JLL Reports Financial Results for Fourth-Quarter and Full-Year 2023

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Resilient business line revenue growth continued as the pace of the market-wide pullback in transaction activity eased

CHICAGO, Feb. 27, 2024 /PRNewswire/ — Jones Lang LaSalle Incorporated (NYSE:JLL) today reported operating income of $290.4 million for the fourth quarter of 2023, up from $254.7 million last year, and $576.5 million for the full year, compared with $868.1 million in 2022. Diluted earnings per share were $3.57 and adjusted diluted earnings per share1 were $4.23 for the quarter; diluted earnings per share were $4.67 and adjusted diluted earnings per share1 were $7.40 for the full year.

Fourth-quarter revenue was $5.9 billion, up 4% in local currency1, and fee revenue1 was $2.2 billion, down 2% in local currency1

Work Dynamics achieved broad-based growth across all service lines, highlighted by the ramp up of recent contract wins
Capital Markets had solid performance against the lowest fourth-quarter investment sales market volumes since 2011
Property Management, within Markets Advisory, delivered double-digit growth from strong momentum across the globe
Also within Markets Advisory, the office sector in the U.S. drove the single-digit decline in Leasing as other asset classes were largely flat

Fourth-quarter margin reflected lower transaction-based revenues and unrealized investment losses associated with certain JLL Technologies portfolio investments, partially offset by growth in resilient revenue and the impact of recent cost mitigation actions, reducing the expense base
Nearly $130 million of incremental cash was generated by operating activities for the quarter; over $375 million incremental for the full year

“JLL’s fourth-quarter and full-year 2023 operating results reflected strong growth within our resilient business lines in the face of the market-wide pullback in transaction activity and elevated geopolitical uncertainty. With a focus on operating efficiency, we drove improved cash generation while continuing to invest in our platform,” said Christian Ulbrich, JLL CEO. “As business confidence globally begins to improve alongside greater stability in interest rates, we expect transaction activity will pick up over the course of the year. Our global platform, industry insights and people uniquely position us to seize significant growth opportunities across the commercial real estate industry in the coming years while continuing to provide exceptional service to our clients.”

Summary Financial Results
 

($ in millions, except per share data, “LC” = local currency)

Three Months Ended December 31,

Year Ended December 31,

2023

2022

% Change
in USD

% Change
in LC

2023

2022

% Change
in USD

% Change
in LC

Revenue

$        5,881.4

$        5,604.8

5 %

4 %

$      20,760.8

$      20,862.1

— %

— %

Fee revenue1

2,180.4

2,214.1

(2)

(2)

7,403.1

8,302.0

(11)

(11)

Net income attributable to common shareholders

$           172.4

$           174.8

(1) %

1 %

$           225.4

$           654.5

(66) %

(64) %

Adjusted net income attributable to common shareholders1

204.5

210.6

(3)

(1)

357.5

775.1

(54)

(53)

Diluted earnings per share

$             3.57

$             3.62

(1) %

1 %

$             4.67

$           13.27

(65) %

(63) %

Adjusted diluted earnings per share1

4.23

4.36

(3)

(2)

7.40

15.71

(53)

(52)

Adjusted EBITDA1

$           306.4

$           338.5

(9) %

(9) %

$           736.7

$        1,247.3

(41) %

(40) %

Free Cash Flow5

$           680.2

$           532.0

28 %

n/a

$           388.9

$              (5.9)

n.m.

n/a

Note: For discussion and reconciliation of non-GAAP financial measures, see the Notes following the Financial Statements in this news release.

Consolidated 2023 Performance Highlights:

Consolidated


($ in millions, “LC” = local currency)

Three Months Ended December 31,

%
Change
in USD

%
Change
in LC

Year Ended December 31,

%
Change
in USD

%
Change
in LC

2023

2022

2023

2022

Markets Advisory

$            1,197.4

$            1,186.3

1 %

— %

$            4,121.6

$            4,415.5

(7) %

(6) %

Capital Markets

537.1

607.9

(12)

(13)

1,778.0

2,488.2

(29)

(29)

Work Dynamics

3,966.1

3,634.6

9

8

14,131.1

13,268.5

7

7

JLL Technologies

65.5

57.3

14

14

246.4

213.9

15

15

LaSalle

115.3

118.7

(3)

(4)

