JONES LANG LASALLE INC 10-Q

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 months ended March 31, 2025, and our audited Consolidated Financial Statements, including the notes thereto, for the fiscal year ended December 31, 2024, which are included in our 2024 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 2024 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 2024 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, 2024. There have been no material changes to these critical accounting policies and estimates during the three months ended March 31, 2025. 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. 23 Table of Contents 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 Investment Management, 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. 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 March 31, 2025 and 2024 are not fully indicative of the results we expect to realize for the full fiscal year. 24 Table of Contents RESULTS OF OPERATIONS Definitions • Assets under management data for Investment Management is primarily reported on a one-quarter lag. • n.m.: not meaningful, represented by a percentage change of greater than 1,000%, favorable or unfavorable. • Effective January 1, 2025, we report Project Management in Resilient revenue. Prior period financial information was recast to conform with this presentation. • We define "Resilient" revenue as, (i) Workplace Management, Project Management and Property Management, within Real Estate Management Services, (ii) Value and Risk Advisory, and Loan Servicing, within Capital Markets Services, (iii) Advisory Fees, within Investment Management, and (iv) Software and Technology Solutions. In addition, we define "Transactional" revenue as (i) Portfolio Services and Other, within Real Estate Management Services, (ii) Leasing Advisory, (iii) Investment Sales, Debt/Equity Advisory and Other, within Capital Markets Services, and (iv) Incentive fees and Transaction fees and other, within Investment Management. • 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 March 31, Change in % Change in Local Currency ($ in millions) 2025 2024 U.S. dollars Real Estate Management Services $ 4,569.4 4,069.2 500.2 12 % 14 % Leasing Advisory 586.1 520.4 65.7 13 13 Capital Markets Services 435.3 377.6 57.7 15 16 Investment Management 98.5 103.4 (4.9) (5) (4) Software and Technology Solutions 57.1 53.9 3.2 6 6 Revenue $ 5,746.4 5,124.5 621.9 12 % 13 % Platform compensation and benefits $ 1,291.7 1,178.5 113.2 10 % 11 % Platform operating, administrative and other expenses 301.1 270.4 30.7 11 12 Depreciation and amortization 71.6 61.0 10.6 17 19 Total platform operating expenses 1,664.4 1,509.9 154.5 10 11 Gross contract costs 3,942.3 3,498.7 443.6 13 14 Restructuring and acquisition charges 19.7 1.7 18.0 n.m. n.m. Total operating expenses $ 5,626.4 5,010.3 616.1 12 % 14 % Operating income $ 120.0 114.2 5.8 5 % 4 % Equity losses $ (25.6) (3.7) (21.9) (592) % (593) % Net non-cash MSR and mortgage banking derivative activity $ (12.9) (9.0) (3.9) (43) % (43) % Adjusted EBITDA $ 224.8 187.1 37.7 20 % 20 % 25 Table of Contents 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. 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 Services 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. 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 Advisory and Capital Markets Services) 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. Equity earnings/losses (Investment Management and Software and Technology Solutions) 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. 26 Table of Contents 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. Credit losses on convertible note investments reflects credit impairments associated with pre-equity convertible note investments in early-stage proptech enterprises. Such losses are similar to the equity investment-related losses included in equity earnings/losses for Software and Technology Solutions' investments and are therefore consistently excluded from adjusted measures. Reconciliation of Non-GAAP Financial Measures Below is a reconciliation of Net income attributable to common shareholders to Adjusted EBITDA. Three Months Ended March 31, (in millions) 2025 2024 Net income attributable to common shareholders $ 55.3 66.1 Add: Interest expense, net of interest income 24.6 30.5 Income tax provision 14.0 15.9 Depreciation and amortization (1) 70.7 60.0 Adjustments: Restructuring and acquisition charges 19.7 1.7 Net non-cash MSR and mortgage banking derivative activity 12.9 9.0 Interest on employee loans, net of forgiveness (1.6) (1.0) Equity losses - Investment Management and Software and Technology Solutions (1) 28.7 4.9 Credit losses on convertible note investments 0.5 — Adjusted EBITDA $ 224.8 187.1 (1) This adjustment excludes the noncontrolling interest portion which is not attributable to common shareholders. 