Jones Lang LaSalle (JLL) has unveiled its first quarter results for 2024, indicating a robust performance with significant profit growth, despite a global decline in commercial real estate investments. The company reported a 12% increase in resilient revenues and a 6% rise in Capital Markets revenue.
Still, the firm also faced challenges, including a decline in industrial leasing activity and lower revenue in its JLL Technologies segment due to decreased bookings and client decision delays. JLL's strong focus on growth, profitability, and cash flow, coupled with a positive outlook for office leasing in the US and Asia-Pacific, positions the company to navigate the evolving market landscape.
Key Takeaways
- JLL's resilient and transactional revenue growth leads to meaningful profit growth in Q1 2024.
- Global commercial real estate investments saw a 4% year-over-year decline, totaling $135 billion.
- Office leasing activity shows improvement, especially in the US and Asia-Pacific regions.
- Industrial leasing activity drops globally, while the retail sector demonstrates resilience.
- JLL Technologies faces a 12% revenue decline, and LaSalle's advisory fees revenue decreases due to valuation declines and lower fees in Europe.
- The company reports increased free cash flow and maintains a strong liquidity position with $2.3 billion at the end of the quarter.
- Adjusted EBITDA margin targets for 2024 are set between $950 million to $1.15 billion.
Company Outlook
- JLL anticipates adapting to a higher interest rate environment with strong demand for high-quality sustainable space.
- The company aims to drive mid-term growth with adjusted EBITDA targets for 2024 and focuses on expanding margins.
Bearish Highlights
- Industrial leasing activity experienced a global decline.
- JLL Technologies' revenue dipped due to lower bookings and delays in client decisions.
- LaSalle's advisory fees revenue fell due to valuation declines and lower fees in Europe.
Bullish Highlights
- Office leasing activity is on the rise, particularly in Class A and trophy segments in the US.
- Work Dynamics is expected to see high-single-digit organic revenue growth long term.
- Private credit market opportunities emerge as traditional lenders pull back.
Misses
- Project management revenue decreased by 3% owing to lower pass-through costs.
- The performance of the Transactional business remains uncertain and will depend on market recovery.
Q&A Highlights
- CEO Christian Ulbrich highlighted opportunities in the private credit market with traditional lenders being less active.
- The SaaS business within JLL Technologies performed well, with expectations for a sales rebound in the medium to long term.
- JLL's management team is compensated based on adjusted EBITDA margin, which remains a key internal metric despite changes in financial reporting methodology.
Jones Lang LaSalle (JLL) has delivered a strong first quarter in 2024, marked by revenue growth and strategic cost management. The company's focus on driving growth and profitability, along with its ability to adapt to market changes, signals a continued commitment to expanding its business and margins in a challenging economic landscape.
InvestingPro Insights
Jones Lang LaSalle (JLL) has shown resilience in its first-quarter performance for 2024, reflecting the company's robust strategic initiatives and market positioning. To provide further context to JLL's financial landscape and market performance, let's delve into some key metrics and insights from InvestingPro.
InvestingPro Data indicates that JLL has a market capitalization of approximately $9.09 billion, showcasing its substantial presence in the industry. The company's Price to Earnings (P/E) ratio stands at 29.64 on an adjusted basis for the last twelve months as of Q4 2023, which may suggest a higher valuation relative to earnings compared to some peers. Still, with a Price to Book (P/B) ratio of 1.44 for the same period, JLL's market valuation seems reasonable in relation to its book value.
InvestingPro Tips highlight that JLL has been a consistent performer, raising its dividend for 9 consecutive years, which is a strong signal of the company's commitment to shareholder returns.
Moreover, JLL is expected to see net income growth this year, which aligns with the company's positive outlook and strategic focus on profitability. It is also noteworthy that JLL is trading at a low EBITDA valuation multiple, suggesting potential undervaluation based on its earnings before interest, taxes, depreciation, and amortization.
For readers looking to delve deeper into JLL's performance and future potential, there are additional InvestingPro Tips available at https://www.investing.com/pro/JLL. These tips provide insights into various aspects of JLL's business, such as industry standing, profitability, and stock price trends. In fact, there are 11 additional tips listed on InvestingPro, offering a comprehensive analysis for investors.
