Item 2. Management’s Discussion and Analysis
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, for the three and six months ended June 30, 2024, and our audited Consolidated Financial Statements, including the notes thereto, for the fiscal year ended December 31, 2023, which are included in our 2023 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. Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Annual Report on Form 10-K.
The following discussion and analysis contains certain forward-looking statements generally identified by the words anticipates, believes, estimates, expects, forecasts, plans, intends and other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause JLL's actual results, performance, achievements, plans and objectives to be materially different from any future results, performance, achievements, plans and objectives expressed or implied by such forward-looking statements. See the Cautionary Note Regarding Forward-Looking Statements included within this section for further information.
We present our quarterly Management's Discussion and Analysis in the following sections:
(1) A summary of our critical accounting policies and estimates;
(2) Certain items affecting the comparability of results and certain market and other risks we face;
(3) The results of our operations, first on a consolidated basis and then for each of our business segments; and
(4) Liquidity and capital resources.
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
An understanding of our accounting policies is necessary for a complete analysis of our results, financial position, liquidity and trends. See Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in our 2023 Annual Report on Form 10-K for a complete summary of our significant accounting policies.
The preparation of our financial statements requires management to make certain critical accounting estimates and judgments that impact (i) the stated amount of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the date of the financial statements and (iii) the reported amount of revenue and expenses during the reporting periods. These accounting estimates are based on management's judgment. We consider them to be critical because of their significance to the financial statements and the possibility that future events may differ from current judgments or that the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to ensure reasonableness. Although actual amounts likely differ from such estimated amounts, we believe such differences are not likely to be material.
A discussion of our critical accounting policies and estimates used in the preparation of our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q 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, 2023. There have been no material changes to these critical accounting policies and estimates during the six months ended June 30, 2024.
ITEMS AFFECTING COMPARABILITY
Macroeconomic Conditions
Our results of operations and the variability of these results are significantly influenced by (i) macroeconomic trends, (ii) the geopolitical environment, (iii) the global and regional real estate markets and (iv) the financial and credit markets. 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.
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Acquisitions and Dispositions
The timing of acquisitions and dispositions may impact the comparability of our results on a year-over-year basis. Our results include incremental revenues and expenses following the completion date of an acquisition. Relating to dispositions, comparable results will include the revenues and expenses of recent dispositions and results may also include gains (losses) on the disposition. In addition, there is generally an initial adverse impact on net income from an acquisition as a result of pre-acquisition due diligence expenditures, transaction/deal costs and post-acquisition integration costs, such as fees from third-party advisors engaged to assist with onboarding and process alignment, retention and severance expense, early lease termination costs and other integration expenses. For dispositions, we may also incur such incremental costs during the disposition process and these costs could have an adverse impact on net income.
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.
The comparability of these items can be seen in Note 4, Business Segments, of the Notes to Consolidated Financial Statements and is discussed further in Segment Operating Results included herein.
Foreign Currency
We conduct business using a variety of currencies, but we report our results in U.S. dollars. As a result, the volatility of currencies against the U.S. dollar may positively or negatively impact our results. This volatility can make it more difficult to perform period-to-period comparisons of the reported U.S. dollar results of operations, because such results may indicate a growth or decline rate that might not have been consistent with the real underlying growth or decline rates in the local operations. 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.
Seasonality
Historically, we have reported a relatively smaller revenue and profit in the first quarter with both measures increasing each of the following three quarters. This is a result of a general focus in the real estate industry on completing or documenting transactions by calendar year end and the fact that certain expenses are constant through the year. Our seasonality excludes the recognition of investment-generated performance fees and realized and unrealized investment equity earnings and losses. Specifically, we recognize incentive fees when assets are sold or as a result of valuation increases in the portfolio, the timing of which may not be predictable or recurring. In addition, investment equity gains and losses are primarily dependent on valuations of underlying investments, and the direction and magnitude of changes to such valuations are not predictable. Non-variable operating expenses, which we treat as expenses when incurred during the year, are relatively constant on a quarterly basis. Other factors may affect seasonality. For example, we experienced disruption to our historical seasonality trends due to rising interest rates and widespread economic uncertainty in 2022 and 2023.
A significant portion of our Compensation and benefits expense is from incentive compensation plans, which we generally accrue throughout the year based on progress toward annual performance targets. This quarterly estimation can result in significant fluctuations in quarterly Compensation and benefits expense from period to period. Consequently, the results for the periods ended June 30, 2024 and 2023 are not fully indicative of the results we expect to realize for the full fiscal year.
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RESULTS OF OPERATIONS
Definitions
• Assets under management data for LaSalle is reported on a one-quarter lag.
• n.m.: not meaningful, represented by a percentage change of greater than 1,000%, favorable or unfavorable.
• 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.
• Gross contract costs represent certain costs associated with client-dedicated employees and third-party vendors and subcontractors and are directly or indirectly reimbursed through the fees we receive. These costs are presented on a gross basis in Operating expenses (with the corresponding fees in Revenue).
• We define "Greater China" as China, Hong Kong, Macau and Taiwan.
