Jones Lang LaSalle (JLL) 6 Aug 242024 Q2 Earnings call transcript

Good day, and welcome to the Q2 2024 JLL Earnings Conference Call. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you.

I'd now like to welcome Scott Einberger, Head of Investor Relations to begin the conference. Scott, over to you.

morning. good and you, Thank Welcome to Jones Conference for XXXX Second LaSalle, Incorporated. Quarter Lang Earnings Call the Earlier we to slide presentation remarks. this with and along morning, Excel issued our file intended supplement prepared release our earnings a materials website, visit our These section please available Investor ir.jll.com. on Relations are of the

earnings During the of for information our presentation GAAP investors. include reconciliations our in financial presentation. and we measures file, in useful Excel call believe and non-GAAP certain provide and non-GAAP to reference measures, slide slide accompanying release which we We

statements reminder, today's results A reports plans, to performance, of December about SEC. a performance and fiscal will with the in those this factors XX-K call on As forward-looking any made live other as year is The and report Actual posted update disclaims from undertaking and result statements. transcript in disclosed filed conference expectations may differ Form being and recorded. and our a be of to annual statements results our webcast publicly website. any objectives or Any and for are recording revise company future the XX, statements. XXXX, call forward-looking forward-looking

Ulbrich, now for call the will to President over Officer, I Chief and Executive opening Christian turn remarks. our

well the our with very welcome the improve operating solid Thank profitability. results I'm JLL's revenue as to second resilient performance of XXXX reflected our businesses. you, quarter across ability combined transactional increased drove pleased the Scott. Quarter as growth model and with Second continue to lines in efficiency business financial Hello, our our Earnings Call. our quarter strength which to of

market estate first Looking the at real backdrop. global

the commercial expectation reaching to compared many bids A quarter, markets estate as at growth. adjustments an investment global activity down modest XXXX currency, is has year-over-year quarter. improving gains Investment more but second the globally JLL year-over-year and by remains U.S., X% XXXX, While In Pacific Asia during declined undergone X% wider-than-normal $XXX In was policy for in large spread peak levels. risks early remain, billion monetary estate easing local have from Research. supported second significant positive price EMEA quarter, to volumes the in in posted midyear real real been for signal late markets. sentiment investor the the in according

improve declines. and Debt [indiscernible] living Lender pricing continue and market sectors volumes strongest in-demand conditions and to retail. for as well anchored confidence as remains stabilize as its such origination logistics, grocery

available XX% number Globally to points and cost U.S. Office quarter to is several The Leasing. regions. rising volumes markets. large Pacific, Leasing and sequentially slightly from limited space to inched key still stabilizing in improving policies subdue increased to lease outlook concerns pre-pandemic X geographies and JLL Europe, and strength by in below increases of lower Research. was The to XX.X%, rate all with Performance Office it higher global in transactions but the XXXX levels. well Turning year-over-year economic Activity an hybrid contributing second work volumes to continued according across quarter. levels while were during the mixed vacancy the continued XX across Asia basis in improve

slow the to expected in level is New record lowest in in Europe, have U.S. and supply the groundbreaking on to fallen XXXX.

will demand. in deliveries meet averages New above current remain to Pacific Asia historic

space positive many with second space large but more beginning operations. still tech of quarter data doubled place plateau Despite slower looking across to to where cautious as solutions to side, lease sector, have automated as spot to demand than average has start growth new center is remains deals. growth. sustainable to a long-term for industrial utilization to leased occupied before remained and XXXX A and increase as an subdued elevated bright global committing been the of during communications given Rental pandemic the technology take level the is and drive On supply. activity high-quality the expected companies technology prices support markets, in

spending amount retail demand of Finally, for resilient, sector, prime remains locations. limited in the consumer space driving in the

results for the JLL's to Turning quarter.

growing continue our We further base XX%, of resilient our business property our businesses. Collectively, to to and base our lines led management focus reduce diversify on earnings vulnerability. strategy our part as revenue and management grew by resilient workplace

We for these business lines. growth have in runway long a

leverage base to As expansion. we and platform, margin our were continue scale cost drive we to global our able existing