To explore these insights and make informed investment decisions, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This exclusive offer can enhance your investment research with valuable data and expert analysis.
JLL's forward-looking strategies, coupled with its ability to adapt to the evolving real estate market, are reflected in these InvestingPro metrics and tips, providing a clearer picture of the company's financial health and market position.
Full transcript - Jones Lang LaSalle Inc (JLL) Q1 2024:
Operator: Welcome to the Q1 2024 JLL Earnings Conference Call. My name is Benjamin and I will the operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. [Operator Instructions] As a reminder, the conference is being recorded. I will now turn the call over to Scott Einberger, Head of Investor Relations. Scott, you may begin.
Scott Einberger: Thank you, and good morning. Welcome to the first quarter 2024 earnings conference call for Jones Lang LaSalle, Incorporated. Earlier this morning, we issued our earnings release, along with the slide presentation, an excel file, intended to supplement our prepared remarks. These materials are available on the Investor Relations section of our website. Please visit ir.jll.com. During the call and in our slide presentation and our accompanying excel file, we reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures to GAAP in our earnings release and slide presentation. As a reminder, today's call is being webcast live and recorded. A transcript and recording of this conference call will be posted to our website. Any statements made about future results and performance, plans, expectations, and objectives are forward-looking statements. Actual results and performance may differ from those forward-looking statements as a result of factors discussed in our soon to be filed Annual Report on Form 10-K for the fiscal year December 31, 2023, and in other reports filed with the SEC. The company disclaims any undertaking to publicly update or revise any forward-looking statements. I will now turn the call over to Christian Ulbrich, our President and Chief Executive Officer for opening remarks.
Christian Ulbrich: Thank you, Scott. Hello, and welcome to our first quarter 2024 earnings call. I am very pleased with our first quarter results. We were able to grow both resilient and transactional revenue and turned up into meaningful profit growth. The year started with some positive momentum, highlighted by an increase in bidders and the closing of several large deals in North America. These green shoots encapsulate investors’ willingness to deploy capital when market conditions warrants. However, once inflation data came in higher than expected and the hope for several interest rate cuts later this year diminished, real estate capital markets became much quieter again. In the first quarter, global commercial real estate investments totaled $135 billion, a year-over-year decline of 4% according to JLL Research. The pace of decline moderated in the quarter across the Americas and EMEA, while Asia-Pacific experienced its second consecutive quarter of growth. Debt market conditions improved in early 2024, both in terms of pricing and liquidity. However, commercial real estate markets have taken a pause over the last several weeks as lenders and investors adapt to a shift in the interest rate outlook. Lender confidence remains varied and it's strongest for industrial living and datacenters, especially for high quality assets, up smaller deal sizes. Turning to Office Leasing, activity improved in the quarter of buy compared a subdued 2023 levels. Globally, Office Leasing volumes increased 7% year-over-year according to JLL Research. Both the US and Asia-Pacific saw increases in demand as occupiers continued to upgrade to premium quality sustainable space that improves the employee experience. In Europe, limited available space continues to dampen transaction activity. The number of large lease transactions improved in the quarter, but is still well below pre-pandemic levels. The global office vacancy rate ticked up 30 basis points to 16.5% in the first quarter driven mainly by North America, where the market continues to process leases that require 10% to 15% less space. On the Industrial side, first quarter leasing activity declined globally as decision-making slowed amid geopolitical and economic uncertainty. In the US, occupiers continued to manage through the record amount of space that was leased following the pandemic. Across much of Europe and Asia-Pacific, a limited supply of modern energy efficient space is constraining activity. Our growth in average rental rates moderated across all three regions, long-term fundamentals in the Industrial sector remains strong, supported by near-shoring requirements and demand for high quality sustainable space that allows for technology integration, automation. Finally, in the Retail sector, Consumer Spending and International Tourism remains resilient, supporting demand for space in prime locations. Turning to JLL, our first quarter results were driven by both revenue growth and the cost management actions we have taken. Collectively, our resilient revenue base grew 12% in the quarter, as clients leveraged the full suite of services we provide across our workplace and property management platforms. Our Leasing and Capital Markets business performed well, given the broader industry and economic environment. As we noted, in the past, JLL has the number one US debt origination platform, as well as the leading equity placement platform according to the Mortgage Brokers Association. We are uniquely positioned to manage the upcoming wave of debt maturities and capitalize on an eventual increase in commercial real estate transactions. With that, I will now turn the call over to Karen, who will provide more details on our results for the quarter.
