JLL Reports Strong Fourth-Quarter and Full-Year Results

CHICAGO, Feb. 7, 2018 /PRNewswire/ -- Jones Lang LaSalle Incorporated (NYSE: JLL) today reported operating performance for the full year and fourth quarter of 2017. For the year, diluted earnings per share² were $5.55 and adjusted diluted earnings per share¹ were $9.16; for the fourth quarter, diluted earnings per share² were $1.71 and adjusted diluted earnings per share¹ were $4.92.

• Revenue up 17 percent to $2.5 billion for the quarter; fee revenue up 18 percent to $2.2 billion
• Broad-based Real Estate Services revenue growth
• Outstanding execution in capital markets and leasing in response to outsized client demand to close transactions by year-end
• Fourth quarter margin expansion in Americas, Asia Pacific and LaSalle
• Strong transactional revenue mix coupled with disciplined cost management
• EMEA mixed results driven by strong transactional performance offset by Integral
• LaSalle delivered solid advisory fees and equity earnings
• Strong operating cash flows contributed to significant net debt reduction
• Substantial leverage improvement driven by $547 million net debt reduction during the year

CEO Comment:
"Outstanding fourth-quarter 2017 performance contributed to record revenue and strong adjusted EBITDA and cash flows for the year," said Christian Ulbrich, JLL CEO. "We achieved these results while making significant progress in 2017 on our ambitious data and technology agenda. With favorable economic conditions and healthy real estate fundamentals in most markets, we anticipate continued growth in 2018."

Consolidated 2017 Performance Highlights:

• Consolidated revenue for the year was $7.9 billion and consolidated fee revenue was $6.7 billion, both records that represent annual increases of 17 percent and 16 percent, respectively. Annual RES revenue growth reflects double-digit expansion across all three segments. Organic growth accounted for approximately 65 percent of the RES fee revenue increase. For the fourth quarter, consolidated revenue was $2.5 billion and consolidated fee revenue was $2.2 billion, both increases of 14 percent against the prior-year quarter.
              
• For the full year, consolidated operating expenses were $7.4 billion and consolidated fee-based operating expenses¹, excluding restructuring and acquisition charges, were $6.1 billion, both an increase of 17 percent over the prior-year quarter. The increase in expenses reflects revenue growth and continued increases to investments in data, technology and people. Consolidated operating expenses for the fourth quarter were $2.2 billion, up 13 percent, and consolidated fee-based operating expenses, excluding restructuring and acquisition charges, were $1.9 billion, an increase of 13 percent compared with 2016.
             
• LaSalle performance reflects lower incentive and transaction fees as anticipated, down $57.3 million year over year (down $17.3 million from the prior-year quarter). LaSalle results also reflect solid advisory fees and notable equity earnings, led by net valuation increases across the co-investment portfolio.
             
• Net income attributable to common shareholders for the year was $253.8 million, compared with $317.8 million last year, and adjusted EBITDA increased 13 percent year over year to $760.0 million. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 11.4 percent for the year (11.1 percent in local currency), compared with 11.4 percent in 2016. For the fourth quarter, net income attributable to common shareholders was $78.2 million, compared with $165.3 million last year, and adjusted EBITDA increased 22 percent to $360.0 million. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 16.5 percent in USD and local currency for the quarter, compared with 15.5 percent last year.
               
• The consolidated results reflect strong performance in Americas and Asia Pacific with notable contributions from transactional businesses, partially offset by weak performance of Integral and lower LaSalle incentive and transaction fees.
                  
• Net income for both the fourth quarter and year-to-date reflected additional income tax expense of $141.3 million. This amount represents the Company's provisional estimate of the transition tax on deemed repatriated earnings of foreign subsidiaries and the remeasurement of U.S. deferred tax assets ("DTA") in response to the enactment of the Tax Cuts and Jobs Act in December 2017. The impact on diluted earnings per share was $3.09, with no impact to adjusted diluted earnings per share.
                  
• Diluted earnings per share were $5.55 for the year, compared with $6.98 in 2016, and adjusted diluted earnings per share were $9.16, up from $8.13 last year. For the fourth quarter, diluted earnings per share were $1.71, compared with $3.62 last year, and adjusted diluted earnings per share were $4.92, compared with $3.95 in the fourth quarter of 2016.

Balance Sheet and Net Interest Expense:

• Total net debt was $586.2 million as of December 31, 2017, a decrease of $426.6 million from last quarter and $547.2 million from December 31, 2016, reflecting business performance and improvements in working capital management.
                  
