Jones Lang LaSalle Incorporated

Q3 2021 Earnings Conference Call


spk_0: good morning and at this time i would like to welcome everyone to the james lang lasalle in corporate it incorporated third quarter earnings conference group for your information discomfort who is being recorded who lines have been placed on meet to prevent any background noise after the speak his remarks that will be a question and answer session if you would like to after question during this time simply prescott followed by the number one on your telephone keep out if he would like to withdraw your question please press saw followed by the number two on his head of a keypad thank you are i would now like to ten the conference a virtue chris sense executive at managing director of investor relations
spk_1: please go ahead
spk_2: thank you and good morning welcome to our third quarter two thousand and twenty one conference call for jones lang lasalle incorporated earlier this morning we should earnings release which is available on the investor relations section of our website
spk_3: along with the slide presentation intended to supplement are prepared remarks please visit i are that jll dot com
spk_2: during the call we will reference certain non get financial measures which we believe provide useful information for investors we include reconciliations of non get financial measures the gap in our earnings release and presentation as a reminder today's calls being webcast live and recorded the transcript of this conference call will also be posted on our website any statements made that future results and performance plans expectations and objectives are forward looking statements actual results in performance may differ from most for looking statements as a result of factors discussed in the a new report on form ken k of the fiscal year ended december thirty one two thousand and twenty and another reports filed with the fcc the company disclaims any undertaking publicly update or revise any forward looking statements i will now turn the call over to a christian all brick or president and chief executive officer for opening remarks
spk_4: thank you chris hello and thank you for joining our good water or in scope while be operating environment remain dynamic i'm pleased to report of the recovery we have seen all the possible quarters continues to accelerate and dealt with another quarter of strong form our outstanding service orientation and the constant flow of for like innovation on portland dry those of the impressive results
spk_3: but i must the ganic than my appreciation for our employees dedication
spk_4: last month we announced the agreement to acquire building and it a us market leaving building operation technology platform that transforms how properties along it provides exceptional experiences for a break up and ten and and improves the net operating income across some of the most successful commercial real estate couple years the strategic acquisition and able sale l to leverage building engines open platform to create a comprehensive ecosystem of building operations application i'm extremely excited about the gross opportunities live acquisition will provide across our entire business as he expand buildings and to climb faith more widely a number of building engines applications already integrate with jello technologies will but technology policy portfolio he the our client and industry leading solution for all of that building operation new as i mentioned last water the hybrid workplace transformation as the emerged from the pandemic will dry technology land across the entire real estate ecosystem this acquisition and a decent job announced acquisition of skyline a i have problems our commitment to ensuring that we out the forefront of full body our clients for the most rather than technology for their will feed me turning to the market environment we continue to witness generally improving conditions although not uniformly as the lingering effects or could pandemic and recent surge of the delta valley and have had different impacts to economies specially across asia pacific markets are still pay was wide ranging travel restrictions and local regulations which prevents people from working up their offices and meeting with clients in person kayla research reports that over old sentiment and activity house continue to improve upon the momentum recorded in the first half of this year as quarterly global leaping volumes were thirty nine percent higher than a year ago however volumes of filled twenty five percent below q need twenty nine t illustrating a continued significant road to recovery across all three regions quarterly market leaping volumes are below where they were in twenty nine key will the us lagging the most with a thirty one percent decline compared to the same period in twenty nineteen while europe and asia pacific we call a decline of twenty six percent and for or percent respectively and and frankie conditioned to sit in most markets oh the ongoing flight to trying to have seen renzo for premium applying building at up in some markets the real estate capital markets continued their recovery in the third quarter with global transaction volume smoking at seventy seven percent increase from a year ago and an eight percent increase from key agree to a nineteen diminishing operational uncertainty and rising institutional allocations a bolstering equality in the commercial real estate markets a p most liquid country for us germany in the uk accounted for seventy percent of global acted appeal a quarter that as a backdrop i'm pleased to announce that yellow recorded exceptionally strong result in the third quarter building upon the momentum generated throughout twenty twenty one consolidated read you rose twenty two percent to four point nine billion dollars and p revenue increased forty five percent to two point one billion in local currency just a deep into of three hundred and fifty two million dollars we presented an increase of forty four percent from the fly a year