27 Table of Contents 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 March 31, ($ in millions) 2025 % Change Revenue: At current period exchange rates $ 5,746.4 12 % Impact of change in exchange rates 60.4 n/a At comparative period exchange rates $ 5,806.8 13 % Operating income: At current period exchange rates $ 120.0 5 % Impact of change in exchange rates (1.3) n/a At comparative period exchange rates $ 118.7 4 % Adjusted EBITDA: At current period exchange rates $ 224.8 20 % Impact of change in exchange rates (0.5) n/a At comparative period exchange rates $ 224.3 20 % 28 Table of Contents Revenue Revenue increased 13% compared with the prior-year quarter. Several businesses with Resilient revenues, collectively up 13%, continued to deliver strong growth, highlighted by (i) Workplace Management, up 15%, and (ii) Project Management, up 16%, both within Real Estate Management Services, as well as (iii) Software and Technology Solutions, up 6%. The collective 14% increase in Transactional revenue was led by Leasing, within Leasing Advisory, up 15%, and Investment Sales, Debt/Equity Advisory and Other, within Capital Markets Services, up 22% (excluding the impact of non-cash MSR and mortgage banking derivative activity). The following highlights Revenue by segment, for the first quarter of 2025 and 2024 ($ in millions). Refer to segment operating results for further detail. Operating Expenses Consolidated operating expenses were $5.6 billion for the first quarter, up 14% from the same period in 2024. Gross contract costs were $3.9 billion, up 14% from the prior-year quarter, attributable to growth from businesses with higher client pass-through expenses such as Workplace Management and Property Management, within Real Estate Management Services. Platform operating expenses were $1.7 billion for the first quarter, an 11% increase from the prior-year quarter, largely due to revenue-related expense growth and incremental investments in the platform (notably technology and artificial intelligence capabilities) across segments to drive future business growth. 29 Table of Contents For the first quarter of 2025, Restructuring and acquisition charges increased primarily due to the year-over-year change in non-cash charges/benefit associated with expected achievement of acquisition-related earn-outs. Refer to the following table for detail on Restructuring and acquisition charges. Three Months Ended March 31, (in millions) 2025 2024 Severance and other employment-related charges $ 7.4 4.5 Restructuring, pre-acquisition and post-acquisition charges 8.4 7.7 Fair value adjustments that resulted in a net increase (decrease) to earn-out liabilities from prior-period acquisition activity 3.9 (10.5) Restructuring and acquisition charges $ 19.7 1.7 Interest Expense Interest expense, net of interest income, for the three months ended March 31, 2025 was $24.6 million, compared with $30.5 million in the prior-year period. Lower expense resulted primarily from a lower effective interest rate and also lower average borrowings for the current quarter. Equity (Losses) Earnings The following details Equity (losses) earnings by relevant segment. In the current period, equity losses were largely attributable to valuation declines of investments within Software and Technology Solutions. Refer to the segment discussions for additional details. Three Months Ended March 31, (in millions) 2025 2024 Investment Management $ (6.1) (3.9) Software and Technology Solutions (21.5) (1.0) Other 2.0 1.2 Equity losses $ (25.6) (3.7) Income Taxes The Income tax provision was $14.0 million for the three months ended March 31, 2025, representing an effective tax rate ("ETR") of 19.5%. For the three months ended March 31, 2024, the income tax provision was $15.9 million, also representing an ETR of 19.5%. A number of countries in which we have a taxable presence have enacted legislation effective in 2024 correlated to 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, 2025 did not have a material impact on our effective tax rate for the first three months of 2025 and is not presently expected to have a material impact for the full year 2025. 30 Table of Contents Net Income and Adjusted EBITDA Net income attributable to common shareholders was $55.3 million for the three months ended March 31, 2025, compared with $66.1 million in the prior-year quarter. Adjusted EBITDA was $224.8 million for the first quarter of 2025, compared with $187.1 million in the prior-year period. The change in net income attributable to common shareholders reflected higher equity losses from Software and Technology Solutions and Investment Management investments as well as an increase in restructuring and acquisition charges. These items are excluded from Adjusted EBITDA. The following chart reflects the aggregation of segment Adjusted EBITDA for the first quarter of 2025 and 2024. Segment Operating Results Effective January 1, 2025, we report Property Management (historically included in Markets Advisory, which was renamed Leasing Advisory) within Real Estate Management Services (formerly referred to as Work Dynamics). Additionally, Capital Markets, LaSalle and JLL Technologies were renamed to Capital Markets Services, Investment Management