CEO.CA Chairman's Briefing

CHICAGO, IL--(Marketwired - Feb 6, 2017) - Jones Lang LaSalle Incorporated (NYSE: JLL) today reported diversified revenue increases for the full year and fourth quarter of 2016. For the full year, diluted earnings per share were $6.98 and adjusted diluted earnings per share were $8.13. Fourth quarter diluted earnings per share were $3.62; adjusted diluted earnings per share were $3.95. Fourth quarter revenue was up 14 percent to $2.2 billion; fee revenue of $1.8 billion was up 11 percent.

• Fourth-quarter and full-year revenue growth led by Property & Facility Management and Project & Development Services
  
  
• Margin declines reflect increased investments in technology and data, shift toward annuity businesses and decline in LaSalle equity earnings
  
  
• Robust full-year leasing and capital markets performance despite market volume declines
  
  
• Strong performance in Continental Europe overshadowed by post-Brexit market volume and margin declines in the UK
  
  
• LaSalle continues solid performance and annuity-based advisory fee expansion
  
  
• Net debt reduced by $171 million during the quarter, reducing leverage to 1.7x
  
  

CEO Comment:

"We recorded double-digit revenue growth for both the fourth quarter and full year of 2016, driven by recent acquisitions and organic growth," said Christian Ulbrich, JLL CEO. "Going forward, we are focused on translating our increases in revenue and strategic investments into accelerated profit growth," Ulbrich added. "Our businesses continue to perform well, and we expect economic and real estate markets to remain positive in most markets globally this year."

Consolidated Performance Highlights:

• Record consolidated revenue performance of $6.8 billion and consolidated fee revenue of $5.8 billion for the year represented double-digit percentage increases over a robust 2015. For the fourth quarter, consolidated revenue was $2.2 billion and consolidated fee revenue was $1.8 billion, which represented increases of 19 percent and 15 percent, respectively, against the same period in 2015. Revenue growth occurred across all geographic segments and LaSalle, fueled by recent acquisitions that contributed over $470 million of incremental fee revenue in 2016. Annuity businesses led revenue growth while transactional businesses also grew against a global decline in market volumes, which was notably impactful in the UK.
  
  
• Consolidated operating expenses for the year were $6.4 billion, compared with $5.4 billion for the same period in 2015, an increase of 21 percent. Consolidated fee-based operating expenses, excluding restructuring and acquisition charges, were $5.3 billion for the year, compared with $4.6 billion last year, an increase of 18 percent. For the fourth quarter, consolidated operating expenses were $1.9 billion, and consolidated fee-based operating expenses, excluding restructuring and acquisition charges, were $1.6 billion, up 24 percent and 20 percent, respectively, against 2015. The annual expense growth reflected expansion of annuity businesses and included over $420 million of fee-based operating expenses from recent acquisitions and nearly $60 million of technology and data expenditures, excluding depreciation and amortization, incremental to 2016.
  
  
• LaSalle generated solid performance for the year, driven by continued growth of annuity-based advisory fees together with strong incentive and transaction fee performance.
  
  
• Net income attributable to common shareholders was $317.8 million for the year, compared to $438.4 million last year. Adjusted EBITDA was $657.9 million for the year, compared with $742.3 million last year. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 11.4 percent in USD (11.1 percent in local currency) for the year, compared with 14.4 percent last year.
  
  The results for the year reflect strong revenue growth which was more than offset, notably by the following year-over-year changes:
  
  
  • $66.2 million decline in LaSalle incentive fee revenue and equity earnings;
    
    
  • $45.6 million EBITDA decline from a change in EMEA service mix, led by slower UK capital markets and leasing volumes and a decline in capital markets performance fees, combined with additional contract expenses incurred during the wind-down of operations in a non-core UK market; and
    
    
  • Aforementioned increase in technology and data expenditures.
    
    
• The acquisition of Integral UK Ltd. ("Integral") also contributed to the results, and particularly margin performance, by adding $175.6 million of fee revenue and $167.5 million of fee-based operating expenses, excluding depreciation and amortization, during 2016.
  
  For the fourth quarter, net income attributable to common shareholders was $165.3 million, compared with $195.9 million last year. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 15.5 percent in USD (15.1 percent in local currency) for the quarter, compared with 18.6 percent last year.
  
  
• Diluted earnings per share for the year were $6.98, compared with $9.65 last year. Adjusted diluted earnings per share were $8.13, compared with $10.20 last year. Diluted earnings per share for the fourth quarter were $3.62, compared with $4.31 last year. Adjusted diluted earnings per share were $3.95 for the fourth quarter, compared with $4.61 last year.
  
  

Balance Sheet and Net Interest Expense:

• Total net debt was $1.1 billion as of December 31, 2016, a decrease of $171 million from the third quarter, but an increase of $673 million from prior year. The year-to-date increase primarily reflected outflows for acquisitions and capital expenditures of $538 million and $216 million, respectively.
  
