Jones Lang LaSalle Incorporated — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. JLL is a global real estate services and investment management firm operating through the Americas, EMEA, Asia Pacific and LaSalle. The filing reports annual results, not a standalone fourth-quarter filing.
Financial performance
| Metric | 2015 | 2014 | Change |
|---|---|---|---|
| Revenue | $5.966 billion | $5.430 billion | Up 10% in U.S. dollars; 18% in local currency |
| Fee revenue | $5.164 billion | $4.702 billion | Up 10% in U.S. dollars; 17% in local currency |
| Operating income | $529.8 million | $465.7 million | Up 14% |
| Adjusted EBITDA | $749.4 million | $650.8 million | Up 15% |
| Net income attributable to common shareholders | $438.4 million | $385.7 million | Up 14% |
| Diluted EPS | $9.65 | $8.52 | Up 13% |
| Cash from operating activities | $375.8 million | $498.9 million | Down $123.1 million |
| Cash and cash equivalents at year-end | $216.6 million | $250.4 million | Down $33.8 million |
| Total debt | $579.2 million | $294.6 million | Up $284.6 million |
Fee revenue is revenue net of reimbursed vendor and subcontractor costs; reported revenue includes $801.3 million of gross contract costs in 2015. Adjusted EBITDA is a non-GAAP measure. Adjusted operating income margin was 10.9%, versus 10.8% in 2014; adjusted EBITDA margin on fee revenue was 14.6%, versus 13.8%.
Cash used in investing activities was $584.6 million, chiefly reflecting $391.6 million of net cash consideration for 20 acquisitions. Financing activities provided $191.6 million, primarily as borrowing increased to support acquisitions and business growth. Capital expenditures were $149.1 million. The company declared dividends of $0.56 per share, up from $0.48; it made no program share repurchases.
Material changes and operating drivers
- Fee revenue grew across all four segments in local currency: Americas 16%, EMEA 20%, Asia Pacific 17% and LaSalle 20%.
- Strongest service-line growth included Project & Development Services, up 26% in local currency, and Capital Markets & Hotels, up 25%. Property & Facility Management grew 13% and Leasing 13%.
- LaSalle’s revenue benefited from incentive fees and equity earnings tied to investment dispositions and asset valuations. Equity earnings from real estate ventures were $77.5 million, compared with $48.3 million.
- Operating cash flow declined despite higher earnings, mainly because of increased working-capital needs and timing of receivables and payables. Trade receivables increased to $1.592 billion from $1.375 billion.
- JLL completed 20 acquisitions, compared with 10 in 2014. Year-end goodwill rose to $2.141 billion from $1.908 billion.
- LaSalle assets under management increased to $56.4 billion from $53.6 billion; it raised $5.0 billion in capital commitments, compared with $8.9 billion in 2014.
Liquidity, debt and financial position
At year-end, JLL had $255.0 million outstanding under its $2.0 billion revolving credit facility, $275.0 million of senior notes due 2022 bearing 4.4% interest, and $49.2 million of short-term borrowings. The facility was renewed in February 2015, with maturity extended to February 2020. JLL reported compliance with its debt covenants and investment-grade ratings of BBB+ from S&P and Baa2 from Moody’s.
Total assets were $6.205 billion and total liabilities were $3.476 billion. The company reported $1.853 billion in contractual obligations, including lease obligations of $762.6 million. In addition, it had up to $230.4 million of contingent acquisition earn-outs and $189.8 million of unfunded co-investment commitments. These contingent amounts are not included in the contractual-obligations total.
Outlook, commentary and risks
Management provided no specific numerical earnings or revenue guidance. It said it expects to continue investing in its strategic priorities and to consider acquisitions that complement organic growth. Management noted that 2015 was a record year for fee revenue, but cautioned that LaSalle incentive fees and equity gains are volatile and the record contribution from these items in 2014–2015 is expected to moderate.
The filing describes strong capital markets but comparatively cautious leasing demand, fee pressure, real estate market cyclicality and seasonality. Risks highlighted include economic and geopolitical uncertainty, lower oil and commodity prices, slower growth in China, currency movements, acquisition integration, competition for talent, cyber and data-security incidents, regulatory and tax changes, and potential client credit or contract disputes. The company had no material environmental claims disclosed and stated that pending litigation was not expected, based on information then available, to materially adversely affect its financial position, results or liquidity.
Unusual or notable items include $34.1 million of restructuring and acquisition charges, including a $12.8 million write-off of an acquisition-related indemnification asset; $6.0 million of impairment charges related primarily to real estate ventures; and $163.7 million of negative foreign-currency translation adjustments in other comprehensive income. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; the internal-control assessment excluded the 2015 acquisitions, which contributed $135 million of revenue and had $716 million of assets.
Investor verification priorities
- Reconcile reported revenue growth with fee-revenue growth and the local-currency measures; assess the impact of foreign exchange on reported performance.
- Evaluate the sustainability of LaSalle incentive fees and equity earnings, including the contribution from dispositions and fair-value gains.
- Review the decline in operating cash flow, rising receivables, acquisition spending and resulting increase in debt and leverage.
- Assess acquisition integration, purchase-price allocations, goodwill and the potential timing and amount of earn-out payments and co-investment funding.
- Monitor the facility’s covenant headroom, refinancing and interest-rate exposure, alongside investment-grade ratings and liquidity needs.
- Review the detailed notes for litigation, insurance reserves, tax examinations, foreign earnings and other commitments; the filing does not quantify a probable material loss from pending litigation.