• Net interest expense for the year was $56.2 million, an increase from $45.3 million for 2016. The increase in annual net interest expense was primarily due to a higher effective interest rate on debt. For the fourth quarter, net interest expense was $13.6 million, up from $13.1 million in the fourth quarter of 2016. The reduction in outstanding borrowings for the quarter substantially offset the increase in the effective interest rate.

Business Segment Performance Highlights

Americas 2017 Performance Highlights:

• For the year, revenue was $3.4 billion and fee revenue was $3.2 billion, representing year-over-year increases of 13 percent and 15 percent, respectively. The growth was led by strong U.S. Leasing performance in favorable market conditions, specifically in the Northwest, Midwest, New York and Atlanta markets. Advisory, Consulting and Other reflected incremental contributions from Technology Solutions and the recently acquired U.S. valuations platform. Project & Development Services was driven by expansion of existing client mandates and new wins, while Capital Markets & Hotels reflects growth in multifamily originations and servicing as well as hotels investment sales activity. Revenue and fee revenue for the fourth quarter increased 13 percent to $1,043.2 million and 17 percent to $992.9 million, respectively, over the prior-year quarter.
            
• Operating expenses were $3.0 billion for the year, up 12 percent against 2016; fee-based operating expenses, excluding restructuring and acquisition charges, were $2.8 billion for 2017, up 13 percent from the prior year. For the fourth quarter, operating expenses were $887.8 million, up 11 percent from 2016, and fee-based operating expenses, excluding restructuring and acquisition charges, were $842.1 million, up 12 percent over 2016. These increases correlated with the growth in revenue.
                   
• Compared with full-year 2016, operating income increased 26 percent to $341.3 million and Adjusted EBITDA increased 27 percent to $421.1 million. Adjusted EBITDA margin, calculated on a fee-revenue basis, improved to 13.3 percent in USD and local currency for the year, compared with 12.0 percent for 2016. The increase in profitability was driven by strong transactional business performance augmented by management initiatives to contain controllable expenses. For the fourth quarter, operating income was $155.4 million, up 26 percent from last year, and adjusted EBITDA was $175.2 million, an increase of 37 percent from 2016. Adjusted EBITDA margin, calculated on a fee-revenue basis, improved to 17.6 percent in USD for the quarter (17.7 percent in local currency), compared with 15.0 percent last year.

EMEA 2017 Performance Highlights:

• EMEA revenue for the year was $2.6 billion, an increase of 25 percent, and fee revenue for the year was $1.9 billion, an increase of 29 percent, compared with 2016. Revenue expansion included the August 2016 acquisition of Integral UK Ltd. ("Integral"), reflected in Property & Facility Management, as well as strong Capital Markets & Hotels performance in the UK, Germany and Switzerland. For the fourth quarter, revenue was $858.9 million and fee revenue was $669.6 million, both reflecting increases of 13 percent from the fourth quarter of 2016.
            
• For the year, operating expenses increased 28 percent to $2.5 billion, and fee-based operating expenses, excluding restructuring and acquisition charges, increased 32 percent to $1.9 billion, compared with 2016. Integral drove 65 percent of the increase to fee-based operating expenses with the balance attributable to revenue growth and continued increases to investments in data, technology and people. For the fourth quarter, operating expenses increased 15 percent to $786.7 million, and fee-based operating expenses, excluding restructuring and acquisition charges, increased 16 percent to $597.4 million, compared with the prior-year quarter.
                    
• Operating income for the year was $54.0 million, a decrease of 42 percent from 2016, and adjusted EBITDA was $98.9 million, a decrease of 18 percent. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 5.1 percent in USD for the year (4.4 percent in local currency), compared with 6.9 percent in 2016. Strong transactional business performance in the UK and Continental Europe was offset by Integral, reflecting (i) the margin dilutive impact from the August 2016 acquisition date, (ii) over $20 million of contract losses, nearly $15 million from now-terminated contracts, and (iii) investments and continued integration spend.

For the fourth quarter, operating income was $72.2 million and adjusted EBITDA was $84.1 million, both a decrease of 6 percent compared with the prior year. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 12.6 percent in USD for the quarter (12.2 percent in local currency), compared with 14.6 percent last year.