Karen Brennan: Thank you, Christian. Before I comment on our performance, there are a few items to note regarding changes to our reporting presentation effective in January that we previewed during the fourth quarter call and late February. First, JLL Technologies and LaSalle's equity earnings have been excluded from adjusted EBITDA and adjusted net income calculations. While we exclude these investment-rated items, equity earnings from our operating ventures across the other segments continue to be included. Second, our definition of LaSalle's assets under management now includes uncalled committed capital and cash conforming with the industry standard. This definition change has no impact on the fees we earn. Third, following the conclusion of a Comment Letter from the SEC in February, we no longer report on the non-GAAP measure of fee revenues. As such, our discussion of revenue and associated growth rates are inclusive of gross contract cost and net non-cash MSRs. This primarily impacts the Work Dynamics segment on the Property Management business line within the Markets Advisory segments. Given the absence of fee revenue in our reported financials, we no longer specifically report adjusted EBITDA margins. Importantly, these presentation changes have no impact on how we manage our business, nor on our profitability or cash flow. Nearly all of the information we previously provided is included in or can be derived from our new presentation. Comparable historical information is available at ir.jll.com. Separately, and consistent with prior practice, variances discussed are against the prior year period in local currency, unless otherwise noted. Now on to the discussion of our performance. Revenue increased 9% to $5.1 billion on continued strengths in our resilient revenues and return to growth in our Transactional revenues. The revenue growth, along with the benefits of our cost reductions were the primary drivers of the 70% increase in adjusted EBITDA to an $187 million and a 168% increase in adjusted diluted EPS to $1.78. The first quarter reflects the strength and diversity of our platforms, as well as our continued focus on improving operating efficiency. The 12% increase in our resilient revenues was consistent with the pace in the fourth quarter and it was led by growth in Workplace Management and Property Management. A notable increase in investment sales activity, albeit on a soft 2023 comparison, drove a 1% increase in Transactional revenue, the first year-over-year increase since the second quarter of 2022. The 1% decline in platform operating expenses are a testament to our cost management actions, as well as our ongoing initiatives to enhance efficiency. The increase in profitability led to a 6% year-over-year improvement in free cash flow and a reduction in leverage, while we continue to invest in our business and return capital to shareholders. We remain focused on positioning our business to best capitalize on near and long-term opportunities to drive growth, profitability, and cash flow. Moving to a detailed review of our operating performance by segments. Beginning with Markets Advisory, the 5% growth in revenue in the quarter was mainly driven by Property Management. Portfolio expansions in the Americas and the UK and incremental pass-through expenses drove 8% Property Management revenue growth, after five down quarters, Leasing revenue returned to growth increasing 2%, though on a soft prior year quarter. The growth was led by mid-single-digit growth in the US, as most other geographies were down. Increased deal size and transaction volumes in the office sector drove the growth in the US, which more than offset declines in the Industrial sector globally. We continued to see more sustained leasing demand for high quality assets and so our pick up in large deals, both of which are favorable for our business mix, still occupiers continued to delay leasing decisions and large deals remain materially below the long-term average. Our global gross leasing pipeline continues to hold up, supported in part by the contractual nature of leases. The improvement in the OECD Business Confidence Index from late 2023 through March, which generally leads leasing activity by two to three quarters, along with limited new office and industrial building starts and stabilization in sublease space provides optimism for pickup in activity in the latter part of 2024 and over the longer term. We will be closely watching whether the recent escalation in geopolitical tensions impacts business confidence metrics. The revenue growth and cost management actions drove a 33% increase in Markets Advisory adjusted EBITDA. Shifting to our Capital Markets segment, revenue increased 6% in the quarter, though often muted prior year quarter. Even as economic, geopolitical, and interest rate outlook uncertainty prolongs investor decision-making, our global investment sales revenue, which accounted for nearly 40% of segment revenue in