Our in for the by digits revenue quarter, led leasing our was second in office transaction revenues up in row. X% quarter a by the U.S. double increased growth leasing, where

as revenue growth is are quality about sales engagements. earlier in made business translating Investment to of leads are spoke have higher we we brokers client market rates. the also additional year part growth shoots showing generating of Investments green our this our and year-over-year supporting for this

Our in the focus meaningfully dividends months year. the on cost management revenue EBITDA exceeding growth and X first is operating with growth efficiency of paying adjusted

I that, detail over results turn will now provide more Karen, call who our With quarter. to will on the for the

Thank Christian. you,

are noted. with reminder our performance in operating in against in I'm year local the quarter, Overall, revenues, and an begin, acceleration period transactional in the revenue currency, continued resilient pleased that variances prior I our with Before A growth. strength unless otherwise

reflected services, efficiency are and are drive clients in long-term making JLL we cash ratio. the to focus superior ongoing our differentiating our operating value at improved leverage platform enabling our stakeholder flow aimed on our us investments The profitability, and deliver further free our addition, to is in In value. of enhancing business

led in well as leasing, both project in by the level, increase and management X% and Work management in to Advisory. increase increased Markets $X.X XX% a [indiscernible] Dynamics, At consolidated as growth management, the X% XX% property growth in revenue within workplace in billion XX% quarter,

drivers as profitability million adjusted LaSalle along prior quarter year-over-year XX% in increase our reductions, the expenses $XXX headwinds increase of million loan, of impacting items and with year as fee to to The earnings compensation in included a revenue in primary and $XX carried from EPS a the growth, of of a with the with the diluted accruals impact equity of $X.XX. XX% to Other the the cost well notable timing in adjusted for EBITDA and the expense increase benefit million interest repurchase losses. compared year-over-year $XX the associated Technologies activity related JLL of lower incentive incentive positive within

were across expansions was The and to operating in review generated with and the the growth expenses, property Asia led primarily by geographies, Advisory. leasing office from deal performance the offsets. Moving detailed led of by which size a incremental revenue lower and Markets management in in industrial deal India increase our partial Pacific, the in Portfolio Greater leasing, Americas the led sector segment, transaction U.S., growth in while notably beginning China, size most X% Increased Germany. sector and growth. volumes volumes pass-through revenue within quarter

and increased We for continue are from both ago, a office business assets to our favorable deals see high-quality year of mix. sustained for large leasing demand more which

executed Our limited tenant June activity global growth The leasing second in optimism market for ], leasing Business supported in time and the XX% beyond. revenue [indiscernible] requirements. trends and industrial pipeline XXXX which X.XX and year, the the drove adjusted increase is by half The cost to late subleaspace, OECD a in continued of this in up active last a in building office in advisory generally Confidence growth pickup with within actions by XXXX stabilization new provides growth to XXXX along EBITDA. and largely [ leads X from versus activity management Index

In accruals timing positively addition, of incentive the compensation profitability. impacted year-over-year

the X% increase quarter. show the our Broad-based across all growth Capital in rate Markets segment. economic, lines despite business to Shifting uncertainty interest geopolitical during and outlook revenue

a million though $XX year-over-year most growth the with noncash MSR hotels, classes retail. by was notable asset activity, mortgage decline in and X%. offset residential revenue banking led U.K., Australia the in and increased grew mixed across across U.S., a and industrial growth an from Excluding office derivative net headwind and Revenue major geographies by

investment which volumes sales the for in sales Christian accounted a nearly X% revenue, XX% revenue quarter, global decline and favorably global in that of XX% segment with compared grew referenced. Our

and JLL than Research. Americas according notably the regions With to market EMEA respective our better performing activity

advisory investment debt in was X/X offset segment than by accounts investment advisory. more equity and decline for notable which a U.S. sales, grew revenue revenue, sales digits Our as mostly a in equity increase low single of approximately XX%

associated Mae XXXX. cost which Fannie The EBITDA predominantly by million costs offset driven of to of $XX than was management repurchase the in a sold positive Capital with decline growth Markets more primarily contribution adjusted and executed in originated revenue the we loan from actions,