Consolidated Operating Results
Three Months Ended June 30, Change in % Change in Local Currency
($ in millions) 2024 2023 U.S. dollars
Markets Advisory $ 1,078.8 1,025.4 53.4 5 % 6 %
Capital Markets 457.6 448.0 9.6 2 3
Work Dynamics 3,933.3 3,374.6 558.7 17 17
JLL Technologies 56.4 60.6 (4.2) (7) (7)
LaSalle 102.6 143.9 (41.3) (29) (27)
Revenue $ 5,628.7 5,052.5 576.2 11 % 12 %
Platform compensation and benefits $ 1,330.8 1,332.5 (1.7) — % — %
Platform operating, administrative and other expenses 324.3 293.3 31.0 11 11
Depreciation and amortization 62.3 59.9 2.4 4 5
Total platform operating expenses 1,717.4 1,685.7 31.7 2 2
Gross contract costs 3,747.4 3,205.8 541.6 17 18
Restructuring and acquisition charges 11.5 11.8 (0.3) (3) (2)
Total operating expenses $ 5,476.3 4,903.3 573.0 12 % 12 %
Operating income $ 152.4 149.2 3.2 2 % 4 %
Equity losses $ (15.4) (103.5) 88.1 85 % 85 %
Net non-cash MSR and mortgage banking derivative activity $ (11.8) (0.6) (11.2) n.m. n.m.
Adjusted EBITDA $ 246.3 225.1 21.2 9 % 11 %
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Consolidated Operating Results (continued)
Six Months Ended June 30, Change in % Change in Local Currency
($ in millions) 2024 2023 U.S. dollars
Markets Advisory $ 2,028.9 1,931.8 97.1 5 % 5 %
Capital Markets 835.2 805.1 30.1 4 4
Work Dynamics 7,572.8 6,650.8 922.0 14 14
JLL Technologies 110.3 122.0 (11.7) (10) (10)
LaSalle 206.0 258.3 (52.3) (20) (19)
Revenue $ 10,753.2 9,768.0 985.2 10 % 10 %
Platform compensation and benefits $ 2,509.3 2,512.6 (3.3) — % — %
Platform operating, administrative and other expenses 594.7 584.4 10.3 2 1
Depreciation and amortization 123.3 117.4 5.9 5 5
Total platform operating expenses $ 3,227.3 3,214.4 12.9 — % 1 %
Gross contract costs 7,246.1 6,339.1 907.0 14 15
Restructuring and acquisition charges 13.2 47.5 (34.3) (72) (72)
Total operating expenses $ 10,486.6 9,601.0 885.6 9 % 10 %
Operating income $ 266.6 167.0 99.6 60 % 65 %
Equity losses $ (19.1) (106.1) 87.0 82 % 82 %
Net non-cash MSR and mortgage banking derivative activity $ (20.8) (2.4) (18.4) (767) % (753) %
Adjusted EBITDA $ 433.4 338.0 95.4 28 % 31 %
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Non-GAAP Financial Measures
Management uses certain non-GAAP financial measures to develop budgets and forecasts, measure and reward performance against those budgets and forecasts, and enhance comparability to prior periods. These measures are believed to be useful to investors and other external stakeholders as supplemental measures of core operating performance and include the following:
• Adjusted EBITDA attributable to common shareholders ("Adjusted EBITDA") and
• Percentage changes against prior periods, presented on a local currency basis.
However, non-GAAP financial measures should not be considered alternatives to measures determined in accordance with U.S. GAAP. Any measure that eliminates components of a company’s capital structure, cost of operations or investments, or other results has limitations as a performance measure. In light of these limitations, management also considers U.S. GAAP financial measures and does not rely solely on non-GAAP financial measures. Because our non-GAAP financial measures are not calculated in accordance with U.S. GAAP, they may not be comparable to similarly titled measures used by other companies.
Effective January 1, 2024, we updated the definition of Adjusted EBITDA to exclude certain equity earnings/losses as further described below. Comparable periods have been recast to conform to the revised presentation.
Also effective with first-quarter 2024 reporting, we no longer report the non-GAAP measures "Fee revenue" and "Fee-based operating expenses" following the conclusion of a comment letter from the Securities and Exchange Commission Staff in February 2024.
Adjustments to U.S. GAAP Financial Measures Used to Calculate non-GAAP Financial Measures
Net non-cash MSR and mortgage banking derivative activity consists of the balances presented within Revenue composed of (i) derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity and (ii) gains recognized from the retention of MSR upon origination and sale of mortgage loans, offset by (iii) amortization of MSR intangible assets over the period that net servicing income is projected to be received. Non-cash derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity are calculated as the estimated fair value of loan commitments and subsequent changes thereof, primarily represented by the estimated net cash flows associated with future servicing rights. MSR gains and corresponding MSR intangible assets are calculated as the present value of estimated net cash flows over the estimated mortgage servicing periods. The above activity is reported entirely within Revenue of the Capital Markets segment. Excluding net non-cash MSR and mortgage banking derivative activity reflects how we manage and evaluate performance because the excluded activity is non-cash in nature.
Restructuring and acquisition charges primarily consist of (i) severance and employment-related charges, including those related to external service providers, incurred in conjunction with a structural business shift, which can be represented by a notable change in headcount, change in leadership or transformation of business processes; (ii) acquisition, transaction and integration-related charges, including fair value adjustments, which are generally non-cash in the periods such adjustments are made, to assets and liabilities recorded in purchase accounting such as earn-out liabilities and intangible assets; and (iii) other restructuring, including lease exit charges. Such activity is excluded as the amounts are generally either non-cash in nature or the anticipated benefits from the expenditures would not likely be fully realized until future periods. Restructuring and acquisition charges are excluded from segment operating results and therefore not a line item in the segments’ reconciliation to Adjusted EBITDA.