the quarter grew 20% when compared favorably with the 4% decline in the global sales volume Christian referenced. Revenue increased across most geographies, led by Japan and Germany and nearly all major asset classes notably, office and healthcare. Investment sales revenue in each region performed notably better than their respective market activities, led by Asia Pacific, according to JLL Research. Our US investment sales debt and equity advisory, which accounts for approximately a third of segment revenue, grew low-single-digits. The Capital Markets adjusted EBITDA improvement was predominantly driven by revenue growth, as well as cost management actions, which more than offset an increase in our multifamily loan loss reserves. The investments we've made in our Capital Markets talent and platform over the past several years position us to capitalize on a rebound in transaction volumes. Looking ahead, the Global Capital Markets Investment sales debt and equity advisory pipeline is up modestly, compared with this time last year and client engagement momentum has picked up. We continue to anticipate higher growth rates in the second half of 2024. However, as Christian described, the volatility and an outlook for interest rates, along with elevated geopolitical tensions continue to weigh on investor sentiments and are impacting deal timing and closing rates, particularly in the near-term. Moving next to Work Dynamics, 11% revenue growth was led by a 15% increase in workplace, management revenue, with the 2023 global client wins and mandate expansions further ramped up. Within project management, lower pass-through cost drove the 3% decline in revenue, as management fees were flat. In addition, the softer leasing activity in 2023 has moderated new project contracts. The increase in Work Dynamics adjusted was primarily attributable to the revenue growth absence of Tetris Contract losses we noted last year and ongoing cost management. Overall, the vast market opportunity, demand for our services and their well-positioned global platform give us confidence in the sustainability of the segments’ revenue and profit growth trajectory over the coming years. Workplace Management continues to see solid new sales trends, alongside strong contract renewal and expansion rates. The large 2023 wins will continue to support solid momentum through the first half of 2024 though likely at a more moderate pace in the past few quarters. We remained focused on securing additional project management mandates. However, the slower economic backdrop and soft late 2023 leasing environment may down the near term growth rates. Turning to JLL Technologies, lower bookings in the second half of 2023, as well as delays in client decisions were the primary drivers of the 12% decline in revenue. We continue to see strong retention rates of JLL Technology Software revenues. However, the combination of the change in our go-to-market approach, which primarily consisted of reducing our sales and marketing expenses in the latter part of 2023 and delays in client decisions is likely to continue to pressure growth in the near term. The reduction in certain expenses associated with cost management actions and incremental operating efficiency gains drove an improvement in JLL Technologies’ adjusted EBITDA, which more than offset the lower revenue. While the path is unlikely to be leaning on us, we aim to strike an appropriate balance between investing to drive growth and progressing to sustained profitability within the segment. The combination of the revenue pressures and timing of expenses, including carried interest accruals may adversely impact JLL Technologies’ profitability in the near term. Now to LaSalle, revenue from Advisory Fees declined 7% in the quarter, primarily on the impact of ongoing valuation declines within our assets under management over the past year, as well as lower fees in Europe from structural changes in our business mix. We anticipate valuation declines to pressure our assets under management over the next few quarters. Absent foreign currency exchange movements, assets under management were 3% lower than a year earlier, entirely attributable to valuation reductions. Capital raising and deployment activity continue to be subdued in the evolving market environment, which also shows in the media transaction and incentive fees in the quarter. The decline in LaSalle’s adjusted EBITDA in the quarter was largely attributable to the lower revenue, mostly offset by benefits from cost management actions and lower compensation accruals. Turning to free cash flow, the growth in earnings more than offset some modest growth-related working capital headwinds and drove a 6% of improvement in free cash flow, which was a net outflow of $721 million in the quarter. As a reminder, the first quarter outflow primarily stemmed from annual incentive compensation payments, coinciding with typically seasonally slower business performance, cash flow