prior In million in year quarter reflected a gain as not the that did expected. equity recur addition, lower earnings $X.X

pipeline Looking client debt with engagements sales year, ahead, and is time have up. picked up single global the equity and last compared investment digits this advisory high

of half sentiment which higher we the mentioned, for Christian second XXXX. in signs see As growth bodes improving investor rates well of

as seen However, outlook and past, as the activity, particularly factors the recent closing rate near impact timing in quickly we've field shift and risks, transaction geopolitical term. can the interest rates, and that in influence such

demand to global Project XXXX considering a Dynamics confident revenue and higher opportunity workplace low of coming next revenue a drove significant by and cost client XX% in expansions. ongoing [indiscernible] platform Work and growth revenue wins market management we from increase the in as The the compensation remain grew revenue growth Dynamics. capabilities, single management digits. costs Management, Dynamics EBITDA fees attributable Moving in a management increase global accruals. led XX% Work our adjusted to was the continue timing strong Work primarily growth, We revenue was XX% in years, benefit the incentive mandate Within as opportunity. pass-through and increase to over

and growth Within long-term to Workplace expand a trajectory. Management, supporting add continue clients existing we solid mandates,

begin the in we quarter meaningfully quarter the of more will the reminder, wins this a third fourth of year. As and in lapping benefit the XXXX

on Shifting mandates. securing remain additional We Project Management. to focused

corporate may in growth and dampen CapEx near-term However, environment the the broadly leasing late moderation XXXX rates. spending soft

JLL were primary to the X% decisions as client the Technologies. delay decline revenue. over in few Lower Turning of projects well to drivers past quarters as bookings the

near these change million declined Adjusted ago, million carried associated year-over-year interest expect we long-term year term, to continue growth the losses business. encouraged trends technology our funds. accruals the in our pressure from and of the are within by we venture in by entirely to equity a with EBITDA opportunity $XX driven earnings While growth $XX Spark

sustain the The revenue associated actions management The efficiency combination more in incremental from pressures certain and months. benefits carried with XX of past cost reduction offset expenses the over timing gains interest and the accruals operating than near carried expenses, segment. adversely aim and in JLL to drive investing the Technologies appropriate progressing to term. growth balance impact the of between to strike We an interest within including profitability profitability may

discussed in to on fee year our Europe within from declines in on assets Revenue activity fees quarter. fees decreased our in incentive the past the and the all assets mix reduction quarter. quarter valuation LaSalle. investments. the foreign changes fell X% moderating ongoing management the albeit the business structural under X% first exchange decline Absent the valuation attributable lower well than currency a Advisory withdrawals the of valuation earlier, anticipate at in expected as primarily we XXXX, in current XX%, dispositions of continue to Now in largely as balance movements, impact were management as under the lower over mostly We were to through offset by pace. declines a nearly year

gain actions and in alongside The which the activity reflecting muted in driven interest contraction evolving Capital fund. subdued a wholesale items. quarter by in variable in quarter. fees Partially offset in the are the lower by managed was an lower a operating individually management a million the and reflected adjusted expenses, raising LaSalle a and remain compensation decline deployment discrete EBITDA purchase of incentive $X controlling in environment and and transaction market immaterial cost following revenue few the

improved to time by cash remain focused business efficiency. on a Turning high performance, The XX% led capital our partially payments, in $XXX to and earnings million. flow a working of offset we conversion free cash priority, flow increase Cash from growth flow. free tax is very in

authorized launched purposes, end Shifting undrawn capital repayment credit allocation. balance capacity. corporate during and ] including paper are $X issuance. to of the for million credit borrowings. at We commercial including the a quarter for general our billion totaled sheet [ $X.X intended Proceeds facility billion $X.X program facility with of Liquidity the second quarter of

expense In short-term our addition sources interest commercial paper savings. provide to further liquidity, of the program diversifying to intends

net of reduction both the net was XX June trailing down reported adjusted to months. in over from higher XX, and year due a X.Xx, leverage As the EBITDA earlier debt X.Xx

range. term, X Over medium business manage of the intend our Xx we leverage the to to

million quarter, towards initiatives the During shares growth $XX we deployed capital of during repurchased selectively the quarter. and

business macro capital Christian near-term leverage allocation objective of of for remains stock broader pace detail, As geopolitical will in seasonality a repurchases prime a the current overall capital we acquisition will SKAE offset that continue Considering our cash a framework. further example least volatility, at compensation full the at year reinvestment our top to is our share anticipate allocation. our and Organic dilution. flow, targeted within of M&A priority and

our financial outlook, solid. remain trends and collectively Regarding lines of our a pipeline drivers. XXXX year growth activity business general market improvement resilient full in Considering in more number our key