spk_0: but adjusted ebitda margin contract been to seventy eight point one percent from seventeen point two percent in local currency
spk_4: just the net income total to one hundred and thirty seven million dollars for the quarter and set the diluted earnings per share of total to four dollars fifty tick it oh transaction based service lines have shown to be strong performance was meeting capital markets recording was of some degree and one and three percent respectively coinciding with a recovery up plans action related activity and and pulling market sentiment our about us advisory service was key grows engine for our by jury consulting and other business which was up twenty one percent for the quarter moving towards capital allocation alongside supporting both organic and inorganic strategic investments across our platform we also continued with our share repurchase program consistent with a guideline of all a capital allocation framework as well as our continued commitment to the return of capital to shareholders over the long term we purchased approximately one hundred fifty million dollars of shares in the third quarter i will now john the cold over to count brennan will provide further detail on the results for the quarter
spk_5: thank you crush and
spk_3: our third quarter results reflect strong execution continued business momentum and the benefit of investments and our global platform of the last several years
spk_6: total quarterly fever avenue and profitability or past two thousand and nineteen off
spk_5: with considerable strengthen the americans region and transaction based revenues across the globe be improving overall activity within a commercial real estate operating environment along with our building pipelines investments and people in technology and a secular growth trends of our industry leave us optimistic and momentum will continue and we are mindful of the dynamic factors at play within the global economy
spk_6: prior to providing a detailed review of her operating perform and i remind everyone that variances or again a prior year period and local currency unless otherwise noted are consolidated real state services the revenue increased forty seven percent due in part to lapping covered and patted results from the prior year compared to third quarter two thousand and nineteen real state services v revenue grew twelve percent and i relative strength and the americas and transaction based revenue
spk_3: the real state services adjusted ebitda margin of eckstein point six percent compares with sixteen point two percent a year earlier and fifteen point four percent and the third quarter of two thousand and nineteen
spk_6: the growth of our transaction based revenues offset the expected reduction of search and twenty twenty non permanent savings is love incremental investments and our people and technology platform that we believe and hands as our strategic positioning and will drive future incremental revenues and operating efficiency
spk_3: or margin results do not yet reflect a fully normalized expand space for certain extent categories such as t any as well as our continued hiring admits the current wage inflation to capitalize on growth opportunities that with the ahead
spk_6: turning to the americas capital markets and leasing lead broad based v revenue growth compared with third quarter two thousand and nineteen the revenue was up approximately twenty five percent with growth across all service lines except project and about and services we're seeing clients continue to delay build our projects as they seek more clarity regarding future will place to man within america's capital markets see revenue from us investment advisory cells nearly tripled and us debt advisory more than doubled his optimism continue to broaden across sectors or multifamily that origination and loan servicing businesses maintain strong momentum highlighted by an acceleration and the growth rate of our loan servicing fee revenue to thirty five percent from twenty six percent in the prior quarter america three things the revenue with a record high as growth accelerated driven by good operating momentum and up demand and certain asset classes and some pull forward transaction compared with a third quarter two thousand and nineteen america's leasing see revenue increased twenty six percent relative to last year all asset classes exhibited growth led by the industrial sector while office retail and life sciences were also strong americans office leasing the revenue was approximately one percent above two thousand and nineteen level transaction velocity has increased meaningfully and is up forty percent from two thousand and nineteen
spk_5: average deal side increase for the first time since the onset of the pandemic but remains about ten percent below two thousand and nineteen
spk_3: our full year twenty twenty one you actually thing growth pipeline is up forty four percent from twenty twenty and four percent from two thousand and nineteen
spk_6: deporting her optimism for continued strong growth through the and of the year though timing and closing rates will be key determinant from a profitability standpoint the americas adjusted ebitda margin increase to twenty two point four percent from twenty point nine percent and twenty twenty and nineteen point three percent and twenty nineteen driven primarily by strong growth and transactional revenues that were partially offset by expected reader auction at thirteen twenty twenty nonpermanent savings and incremental investments and are people and technology platform we continue to ramp up hiring to execute and growth opportunities in india v revenue growth was led by our transaction based service lines and was most notable and the uk and germany