483.7

476.0

2

2

Total revenue

$            5,881.4

$            5,604.8

5 %

4 %

$          20,760.8

$          20,862.1

— %

— %

Gross contract costs1

(3,709.7)

(3,392.5)

9

9

(13,375.9)

(12,549.1)

7

7

Net non-cash MSR and mortgage banking derivative activity

8.7

1.8

(383)

(381)

18.2

(11.0)

(265)

(266)

Total fee revenue1

$            2,180.4

$            2,214.1

(2) %

(2) %

$            7,403.1

$            8,302.0

(11) %

(11) %

Markets Advisory

895.6

915.3

(2)

(3)

2,968.0

3,360.2

(12)

(11)

Capital Markets

532.2

598.9

(11)

(12)

1,748.7

2,430.2

(28)

(28)

Work Dynamics

582.2

534.3

9

8

1,999.7

1,864.7

7

7

JLL Technologies

62.0

54.2

14

14

231.9

200.2

16

16

LaSalle

108.4

111.4

(3)

(4)

454.8

446.7

2

2

Operating income

$               290.4

$               254.7

14 %

15 %

$               576.5

$               868.1

(34) %

(33) %

Equity (losses) earnings

$                (76.8)

$                (21.6)

(256) %

(256) %

$              (194.1)

$                 51.0

(481) %

(480) %

Adjusted EBITDA1

$               306.4

$               338.5

(9) %

(9) %

$               736.7

$            1,247.3

(41) %

(40) %

Net income margin attributable to common shareholders (USD basis)

2.9 %

3.1 %

(20) bps

n/a

1.1 %

3.1 %

(200) bps

n/a

Adjusted EBITDA margin (local currency basis)

14.3 %

15.3 %

(120) bps

(100) bps

10.0 %

15.0 %

(500) bps

(500) bps

Adjusted EBITDA margin (USD basis)

14.1 %

10.0 %

Note: For discussion and reconciliation of non-GAAP financial measures, see the Notes following the Financial Statements in this news release. Percentage variances in the Performance
Highlights below are calculated and presented on a local currency basis, unless otherwise noted.

Revenue

Revenue increased 4% and fee revenue decreased 2% compared with the prior-year quarter. Businesses with resilient revenues continued to deliver fee revenue growth for the quarter as Workplace Management, within Work Dynamics, grew 17%; Property Management, within Markets Advisory, grew 12%; and JLL Technologies increased 14%. Consistent with earlier quarters in 2023, economic uncertainty and elevated interest rates adversely impacted most of the transaction-based businesses, notably Investment Sales and Debt/Equity Advisory within Capital Markets, and Leasing within Markets Advisory.

For the full year, revenue was flat and fee revenue decreased 11% compared with the prior year, as transaction-based businesses lagged the prior year, consistent with the fourth-quarter narrative. Resilient businesses, collectively, delivered 5% fee revenue growth for the full year. Refer to segment performance highlights for additional detail.

The following charts reflect the segment proportion of Revenue and Fee revenue for the current quarter and full year.

Net income, Adjusted EBITDA and Margin Performance

Net income attributable to common shareholders for the fourth quarter was $172.4 million, compared with $174.8 million in 2022, and Adjusted EBITDA was $306.4 million, compared with $338.5 million last year. For the full year, net income attributable to common shareholders was $225.4 million in 2023, compared with $654.5 million last year, and Adjusted EBITDA was $736.7 million, compared with $1,247.3 million in 2022. For the fourth quarter and full year, interest expense, net of interest income, increased $5.4 million and $60.2 million, respectively, compared with the prior-year periods. While the fourth-quarter increase was solely driven by a higher effective interest rate on the company’s debt, the full-year increase was also partially due to higher average outstanding borrowings under our credit facilities.

Diluted earnings per share for the fourth quarter and full year were $3.57 and $4.67, respectively, compared with $3.62 and $13.27 in the respective prior-year periods; Adjusted diluted earnings per share were $4.23 and $7.40 for the fourth quarter and full year, respectively, compared with $4.36 and $15.71 in 2022. The effective tax rates for the full-year 2023 and 2022 were 10.2% and 20.2%, respectively. The meaningfully lower ETR in 2023 was primarily attributable to the decline in pre-tax earnings as well as the geographic mix of income.

Higher equity losses equated to approximately 250 basis points of the fourth-quarter margin decline. The residual net margin expansion was primarily attributable to growth in resilient revenue businesses, the benefit of cost reduction actions executed in the last year, and an actuarial benefit associated with U.S. medical self-insurance. Partially offsetting these items was the impact of lower transaction-based revenue and the timing of incentive compensation accruals.