Gain/loss on disposition reflects the gain or loss recognized on the sale or disposition of businesses. Given the low frequency of business disposals by the Company historically, the gain or loss directly associated with such activity is excluded as it is not considered indicative of core operating performance. In 2023, the $1.8 million loss related to the disposition of a business in Markets Advisory.
Interest on employee loans, net of forgiveness reflects interest accrued on employee loans less the amount of accrued interest forgiven. Certain employees (predominantly in Leasing and Capital Markets) receive cash payments structured as loans, with interest. Employees earn forgiveness of the loan based on performance, generally calculated as a percentage of revenue production. Such forgiven amounts are reflected in Compensation and benefits expense. Given the interest accrued on these employee loans and subsequent forgiveness are non-cash and the amounts perfectly offset over the life of the loan, the activity is not indicative of core operating performance and is excluded from non-GAAP measures.
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Equity Earnings/Losses (JLL Technologies and LaSalle) primarily reflects valuation changes on investments reported at fair value. Investments reported at fair value are increased or decreased each reporting period by the change in the fair value of the investment. Where the measurement alternative has been elected, our investment is increased or decreased upon observable price changes. Such activity is excluded as the amounts are generally non‑cash in nature and not indicative of core operating performance.
Note: Equity earnings/losses in the remaining segments represent the results of unconsolidated operating ventures (not investments), and therefore, the amounts are included in Adjusted EBITDA on both a segment and consolidated basis.
Reconciliation of Non-GAAP Financial Measures
Below is a reconciliation of Net income attributable to common shareholders to Adjusted EBITDA.
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2024 2023 2024 2023
Net income (loss) attributable to common shareholders $ 84.4 2.5 $ 150.5 (6.7)
Add:
Interest expense, net of interest income 41.7 40.5 72.2 66.8
Income tax provision (benefit) 20.5 0.8 36.4 (1.5)
Depreciation and amortization (1)
61.4 59.0 121.4 115.5
Adjustments:
Restructuring and acquisition charges 11.5 11.8 13.2 47.5
Net loss on disposition — 1.8 — 1.8
Net non-cash MSR and mortgage banking derivative activity 11.8 0.6 20.8 2.4
Interest on employee loans, net of forgiveness (1.3) (0.9) (2.3) (0.7)
Equity losses - JLL Technologies and LaSalle 16.3 109.0 21.2 112.9
Adjusted EBITDA $ 246.3 225.1 $ 433.4 338.0
(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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In discussing our operating results, we report percentage changes in local currency, unless otherwise noted. Amounts presented on a local currency basis are calculated by translating the current period results of our foreign operations to U.S. dollars using the foreign currency exchange rates from the comparative period. We believe this methodology provides a framework for assessing performance and operations excluding the effect of foreign currency fluctuations.
The following table reflects the reconciliation to local currency amounts for consolidated (i) Revenue, (ii) Operating income and (iii) Adjusted EBITDA.
Three Months Ended June 30, Six Months Ended June 30,
($ in millions) 2024 % Change 2024 % Change
Revenue:
At current period exchange rates $ 5,628.7 11 % $ 10,753.2 10 %
Impact of change in exchange rates 32.5 n/a 38.1 n/a
At comparative period exchange rates $ 5,661.2 12 % $ 10,791.3 10 %
Operating income:
At current period exchange rates $ 152.4 2 % $ 266.6 60 %
Impact of change in exchange rates 2.7 n/a 8.1 n/a
At comparative period exchange rates $ 155.1 4 % $ 274.7 65 %
Adjusted EBITDA:
At current period exchange rates $ 246.3 9 % $ 433.4 28 %
Impact of change in exchange rates 2.7 n/a 8.0 n/a
At comparative period exchange rates $ 249.0 11 % $ 441.4 31 %
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Revenue
Revenue increased 12% compared with the prior-year quarter. Businesses with Resilient revenues continued to deliver strong revenue growth, collectively up 16%, highlighted by Workplace Management, within Work Dynamics, up 19%, and Property Management, within Markets Advisory, up 8%. Transactional-revenue businesses grew modestly, collectively up 5%. The growth in Transactional revenue was led by Project Management, within Work Dynamics, up 13% and Leasing, within Markets Advisory, up 5%. In addition, excluding the impact of non-cash MSR and mortgage banking derivative activity, Investment Sales, Debt/Equity Advisory and Other, within Capital Markets, grew 4% for the quarter. These increases were meaningfully offset by the expected decline in LaSalle incentive fees, as the prior-year quarter had significant fees associated with the disposition of assets on behalf of clients.
For the first half of 2024, consolidated revenue was up 10% compared with 2023. The year-to-date drivers were consistent with the quarter-to-date drivers noted above.
The following highlights Revenue by segment, for the second quarter and first half of 2024 and 2023 ($ in millions). Refer to segment operating results for further detail.
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Operating Expenses
Consolidated operating expenses were $5.5 billion for the second quarter, up 12% from the same period in 2023. Gross contract costs were $3.7 billion, up 18% from the prior-year quarter, attributable to growth from businesses with higher client pass-through expenses such as Workplace Management, within Work Dynamics, and Property Management, within Markets Advisory. Platform operating expenses were $1.7 billion for the second quarter, a 2% increase from the prior-year quarter, primarily due to two discrete items in the second quarter: (i) $18.0 million of expense, within Capital Markets, associated with the August 2024 repurchase of a loan from Fannie Mae and (ii) a $12.2 million year-over-year increase in carried interest expense, within JLL Technologies, primarily as a result of the $10.0 million reduction in the prior-year quarter associated with investment equity losses. Outside of these discrete items, revenue-related expense growth was largely offset by the benefit of cost reduction actions largely executed in 2023 coupled with continued cost discipline, and a positive impact associated with the year-over-year timing of incentive compensation accruals.