spk_5: v revenue within each of the emir a capital markets we thing and valuation advisory within the advisory consulting and other service line
spk_6: was ahead of two thousand and nineteen levels of vaccinations have led to improving market sentiment particularly and the industrial office and residential sector amy as profitability decline due to several factors including expected reduction that certain twenty twenty nine pregnant fading investments and our people and technology platform
spk_5: ongoing softness and challenges with that aren't uk mobile engineering business
spk_6: and overall wage inflation we're taking it number of steps to dress in the as profit contribution and will be closely monitoring progress against our financial objectives for each the service line asia pacific be rather new growth was driven by our transaction based revenues however performance was next across the region you to varying can
spk_7: democrat coverage
spk_6: asia pacific capital markets with particularly strong and the office retail and industrial sectors and largely concentrated in australia and japan asia pacific leasing fear revenue was up thirty three percent from a year ago and up one percent from twenty nineteen with gross led by the office and industrial sectors and most notably in china and australia and addition to incremental investments in our people and technology platform expected reduction of certain twenty twenty non permanent saving wage inflation and geographic revenue next java decline in asia pacific profitability partially offset by the growth and are higher margin transaction based revenue our global work dynamics the revenue with flat earth a year ago but up three percent from twenty nineteen mid single digit underlying growth of our more annuity like facility management business driven primarily by new client when and contract extensions and the america as an email was offset by the absence of coded related project work and twenty twenty turning to a cell
spk_3: the revenue increased sixteen percent driven by advisory fee growth within it's core open and funds as well as twenty two million dollars of insanity is tied to strong investment performance on dispositions on behalf of clients in asia pacific in europe
spk_5: we anticipate full year twenty twenty one in fantasy is to be approximately seventy million dollars up from our prior estimate of forty five million dollars
spk_6: the salaries the record for billion dollars of capital and a quarter and had twelve billion dollars of dry powder a quarter and which speaks to the continued trend an increasing capital allocation to real estate and are strong track record
spk_3: the south profitability would adversely impacted by deferred compensation expand associated with the run off of the previous compensation program
spk_6: shifting now to an update on her balance sheet and capital allocation we are very pleased with how the business has performed and the resiliency of the cash vote for the past eighteen months with reported not leverage of zero point four time and liquidity of three point one billion dollars at the end of the third quarter we have the capacity to balls and vast for a long term growth and return cash to shareholders the investment opportunities that remains dynamic and we intend to maintain flexibility to capitalize on am in a opportunities and organic investments to drive long term shareholder value alongside continued share repurchases through the end of the third quarter we repurchased one hundred and ninety one million dollars of stock this year we are seeking am in a is where we can generate strong top and bottom line growth across more than one service line or use our diversified platform to accelerate growth within the target company
spk_5: we're focusing on specific strategic categories and screening potential opportunities against officer cusick that and our target financial metrics including margin accretion and minimum our allies the hurdle are pending acquisition of building engine is a strong strategic bet that improve the technology solutions we can deliver across our client base
spk_6: we also expect the acquisition to create significant long term shareholder value
spk_5: oh labrie briefly on our focus on an investment in technology initiative which comprise three bucket
spk_6: first investments and early stage prop tech companies that are transforming the real stay industry second investments and technology companies that accompanied strategic partnerships to drive growth and third investments and our technology platform that further differentiate and enhance our service capabilities we began investing in early stage proctor companies in two thousand and eighteen
spk_5: today our investments across the early stage prop tech companies and strategic partnership are collectively valued materially higher than or cloth basis as evidenced by the market food and the portfolio over the past several quarters beyond a direct investment return these investments and form our strategic direction allow us to provide cutting edge technology solutions to our clients and generate incremental revenue