The full-year margin contraction was primarily attributable to the $245.1 million decrease in equity earnings, which comprised nearly two-thirds of the margin decline, and the impact of lower transaction-based revenue. Partially offsetting these items were margin accretive drivers including resilient revenue growth and the benefit of cost reduction actions executed in the last year.

Aggregation of Segment Adjusted EBITDA (in millions)

Cash Flows and Capital Allocation:

Net cash provided by operating activities was $729.4 million for the fourth quarter of 2023, compared with $601.8 million in the prior-year quarter. Free Cash Flow5 was an inflow of $680.2 million this quarter, compared with $532.0 million in the fourth quarter of 2022. Incremental cash flows associated with lower commission payments, cash provided by earnings, and receivables outpaced the incremental outflows associated with net reimbursables, attributable to recent growth in Workplace Management from contract wins and timing of reimbursables collections.

Year to date, net cash provided by operating activities was $575.8 million in 2023, compared with $199.9 million in the comparative period. Free Cash Flow5 was an inflow of $388.9 million through December 31, 2023, compared with an outflow of $5.9 million in the prior year. The year-over-year improvement was primarily due to (i) improved collection of receivables, (ii) $162.8 million less in cash taxes paid, (iii) lower annual incentive compensation payments, typically paid in the first quarter, compared with 2022, and (iv) lower commission payments this year. These items were partially offset by lower cash provided by earnings and incremental outflows associated with net reimbursables.

In the fourth quarter of 2023, the company repurchased 147,805 shares for $21.9 million. There were no share repurchases in the fourth quarter of 2022. On a year-to-date basis, 410,260 shares were repurchased in 2023, returning $62.0 million to shareholders this year, compared with 2,922,466 shares repurchased and $601.2 million of capital returned during 2022. As of December 31, 2023, $1,093.6 million remained authorized for repurchase.

Net Debt, Leverage and Liquidity5:

December 31, 2023

September 30, 2023

December 31, 2022

Total Net Debt (in millions)

$                         1,150.3

1,698.6

1,244.0

Net Leverage Ratio

1.6x

2.2x

1.0x

Corporate Liquidity (in billions)

$                                 3.1

2.1

2.6

The decrease in Net Debt from September 30, 2023, was primarily due to significant cash provided by operating activities in the fourth quarter. The higher year-over-year leverage ratio was entirely driven by a decline in the trailing twelve month Adjusted EBITDA (which includes the impact of equity losses).

Markets Advisory 2023 Performance Highlights:

Markets Advisory


($ in millions, “LC” = local currency)

Three Months Ended December 31,

%
Change
in USD

%
Change
in LC

Year Ended December 31,

%
Change
in USD

%
Change
in LC

2023

2022

2023

2022

Revenue

$           1,197.4

$           1,186.3

1 %

— %

$           4,121.6

$           4,415.5

(7) %

(6) %

Gross contract costs1

(301.8)

(271.0)

11

11

(1,153.6)

(1,055.3)

9

11

Fee revenue1

$              895.6

$              915.3

(2) %

(3) %

$           2,968.0

$           3,360.2

(12) %

(11) %

Leasing

709.3

739.9

(4)

(5)

2,322.3

2,736.7

(15)

(15)

Property Management

155.2

136.5

14

12

551.7

500.2

10

11

Advisory, Consulting and Other

31.1

38.9

(20)

(20)

94.0

123.3

(24)

(23)

Segment operating income

$              142.9

$              127.4

12 %

12 %

$              351.9

$              448.0

(21) %

(22) %

Adjusted EBITDA1

$              160.5

$              150.2

7 %

6 %

$              416.6

$              527.5

(21) %

(21) %

Adjusted EBITDA margin (local currency basis)

18.0 %

16.4 %

150 bps

160 bps

14.1 %

15.7 %

(170) bps

(160) bps

Adjusted EBITDA margin (USD basis)

17.9 %

14.0 %

Note: For discussion and reconciliation of non-GAAP financial measures, see the Notes following the Financial Statements in this news release. Percentage variances in the Performance
Highlights below are calculated and presented on a local currency basis, unless otherwise noted.