and Software and Technology Solutions, respectively. We manage and report our operations as five business segments: Real Estate Management Services, Leasing Advisory, Capital Markets Services, Investment Management and Software and Technology Solutions. Our Real Estate Management Services business provides a broad suite of integrated services to occupiers of real estate, including facility and property management, project management, and 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. Leasing Advisory offers agency leasing and tenant representation, as well as advisory and consulting services. Our Capital Markets Services offerings include investment sales, debt and equity advisory, value and risk advisory, and loan servicing. Investment Management provides services on a global basis to institutional investors and high-net-worth individuals, while our Software and Technology Solutions segment offers various software products and services to our clients. 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. 31 Table of Contents Real Estate Management Services % Change Three Months Ended March 31, Change in in Local ($ in millions) 2025 2024 U.S. dollars Currency Workplace Management $ 3,263.6 2,871.7 391.9 14 % 15 % Project Management 747.5 656.4 91.1 14 16 Property Management 445.6 429.7 15.9 4 5 Portfolio Services and Other 112.7 111.4 1.3 1 2 Revenue $ 4,569.4 4,069.2 500.2 12 % 14 % Platform compensation and benefits $ 431.6 400.5 31.1 8 % 9 % Platform operating, administrative and other 139.2 128.6 10.6 8 10 Depreciation and amortization 31.5 29.0 2.5 9 10 Segment platform operating expenses 602.3 558.1 44.2 8 10 Gross contract costs 3,930.3 3,469.1 461.2 13 15 Segment operating expenses $ 4,532.6 4,027.2 505.4 13 % 14 % Equity earnings $ 0.4 1.1 (0.7) (64 %) (63) % Adjusted EBITDA $ 66.3 71.4 (5.1) (7) % (9) % Real Estate Management Services revenue growth was driven by continued strong performance in Workplace Management, largely from a balanced mix of client wins and mandate expansions, as incremental pass-through costs augmented high single-digit management fee growth. Project Management revenue increase was led by the U.S. and Asia Pacific, as a near-double-digit management fee increase was supplemented by higher pass-through costs. Increased segment platform operating expenses were driven by i) continued investments in our technology platform (including in artificial intelligence and project management capabilities) and ii) incremental human capital investments in the latter half of 2024, most notably in Project Management, to support future business growth. Higher gross contract costs correlated to top-line performance in the Resilient business lines (Workplace Management, Project Management and Property Management). The change in Adjusted EBITDA and margin was primarily due to the technology platform and human capital investments described above, which outpaced revenue growth. 32 Table of Contents Leasing Advisory % Change Three Months Ended March 31, Change in in Local ($ in millions) 2025 2024 U.S. dollars Currency Leasing $ 566.1 497.3 68.8 14 % 15 % Advisory, Consulting and Other 20.0 23.1 (3.1) (13) (12) Revenue $ 586.1 520.4 65.7 13 % 13 % Platform compensation and benefits $ 426.8 381.8 45.0 12 % 13 % Platform operating, administrative and other 60.4 57.6 2.8 5 6 Depreciation and amortization 12.0 9.1 2.9 32 35 Segment platform operating expenses 499.2 448.5 50.7 11 12 Gross contract costs 2.0 6.4 (4.4) (69) (68) Segment operating expenses $ 501.2 454.9 46.3 10 % 11 % Adjusted EBITDA $ 97.0 74.8 22.2 30 % 29 % Compared with the prior-year quarter, increased revenue was driven by broad-based Leasing growth across asset classes, led by growth in office together with accelerated momentum from industrial. Many geographies achieved double-digit Leasing revenue growth for the quarter, most notably the U.S., Canada, Greater China and Germany. U.S. office leasing increased for the fifth consecutive quarter, exceeding first-quarter 2019 levels, partially driven by an increase in the number of large leasing deals across nearly all asset classes. Globally, office leasing grew 18% over the prior-year quarter, outperforming market volume growth of 9% according to JLL Research. The increase in segment platform operating expenses was due to higher commissions correlated to revenue growth, partially offset by continued improvement in platform leverage. Higher Adjusted EBITDA was largely driven by the revenue growth and improved platform leverage described above. 