We transaction the target mind adjusted given remain our macro range $X.X to year. we key first With and half sustained in Though activity full acceleration this the half in are geopolitical year, cautiously recovery. of EBITDA of an the the strong risks optimistic are for factors $X.X in billion the billion. increasing XXXX our performance year of timing and to shape a back and in in

of and future resiliency and in prospects strategic of executing on the creation business. our efficiency gives our value focused opportunities, long-term are growth initiatives, us which platform operating confidence improving for the investing the We our

to you. back Christian,

Thank you, Karen.

first rate There been is One to early cut estate have the real in of inflection still the U.S. markets. point of interest an come. signs

half activity. markets transactions globally, expected proprietary the bit global of intensity Bill index. are year. in the more barometers reemerging These first to the significantly increased the spur transactions for strategic particularly according activity are living the in market JLL's to has Large sector. represent important Over

as the we with executed leasing, brands, active a continued to premier year. quarter, improving global continue the activity. In tenant is In raise outpacing the transactions for their commercial our expecting lead up last activity estate At from culture which our from requirements stable industry's and year and during to technology, inclusive client requirements remainder sustainable were for insights, position vision our to JLL, the in the outcomes. QX new global grow of real should leveraging leading are practices U.S.,

an globally, expectations and center data see is this take to new are to we the center recent platform, services we New technical and SKAE into foreseeable positions data center cross-sell scale quickly growth for the York-based SKAE, of us advantage into scale clients. acquisition existing area enhance well JLL management a markets project regional market of example Our provider services an deliver this capabilities opportunity. of is The of vision. expertise to able the on data clients' talent this and and JLL By infusing future where acquisition our

both this help in leveraging resilient order to continue the We M&A will type our data-driven our product on organically strengthen our of we through plan offerings to to insights targeted invest grow ahead. capabilities, to and clients I'm in and opportunities our confident serve By business market seize lines.

I look all and like forward can clients close, JLL what do to colleagues to for I I our together. our Before achieve for thank you every day. we would

Q&A the explain please Operator, process.

comes from Instructions] Stephen [Operator question first William your the Blair. And of of line Sheldon

deals pickup and Can quarter. right with about am than an you the you in larger in average give us potentially you on comments your think a think [indiscernible] seeing? about larger seeing that ask exposed start to some some want of Nice Christian, is Or capital in to deal some your ending I there markets. more detail peers? And on characterization? activity what to of do I unfair more you're that's maybe JLL

significantly, quite at we have intensity earnings are what as more be significant that to to larger bid living on And will a a nice especially intake is the we already see always of the which strengthened is, far, prepared We Yes, that continue sector. levels, transactions, to sign. to a came look so the around alluded number seeing you is that pricing. is where capital considering are at level from roughly of XX-year interest the market and on needs to basis we overall the XXX it development rate case now points, very cost where current the current close the up when peak the foundry, be

And the more market. coming so we the into have this prompt disturbances year will deals quarter of that any other second if major don't in

very are we large And transaction. yes, focused on

take So particular a that from we trend. will benefit

helpful. you Karen, more Can drag quarter. markets be And That's you then, do coming profit how profit a look the answer, there? loan like then the really some on as the this give that follow-up it. that And or repurchase markets background but items and context a was in Got capital much additional out as you quarters? tough one-off to one might a of dragging on risk on see over capital

Sure.