spk_6: looking ahead to the balance of twenty twenty one are improving underlying business fundamentals and growing pipelines give us confidence that the momentum is likely to continue to we expected to progress at different speeds across geography is and sectors accordingly we will continue to invest strategic lee to drive future growth while seeking to effectively manage expenses that are expected to gradually return such as to any and an environment of wage inflation which we expect to persist in the near term we continue to expect to operate within our sixteen to nineteen percent adjusted ebitda margin target for the full year twenty twenty one and twenty twenty two in closing i would like to thank my jail or colleagues for their continued dedication to deliver in best in class clients service and thought leadership which are paramount to jail our long term value creation for all stakeholders
spk_3: christian back to you
spk_4: thank you karen as we are currently in the lives of the twenty twenty one united nations climate change conference known as cop twenty six i would like to reiterate a key role the lead affecting the three hat on the road to net zero jalil is committed to being a partner on this journey and we continue to enhance our product offerings and solution dedicated to help our clients realize their contribution to a more sustainable environment this newly reason he collaborated with world economic forum in developing can green building principles to die be industries tradition one guiding principle is to shape the future of real estate for better what looking ahead to the end of the year and twenty twenty two we continue to see promising opportunities across the commercial real estate industry and a fully committed to capitalizing on that we believe that twenty twenty two will be a knee and which grows rates stop to normalize while uncertainty and me a child happenings persist he believed that these challenges will soon give rise to a more bullish confidence as neat evaluate our execution against our long term strategy we remain encouraged by the multi prong scroll strategy the previous the outlines and are committed to enhancing our capabilities to support a long term objectives bones or gallegly and in a canopy and in a will remain an important component of our growth strategy which we will utilize for the right opportunity as can mentioned we remain committed to each hearing tell a stringent underwriting criteria ask me goalie evaluate opportunity and be key areas of focus which our line but our strategic priorities our global platform thought leadership commitment to excellence and continued operational and she cheated execution nextel l l a preferred partner across our and markets and business segments we remain well positioned to capitalize on the continued macro economic recovery and favorable underlying trends altering the commercial real estate industry to achieve sustainable growth and create meaningful long term shareholder value operator please explain the q and a process
spk_0: at this time i would like to remind everyone in order to ask a question please press start than the number one on the telephone keypad were poised to spread name it to compile the cuban a ah first question today comes from anthony how line of jp morgan anthony please go ahead
spk_3: great thank you on my first question relates to are thinking about the rest of this year and margins you you gave a bridge from ah a margin for can take some a third quarter and i'm just wondering if you could help put into context ahmadis incremental tech spending and costs coming back i i kind of bridge or margins in the fourth year i think lasher euro over twenty one percent
spk_8: yeah marine county
spk_6: good confirmed in thinking about the fourth quarter mile need for start with that cop line and thinking about the pipeline and we mentioned earlier were encouraged with their respective pipeline them both are leaping and capital market business for the quarter or but we are watching that closely because right clothing conversion rates are always impacted by the fishing net you by occupied an investor are really but the continent how to content played out in the fourth quarter or certainly impact our conversion there and an alpha want to highlight that are typical seasonality had already been impacted the to date by the various be that cold recoveries across different geography the cross different factors as and right now expect that to continue into the fourth quarter felt well this gonna get friends that are differential an empty the now do expect to continue and early could expand side in a we mentioned a couple factors at play there were certainly hiring today for growth wifi right now and grocery and had the peyton the future and we've been a we lied to call out some of the continued ah movement and and now wage inflation that were and feeling as we continue hiring and and also continued return on m those permanent conflating so other factors will come into play the fourth quarter
spk_9: due to do think though the
spk_3: i'm eating out a small bit of diminution year over year from some of those items coming back you think that's fewer magnitude be thinking about a in a fourth quarter or is there something materially different we should keep in mind
spk_6: yeah we're not going to get that that gonna target margin for the fourth quarter but one of the highlight of few points to consider as you think about forecast
spk_3: and then on is there any of the you can provide on the potential sale and beard china property management business and and were what type of proceeds that that you don't produce
spk_6: yeah we're not going to comment on our market speculation
spk_3: again and his last question i'm on the skyline a i am building engine diaz how should we think about from from out just tnl point of view as you put that money to work and in those deals is that out and of were cat paxton hands the over a business or do those come with the media are either
