Jones Lang LaSalle(JLL) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue grew by 10%, adjusted EBITDA increased by 16%, and adjusted EPS was up by 29%, marking the sixth consecutive quarter of double-digit revenue gain and eighth consecutive quarter of double-digit adjusted EPS growth [6][5][12] - Transactional revenue grew by 13%, driven by a 26% increase in investment sales, debt, and equity advisory [6][12] Business Line Data and Key Metrics Changes - Real Estate Management Services saw strong performance with nearly 30% revenue growth on a two-year stacked basis, driven by workplace management [14] - Project management revenue grew in double digits, while property management revenue growth was tempered by elevated contract turnover [14][15] - Leasing advisory revenue grew nearly 30% on a two-year stacked basis, with global office leasing revenue growth accelerating to 14% [16] - Capital markets services experienced significant growth, with debt advisory revenue increasing by 47% and investment sales growing by 22% [18] Market Data and Key Metrics Changes - The U.S. market showed broad-based activity across capital markets, office, and industrial leasing, with investors shifting to a risk-on mode supported by healthy debt markets [6][7] - Industrial leasing revenue grew by 6% globally, driven by strength in the U.S. [16] Company Strategy and Development Direction - The company continues to invest in technology and AI to drive long-term revenue and margin growth, with over 41% of the addressable population using proprietary AI tools daily [8][9] - Software and Technology Solutions will operate as a fifth business line within Real Estate Management Services starting January 1, 2026, to enhance scalability and client-centric approaches [10] - The company is developing a new strategy to drive growth to 2030, with a focus on resilient and transactional businesses [24] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for continued growth, citing a stable economic outlook and improved forward indicators for transactional markets [6][22] - The company anticipates continued margin expansion and is on track to achieve the low end of its midterm adjusted EBITDA margin target range [22][70] Other Important Information - Free cash flow generation reached its highest level since 2021, contributing to a reduction in net debt and an improvement in reported net leverage to 0.8 times [20][21] - Share repurchases totaled $70 million in the quarter, with a year-to-date total of $131 million, exceeding expected full-year stock compensation dilution [21] Q&A Session Summary Question: Property management and REM growth moderation - Management clarified that property management growth is muted due to exiting contracts that do not align with long-term margin goals, particularly in Asia Pacific, while U.S. growth remains in the mid-single digits [27][28][30] Question: Free cash flow and buyback plans - Management indicated that share repurchases are expected to continue as a preferred use of cash, especially if no strong M&A opportunities arise [32][33] Question: Impact of AI on financials - The main benefit of AI solutions currently is efficiency gains, with productivity in capital markets significantly increasing due to AI tools [36][37] Question: Capital markets trends heading into Q4 - Management expressed positive outlook for capital markets, with steady recovery in transaction volumes expected [38][39] Question: Asset under management and valuation trends - Management noted a slight increase in underlying values, suggesting that CRE valuations may have bottomed out [40][41] Question: Property management growth potential - Management stated that while current growth is mid-single digits, they have higher ambitions for the future as restructuring progresses [44][47] Question: Margin outlook for capital markets - Management sees significant upside potential for margin expansion in capital markets, supported by a strong cohort of producers [51][52] Question: Fraud charges and credit trends - Management confirmed that the charges related to fraud were primarily from two loans, with no indication of broader deterioration in credit trends [53][56]