For the second quarter of 2024, Restructuring and acquisition charges decreased slightly compared with the prior-year period, driven by net decreases to the fair value of future acquisition-related payments. Refer to the following table for detail on Restructuring and acquisition charges.
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2024 2023 2024 2023
Severance and other employment-related charges $ 7.2 5.8 $ 11.7 31.5
Restructuring, pre-acquisition and post-acquisition charges 6.4 6.6 14.1 16.6
Fair value adjustments that resulted in a net decrease to earn-out liabilities from prior-period acquisition activity (2.1) (0.6) (12.6) (0.6)
Restructuring and acquisition charges $ 11.5 11.8 $ 13.2 47.5
While second-quarter Restructuring and acquisition charges were relatively flat compared with the prior-year quarter, there was a notable year-over-year decline for the first six months due to lower severance and other employment-related charges from cost-out actions and net decreases to the fair value of future acquisition-related payments.
Interest Expense
Interest expense, net of interest income, for the three and six months ended June 30, 2024 was $41.7 million and $72.2 million, respectively, compared with $40.5 million and $66.8 million in the prior-year periods. The increase in our effective interest rate was largely offset by lower average outstanding borrowings.
Equity (Losses) Earnings
The following details Equity (losses) earnings by relevant segment. In the prior-year quarter, the significant equity losses were largely attributable to valuation declines in two JLL Technologies investments. Refer to the segment discussions for additional details.
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2024 2023 2024 2023
JLL Technologies $ (9.0) (103.9) $ (10.0) (99.0)
LaSalle (7.3) (5.1) (11.2) (13.9)
Other 0.9 5.5 2.1 6.8
Equity losses $ (15.4) (103.5) $ (19.1) (106.1)
Income Taxes
The Income tax provision was $20.5 million and $36.4 million for the three and six months ended June 30, 2024, respectively, representing an effective tax rate ("ETR") of 19.5% for both periods. For the three months ended June 30, 2023, the income tax provision was $0.8 million, while the income tax benefit was $1.5 million for six months ended June 30, 2023, representing an ETR of 21.0%.
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A number of countries in which we have a taxable presence have enacted legislation effective in 2024 inspired by the Organization for Economic Co-operation and Development (OECD) guidance for a global minimum tax rate of 15%, referred to as “Pillar Two” taxation. Such legislation enacted through March 31, 2024 did not have a material impact on our effective tax rate for the first half of 2024 and is not presently expected to have a material impact for the full year 2024.
Net Income and Adjusted EBITDA
Net income attributable to common shareholders was $84.4 million for the three months ended June 30, 2024, compared with $2.5 million in the prior-year quarter. For the first half of 2024, net income attributable to common shareholders was $150.5 million, compared with a net loss of $6.7 million in 2023. Adjusted EBITDA was $246.3 million and $433.4 million for the second quarter and first half of 2024, compared with $225.1 million and $338.0 million in the respective prior-year periods. The growth in consolidated profit for the second quarter and first half of 2024 was primarily attributable to (i) higher revenues, particularly Resilient revenues as well as certain Transactional revenue streams like Leasing, within Markets Advisory, (ii) the benefit of cost reduction actions largely executed in 2023 coupled with continued cost discipline and (iii) a positive impact associated with the year-over-year timing of incentive compensation accruals. These positive profit drivers were partially offset by (i) $18.0 million of expense, within Capital Markets, associated with the August 2024 repurchase of a loan, (ii) a $12.2 million year-over-year increase in carried interest expense, within JLL Technologies, primarily as a result of the prior-year quarter's reduction in carried interest expense associated with investment equity losses and (iii) LaSalle segment performance, primarily due to expected lower incentive fees. In addition to the drivers described above, the increase in Net income attributable to common shareholders was the result of lower current-quarter equity losses related to JLL Technologies.
The following charts reflects the aggregation of segment Adjusted EBITDA for the second quarter and first half of 2024 and 2023.
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Segment Operating Results
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, 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 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.
Segment operating expenses comprise Gross contract costs and Segment platform operating expenses, which includes Platform compensation and benefits; Platform operating, administrative and other expenses; and Depreciation and amortization. Our measure of segment results excludes Restructuring and acquisition charges.
