Jones Lang LaSalle(JLL) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Second quarter revenue rose 21% to $5.3 billion and fee revenue increased 23% to $2.1 billion in local currency, nearly all of which was organic [16] - Adjusted EBITDA for the quarter was $359 million, an increase of 10% from the prior year, with an adjusted EBITDA margin of 16.5% in local currency [17] - Adjusted net income totaled $222 million for the quarter, with adjusted diluted earnings per share at $4.48, a 9% increase from the prior year [17] Business Line Data and Key Metrics Changes - Market advisory fee revenue grew 26%, with strong performance in the office and industrial sectors [26] - Capital markets fee revenue grew 28%, driven by debt advisory and investment sales, with notable growth in retail, land, and residential sectors [31] - Work Dynamics fee revenue grew 19%, with project management fee revenue growth accelerating to 22% [36] - JLL Technologies fee revenue grew 48%, with 22% organic growth driven by large enterprise clients [38] Market Data and Key Metrics Changes - Global investment in capital markets totaled $281 million, up 2% for the quarter and 19% year-to-date [8] - The Americas outperformed with volumes up 23% for the quarter, while Europe and Asia Pacific showed mixed performance due to geopolitical challenges and COVID lockdowns [9] - Global leasing volumes across all asset types were up 20% year-over-year in the second quarter [13] Company Strategy and Development Direction - The company continues to focus on its "One JLL" philosophy to drive growth across business lines and enhance client service [7] - Capital allocation strategy remains unchanged, prioritizing reinvestment in the business and returning capital to shareholders [18] - The company expects to operate within a 16% to 19% adjusted EBITDA margin target range for the full year [24] Management's Comments on Operating Environment and Future Outlook - The management noted that rising interest rates and inflationary pressures have made investors more cautious, potentially delaying deal closures [48] - Despite the challenges, there is sufficient liquidity in the market and a significant amount of capital yet to be deployed in commercial real estate [49] - The company is confident in its ability to capitalize on growth opportunities, particularly with a record number of lease expirations expected in the coming years [50] Other Important Information - The company repurchased nearly $300 million of shares during the quarter, bringing the trailing 12-month repurchases to approximately $750 million [43] - Liquidity stood at $1.9 billion, with reported net leverage at 1.0x, providing a strong foundation for strategic priorities [42] Q&A Session Summary Question: Pipeline and Timing of Deals - The management confirmed that while the pipelines for leasing and capital markets are good, some deals may be pushed into 2023 due to market turbulence [53] Question: JLL Technologies and Equity Earnings - The management provided insights on valuation increases and decreases within the JLL Technologies portfolio, indicating a cautious outlook for equity earnings [55][56] Question: Hiring and Compensation Decisions - The management discussed the decision to hire in a slowing environment, emphasizing a balanced approach to hiring based on macroeconomic conditions [61][62] Question: Capital Markets Pipeline and Revenue Predictions - The management indicated that while the capital markets pipeline is 30% larger than a year ago, it does not guarantee significant revenue increases in the next quarter due to current uncertainties [70][88] Question: Market Trends in Office Space - The management noted a flight to quality in office space, with Class A buildings holding firm while Class B and C spaces face increasing vacancy rates [107][108]