Markets Advisory top-line movements for the quarter and full year were largely driven by Leasing and reflected a decrease in average deal size across nearly all asset types, especially the office sector as a year-to-date driver. For the fourth quarter, transaction volume was up in industrial but down in most other asset classes; year to date, transaction volumes were down for all asset classes. Consistent with recent quarters, continued economic uncertainty has delayed commercial real estate decision making, particularly for large-scale leasing actions where JLL has a greater presence. Property Management’s top-line growth for the fourth-quarter and full year was primarily attributable to portfolio expansions, most notably in the Americas, and incremental fees from interest-rate sensitive contract terms in the U.K. (as also noted in the second and third quarters). The decreases in Advisory, Consulting and Other for the fourth quarter and full year were substantially driven by the absence of revenues associated with a business exited at the end of the fourth quarter of 2022.

The margin expansion for the fourth quarter was predominantly driven by lower operating expenses associated with cost management actions over the last year as well as incentive compensation accrual timing.

The full-year margin contraction was predominantly driven by the lower Leasing revenue (net of lower commissions) and higher incentive compensation accruals in the current year, overshadowing the revenue growth in Property Management and benefit associated with cost management actions over the past year.

Capital Markets 2023 Performance Highlights:

Capital Markets


($ in millions, “LC” = local currency)

Three Months Ended December 31,

%
Change
in USD

%
Change
in LC

Year Ended December 31,

%
Change
in USD

%
Change
in LC

2023

2022

2023

2022

Revenue

$              537.1

$              607.9

(12) %

(13) %

$           1,778.0

$           2,488.2

(29) %

(29) %

Gross contract costs1

(13.6)

(10.8)

26

23

(47.5)

(47.0)

1

1

Net non-cash MSR and mortgage banking derivative activity

8.7

1.8

(383)

(381)

18.2

(11.0)

(265)

(266)

Fee revenue1

$              532.2

$              598.9

(11) %

(12) %

$           1,748.7

$           2,430.2

(28) %

(28) %

Investment Sales, Debt/Equity Advisory and Other

391.0

458.1

(15)

(16)

1,245.0

1,906.7

(35)

(35)

Value and Risk Advisory

103.1

103.7

(1)

(2)

351.1

365.6

(4)

(3)

Loan Servicing

38.1

37.1

3

3

152.6

157.9

(3)

(3)

Segment operating income

$                49.3

$                96.8

(49) %

(49) %

$                81.1

$              389.3

(79) %

(79) %

Equity earnings

$                  0.6

$                  1.0

(40) %

(42) %

$                  6.7

$                  3.1

116 %

114 %

Adjusted EBITDA1

$                76.1

$              115.9

(34) %

(34) %

$              173.1

$              444.0

(61) %

(61) %

Adjusted EBITDA margin (local currency basis)

14.5 %

19.4 %

(510) bps

(490) bps

9.9 %

18.3 %

(840) bps

(840) bps

Adjusted EBITDA margin (USD basis)

14.3 %

9.9 %

Note: For discussion and reconciliation of non-GAAP financial measures, see the Notes following the Financial Statements in this news release. Percentage variances in the Performance
Highlights below are calculated and presented on a local currency basis, unless otherwise noted.

Note: “Valuation Advisory” was changed to “Value and Risk Advisory” in the third quarter of 2023.

Lower Capital Markets revenue and fee revenue for the quarter and full year reflected the meaningful drop in transaction volumes compared with 2022. The rapid rise in interest rates and elevated uncertainty this year prolonged investor decision making and drove wide bid-ask spreads. This impact was most pronounced in Investment Sales and Debt/Equity Advisory, which experienced declines across most asset classes and geographies, on both a fourth-quarter and full-year basis. This outperformed broader market trends as Q4 global market volumes for investment sales were down 23% in USD (24% in local currency) according to JLL Research, the lowest fourth quarter since 2011. Loan Servicing continued to achieve growth in fees generated by the Fannie Mae DUS portfolio as core servicing fees were up 6%, slightly offset by lower prepayment fees as refinancing activity remained suppressed. On a full-year basis, the $13.4 million decline in prepayment fees outpaced the 6% year-to-date growth in core servicing fees.

The margin contraction for the fourth quarter and full year were predominantly driven by a decline in Investment Sales and Debt/Equity Advisory revenues, net of lower commissions expense, as well as incentive compensation accruals.