Markets Advisory
% Change
Three Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Leasing $ 619.1 591.4 27.7 5 % 5 %
Property Management 436.6 409.9 26.7 7 8
Advisory, Consulting and Other 23.1 24.1 (1.0) (4) (3)
Revenue $ 1,078.8 1,025.4 53.4 5 % 6 %
Platform compensation and benefits $ 543.4 546.4 (3.0) (1) % — %
Platform operating, administrative and other 92.1 93.3 (1.2) (1) —
Depreciation and amortization 17.4 17.4 — — 1
Segment platform operating expenses 652.9 657.1 (4.2) (1) —
Gross contract costs 312.7 284.3 28.4 10 11
Segment operating expenses $ 965.6 941.4 24.2 3 % 3 %
Equity losses $ — (0.1) 0.1 100 % 493 %
Adjusted EBITDA $ 129.6 99.4 30.2 30 % 30 %
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Markets Advisory (continued)
% Change
Six Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Leasing $ 1,116.4 1,078.4 38.0 4 % 4 %
Property Management 866.3 810.1 56.2 7 8
Advisory, Consulting and Other 46.2 43.3 2.9 7 7
Revenue $ 2,028.9 1,931.8 97.1 5 % 5 %
Platform compensation and benefits $ 1,005.9 1,007.4 (1.5) — % — %
Platform operating, administrative and other 179.0 186.9 (7.9) (4) (4)
Depreciation and amortization 34.8 34.5 0.3 1 2
Segment platform operating expenses 1,219.7 1,228.8 (9.1) (1) —
Gross contract costs 617.6 563.4 54.2 10 11
Segment operating expenses $ 1,837.3 1,792.2 45.1 3 % 3 %
Equity earnings $ 0.4 0.2 0.2 100 % 131 %
Adjusted EBITDA $ 224.9 171.0 53.9 32 % 31 %
The quarter-to-date increase in Markets Advisory revenue was primarily driven by Leasing, which achieved growth in most geographies, most notably in the U.S., Greater China, India and Germany. The number of larger-scale deals, where JLL has historically had a greater presence, increased over the prior-year quarter and contributed to the quarter-to-date and year-to-date revenue growth. Second-quarter Leasing growth was led by the office sector, which saw increased deal size and transaction volumes, partially offset by industrial which had a decline in both deal size and volume. Year-to-date revenue growth was propelled by Property Management expansion in the Americas and Asia Pacific, including incremental revenue associated with pass-through expenses.
The net decreases in segment platform operating expenses for the quarter and first half of the year were due to the continued impact of cost management actions largely executed in 2023, offset by an increase in revenue-related variable compensation expense. Higher gross contract costs over the prior-year periods correlated with revenue growth, predominantly associated with Property Management.
The Adjusted EBITDA increases for the second quarter and first half of the year were predominantly driven by revenue growth and the benefit of cost management actions largely executed in 2023. In addition, the timing of incentive compensation accruals in the second quarter positively impacted year-over-year profit performance.
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Capital Markets
% Change
Three Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Investment Sales, Equity & Debt Advisory $ 320.3 319.5 0.8 — % 1 %
Valuation Advisory & Other 95.8 89.5 6.3 7 8
Loan Servicing 41.5 39.0 2.5 6 6
Revenue $ 457.6 448.0 9.6 2 % 3 %
Platform compensation and benefits $ 341.1 335.4 5.7 2 % 2 %
Platform operating, administrative and other 83.3 69.2 14.1 20 21
Depreciation and amortization 17.3 16.2 1.1 7 7
Segment platform operating expenses 441.7 420.8 20.9 5 6
Gross contract costs 11.8 13.1 (1.3) (10) (9)
Segment operating expenses $ 453.5 433.9 19.6 5 % 5 %
Equity earnings $ 0.5 4.8 (4.3) (90) % (90) %
Net non-cash MSR and mortgage banking derivative activity $ (11.8) (0.6) (11.2) n.m. n.m.
Adjusted EBITDA $ 33.8 36.0 (2.2) (6) % (8) %
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Capital Markets (continued)
% Change
Six Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Investment Sales, Equity & Debt Advisory $ 579.0 560.1 18.9 3 % 4 %
Valuation Advisory & Other 176.0 168.6 7.4 4 5
Loan Servicing 80.2 76.4 3.8 5 5
Revenue $ 835.2 805.1 30.1 4 % 4 %
Platform compensation and benefits $ 628.7 619.3 9.4 2 % 2 %
Platform operating, administrative and other 144.1 125.3 18.8 15 15
Depreciation and amortization 33.7 32.1 1.6 5 5
Segment platform operating expenses 806.5 776.7 29.8 4 4
Gross contract costs 25.4 22.4 3.0 13 15
Segment operating expenses $ 831.9 799.1 32.8 4 % 5 %
Equity earnings $ 0.6 5.4 (4.8) (89) % (89) %
Net non-cash MSR and mortgage banking derivative activity $ (20.8) (2.4) (18.4) (767) % (753) %
Adjusted EBITDA $ 58.8 46.7 12.1 26 % 27 %
Capital Markets achieved broad-based revenue growth across all business lines despite residual macroeconomic headwinds, including interest rate uncertainty. Notably, for the quarter, Investment Sales, Debt/Equity Advisory and Other, excluding Net non-cash MSR, increased in the office, industrial and hotels sectors, and was geographically led by the UK, Australia and the U.S. For the first half of 2024, Japan contributed meaningfully to the growth. U.S. Investment Sales growth was up over 20%, notably outperforming the broader market for investment sales, which fell 3% according to JLL Research. Revenue growth in Investment Sales was largely offset by (i) the impact of net non-cash MSR and mortgage banking derivative activity, which was a headwind of $11.2 million for the second quarter ($18.4 million for the first half of the year), as well as (ii) a decline in Equity Advisory.
The increase in segment platform operating expenses for the second quarter and first half of 2024 was largely due to an $18.0 million impact associated with the August 2024 repurchase of a loan which JLL originated and then sold to Fannie Mae. This impact includes the amount of the repurchase price in excess of unpaid principal balance, for items such as unpaid interest, as well as current estimated losses associated with the repurchased loan, reflecting the current underlying value of the collateral. The net increase in operating expenses was also partially driven by higher variable compensation expense compared with the prior-year periods, as segment profit grew. The increase in variable compensation more than offset the impact of cost management actions largely executed in 2023.