33 Table of Contents Capital Markets Services % Change Three Months Ended March 31, Change in in Local ($ in millions) 2025 2024 U.S. dollars Currency Investment Sales, Debt/Equity Advisory and Other $ 312.6 258.7 53.9 21 % 21 % Value and Risk Advisory 81.6 80.2 1.4 2 4 Loan Servicing 41.1 38.7 2.4 6 6 Revenue $ 435.3 377.6 57.7 15 % 16 % Platform compensation and benefits $ 329.5 287.6 41.9 15 % 16 % Platform operating, administrative and other 70.7 60.8 9.9 16 18 Depreciation and amortization 18.9 16.4 2.5 15 16 Segment platform operating expenses 419.1 364.8 54.3 15 16 Gross contract costs 1.1 13.6 (12.5) (92) (92) Segment operating expenses $ 420.2 378.4 41.8 11 % 12 % Equity earnings $ 1.6 0.1 1.5 n.m. n.m. Net non-cash MSR and mortgage banking derivative activity $ (12.9) (9.0) (3.9) (43) % (43) % Adjusted EBITDA $ 48.6 25.0 23.6 94 % 90 % Capital Markets Services top-line growth was fueled by debt advisory and investment sales, most notably in the United States. Debt advisory grew over 45% for the quarter while investment sales were up approximately 15%. The residential sector demonstrated the most significant improvement over the prior-year quarter, while hotels and industrial also contributed to the current-quarter growth. Specifically, Investment sales in the U.S. grew approximately 46% for the quarter, outperforming the broader market volume for U.S. investment sales, which grew 42% for the quarter, according to JLL Research. The increase in segment platform operating expenses was largely driven by higher commission expense, correlated to the growth in Investment Sales, Equity & Debt Advisory. Higher platform operating and administrative costs were offset by lower gross contract costs. As such, the revenue growth outpaced the increase in segment operating expenses. Adjusted EBITDA improvement for the quarter was largely attributable to transactional revenue growth described above, together with continued improvement in platform leverage. 34 Table of Contents Investment Management % Change Three Months Ended March 31, Change in in Local ($ in millions) 2025 2024 U.S. dollars Currency Advisory fees $ 89.3 92.3 (3.0) (3) % (2) % Transaction fees and other 8.5 8.9 (0.4) (4) (4) Incentive fees 0.7 2.2 (1.5) (68) (67) Revenue $ 98.5 103.4 (4.9) (5) % (4) % Platform compensation and benefits $ 58.3 61.3 (3.0) (5) % (4) % Platform operating, administrative and other 16.3 12.9 3.4 26 28 Depreciation and amortization 2.9 2.0 0.9 45 51 Segment platform operating expenses 77.5 76.2 1.3 2 3 Gross contract costs 8.2 8.4 (0.2) (2) (3) Segment operating expenses $ 85.7 84.6 1.1 1 % 2 % Adjusted EBITDA (1) $ 15.8 21.0 (5.2) (25) % (22) % Equity losses $ (6.1) (3.9) (2.2) (56) % (60) % (1) Adjusted EBITDA excludes Equity losses attributable to common shareholders for Investment Management. Investment Management advisory fees declined primarily due to lower assets under management ("AUM"), reflecting asset dispositions on behalf of certain clients in the fourth quarter of 2024. The net increase in segment operating expenses was driven primarily by foreign currency transaction losses in the current quarter, and the timing of certain expenses. The change in Adjusted EBITDA was attributable to the overall reduction in revenue, coupled with the expense drivers described above. AUM decreased 7% in USD (4% in local currency) during the quarter, and decreased 8% in USD (6% in local currency) over the trailing twelve months. Changes in AUM are detailed in the tables below (in billions): Quarter-to-date Beginning balance (December 31, 2024) $ 88.8 Asset acquisitions/takeovers 2.2 Asset dispositions/withdrawals (3.7) Valuation changes 0.2 Foreign currency translation (2.8) Change in uncalled committed capital and cash held (2.4) Ending balance (March 31, 2025) $ 82.3 Trailing Twelve Months Beginning balance (March 31, 2024) $ 89.7 Asset acquisitions/takeovers 5.3 Asset dispositions/withdrawals (7.0) Valuation changes (0.1) Foreign currency translation (2.2) Change in uncalled committed capital and cash held (3.4) Ending balance (March 31, 2025) $ 82.3 35 Table of Contents Software and Technology Solutions % Change Three Months Ended March 31, Change in in Local ($ in millions) 2025 2024 U.S. dollars Currency Revenue $ 57.1 53.9 3.2 6 % 6 % Platform compensation and benefits (1) $ 45.5 47.3 (1.8) (4) % (3) % Platform operating, administrative and other 14.5 10.5 4.0 38 38 Depreciation and amortization 6.3 4.5 1.8 40 39 Segment platform operating expenses 66.3 62.3 4.0 6 7 Gross contract costs 0.7 1.2 (0.5) (42) (35) Segment operating expenses $ 67.0 63.5 3.5 6 % 6 % Adjusted EBITDA (2) $ (2.9) (5.1) 2.2 43 % 37 % Equity losses $ (21.5) (1.0) (20.5) n.m. n.m. (1) Included in Platform compensation and benefits expense is a reduction in carried interest expense of $2.4 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively. Carried interest expense (benefit) is associated with equity earnings/losses on Spark Venture Funds investments. (2) Adjusted EBITDA excludes Equity losses for Software and Technology Solutions. Software and Technology Solutions revenue growth was due to increased bookings from software, partially offset by technology solutions. The increase in segment operating expenses was driven by growth in revenue-related expenses, partially offset by the higher year-over-year carried interest benefit. The improvement in Adjusted EBITDA was a product of the change in carried interest benefit and higher revenue, partially tempered by the revenue-related expense growth. 