  
• Net interest expense for the year was $45.3 million, up from $28.1 million in 2015, primarily due to an increase in average borrowings from $335.1 million during 2015 to $981.6 million during 2016.
  
  

Business Segment Performance Highlights

Americas Real Estate Services

Americas Performance Highlights:

• Total revenue for the year was $3.0 billion, a 15 percent increase compared with last year. Fee revenue for the year was $2.8 billion, an increase of 15 percent from 2015. Fee revenue growth compared with last year was broad-based across all business lines, reflecting balanced organic and acquisition-driven expansion. For the fourth quarter, total revenue was $918.4 million and total fee revenue was $850.0 million, representing increases of 13 percent and 12 percent, respectively, over the prior year quarter.
  
  
• Operating expenses for the year were $2.7 billion, up 16 percent from $2.4 billion in 2015. Fee-based operating expenses for the year, excluding restructuring and acquisition charges, were $2.5 billion, up 18 percent from $2.1 billion in 2015. Operating expenses for the quarter were $796.1 million, up 13 percent from $706.9 million in 2015. Fee-based operating expenses for the quarter, excluding restructuring and acquisition charges, were $748.9 million, up 15 percent from $652.8 million in the fourth quarter of 2015.
  
  
• Operating income for the year was $260.7 million, up 6 percent from $245.2 million in 2015. Adjusted EBITDA was $322.0 million for the year, compared with $309.3 million in 2015. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 11.7 percent in USD and local currency for the year, compared with 12.9 percent in 2015. The decline in Adjusted EBITDA margin was driven by continued spend in data, technology and people, partially offset by the contributions from recent acquisitions. Operating income for the quarter was $122.3 million, up from $107.6 million in 2015. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 14.8 percent in USD (14.9 percent in local currency) for the fourth quarter, compared with 16.5 percent in the prior year quarter.
  
  

EMEA Real Estate Services

EMEA Performance Highlights:

• Total revenue for the year was $2.1 billion, an increase of 24 percent from last year. Fee revenue for the year was $1.5 billion, an increase of 16 percent from 2015. Revenue expansion compared with 2015 was most notable in Property & Facility Management, driven by approximately $175 million of incremental fee revenue from the August 2016 acquisition of Integral, along with Project & Development Services. Partially offsetting the increase in revenue was the impact of a 39 percent year-over-year decrease (measured in USD) in capital markets investment volumes in the UK. Revenue growth in the region was led by Germany and France combined with the acquisition of Integral in the UK. For the fourth quarter, total revenue was $704.1 million and total fee revenue was $548.1 million, representing increases of 28 percent and 24 percent, respectively, from 2015.
  
  
• Operating expenses for the year were $2.0 billion, up 30 percent from $1.7 billion in 2015. Fee-based operating expenses, excluding restructuring and acquisition charges, were $1.4 billion, up 24 percent from $1.3 billion in 2015, primarily reflecting the impact of the Integral acquisition. Operating expenses for the fourth quarter were $636.2 million, up 37 percent from $524.1 million in 2015. Fee-based operating expenses for the quarter, excluding restructuring and acquisition charges, were $480.2 million, up 35 percent from $402.7 million in 2015.
  
  
• Operating income for the year was $79.1 million, down from $144.7 million in 2015. Adjusted EBITDA was $115.7 million for the year, compared with $170.9 million in 2015. Adjusted EBITDA margin, calculated on a fee revenue basis, was 7.6 percent in USD (7.0 percent in local currency) for the year, compared with 12.2 percent in 2015. The decline in profitability was primarily UK-focused and driven by the decline in capital markets transaction volumes, nearly $35.0 million of capital markets performance fees earned in 2015 that did not recur in 2016, and approximately $13.0 million of additional contract expenses incurred during the wind down of operations in a non-core market. The decline in adjusted EBITDA margin also reflects the shift in service mix associated with the Integral acquisition. Operating income for the fourth quarter was $67.9 million, down from $89.8 million in 2015. Adjusted EBITDA margin, calculated on a fee revenue basis, was 14.8 percent in USD (13.6 percent in local currency) for the fourth quarter, compared with 19.6 percent in 2015.
  
  

Asia Pacific Real Estate Services

Asia Pacific Performance Highlights:

• Total revenue for the year was $1.4 billion, an increase of 18 percent from last year. Fee revenue for the year was $1.1 billion, an increase of 13 percent from 2015. Revenue growth compared with last year was driven by Property & Facility Management; Advisory, Consulting & Other; and Project & Development Services. Growth in the region, led by Japan, Australia and Greater China, was balanced between organic expansion and acquisitions of annuity businesses such as property management, facilities management and valuations. For the fourth quarter, total revenue was $435.7 million and total fee revenue was $350.9 million, representing increases of 20 percent and 11 percent, respectively, from 2015.
  