The slight decline in second-quarter Adjusted EBITDA was attributable to the aforementioned negative impact associated with the repurchased loan, which overshadowed the revenue growth and the benefit associated with cost management actions described above. In addition, the lower equity earnings reflected a $4.6 million benefit in the prior-year quarter which, as expected, did not recur this year. On a year-to-date basis, revenue growth and continued cost discipline overcame the negative impact of the repurchased loan, with the segment achieving double-digit Adjusted EBITDA expansion.
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Work Dynamics
% Change
Three Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Workplace Management $ 3,021.1 2,553.4 467.7 18 % 19 %
Project Management 788.1 703.2 84.9 12 13
Portfolio Services and Other 124.1 118.0 6.1 5 5
Revenue $ 3,933.3 3,374.6 558.7 17 % 17 %
Platform compensation and benefits $ 333.8 321.0 12.8 4 % 5 %
Platform operating, administrative and other 116.0 101.2 14.8 15 15
Depreciation and amortization 20.8 19.9 0.9 5 5
Segment platform operating expenses 470.6 442.1 28.5 6 7
Gross contract costs 3,412.7 2,896.8 515.9 18 18
Segment operating expenses $ 3,883.3 3,338.9 544.4 16 % 17 %
Equity earnings $ 0.4 0.8 (0.4) (50 %) (51) %
Adjusted EBITDA $ 71.1 56.2 14.9 27 % 26 %
% Change
Six Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Workplace Management $ 5,892.8 5,050.6 842.2 17 % 17 %
Project Management 1,444.5 1,379.5 65.0 5 5
Portfolio Services and Other 235.5 220.7 14.8 7 6
Revenue $ 7,572.8 6,650.8 922.0 14 % 14 %
Platform compensation and benefits $ 653.6 626.0 27.6 4 % 5 %
Platform operating, administrative and other 215.3 212.7 2.6 1 1
Depreciation and amortization 41.5 39.2 2.3 6 6
Segment platform operating expenses 910.4 877.9 32.5 4 4
Gross contract costs 6,583.3 5,731.0 852.3 15 15
Segment operating expenses $ 7,493.7 6,608.9 884.8 13 % 14 %
Equity earnings $ 1.1 1.2 (0.1) (8 %) (8) %
Adjusted EBITDA $ 122.0 81.9 40.1 49 % 50 %
For the second quarter and first half of the year, Work Dynamics revenue growth was led by continued strong performance in Workplace Management, as Americas contract wins and mandate expansions from 2023 onboarded. Project Management revenue grew over the prior-year periods, primarily in the Americas and Asia Pacific, where higher pass-through costs drove the increase in revenue.
The increases in segment operating expenses for the second quarter and first half of the year, compared with the prior-year periods, were primarily due to revenue-related expense growth, including gross contract costs, partially tempered by continued cost discipline and the timing of incentive compensation accruals.
The increase in Adjusted EBITDA for the second quarter and first half of 2024 was primarily attributable to the top-line performance described above, largely driven by Workplace Management, and continued cost discipline. In addition, the timing of incentive compensation accruals positively impacted year-over-year profit performance.
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JLL Technologies
% Change
Three Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Revenue $ 56.4 60.6 (4.2) (7) % (7) %
Platform compensation and benefits (1)
$ 53.5 45.3 8.2 18 % 18 %
Platform operating, administrative and other 12.4 12.5 (0.1) (1) (2)
Depreciation and amortization 4.8 4.1 0.7 17 16
Segment platform operating expenses 70.7 61.9 8.8 14 14
Gross contract costs 1.4 4.1 (2.7) (66) (65)
Segment operating expenses $ 72.1 66.0 6.1 9 % 9 %
Adjusted EBITDA (2)
$ (10.9) (1.3) (9.6) (738) % (704) %
Equity losses $ (9.0) (103.9) 94.9 91 % 91 %
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JLL Technologies (continued)
% Change
Six Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Revenue $ 110.3 122.0 (11.7) (10) % (10) %
Platform compensation and benefits (1)
$ 100.8 106.6 (5.8) (5) % (6) %
Platform operating, administrative and other 22.9 27.2 (4.3) (16) (16)
Depreciation and amortization 9.3 8.0 1.3 16 16
Segment platform operating expenses 133.0 141.8 (8.8) (6) (6)
Gross contract costs 2.6 7.7 (5.1) (66) (66)
Segment operating expenses $ 135.6 149.5 (13.9) (9) % (9) %
Adjusted EBITDA (2)
$ (16.0) (19.5) 3.5 18 % 19 %
Equity losses $ (10.0) (99.0) 89.0 90 % 90 %
(1) Included in Platform compensation and benefits expense is carried interest expense of $2.2 million and $2.1 million for the three and six months ended June 30, 2024, and a reduction in carried interest expense of $10.0 million and $9.3 million for the three and six months ended June 30, 2023, related to Equity losses of the segment.
(2) Adjusted EBITDA excludes Equity losses for JLL Technologies.
The decline in JLL Technologies current-quarter and year-to-date revenue was partially due to lower contract signings over the last few quarters and delayed decisions on technology spend from existing solutions clients, which included certain contract renewals.
Segment operating expenses includes carried interest, which was a $10.0 million reduction to expense in the prior-year quarter ($9.3 million reduction to expense for the first half of 2023), versus incremental expense of $2.2 million this quarter (incremental expense of $2.1 million for the first half of 2024). Carried interest expense is associated with equity earnings/losses on certain investments within the JLL Technologies Spark Venture Funds and the reduction to expense in the prior year reflected notable equity losses on certain investments in 2023.