Asia Pacific 2017 Performance Highlights:

• For the year, Asia Pacific revenue was $1.6 billion and fee revenue was $1.2 billion, increases of 20 percent and 14 percent, respectively, over 2016. Growth across all service lines was led by Property & Facility Management, driven by organic expansion. Capital Markets & Hotels revenue increased 26 percent with notable contributions from large transactions in Japan. Project & Development Services fee revenue increased 23 percent, reflecting both organic and acquisition-related growth. Geographically, the increase in 2017 fee revenue was led by Greater China, Australia, India and Japan. For the fourth quarter, revenue was $541.2 million and fee revenue was $424.2 million, increases of 21 percent and 18 percent, respectively, from the fourth quarter of 2016.
         
• For the full year, operating expenses were $1.5 billion and fee-based operating expenses, excluding restructuring and acquisition charges, were $1.1 billion, up 19 percent and 13 percent compared with 2016; these changes correlated with the revenue growth. For the fourth quarter, operating expenses were $472.6 million and fee-based operating expenses, excluding restructuring and acquisition charges, were $355.6 million, increases of 21 percent and 17 percent from the prior-year quarter.
               
• Operating income for the year increased 26 percent to $114.6 million compared with 2016, and adjusted EBITDA increased 28 percent to $139.7 million. Adjusted EBITDA margin, calculated on a fee-revenue basis, improved to 11.2 percent in USD for the year (11.0 percent in local currency), compared with 9.8 percent in 2016. For the fourth quarter, operating income was $68.6 million and adjusted EBITDA was $75.7 million, both increases of 26 percent compared with 2016. Adjusted EBITDA margin, calculated on a fee-revenue basis, improved to 17.8 percent in USD for the quarter (17.7 percent in local currency), compared with 16.5 percent last year. The increase in the year-to-date and quarter-to-date Adjusted EBITDA margins reflected robust organic growth, revenue contributions from higher margin transactional businesses and strong cost management discipline.

LaSalle 2017 Performance Highlights:

• Revenue for the year declined 12 percent (11 percent for the quarter) from 2016, driven by lower incentive fees as anticipated. Prior-year incentive fees were primarily earned on opportunistic dispositions of real estate assets. The increase in fourth quarter advisory fees reflects approximately $7 million of catch-up advisory fees earned as a result of new equity commitments in established funds.
          
• Equity earnings increased 30 percent from 2016 to $41.1 million for the full year. Both years were primarily driven by net valuation increases for investments in Europe and Asia.
            
• Operating expenses for the year were $297.6 million, down 8 percent from 2016. Operating expenses for the fourth quarter were $78.8 million, down 10 percent from last year. The declines reflect lower variable compensation expense as a result of the decrease in incentive fees.
            
• Operating income for the year was $57.7 million, a decrease of 30 percent compared with 2016, and adjusted EBITDA was $100.7 million, a decrease of 13 percent compared with last year. Adjusted EBITDA margin was largely flat at 28.3 percent in USD and local currency for the full year, compared with 28.5 percent last year. For the fourth quarter, operating income was $13.4 million, down 14 percent from 2016. Adjusted EBITDA increased 23 percent from the fourth quarter of 2016 to $25.2 million, driven by the higher equity earnings. Adjusted EBITDA margin increased to 27.3 percent in USD and local currency for the quarter, from 19.8 percent in 2016.
         
• Assets under management were $58.1 billion as of December 31, 2017, a decrease of 3 percent in USD (5 percent in local currency) from $60.1 billion as of December 31, 2016. The net decrease in assets under management during the year resulted from $13.1 billion of dispositions and withdrawals, partially offset by $6.8 billion of acquisitions, $3.4 billion of net valuation increases and $0.9 billion of foreign currency increases.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit ir.jll.com.

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Statements in this news release regarding, among other things, future financial results and performance, achievements, plans, and objectives may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the company's actual results, performance, achievements, plans, and objectives to be materially different from those expressed or implied by such forward-looking statements. For additional information concerning risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated in forward-looking statements, and risks to the company's business in general, please refer to those factors discussed under "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures about Market Risk," and elsewhere in the company's Annual Report on Form 10-K for the year ended December 31, 2016, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017, and September 30, 2017, and other reports filed with the Securities and Exchange Commission (the "SEC"). Any forward-looking statements speak only as of the date of this release, and except to the extent required by applicable securities laws, management expressly disclaims any obligation or undertaking to publicly update or revise any forward-looking statements contained herein to reflect any change in expectations or results, or any change in events.