Work Dynamics 2023 Performance Highlights:

Work Dynamics


($ in millions, “LC” = local currency)

Three Months Ended December 31,

%
Change
in USD

%
Change
in LC

Year Ended December 31,

%
Change
in USD

%
Change
in LC

2023

2022

2023

2022

Revenue

$           3,966.1

$           3,634.6

9 %

8 %

$         14,131.1

$         13,268.5

7 %

7 %

Gross contract costs1

(3,383.9)

(3,100.3)

9

8

(12,131.4)

(11,403.8)

6

7

Fee revenue1

$              582.2

$              534.3

9 %

8 %

$           1,999.7

$           1,864.7

7 %

7 %

Workplace Management

239.9

202.3

19

17

806.4

752.8

7

7

Project Management

258.2

250.1

3

2

928.4

850.7

9

9

Portfolio Services and Other

84.1

81.9

3

1

264.9

261.2

1

1

Segment operating income

$              100.1

$                64.6

55 %

55 %

$              183.8

$              158.4

16 %

15 %

Adjusted EBITDA1

$              120.5

$                83.9

44 %

44 %

$              264.0

$              230.1

15 %

14 %

Adjusted EBITDA margin (local currency basis)

21.0 %

15.7 %

500 bps

530 bps

13.1 %

12.3 %

90 bps

80 bps

Adjusted EBITDA margin (USD basis)

20.7 %

13.2 %

Note: For discussion and reconciliation of non-GAAP financial measures, see the Notes following the Financial Statements in this news release. Percentage variances in the Performance
Highlights below are calculated and presented on a local currency basis, unless otherwise noted.

For both the fourth quarter and full year, Work Dynamics revenue and fee revenue growth was broad-based across service lines and geographies, led by strong performance in Workplace Management as recent wins and mandate expansions ramped up in the second half of the year. Momentum from increased project demand drove Project Management growth for the fourth quarter and full year, though the growth decelerated in the current quarter.

Adjusted EBITDA margin expansion for the fourth quarter was attributable to the top-line performance described above, most notably Workplace Management, and the reduction of certain expenses associated with cost management actions over the last year.

Full-year adjusted EBITDA margin expansion was primarily driven by Workplace Management and Project Management revenue growth as well as cost management actions discussed above.

JLL Technologies 2023 Performance Highlights:

JLL Technologies


($ in millions, “LC” = local currency)

Three Months Ended December 31,

%
Change
in USD

%
Change
in LC

Year Ended December 31,

%
Change
in USD

%
Change
in LC

2023

2022

2023

2022

Revenue

$                 65.5

$                 57.3

14 %

14 %

$               246.4

$               213.9

15 %

15 %

Gross contract costs1

(3.5)

(3.1)

13

13

(14.5)

(13.7)

6

6

Fee revenue1

$                 62.0

$                 54.2

14 %

14 %

$               231.9

$               200.2

16 %

16 %

Segment operating income (loss)(a)

$                   2.1

$               (22.4)

109 %

110 %

$               (35.0)

$             (112.9)

69 %

68 %

Equity (losses) earnings

$               (75.0)

$               (17.9)

(319) %

(317) %

$             (177.0)

$                 46.6

(480) %

(480) %

Adjusted EBITDA1

$               (68.9)

$               (36.2)

(90) %

(90) %

$             (196.1)

$               (50.9)

(285) %

(286) %

Adjusted EBITDA margin (local currency basis)

(111.3) %

(66.8) %

(4,430) bps

(4,450) bps

(84.9) %

(25.4) %

(5,920) bps

(5,950) bps

Adjusted EBITDA margin (USD basis)

(111.1) %

(84.6) %

Note: For discussion and reconciliation of non-GAAP financial measures, see the Notes following the Financial Statements in this news release. Percentage variances in the Performance
Highlights below are calculated and presented on a local currency basis, unless otherwise noted.

(a) Included in Segment operating income (loss) for JLL Technologies is a reduction in carried interest expense of $4.4 million and $13.8 million for the three and twelve months ended December 31,
2023, respectively. There was no carried interest for the three months ended December 31, 2022, and $16.6 million of expense for the twelve months ended December 31, 2022, related to Equity
earnings of the segment.

The fourth-quarter and full-year increases in JLL Technologies revenue and fee revenue were primarily due to growth in solutions and service offerings, largely from existing enterprise clients. The fourth quarter increase was also partially attributable to higher subscriptions revenue.

Equity losses for the fourth quarter resulted from valuation declines in certain JLL Technologies’ …

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