The increase in current-quarter platform operating expenses was driven by the impact of carried interest (an adverse swing of $12.2 million) described above; this increase was tempered by the reduction of certain expenses associated with cost management actions and improved operating efficiency over the trailing twelve months. For the first half of 2024, the aforementioned cost management actions over the trailing twelve months, coupled with ongoing cost discipline, more than offset the impact of carried interest (adverse change of $11.4 million).
Second-quarter Adjusted EBITDA contraction reflects lower revenue and the change in carried interest expense, as described above, which overshadowed cost management actions and improved operating efficiency over the trailing twelve months. For the first half of 2024, those cost management actions and improved operating efficiency drove margin improvement, as ongoing cost discipline outpaced the impact of carried interest and lower revenue.
Equity losses for the quarter and first half of the year resulted from current-quarter valuation declines in JLL Technologies' investments. The higher equity losses in 2023 were due to subsequent financing rounds at decreased per-share values and were predominantly driven by two investments for which we previously recognized significant equity earnings.
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LaSalle
% Change
Three Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Advisory fees $ 93.1 103.1 (10.0) (10) % (8) %
Transaction fees and other 6.9 5.0 1.9 38 39
Incentive fees 2.6 35.8 (33.2) (93) (92)
Revenue $ 102.6 143.9 (41.3) (29) % (27) %
Platform compensation and benefits $ 59.0 84.4 (25.4) (30) % (29) %
Platform operating, administrative and other 20.5 17.1 3.4 20 21
Depreciation and amortization 2.0 2.3 (0.3) (13) (10)
Segment platform operating expenses 81.5 103.8 (22.3) (21) (20)
Gross contract costs 8.8 7.5 1.3 17 16
Segment operating expenses $ 90.3 111.3 (21.0) (19) % (18) %
Adjusted EBITDA (1)
$ 22.7 34.8 (12.1) (35) % (31) %
Equity losses $ (7.3) (5.1) (2.2) (43) % (42) %
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LaSalle (continued)
% Change
Six Months Ended June 30, Change in in Local
($ in millions) 2024 2023 U.S. dollars Currency
Advisory fees $ 185.4 203.6 (18.2) (9) % (8) %
Transaction fees and other 15.8 15.4 0.4 3 7
Incentive fees 4.8 39.3 (34.5) (88) (87)
Revenue $ 206.0 258.3 (52.3) (20) % (19) %
Platform compensation and benefits $ 120.3 153.3 (33.0) (22) % (21) %
Platform operating, administrative and other 33.4 32.3 1.1 3 4
Depreciation and amortization 4.0 3.6 0.4 11 11
Segment platform operating expenses 157.7 189.2 (31.5) (17) (16)
Gross contract costs 17.2 14.6 2.6 18 18
Segment operating expenses $ 174.9 203.8 (28.9) (14) % (14) %
Adjusted EBITDA (1)
$ 43.7 57.9 (14.2) (25) % (20) %
Equity losses $ (11.2) (13.9) 2.7 19 % 21 %
(1) Adjusted EBITDA excludes Equity losses for LaSalle.
For the second quarter and first half of the year, LaSalle’s decrease in revenue was primarily due to the expected decline in incentive fees compared with 2023. Advisory fees also declined, attributable to lower assets under management ("AUM"), as detailed below, and lower fees in Europe as a result of structural changes to a lower-margin business, as discussed in the first quarter.
The decrease in operating expenses for the second quarter and half year were largely driven by lower variable compensation accruals in 2024 as well as cost management actions largely executed in 2023.
The Adjusted EBITDA contraction over the prior-year quarter and first half of 2023 was driven by lower revenues and a few discrete, individually immaterial items, partially offset by (i) the operating expense reductions described above and (ii) an $8.2 million gain recognized following the purchase of a controlling interest in a LaSalle-managed fund.
As of June 30, 2024, LaSalle had $86.6 billion of AUM. Compared with AUM of $93.2 billion as of June 30, 2023, the AUM as of June 30, 2024, decreased 7% in USD (5% in local currency). The net decrease in AUM over the trailing twelve months resulted from (i) $4.3 billion of dispositions and withdrawals, (ii) $4.2 billion of net valuation decreases, (iii) $1.8 billion of foreign currency decreases, and (iv) a $0.2 billion decrease in uncalled committed capital and cash held, partially offset by (v) $3.9 billion of acquisitions.
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LIQUIDITY AND CAPITAL RESOURCES
We finance our operations, co-investment activity, share repurchases, capital expenditures and business acquisitions with internally generated funds, borrowings on our Facility, and through issuance of Long-term debt.
Cash Flows from Operating Activities
Operating activities used $403.6 million of cash in the first six months of 2024, compared with $479.3 million of cash used in operating activities during the same period in 2023. The year-over-year higher cash inflow was primarily driven by improved business performance, partially offset by the timing of corporate tax payments.
Cash Flows from Investing Activities
We used $154.1 million of cash for investing activities during the first six months of 2024, compared with $160.7 million used during the same period in 2023. The net decrease was driven by lower net capital contributions to investments and lower net capital additions, partially offset by higher cash paid for acquisitions. We discuss these drivers, along with other investing activities, individually below in further detail.