conversion is the high priority and we are very focused on our working capital efficiency. Shifting to our balance sheet and capital allocation, liquidity totaled $2.3 billion at the end of the first quarter, including $1.9 billion of undrawn credit facility capacity. As of March 31st, reported net leverage was 1.9 times, down from 2.0 times a year earlier, due to a reduction in net debt, partially offset by lower cash earnings over the trailing 12 months. The first quarter typically marks the seasonal high point for leverage given the nature of our cash flows. Over the medium term, we intend to manage the business towards the middle of our zero to two times leverage range. During the quarter, we selectively deployed capital towards growth initiatives and repurchased $20 million of shares during the quarter. Organic reinvestment in our business remains a top priority for capital allocation, augmented with targeted M&A. Considering the seasonality of cash flow, current leverage, and the broader macro and geopolitical volatility, we anticipate near term share repurchases to continue at a pace that will at least offset expected full year stock compensation dilutions. Looking further out, the amount of share repurchases will be dependent on the performance of our business, particularly cash generation and the macroeconomic outlook, while also weighed against our broader investment opportunity set. Regarding our 2024 full year financial outlook, growth trends in our more resilient business lines collectively remain solid. The timing of a sustained recovery in the Transactional business lines continues to be difficult to confidently predict considering the volatility in interest rate outlook, elevated geopolitical risk and mixed economic indicators. Still, given our pipeline activity, we're cautiously optimistic for a pickup in transaction activity in the latter part of the year. We continue to scale our platform and invest to both capture future growth opportunities and drive operating leverage. While we previously provided a full year 2024 target margin range, to confirm with our new presentation format, we had shifted to an adjusted EBITDA dollar target range. For full year 2024, we are targeting an adjusted EBITDA range of $950 million to $1.15 billion, which is consistent with our previously communicated range. Our mid-term targets, again aligning with our new presentation format now consists of revenue and growth contract costs ranges, which are $25 billion to $30 billion and $15 billion to $19 billion respectively, as well as an adjusted EBITDA range of $1.6 billion to $2.1 billion. Importantly, these ranges are consistent with our previously communicated mid-term targets. The timeframe to achieve these targets will depend in part on the timing and pace of recovery in the Transactional markets. The many strategic initiatives we have undertaken to drive growth and efficiency give us confidence in the long-term resiliency and the value creation prospects of our business. Christian, back to you.
Christian Ulbrich: Thank you, Karen. Let me look out to later this year. The market will adapt to a higher for longer interest rate environment. Pricing for the very best assets is beginning to stabilize in the US, UK and Australia, but prices have declined 15% to 35% from peak levels. According to JLL’s proprietary Global Bid Intensity Index, there has been a growing number of bidders across most sectors in early 2024, which dynamic is strongest for the Industrial and living sectors. Real estate as an asset class remains attractive based on its unique investment characteristics and returns. In Leasing, we expect the strong demand for high quality sustainable space to continue and due to the shortage of this type of space to drive an increase in rental rates. In today’s changing world, we have proved our ability to deliver superior client outcomes, while effectively managing profitability. Our One JLL model brings together the unique capabilities of our platform across the commercial real estate space, allowing us to sell more services and products to the same clients. Our technology and data tools provide our clients with leading insights into market trends and differentiate our offering, while also helping to increase productivity. We remain focused on growing our business, as well as also expanding our margins, especially in our resilient business lines. As we strengthening our service and product offerings, we will selectively add people and capabilities, both organically and through very targeted M&A. Despite an ongoing challenging operating environment, the prospects of JLL are bright and we are optimistic for 2025 and beyond. Before I close, I would like to thank our colleagues for their foremost commitment to always serving our clients. Operator, please explain the Q&A process.
Operator: [Operator Instructions] Thank you. And your first question comes from the line of Stephen Sheldon with William Blair. Please go ahead.