Both at XXXX. in So fraud loss the that million loan. cited more is originated were unpaid August first, and [ color The repurchase we Mae the we borrower and is Mae loan had associated guilty some we that loan Actually mentioned. Fannie includes repurchased quarter which of in sold quarter give let estimated balance on ] the $XX individual that loan half The and this the $XX of has of was in I as Lee me on the principal sentencing. repurchase to put in with first expenses an Fannie when and victims the awaiting loan well. million,

loan has status the it's right intending asset some the receiver stabilize appointed improvements of including the to now is property, default. occupancy we're before that is that sold. A So in and been

on by for one-off which at In resolution have in might There fraud coming question around also that are your the subject else are we what terms time. handful of loans of like borrower a full terms particular this or we second other of this items that don't suspected topic. fraud are this, to be monitoring,

to in are highlight The nature. smaller I other want loans

loans the of fraud our and with loan, including than half known has repurchased you Fannie by Holistically, one Freddie if also are overall So represent less that lowest the just at stabilized level, other the X% but unpaid the the repurchased just largest of occupancy portfolio. borrowers more or loans has recently repurchased balance we principal of we look loan the potential list. occupancy. And

at So quite stage, this contained.

question next from of the comes Paolone Anthony JPMorgan. Your line from

maybe on If I add, And capital to markets, for markets $XX just pretty loan. high been a stay XX% like capital guess, million adjust we Yes. EBITDA, to sort plus. seem margin this would to have your the of and back

Or maybe improvement wondering in the how markets Like than if year? number help this period? that in just the higher we ago so And about any about think should margin is between? cap the right somewhere year in whether was thinking dramatically just

Well, Anthony, how quarter plays it will depend much second very the out.

And that continuing, high. we weeks of of for rest know, the further if that over will signs margin business is relatively then the last As see encouraging margin couple improvement the incremental you business year. these expect of we the in

Okay.

second so And for quarter, $XX like a number one. a adjusting the like fairly that the that's just million, is straightforward

would call thing the lapping the significant half The Tony, reduction the I of would half second that be other we in out, that second just of cost year. year actions we're fact last this and more took

business And experienced all being as impact segments really so different of well. that is our across

it. Got

that seemed be out If Work So sort just basis was to be in to I year-over-year of Dynamics, follow-up, too. up the if that look going inside pass-throughs, margin my points. take XXX I

I trying guess I in to lap you just those both notable both pickups cases, thing. margin. when understand guess, -- sort pretty So of same in those because

Yes.

EBITDA call specific related margin Work for I'd versus first half Dynamics, overall So half adjusted things to second out X expectations. and

the more this we to I took second referenced Markets. a holds be also in incentive as half in cost of The the of finally, second an in half of just fourth the in of So this will impact half impact first, on and true quarter. of significant that in year overall increase even I referenced year, accrual quarter second timing revenue the on and phasing. lapping the year, revenue certainly caused we in then we're that wins lapping last Then reduction the the the Capital third the we that had begin have actions side,

itself will second half And so year unwind in that of well. the the as

the our X So respect to Dynamics those business. I'd are say Work with callouts

of next from Michael Citi. Griffin from line Your comes question the

give peers macro been us really if that a would certainly business you the picked up kind potential comments the scenario last to have expect recessionary maybe your weeks. up of the over can just landing recession of your fruition? acknowledge in to sense I probably hard I maybe But in week, Christian, coming recent be how prepared on appreciated volatile remarks. that this performance you given ends

that's been enthusiastic have couple for Yes. massive I mean year. quarters, plan the for we we how the about tailwinds already less of and last

the has off stock a completely weeks what come so maybe last is chart the over And happened and not little the to own with it's planning for surface X X our has last to bit regards the of the over more year. days market

management markets kind leasing overall. at rate dynamics opposing will with two have over weeks of into the interest obviously, couple last sentiment and of our feed have and seen more rapid business, regards time, decline, business. will our we overall the to So business an economic project into which same help we our the decline this capital But

is bit that there so there And a side. on of an offset

a So is overall, economy expected ago couple has If doing great. frankly that than guidance when of our months the year. second slightly the an we the for harder but have been lending economy of has the impact, it's in half reflected may better a what do

maybe kind other that M&A flow. debt, uses? pretty of any future, But or look make terms cash potential down allocation, Great. of just cash to free use free to pay in future it more as in it using flow then Obviously, the was That's helpful. a you sense does to positive a question for quarter Karen. on for And opportunities capital

just Yes. about capital this I'll stage. thinking how restate we're at allocation

business and growth. to our So for foremost, it's first organically reinvest in

and evaluate any the offset average dilution year. compensation Second, the we continuing to reduce the our share shares opportunities and to committed midpoint versus repurchasing target closer levels then are M&A we opportunities repurchases, overall of very range. given of our are we on focused in what stock And are think to that