Cash Flows from Financing Activities
Financing activities provided $566.6 million of cash during the first six months of 2024, compared with $503.9 million provided during the same period in 2023. In the second quarter of 2023, we notably enhanced efforts to centrally pool available cash from across JLL to pay down our Facility. While we have continued this effort, subsequent quarters identified less new cash to centralize, as expected, and incremental pay-downs have generally plateaued. Therefore, the impact on financing cash flows was most impactful in the prior-year quarter. The resulting increase in year-over-year net borrowings (driven by lower quarter-end repayments) was partially offset by higher share repurchase activity, as detailed below.
Debt
Our $3.3 billion Facility matures on November 3, 2028 and bears a variable interest rate. 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) June 30, 2024 December 31, 2023
Outstanding borrowings under the Facility $ 1,275.0 625.0
Short-term borrowings 126.2 147.9
In addition to our Facility, we had the capacity to borrow up to $53.8 million under local overdraft facilities as of June 30, 2024.
The following table provides additional information on our Facility and Uncommitted Facility, collectively.
Three Months Ended June 30, Six Months Ended June 30,
($ in millions) 2024 2023 2024 2023
Average outstanding borrowings $ 1,705.8 2,315.8 $ 1,381.3 2,019.5
Average effective interest rate 6.2 % 5.9 % 6.2 % 5.7 %
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.
On June 27, 2024, we established a commercial paper program (the “Program”) in which we may issue up to $2.5 billion of short-term, unsecured and unsubordinated commercial paper notes at any time, under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Amounts available under the Program may be borrowed, repaid and re-borrowed from time to time. Payment of the Program notes will be fully and unconditionally guaranteed on an unsecured and unsubordinated basis. We intend to use net proceeds of the Program for general corporate purposes, including the repayment of outstanding borrowings under the Facility.
Notes issued under the Program will be sold under customary market terms in the U.S. commercial paper market at par less a discount representing an interest factor or, if interest bearing, at par. The maturities of the Program notes may vary but may
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not exceed 397 days from the date of issuance. The Program notes and guarantee of payment thereof will rank pari passu with all other unsecured and unsubordinated indebtedness. As of the end of June 30, 2024, we have not issued any notes under the Program.
Refer to Note 9, Debt, in the Notes to Consolidated Financial Statements for additional information on our debt.
Investment Activity
As of June 30, 2024, we had a carrying value of $819.7 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 six months ended June 30, 2024 and 2023, funding of investments exceeded return of capital by $31.4 million and $53.5 million, respectively. We expect continued investment activity by both JLL Technologies and LaSalle.
See Note 6, Investments, in the Notes to Consolidated Financial Statements for additional information on our investment activity.
Capital Expenditures
Net capital additions for the six months ended June 30, 2024 and 2023 were $81.4 million and $88.2 million, respectively. Our capital expenditures in 2024 were primarily for purchased/developed software and leasehold improvements.
Business Acquisitions
During the six months ended June 30, 2024, we paid $44.2 million for business acquisitions. This included $39.3 million of payments relating to acquisitions in 2024 and $4.9 million for deferred business acquisition and earn-out obligations related to acquisitions completed in prior years, which are primarily reflected in cash flow 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 $13.9 million as of June 30, 2024. These obligations represent the current discounted values of payments due to sellers of businesses for which our acquisition had been completed as of the balance sheet date and for which the only remaining condition on those payments is the passage of time. As of June 30, 2024, we had the potential to make earn-out payments for a maximum of $113.6 million on 13 completed acquisitions subject to the achievement of certain performance conditions. Refer to Note 5, Business Combinations, Goodwill and Other Intangible Assets, in the Notes to the Consolidated Financial Statements for further information on Business Acquisitions.
We will continue to consider acquisitions that we believe will strengthen our market position, increase our profitability and supplement our organic growth.
Share Repurchase and Dividend Programs
The number of shares repurchased and cash paid for repurchases is noted in the following table.
Three Months Ended June 30, Six Months Ended June 30,
($ in millions) 2024 2023 2024 2023
Total number of shares repurchased (in 000's) 103.7 139.3 214.4 139.3
Total paid for shares repurchased $ 20.1 20.0 $ 40.2 20.0
As of June 30, 2024, $1,053.4 million remained authorized for repurchases under our share repurchase program.
Repatriation of Foreign Earnings
Based on our historical experience and future business plans, we do not expect to repatriate our foreign-sourced earnings to the United States. We believe our policy of permanently investing earnings of foreign subsidiaries does not significantly impact our liquidity. As of June 30, 2024, and December 31, 2023, we had total Cash and cash equivalents of $424.4 million and $410.0 million, respectively, of which approximately $326.7 million and $310.1 million, respectively, was held by foreign subsidiaries.
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Restricted Net Assets
We face regulatory restrictions in certain countries that limit or prevent the transfer of funds to other countries or the exchange of the local currency to other currencies. However, we generally face no such restrictions with regard to the use or application of funds for ordinary course business activities within such countries. The assets of these countries aggregated to approximately 4% of our total assets as of both June 30, 2024, and December 31, 2023.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report, including this Management's Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may also be included in our other public filings, press releases, our website, and oral and written presentations by management.
Statements in the future tense, and all statements accompanied by terms such as “believe,” “will,” “may,” “could,” “project,” “expect,” “estimate,” “assume,” “intend,” “anticipate,” “target,” “plan” and variations thereof and similar terms, are intended to be forward-looking statements. Such statements do not relate strictly to historical or current facts as they relate to our intent, belief and current expectations about our strategic direction, prospects and future results, and give our current expectations or forecasts of future events. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.