Stephen Sheldon: Hey, good morning. Thanks for taking my questions. First one, I just wanted to ask is it seems like there are Leasing signs alike to Capital Markets. So, how are you thinking about your capacity there if things potentially improve later this year? Karen, I think you had some positive commentary there on talent levels, acceptance, so can you get some more detail there? How much your capacity producer levels have maybe changed at a very high level? And are you still investing there? Are you planning to continue investing there as we think about the rest of this year, maybe ahead of a broader pickup in activity?
Christian Ulbrich: Good morning, Stephen. It's Christian speaking. We haven’t reduced our producer capacity at any kind of notable number. And so, we have more than enough capacity to drive higher revenues, grow our folks at the markets, returning in the second part of this year. We are using this current market environment to ex, here and there a few broker where we believe there's room for more capacity within our teams. But also that is at a relatively small number.
Stephen Sheldon: And then just in Work Dynamics, a nice step up in profit this quarter. Can you maybe help parse out some of the moving pieces there? I think you had a drag in the Tetris contract. And maybe just kind of how that cost containment efforts should have maybe help the support of a higher profit level there? Just any detail on the step up in Work Dynamics profit?
Christian Ulbrich: Yeah, we were just calling out that last year we had a drag in the Tetris contract. So year-over-year that didn't drove the numbers this year. And just kind of bring that back to people's attention. Overall, as we noted in previous earnings calls, we had significant wins last year, which then obviously we’re taking life and we are benefiting from that this year. And on top of that, we are constantly trying to increase our productivity within all our service lines, but also within Work Dynamics and the combination of that top line growth, more business coming in and the efforts around productivity has resulted in this margin expansion this quarter.
Stephen Sheldon: Got it. That's helpful. And congrats on the nice results.
Christian Ulbrich: Thank you.
Operator: Your next question comes from the line of Peter Abramovitz with Jefferies. Please go ahead.
Peter Abramovitz: Yes. Thank you. So, I know you, with the reporting change you are now switching to do the adjusted EBITDA number you gave for the full year. Just wondering if you have any sort of outlook or to put brackets around I guess, what you expect from a margin perspective as we think of it on a total revenue basis with the new reporting?
Karen Brennan: Yes, hi Peter. This is Karen. Good morning. We're going to be talking about our targets, whether it's an in-year target or a - the mid-term targets on an adjusted dollars basis now instead of margin basis. But I will say that the adjusted EBITDA dollar targets that we communicated are equivalent to what we previously communicated for our targets on a margin basis. So if you recall, previously our 2024 targets were in a 12.5% to 14.5% adjusted EBITDA margin. That's now then converted to $950 million to $1.15 billion for 2024 and then the same goes for our mid-term targets approach.
Peter Abramovitz: Okay. Got it. And then, I wanted to ask about some of the strength in the US office leasing that you called out in your presentation. Was that kind of mainly, you mentioned tenants looking to kind of trade up and get the best possible space. I guess, could you talk about, is it almost strictly kind of in the Class A and trophy segment? Have there been any signs of why sort of further down market? Just wondering if you can kind of provide more context around that.
Karen Brennan: Sure. So we're continuing to see incremental signs of improvement in office broadly. And that's generally being led by the highest quality best space available and you're seeing rents continuing to increase in that space. One other thing we closely monitor is the activity around large lease deals, which we categorize as those deals over 100,000 square feet in the US. And though they are returning to the market as well, but that's still depressed compared to the pre-pandemic averages right now still almost 50% below that level. So that is still ticking up, but not yet all the way back. And a couple other comments on Leasing, while we're on this topic, we're seeing an increase in new tenant requirements as we did last quarter. And those are within approximately 30% of pre-pandemic levels. And then importantly, the sub-lease vacancy rate is continuing to fall. And so, we're seeing both the new additions decreasing and then notable backfill activity incurring, particularly in the Bay Area in the US and also in New York.
Peter Abramovitz: All right. That's helpful. Thanks, Karen.
Operator: Your next question comes from the line of Michael Griffin with Citigroup. Please go ahead.