  
• Operating expenses for the year were $1.3 billion, up 19 percent from $1.1 billion in 2015. Fee-based operating expenses, excluding restructuring and acquisition charges, were $1.0 billion, up 14 percent from $881.8 million in 2015. Operating expenses for the quarter were $382.2 million, up 23 percent from $308.9 million in 2015. Fee-based operating expenses for the fourth quarter, excluding restructuring and acquisition charges, were $297.4 million, up 12 percent from $263.1 million in 2015.
  
  
• Operating income for the year was $86.4 million, consistent with 2015. Adjusted EBITDA was $104.8 million for the year, compared with $102.7 million in 2015. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 9.7 percent in USD (9.6 percent in local currency) for the year, compared with 10.6 percent in 2015, and reflected increases in data and technology investments. Operating income for the fourth quarter was $53.5 million, up 3 percent from $53.1 million in 2015. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 16.8 percent in USD (17.2 percent in local currency) for the fourth quarter, compared with 18.4 percent in 2015.
  
  

LaSalle

LaSalle Performance Highlights:

• Total revenue for the year was up 3 percent from last year, and included $260.8 million of advisory fees, $95.9 million of incentive fees and $51.1 million of transaction fees. Total revenue for the quarter was up 5 percent from last year.
  
  
• Equity earnings for the year were $31.5 million, as compared with $70.1 million in the prior year. While activity in both periods reflected net valuation increases of assets within the co-investment portfolio, gains recognized in 2015 from the disposition of legacy investments that did not recur in 2016 contributed substantially to the year-over-year decline.
  
  
• Operating expenses for the year were $324.9 million, up 7 percent from $309.5 million last year. Operating expenses for the fourth quarter were $84.8 million, up 9 percent from $80.3 million the prior year quarter.
  
  
• Operating income for the year was $82.9 million, a decrease from $87.5 million in 2015. Adjusted EBITDA was $115.7 million for the year compared with $159.8 million last year. Adjusted EBITDA margin was 28.4 percent in USD (27.5 percent in local currency) for the year, compared with 40.2 percent last year. The decreases in Adjusted EBITDA and Adjusted EBITDA margin reflected the year-over-year decline in incentive fee revenue and equity earnings along with the impact of deferred compensation expense. Operating income for the fourth quarter was $15.2 million, a decrease from $16.7 million in 2015. Adjusted EBITDA was $20.3 million for the quarter, compared with $29.9 million last year. Adjusted EBITDA margin was 20.3 percent in USD (19.1 percent in local currency) for the quarter, compared with 30.8 percent in 2015.
  
  
• Net capital raise was $5.1 billion for the year, with $188 million raised in the fourth quarter.
  
  
• Assets under management reached a record high of $60.1 billion as of December 31, 2016, up from $59.7 billion as of September 30, 2016, and $56.4 billion as of December 31, 2015. The net annual increase in assets under management resulted from $10.7 billion of acquisitions and $5.5 billion of net valuation increases, partially offset by $10.6 billion of dispositions and withdrawals and $1.9 billion of foreign currency decreases.
  
  

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 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and on behalf of its clients managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

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Cautionary Note Regarding Forward-Looking Statements

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 actual results, performance, achievements, plans and objectives of JLL 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 JLL'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 JLL's Annual Report on Form 10-K for the year ended December 31, 2015, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016 and in 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, JLL expressly disclaims any obligation or undertaking to publicly update or revise any forward-looking statements contained herein to reflect any change in JLL's expectations or results, or any change in events.

Live Webcast
We are offering a live webcast for shareholders, analysts, and investment professionals on Monday, February 6, 2017 at 5:00 p.m. Eastern. Follow these steps to participate:

1. You must have a minimum 14.4 Kbps Internet connection
2. Go to http://edge.media-server.com/m/p/jwbhpzav
3. Download free Windows Media Player software: (link located under registration form)
4. If you experience problems listening, please call the webcast hotline +1 800 774 9473 and provide your Event ID (ca3h9owp).

Conference Call
Management will also conduct a conference call. If you are unable to join the live webcast and would like to participate in the teleconference, please dial into one of the following phone numbers five to ten minutes before the start time (the passcode will be required):

• United States callers: +1 844 231 9804
• International callers: +1 402 858 7998
• Passcode: 51862587

Supplemental Information
Supplemental information regarding the fourth quarter 2016 earnings call has been posted to the Investor Relations section of the company's website: ir.jll.com.

Web Audio Replay
An audio replay will be available for download or stream. Information and the link can be found on the company's website: ir.jll.com.

If you have any questions, please contact JLL's Investor Relations department at: JLLInvestorRelations@am.jll.com.