue growth, (ii) the reduction in carried interest expense (associated with equity losses) and (iii) the reduction of certain expenses associated with cost management actions and improved operating efficiency over the last year.

Year Ended December 31, Change in in Local

13 unchanged sentences

Segment operating expenses $ 388.3 385.9 2.4 1 % 1 %

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

Equity (losses) earnings $ (24.7) 0.4 (25.1) n.m.

Adjusted EBITDA $ 79.1 96.6 (17.5) (18) % (17) %

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 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.

The increases in 2021 segment operating expenses and segment fee-based operating expenses, compared with 2020, were primarily driven by compensation expense related to the higher incentive fees, deferred variable compensation expenses associated with the run-off of a previous compensation program, and incremental investments in people and technology.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 36.1% in USD (36.3% in local currency) for 2021, compared with 19.8% in 2020.

The significant margin expansion was largely driven by higher equity earnings and incentive fees, partially offset by the expense drivers noted above.

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) $7.6 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.

Adjusted EBITDA margin (local currency basis) 17.5 % 21.6 % (420) bps (410) bps

Adjusted EBITDA margin (USD basis) 17.4 %

LaSalle's top-line growth was fueled by higher incentive fees earned on asset dispositions on behalf of clients, following muted transaction volume in 2022.

Advisory fees were stable compared to the prior year as increases from capital raising were largely offset by valuation declines impacting AUM.

Lower transaction fees reflected the global trends in investment sales transaction volumes.

The 2023 equity losses were primarily attributable to valuation declines in the co-investment portfolio.

Adjusted EBITDA margin contraction was primarily driven by equity losses in the current year (over 500 basis point negative impact to margin), partially offset by higher incentive fees.

As of December 31, 2023, LaSalle had $73.9 billion of AUM, a decrease of 7% in both USD and local currency from

$79.1 billion as of December 31, 2022.

The net decrease in AUM during the year resulted from (i) $5.7 billion of dispositions and withdrawals and (ii) $4.0 billion of net valuation decreases, partially offset by (iii) $4.0 billion of acquisitions and $0.5 billion of foreign currency increases.

As further described in Item 1, LaSalle will refine the definition of AUM in 2024 to conform with industry standards.

Under the new definition, AUM as of December 31, 2023 would have been $89.0 billion.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

Operating activities provided $575.8 million of cash in 2023, compared with $199.9 million provided in 2022.

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.

The improvement in cash provided was primarily due to (i) improved collection of receivables (ii) $162.8 million less in cash taxes paid, (iii) lower annual incentive compensation payments, typically paid in the first quarter, compared with the prior year and (iv) lower commission payments in 2023.

Cash Flows from Investing Activities

We used $290.4 million of cash for investing activities during 2023, compared with $243.1 million used in 2022.

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.

Net cash outflow was lower in 2022 due to the receipt of $132.4 million net capital proceeds relating to an investment by a less than wholly-owned subsidiary (offset within cash flows from financing activities as noted below).

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

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Financing activities used $374.3 million of cash during 2023, compared with $13.1 million used during 2022.

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 decrease in net borrowings on our Facility ($600.0 million net paydowns in 2023 versus $1,075.0 million of net borrowings in 2022) was driven by lower share repurchases (refer to the Share Repurchases section below) and higher cash provided by operating activities.

In addition, the $400.0 million in proceeds associated with the issuance of senior notes was used to pay down the Facility.

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.

On November 3, 2023, we amended our Facility to extend the maturity date to November 3, 2028 as well as update our borrowing capacity to $3.30 billion.

Our Facility continues to bear a variable rate of interest.

Outstanding borrowings, including the balance of the Facility and Short-term borrowings (financing lease obligations, overdrawn bank accounts and local overdraft facilities) are presented below.

(in millions) 2023 2022

Outstanding borrowings under the Facility $ 625.0 1,225.0

Short-term borrowings 147.9 164.2

In addition to our Facility, we had the capacity to borrow up to $55.2 million under local overdraft facilities as of December 31, 2023.

The following table provides additional information on our Facility as well as our uncommitted credit agreement ("Uncommitted Facility"), which allows for discretionary short-term liquidity of up to $400.0 million, collectively.

Year Ended December 31,

($ in millions) 2023 2022

Average outstanding borrowings $ 1,875.9 1,399.1

Average effective interest rate 5.9 % 2.9 %

As of December 31, 2023, 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.

During 2023, we issued $400.0 million of Senior Notes due December 2028 with a fixed interest rate of 6.875% and used the proceeds to pay down our Facility.

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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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.

As of December 31, 2023, $1,093.6 million remained authorized for repurchases under our repurchase program.

The following table outlines share repurchase activity for the last two year.

Year Ended December 31,

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Total paid for shares repurchased $ 62.0 601.2

As of December 31, 2022, $1,155.6 million remained authorized for repurchases under our share repurchase program.

Capital Expenditures

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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 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.

Net capital proceeds related to consolidated VIEs in which we held no equity interest were $134.8 million in 2022, as a result of a reconsideration event.

The distribution of proceeds from the sale of this investment (the initial acquisition of which was largely funded from employee-investors and related third-party debt) also occurred in 2022 and is included within financing activities.

Business Acquisitions

In 2023, we paid $40.4 million for business acquisitions.

This included $5.7 million of payments relating to acquisitions that closed in 2022 and $18.1 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.

This included $13.6 million of payments relating to an acquisition that closed in 2023 and $26.8 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.

Terms for our acquisitions have typically included cash paid at closing with provisions for additional consideration and earn-out payments subject to certain contract provisions and performance.

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What changed 10-K

Item 7. Management’s Discussion and Analysis