36 Table of Contents 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 and commercial paper. Cash Flows from Operating Activities Operating activities used $767.6 million of cash in the first three months of 2025, compared with $677.5 million of cash used in operating activities during the same period in 2024. Incremental cash outflow in the first quarter was primarily attributable to (i) the timing of Net reimbursables activity, (ii) higher commission payments in the first quarter of 2025 compared with the prior-year quarter (reflecting higher transactional revenue activity in Q4 2024 compared with Q4 2023). These drivers outpaced the increase in cash provided by earnings. Cash Flows from Investing Activities We used $152.8 million of cash for investing activities during the first three months of 2025, compared with $54.3 million used during the same period in 2024. The increase in cash used for investing activities was attributable to our $100 million contribution to JLL Income Property Trust ("JLL IPT"), an Investment Management flagship fund, in January 2025. We discuss other drivers of investing activity below in further detail. Cash Flows from Financing Activities Financing activities provided $900.7 million of cash during the first three months of 2025, compared with $703.4 million provided during the same period in 2024. This increase in cash provided by financing activities was driven by utilization of our commercial paper program, launched in the second quarter of 2024, to support the $100 million investment in JLL IPT as well as the higher cash flow used in operating activities, both noted above. 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, Short-term borrowings (financing lease obligations, overdrawn bank accounts and local overdraft facilities) and the balance outstanding under the Program are presented below. (in millions) March 31, 2025 December 31, 2024 Outstanding borrowings under the Facility $ 420.0 100.0 Short-term borrowings 88.3 153.8 Outstanding commercial paper 900.0 200.0 In addition to our Facility, we had the capacity to borrow up to $44.1 million under local overdraft facilities as of March 31, 2025. The following table provides additional information on our Facility, Uncommitted Facility and the Program, collectively. Three Months Ended March 31, ($ in millions) 2025 2024 Average outstanding borrowings $ 1,003.3 1,056.7 Average effective interest rate 5.0 % 6.1 % 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. Refer to Note 8, Debt, in the Notes to Consolidated Financial Statements for additional information on our debt. 37 Table of Contents Investment Activity As of March 31, 2025, we had a carrying value of $902.4 million in Investments, primarily related to Investment Management co-investments and investments by Software and Technology Solutions in early to mid-stage proptech companies as well as proptech funds. For the first three months ended March 31, 2025 and 2024, funding of investments exceeded return of capital by $108.0 million (notably, the $100.0 million invested in JLL IPT as described above) and $11.7 million, respectively. We expect continued investment activity by both Investment Management and Software and Technology Solutions. 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 three months ended March 31, 2025 and 2024 were $44.5 million and $43.2 million, respectively. Our capital expenditures in 2025 were primarily for purchased/developed software and technology hardware. Business Acquisitions During the three months ended March 31, 2025, we paid $0.6 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 $23.0 million as of March 31, 2025. These obligations represent the current discounted values of payments due to sellers of businesses for which our acquisition had been completed as of the balance sheet date and for which the only remaining condition on those payments is the passage of time. As of March 31, 2025, we had the potential to make earn-out payments for a maximum of $84.5 million on 12 completed acquisitions subject to the achievement of certain performance conditions. Refer to Note 5, Business Combinations, Goodwill and Other Intangible Assets, in the Notes to the Consolidated Financial Statements for further information on Business Acquisitions. We will continue to consider acquisitions that we believe will strengthen our market position, increase our profitability and supplement our organic growth. Share Repurchase and Dividend Programs The number of shares repurchased and cash paid for repurchases is noted in the following table. Three Months Ended March 31, ($ in millions) 2025 2024 Total number of shares repurchased (in 000's) 75.3 110.7 Total paid for shares repurchased $ 19.8 20.1 As of March 31, 2025, $993.4 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 March 31, 2025 and December 31, 2024, we had total Cash and cash equivalents of $432.4 million and $416.3 million, respectively, of which approximately $338.6 million and $314.4 million, respectively, was held by foreign subsidiaries. 38 Table of Contents 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. 39 Table of Contents