Jones Lang LaSalle Incorporated — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. JLL provides commercial real estate services and investment management through its Americas, EMEA and Asia Pacific Real Estate Services businesses and LaSalle. Results are compared with the pandemic-affected 2020 periods.
Financial performance
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Total revenue | $4.495 billion | $3.670 billion | $8.532 billion | $7.766 billion |
| Revenue before reimbursements | $2.508 billion | $1.829 billion | $4.637 billion | $4.062 billion |
| Fee revenue (non-GAAP) | $1.817 billion | $1.245 billion | $3.260 billion | $2.750 billion |
| Operating income | $224.3 million | $10.8 million | $305.0 million | $75.4 million |
| Net income attributable to common shareholders | $200.0 million | $15.2 million | $303.0 million | $20.5 million |
| Diluted EPS | $3.82 | $0.29 | $5.80 | $0.39 |
| Adjusted EBITDA (non-GAAP) | $332.4 million | $103.3 million | $522.5 million | $198.9 million |
Q2 fee revenue rose 41% in local currency; first-half fee revenue rose 15% in local currency. Adjusted EBITDA margin on fee revenue was 18.3% in U.S. dollars in Q2 (18.5% local currency), versus 8.3% a year earlier; first-half margin was 16.2% versus 7.2%. Q2 net income margin on revenue before reimbursements was 8.0%, versus 0.8%. These comparisons reflect both recovery from the prior-year pandemic disruption and higher transaction activity.
Leasing and Capital Markets drove much of the rebound. Q2 Americas segment income was $206.6 million, EMEA reported $0.3 million, Asia Pacific $36.5 million and LaSalle $39.8 million. EMEA remained near break-even despite improvement from its prior-year loss. LaSalle reported record assets under management of $73.4 billion at June 30.
Cash flow, balance sheet and debt
- Operating activities used $246.1 million of cash in the first half, versus $44.7 million used in 2020. Investing activities used $213.8 million; financing activities provided $314.7 million. Cash, cash equivalents and restricted cash ended the period at $684.9 million, including $494.0 million of unrestricted cash and $190.9 million of restricted cash.
- Total assets were $13.455 billion and total equity was $5.900 billion at June 30, 2021. Current assets were $5.328 billion and current liabilities $4.642 billion.
- Reported total debt was $1.127 billion, including $350 million outstanding under the revolving credit facility, $102.5 million of short-term borrowings and $687.9 million of long-term senior notes. Warehouse facilities were separately reported at $714.1 million and are secured by related warehouse receivables.
- JLL amended its $2.75 billion unsecured revolving facility, extending maturity to April 2026. It reported compliance with debt and warehouse-facility covenants. Credit ratings were investment grade: Baa1 from Moody’s and BBB+ from S&P.
- Investments in real estate ventures were $614.0 million, including $505.0 million measured at fair value. Unfunded investment commitments totaled up to $315.5 million; JLL said it did not expect a call on $60.4 million related to a terminated fund.
Material changes, outlook and risks
- Strong year-over-year earnings growth was led by a recovery in transaction-based Leasing and Capital Markets, especially in the Americas. Higher equity earnings also contributed: $89.3 million for the first half versus a $13.6 million loss in 2020, including valuation gains on JLL Technologies and LaSalle investments.
- First-half net income included a $12.0 million gain on the sale of a business in connection with a broader investment in Roofstock; JLL excludes this gain from Adjusted EBITDA. Q2 equity earnings included $16.2 million of valuation increases to JLL Technologies investments.
- Management provided no specific quantitative full-year earnings or revenue guidance in the supplied filing text. It cautioned that pandemic conditions disrupted historical seasonality and that interim results are not necessarily indicative of full-year performance. Revenue and profits have historically tended to increase later in the year.
- Management expects to continue strategic co-investments and JLL Technologies investments, and to consider acquisitions. The board authorized an additional $500 million for share repurchases; $558.9 million remained authorized at June 30. JLL repurchased 200,000 shares for $41.1 million during Q2.
- Key uncertainties include COVID-19 and related restrictions, real estate and capital-market conditions, volatile transaction timing and incentive compensation, foreign-exchange movements, and changes in investment valuations. A 50-basis-point increase in short-term rates was estimated to add $1.0 million to first-half net interest expense.
- JLL had $13.2 billion of unpaid principal in loans subject to Fannie Mae DUS loss-sharing arrangements; its guarantee obligations were $23.6 million and a separate loan-loss reserve was $22.9 million. Litigation arises in the ordinary course; the company said it did not expect resolution to materially adversely affect its financial position, results or liquidity, while noting claims may exceed insurance.
Important facts for investors to verify
- Whether transaction-driven growth persists after comparisons with the pandemic-affected 2020 period, particularly in Leasing and Capital Markets.
- How much reported earnings and investment returns depend on fair-value gains, including the $85.1 million first-half net increase in fair value of investments reported at fair value.
- Whether working-capital movements and receivable collections improve after first-half operating cash outflow of $246.1 million.
- Debt and liquidity trends, including revolving-facility borrowings, warehouse funding and the $315.5 million of potential unfunded investment commitments.
- Potential exposure from DUS loan loss-sharing, litigation, earn-outs and other contingencies, and the effects of COVID-19, currency movements and real estate market conditions.