Jones Lang LaSalle Incorporated — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The filing is unaudited. JLL reorganized its reporting segments effective January 1, 2022; prior-year segment results were recast for comparability.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $5,278.4 million | $4,495.0 million | $10,079.8 million | $8,532.1 million |
| Fee revenue (non-GAAP) | $2,138.8 million | $1,794.3 million | $4,039.3 million | $3,218.8 million |
| Operating income | $235.1 million | $224.3 million | $410.8 million | $305.0 million |
| Net income attributable to common shareholders | $193.9 million | $200.0 million | $339.5 million | $303.0 million |
| Diluted earnings per share | $3.90 | $3.82 | $6.75 | $5.80 |
| Adjusted EBITDA (non-GAAP) | $359.0 million | $332.4 million | $632.6 million | $522.5 million |
| Adjusted EBITDA margin on fee revenue | 16.5% local currency | 18.5% | 15.5% local currency | 16.2% |
Q2 revenue rose 17% in U.S. dollars (21% local currency), while fee revenue increased 19% (23% local currency). First-half revenue rose 18% in U.S. dollars (21% local currency) and fee revenue increased 25% (29% local currency). Fee-revenue growth was broad-based, led by Markets Advisory and Capital Markets. JLL said stronger compensation costs, commissions, headcount, travel and marketing expenses compressed adjusted EBITDA margin. Q2 net income margin attributable to common shareholders was 3.7%, versus 4.4% a year earlier.
For the first half, operating cash flow was negative $539.4 million, compared with negative $246.1 million in 2021, primarily because of greater incentive compensation payments. Investing activities used $63.1 million, versus $213.8 million used in the prior-year period. Financing activities provided $601.3 million, largely reflecting increased credit-facility borrowings and share repurchases. Cash, cash equivalents and restricted cash ended the period at $802.8 million; balance-sheet cash and cash equivalents were $568.0 million.
Total debt was $2.13 billion at June 30, 2022, up from $956.4 million at year-end 2021. Credit-facility borrowings were $1.36 billion, compared with $138.2 million at year-end. The $2.75 billion revolving facility matures April 2026; JLL reported covenant compliance and investment-grade ratings. Current assets were $6.15 billion and current liabilities were $5.34 billion. The filing does not provide a conventional current-ratio or net-debt measure.
Material changes and unusual items
- Revenue and fee revenue advanced across the major service lines. Capital Markets growth included investment sales, debt/equity advisory and loan servicing; Work Dynamics benefited from new and expanded workplace-management mandates and project demand.
- LaSalle Q2 revenue was nearly flat in U.S. dollars: higher advisory fees were largely offset by lower incentive fees. Adjusted EBITDA fell to $27.8 million from $48.0 million, including lower equity earnings. LaSalle assets under management were $82.1 billion at June 30, up 6% in U.S. dollars from March 31.
- JLL Technologies Q2 fee revenue rose 46% in U.S. dollars, including incremental revenue from late-2021 acquisitions; organic fee revenue grew approximately 22%. Equity earnings benefited from investment valuation increases.
- Other income included a $142.3 million gain at a consolidated variable-interest entity in which JLL held no equity interest. The gain was allocated to noncontrolling interests and had no net impact on income attributable to common shareholders. JLL also recorded a $10.5 million loss on the Russia business disposition.
- Foreign-currency translation reduced equity by $188.5 million in the first half. The stronger U.S. dollar also dampened reported revenue growth compared with local-currency growth.
- JLL repurchased $447.7 million of common stock in the first half, including $297.7 million in Q2. As of June 30, $1.31 billion remained authorized under its repurchase program.
Outlook, risks and contingencies
The filing provides no specific financial guidance or quantified forward outlook. Management noted that JLL’s revenue and profit have historically tended to increase as the year progresses because of transaction seasonality; interim results are not necessarily indicative of full-year results. Transaction timing, incentive fees, investment valuations, compensation accruals and foreign exchange can cause significant period-to-period variability. Management expects continued JLL Technologies investment and strategic LaSalle co-investment activity.
Key risks discussed include macroeconomic, geopolitical, real-estate and credit-market conditions; foreign-currency and variable-interest-rate exposure; and variability in transaction-based revenue and investment-related earnings. A 50-basis-point increase in short-term rates during the first half would have increased net interest expense by an estimated $2.8 million. Litigation claims arise in the ordinary course; JLL stated it did not expect their resolution to materially affect its financial position, results or liquidity. Effective April 1, 2022, its captive insurer’s retained professional-indemnity risk increased from $2.5 million to $10.0 million per claim, inclusive of the deductible. JLL reported no material changes to previously disclosed risk factors and no material control deficiencies.
Important facts for investors to verify
- Whether fee-revenue growth can continue while controlling compensation and other operating costs, particularly given the Q2 margin decline.
- How elevated credit-facility borrowings, variable interest rates and upcoming $275 million senior-note maturity in November 2022 affect liquidity and financing costs.
- Whether the first-half operating cash outflow, driven partly by incentive-compensation payments and working-capital movements, reverses in subsequent quarters.
- The sustainability and volatility of investment-related equity earnings, incentive fees and fair-value gains, including the concentration of JLL Technologies investments.
- Progress and remaining authorization under the share-repurchase program, alongside investment and co-investment commitments.
- Potential exposure from the $16.5 billion unpaid principal balance of DUS loans subject to loss sharing, litigation, and increased captive-insurance retention.