Jones Lang LaSalle Incorporated Q3 FY2025 earnings call

• Consolidated Performance: Sixth consecutive quarter of double-digit revenue gains and eighth consecutive quarter of double-digit adjusted EPS growth. Transactional revenue grew 13% led by investment sales, debt, and equity advisory.
• Technology and AI: Central to strategy; over 41% of addressable population use proprietary AI tools daily; Software and Technology Solutions segment progressing towards profitability by 2026.
• Free Cash Flow and Capital Allocation: Strong free cash flow, reduced net debt; share repurchases totaled $70 million in the quarter, year-to-date $131 million.

Real Estate Management Services

• Workplace Management: Client wins and mandate expansions drive strong performance; mid-single-digit management fee growth with incremental pass-through costs. On a 2-year stack, revenue increased nearly 30%.
• Project Management: New and expanded contracts in U.S., Australia, and India drive double-digit revenue growth with low double-digit management fee growth, supplemented by higher pass-through costs.
• Property Management: Revenue growth tempered by elevated contract turnover; overall segment revenue growth offset headwinds, leading to higher adjusted EBITDA and margin.

Leasing Advisory

• Revenue growth accelerated despite tougher comparison; on a 2-year stack, leasing revenue grew nearly 30%. Broad-based growth across asset classes, led by office in U.S. with 14% growth globally, outpacing market volume. Industrial leasing grew 6% globally.

Capital Market Services

• Growth trends accelerated in Debt Advisory, Investment Sales, and Equity Advisory. Debt Advisory up 47%, Investment Sales up 22% on tougher comparisons. On a 2-year stack, Debt Advisory grew 68% and Investment Sales 37%.

Investment Management

• Revenue growth driven by higher incentive fees; strong growth in U.S. core open-end funds offset client asset dispositions. Raised $3.4 billion of private equity capital year-to-date.

Software & Technology Solutions

• Double-digit software revenue growth offset by reduced discretionary technology solutions spend from certain large clients. No longer include carried interest in segment performance

• Increased the low end of 2025 full year adjusted EBITDA target range by $75 million to $1.375 billion to $1.45 billion.
• On track to achieve the low end of midterm adjusted EBITDA margin target range, in line with 2022 timeline.

• Property Management: Elevated contract turnover dampening revenue growth through mid-2026.
• CECL Reserves: Volatility in CECL reserves with potential charges related to loan losses and fraud.

Q: My first question revolves around Property Management and REM, just more broadly. You talked about moderating growth there. And I just wanted to make sure I understand, was that for the broader business segment? And can you put some brackets around what that means? And just also like what is the reason for the churn and on Property Management and what's kind of the drag there?

A: As we explained, we have taking our Property Management business into a global business line last year, and we are evaluating now all the different country businesses, the profitability of those businesses and we are really focused on driving margin in that business. And so we are getting out of some of those contracts, most notably in Asia Pacific, and so when you look at the overall growth ratio, it is muted, but there are still areas, especially here in the U.S., where we still show nice single-digit growth in that business.

Q: Christian, on your Agentic AI solutions, I guess as we think about that from an investor standpoint, where could we start to see some of these solutions impacting financials? Is it a combo of both producer productivity gains that could help top line growth along with efficiency gains and the cost structure. And then is there any detail you can share on where you've seen the biggest benefit so far as you look across the organization?

A: Yes. For the time being, the main benefit is around efficiency gains. What we are doing is we are going thoroughly through all our processes within the organization and define those processes, if possible, move those processes in one of our shared service centers and then within the shared service centers within a couple of months, they are trying to replace some of that by using AI tools in order to take those efficiencies up. And that goes across the board that is within our support services, but it is also within our business lines. So we see productivity, for example, going significantly up in our Capital Markets business where the revenue per head is going up very significantly. And it's not only because the market is more supportive, but we have a whole load of tools, which are supporting our brokers to drive their efficiency.