spk_6: he also taking a big step back against them are framework on overall financial for building engine so wanna be i keep and and subjected to be added to increase our higher margin annuity revenues and sell building engine to the strong fit with that and this is the company that expected to casual positive for that
spk_10: or this year
spk_6: and it but it's not anticipated have a material impact on our revenue or profitability for the first few years
spk_10: and then i'd say that the on that we'd expect building engine to degree of to both the top and bottom line consolidate performance at a growth rate that significantly feed the court adnan a without provide some help contact them
spk_11: oh good god thank you
spk_0: and antony your next question comes from d line of stephen sheldon from william black satin please go ahead
spk_2: thanks to morning really really strong quarter overall pick one thing at the other profitability and near a tactic is that back each jason garrett they did mention you'll be taking a number steps in a knee up with with profitability and mine to peace gives them more
spk_3: detail on what on what the steps they include
spk_4: step on i'm taking that christians christian i'm with me have any or a business would just compounds by a very strong transactional business which has shown are very significant recovery and we are very please
spk_12: but that and then we also have ah a very large business around our mobile engineering and also lounge our club business
spk_4: and the mobile engineering of the it out business of still significantly influenced by the pandemic the return to always stay relatively weak and and therefore there's and lower demand for mobile engine nearing business been he would have hoped a beginning of the year and that finds it's way into the p m l and the same is true while along without business we have taken very ah significant steps to work on the cost base of a lot in the business and can we are pretty optimistic that that will be visible in twenty twenty two and and obviously we see the analogy of in the eyes always slightly stronger than you and the other gg all the p so we'll also quite positive thought because quotable india
spk_12: great added helpful in been just would love an update on broader capital allocation pipeline for he grip on a recent acquisitions you see a lot more attractive opportunity doubt they're dead to ramp investing in the name
spk_2: if you thought about this year the target priorities on the capital allocation by changed at all during the year there app and any gonna change their thanks
spk_6: i'll take that one actually have to figure that back if you look at our balance sheet situation today we have a significant capacity and inflexibility i in hand on an investment and organic ah business and and an a and and cherry purchases and sell were constantly monitoring our pipeline of them in a activity which is is dynamic allow the different opportunities that our targeting and that present themselves and from an organic perspective though we can new to monitor and will continue to invest in those you'll note that in the first half of this year we didn't have any i'm an activity we've out a couple of transactions at the same time we also continued to pack
spk_13: we purchased or stock
spk_0: and if thank you as a reminder please press star and the number one on each i think he patch for any questions
spk_14: well now me they've achieved jade romani of kb wj the line is how a pinch
spk_4: thank you very much we can you give any color as to which areas year ramping up hiring them out
spk_12: i'm jaded question of what i mean in absolute numbers it's clearly within a look back and experts news on where we have a very strong pipeline and we have that
spk_4: a strong influx of new colleagues badly we also doing a lot of and best near each a new talent in a transactional businesses or mean the outlook or the transactional business going into twenty twenty two patients very bright and so we're seeing all the effort to secure additional talent thank you and considering that capital markets values this year look to be in excess of the prior peak in a good fit for the growth and capital markets and twenty twenty two yeah absolutely i mean the environment for the capital markets business is very strong and the capsule each know coming ah investors seek a new investors teaching and money being deployed and in the real estate sector is an ongoing trades and a data that fall within that feeble the environment we believe that we are incredibly well positioned specially when you consider that one up our superior strength age to bring capital from one region of the world to another region which has been very slow over the last two years because of their restrictions around trouble want those travel restrictions are being released we won't see much more ah capital again coming from asia tb us out on the us to you a boy asia we have already seen that or the last couple of weeks and and was be opening up the us from nov eight's onwards we will see even more that thank you very much are using any supply chain bottlenecks and your property management businesses your project and development services or any other business lunch not that it would be meaningfully impacting our business performance you know they are a couple of challenges are which we have to be words had so far we have it's nice the under control
spk_15: and lastly would you be able to quantify your cost basis and deck investments you made
spk_6: yeah right
spk_4: and we're not gonna go and hey eddie tolan that right now surrender their different stages and bucket that we reference earlier and know what were you looking can understand their just the magnitude of potential future gained the know you've taken fair value games and this year they've been some yeah earnings that may not be considered for kind shouts picking up the earnings growth provide for next year were you said you expect me for bottom line growth should we make any adjustments for some of those valuation games are you still expecting meaningful bottom line growth on top of the reported dump the darlings or this year