That's me. Great. good for

from And the Instructions] comes KBW. of question your Jade next [Operator line Rahmani from

you update and on more whether write-downs. for would on taking ] helpful to JLL Jade. [ anticipate This hear Sabshon an is It any Jason Technologies be

Spark -- we the what in fact, last quarter again. trend within those slightly reversing last have companies proptech that portfolio, a earnings, equity is interest overall of we and growing during the our that couple quarters some in seen see is the last we the had in Jason, against

we some tech flags of to Venture in write-downs. other The So we outside completely we red regards that there. capital second have fund. Spark we with further again, in don't it's we investments can the negative but taken further any the the our are have concerned have of quarter have looks the write-downs with And quite exclude how at portfolio moment generally and any the not happy portfolio developments, concerns no major

question next Peter Your the Instructions] Abramowitz from of [Operator line comes from Jefferies.

Yes.

specific any on forward. geographies in types whether sales called in like might out XX. it's invest going drive you teams U.S., specific And on those helping up in investments geographies the earnings that were in that? touch the Could in but down or you quarter looks where just You teams, share the X%, are think property in any thoughts which gained you release, it I investment were you

Peter. Sure,

we may You tight to capital will that the out and team that markets in not take recall our strength, members very we business keeping people come the We during we because our in knew did their back. were market downturn. believed any client-facing

larger the us. we now transactions we which are team that and so ground, to, helpful obviously to alluded because on slightly for are a as up there. picking is coming And have we now is which see a back And they helpful the slight, opportunities whole

driving our a couple third we that times piece win our in this market haven't need believe that new probably year etched once reason to rule be is as the about a and team the we and that and existing really but have in results us members the case. And that make any clients, is get based business to that good team additions believe technology we to performance for on of now a spoke great and opportunity, while, further will better that out that more to helping our there's combination team some the we if for to to is, platform, a doesn't the don't in, get we so continue that planning our to we strength. And want

for one me. then more And right. All

You little from about the a Karen's ground, this supply construction demand in sort I seeing called leasing will of Can years a mentioned might thinking lack industrial have a the you when of a you on new quarter. perspective certainly comments, out just from brokers what bit think tailwind seeing over past what in few inflect? And are a and perspective. talk your you're what maybe you're of that softer

Sure.

couple So trade. clients, the the normalization see this people We're comments. is and on really And were impacts tied not with inflation pre-COVID space specifically U.S. years are ago. the to levels. spending a to on industrial uncertainty of just economy geopolitical just preemptively on leasing frame here the they leasing based market on way to I'll focus a continuing conversations and of And activity demand towards

delivering pushing vacancy, slowing rate we with have and vacancy the so are the And rent overall which growth. developments higher

as trends it's the overall I referenced Importantly, industrial industrial XX% around total and secular mentioned in there and space year-over-year. of U.S., demand amount in is is and at around rate decreased, The remains construction you the strong. still the vacancy -- and X.X% particularly positive down only around industrial, or under thereabouts

We pockets manufacturing energy advanced we're industries are are strength uses. e-commerce and the leasing utilities, still the highest and where key of seeing some volume seeing

in leasing do So we of level strength the broadly. see medium level. over and anticipate longer There'll term. continued We industrial still softness in demand be But some term, near the some

There this further questions at are time. no

So the I'd to like Christian call hand to Ulbrich back for closing remarks.

quarter. again the for call On you participating forward today. on Karen behalf you following thank speaking to of with I entire we and you. the Thank team, all JLL the look third

for That does our participating. Thank you today. conference conclude for

disconnect. may You now all