Jones Lang LaSalle Incorporated (JLL) — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless otherwise noted. JLL provides commercial real estate services through its Americas, EMEA and Asia Pacific Real Estate Services (RES) segments and LaSalle investment management. The company cautions that pandemic impacts and its usual seasonality make first-quarter results not necessarily indicative of full-year results.
Financial highlights
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Total revenue | $4.037 billion | $4.096 billion | Down 1% reported; down 4% in local currency |
| Revenue before reimbursements | $2.130 billion | $2.233 billion | Down 5% reported; down 8% in local currency |
| Fee revenue (non-GAAP) | $1.443 billion | $1.505 billion | Down 4% reported; down 7% in local currency |
| Operating income | $80.7 million | $64.6 million | Up 25% reported |
| Net income attributable to common shareholders | $103.0 million | $5.3 million | Basic EPS $2.01 vs. $0.10; diluted EPS $1.97 vs. $0.10 |
| Adjusted EBITDA (non-GAAP) | $190.1 million | $95.6 million | Up 99% reported; margin 13.2% in USD and 13.4% in local currency, versus 6.4% |
| Operating cash flow | $(461.8) million | $(546.1) million | Cash use narrowed, primarily reflecting lower incentive compensation payments |
| Cash and cash equivalents | $456.6 million | $574.3 million at Dec. 31, 2020 | Restricted cash was $187.9 million |
| Total debt, including warehouse facilities | $1.117 billion | $755.3 million at Dec. 31, 2020 | Includes $833.5 million of warehouse facilities; revolving credit borrowings were $350 million gross |
Performance and material changes
- RES revenue fell 1% in USD and 4% in local currency. Transaction-driven Leasing and Capital Markets remained pressured by COVID-19, while Property & Facility Management and Advisory, Consulting and Other were comparatively resilient. Asia Pacific fee revenue grew 12% in local currency, partly offsetting declines in Americas and EMEA.
- Americas segment income rose to $145.0 million from $94.6 million, supported by lower expenses and $34.5 million of equity earnings. EMEA’s segment loss widened to $35.8 million from $20.5 million amid lower activity and a UK mobile engineering contract loss. Asia Pacific segment income increased to $17.8 million from $2.4 million. LaSalle returned to segment income of $19.4 million from a $26.1 million loss.
- Consolidated equity earnings were $48.5 million, versus equity losses of $28.3 million. The 2021 result included $34.7 million of valuation increases in JLL Technologies investments and $13.0 million of LaSalle equity earnings; LaSalle’s prior-year result included substantial valuation losses.
- Net income included a $12.0 million gain on a business sale associated with a broader investment in Roofstock. Adjusted EBITDA excludes this gain. Lower loan-loss credit-reserve expense also materially supported year-over-year margin improvement.
- Investments in real estate ventures increased to $545.1 million from $430.8 million at year-end. Fair-value investments recorded a net $45.7 million increase in the quarter.
Liquidity, debt and capital resources
- Operating activities used $461.8 million; investing activities used $97.8 million; financing activities provided $376.7 million. Quarter-end cash, cash equivalents and restricted cash totaled $644.5 million.
- JLL had a $2.75 billion unsecured revolving credit facility. It reported $350 million of gross borrowings at March 31, 2021 and remained in compliance with debt and warehouse-facility covenants. The company reported investment-grade ratings of Baa1 from Moody’s and BBB+ from S&P.
- On April 14, 2021, after quarter-end, JLL amended the facility to extend maturity from May 2023 to April 2026, retain $2.75 billion capacity and add, among other terms, sustainability-linked pricing metrics and updated benchmark-rate provisions.
- JLL authorized an additional $500 million for share repurchases in February 2021; it repurchased no shares in Q1 and had $600 million remaining under its authorization at quarter-end.
Outlook, risks and contingencies
- Management gave no specific financial guidance in the provided filing text. It expects pandemic effects may continue to disrupt historical seasonality and transaction activity during 2021; transaction-based fees, incentive compensation and LaSalle performance fees can fluctuate significantly.
- JLL had maximum potential unfunded investment commitments of $309.9 million. This includes $60.4 million related to LIC II, for which the company said it does not expect a capital call, although it remains contractually obligated.
- There were $157.8 million of maximum undiscounted earn-out payments across 24 acquisitions, contingent on performance criteria. JLL expected payments over the next five years. The company also expected approximately $100 million of HFF retention-award expense over the two-year integration period, with possible additional integration costs not estimated.
- For the DUS mortgage program, loans subject to loss-sharing had $12.9 billion aggregate unpaid principal balance; the guarantee obligation was $23.5 million and the separate loan-loss reserve was $28.6 million. No loan losses were incurred in the quarter.
- JLL faces ordinary-course litigation, some involving substantial claims; management said resolution was not expected to materially affect financial position, results or liquidity. Insurance may involve large deductibles or insufficient coverage. The company reported no material risk-factor changes from its 2020 Form 10-K.
Investor verification priorities
- Assess whether improvement in earnings and adjusted margins is sustainable, given the contributions from investment fair-value gains, lower loan-loss reserves and the $12.0 million sale gain.
- Track COVID-19 impacts on transaction-based revenue, particularly leasing and capital markets, and the differing recovery trends across Americas, EMEA and Asia Pacific.
- Reconcile reported cash, restricted cash, seasonal operating cash use, and debt movements; distinguish revolving borrowings from warehouse facilities and associated receivables.
- Review the April 2021 credit-facility amendment, covenant headroom, and contingent investment, earn-out, litigation and DUS loss-sharing exposures.
- Confirm full-year performance against management’s seasonal caveat; the filing provides no specific numerical guidance.