spk_12: what part of our lives out he'd be nice is investing in to truck companies with minority steaks and we are they have field the platform where we are helping those companies to meaningful increase the revenue qaeda with the support of alan gross pigs
spk_4: that is something which is obvious be increasing our cost days but up the same time will increase our a pretty earnings over the future and so you will see going forward as part of l a business model that we will have ah more equity earnings are coming into our p m l we have had that in the past the dominant he only coming from al assad investment management that going forward it will also come from the
spk_14: yellow keep the over all environment for prop tag is incredibly table bowl on and and so we feel very well positioned to take advantage of that old saying twenty twenty two and beyond
spk_16: thank you very much
spk_0: thank you jane before we leave until our final question as a final mind that i'll be staff for the by the number one on the telephone keypad asked a question
spk_17: will now take a question from patch and shaughnessy patrick callan how ipad
spk_12: good morning what's your latest think you know how jail l can engage with a fossil workspace sector particularly in light of your largest competitors are making significant investments in that space of late i'll listen we each state gop before on called that we believe that the flex space and yeah will ah
spk_4: become a meaningful proportional people the all of his leading markets and we are very active in that area to service our clients and so we are helping them to identify the right flex page provide us we're helping as an occupy yeah we're helping
spk_3: the owners ability to find the like like state providers
spk_4: at the talent and we also operating flex space white labeled for our clients what me not doing is we're not competing against our clients in the sense that we are creating our own brands are supporting a specific brands in competition and to be a
spk_18: others and so that's a slight difference and strategy but we are very comfortable with the development of that business we have seen great progress and so on that will be a lot strategy for the near future
spk_17: great thank you
spk_19: the and then it looks to me like you've been outperforming your peers of late in and brokerage revenues and i guess of i'm in the third quarter specifically and ultimately thing and and capital markets and i know you should that a year over year growth in the third quarter then i your can't have already reported what would you point towards as reasons for your marketshare day
spk_4: angel blade while you will understand that i will not comment on our competitors i can only say that we have very pleased but our own performance and we believe that our very significant investment into technology is increasingly differentiated our author john locke
spk_12: lines and and brings our brokers in a net superior position to win more business and to be more productive and so when you see on our mobs and walk the amount of money we i that the into jail l p that is just one kind of way of looking at it be other way of looking at it that that investment is
spk_20: be gonna need to make our costs service the slides more productive and decreed that competitive advantage and so far we believe that strategies working really well
spk_0: i protect thank you
spk_21: you patrick your next question comes from the line of anti palin anthony
spk_22: your line is open
spk_3: great thanks i'm
spk_6: it in your press release you called out gerald technology solutions is helping drive out some of the revenue and advisory consulting and other and ice wondering is is that a mark to market or was that are and i can like service line that that just get round or revenue side
spk_3: yeah that that's a third one i did one at a time
spk_4: occur him from what what exactly as bad as general technology solutions i mean what what we're doing the lounge l l technology solutions we are a week shallow of technology products ah which are helping arm people occupying space to operate get space manage their space are busy set pieces which we have build but also added to and in a specially in the years between fifteen and and eighty and and that is developing said been very nicely
spk_23: but it's not a proprietary product of jail l we are we sell out yeah ah of of the party products
spk_3: okay got it and then
spk_11: discount on a buyback it used elaborated more on on just and what was the magic and one hundred and fifty million in a third quarter versus thinking about say a pace on ago for basis and what are the bracket should put around
spk_15: yeah just by back in time think about it
spk_6: yeah not gonna put any specific brackets around that in a we are a they said earlier really looking at are opportunities for and an a organic investment in cherry purchases and argued that kashmir broadly it and will continue to pursue all free but i'm not been it
spk_11: but a specific number out there for for next four
spk_0: wicked thank you for that it's you anthony
spk_4: there are no further questions at this time i would now hand the cool back to management to closing remarks
spk_0: but the radio while with no further questions we will close to dates call on behalf of the entire jail l t we think you all for participating on the called this morning counted i look forward to speaking with you again following the polls water

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