Michael Griffin: Great. Thanks. I wanted to go back to sort of the mid-term financial targets that you highlighted, Karen. Obviously, the base case is for rent cuts to come in the back half of the year consistent with transaction activity really picking up, should we interpret that as being able to hit those mid-term targets by 2026? And conversely, if the recovery is pushed out further into 2025, would that mean that you'd reach those adjusted EBITDA dollar amounts in the, call it, 2027 or so timeframe?
Karen Brennan: Yeah, at this stage, we're still categorizing those as mid-term targets. We really want to look at how the remainder of the year transpires in terms of the recovery of the Transactional markets before committing a specific calendar year to achieve those. One of the things we now are saying is relates to our mid-term targets is certainly we're very focused on having accelerated growth in the adjusted EBITDA relative to the revenue trends. And so that's something we're very focused on regardless of the shape of the recovery in the top-line.
Michael Griffin: Great. Thanks. And then, I just wanted to ask on free cash flow. Obviously, it improved this quarter relative to this time last year. But how should we think about the cadence going forward? And do you have a maybe percentage amount in mind for free cash flow conversion for the year?
Karen Brennan: Yeah, so, first let me just talk a little bit about remind of the major drivers of free cash flow in the quarter and then I'll talk about outlook for the year. So we were at an outflow of $721 million, which was slightly better to the $676 million outflow last year. That was primarily due to cash from improvement in earnings. And then, that was partially offset by some working capital headwinds as the business grew, particularly in our Workplace Management business, along with the timing of some payables. As we think about the rest of the year, the key drivers on a full year basis will certainly be reflective of our overall earnings level. But importantly, the business mix for those earnings will also impact the working capital outcomes. So you'll have business lines like Workplace Management growth as being a headwind. And then, you'll have some tailwinds from Capital Markets in the US to the extent that it’s growing strongly. And a couple other things to call out, as we think about our free cash flow, the ability to ensure we're continuing to timely collect the receivables remains very important. So we're very - continue to be focused on that. And then also we’d want to call out for this year that we will expect some lumpiness associated with the timing of cash tax payments on an individual quarter basis, compared to last year. So you may see that materialize as the year progresses.
Michael Griffin: Great. And that’s it for me. Thanks for the time.
Operator: Your next question comes from the line of Anthony Palone with JP Morgan. Please go ahead.
Anthony Palone: Yeah, thank you. Just on Work Dynamics, you've got the change in presentation. You talked about some of the project management drags and then, also some of the wins. Can you maybe just put that all together and give us a sense as to kind of where organic revenue growth is likely to be for that business as we look ahead to the next few years? I mean, maybe just back to the old way of thinking about it in terms of more fee revenue.
Christian Ulbrich: Well, first of all, all the growth you have seen is organic. We haven't done any M&A recently. And as we said, Workplace Management business has had some significant wins last year and has continued to win at a very nice pace. And so, we expect that business to continue to show good growth, but that growth may not be as has been in the last quarter that will fix it that may fall back to what we have called out for the longer term we are aspiring something in the high-single-digit overall. Our Project Management business had a slower quarter and that correlates very much with the activity on the Leasing front. And so, as Leasing picks up, the delay of two to three quarters, we would expect that business to show stronger growth rates again. And so, overall, as we have stated in previous calls, we are very optimistic about our Work Dynamics business over the next couple of years.
Anthony Palone: So either project management ebb and flow, the idea is that Work Dynamics overall you still see as a high-single-digit grower, is that fair?
Christian Ulbrich: Yeah, I mean, every quarter make so little differences. As you saw this quarter, we had this very strong growth from our Workplace Management business. But overall in the longer term, you should see on average high-single-digits that's our aspiration here.
Anthony Palone: Okay. And then, in terms of just the EBITDA guide and for the full year, can you talk a bit about just where you see the pressure points either on the upside or downside or in sort of that guidance and also should we anticipate 2Q to show a progression from 1Q? Because 1Q came in pretty strong it seems like.
Christian Ulbrich: Maybe I kick it off and then Karen will add. Listen, the main uncertainty is coming from the Transactional side. We are pretty comfortable with forecasting our annuity type business especially from our Work Dynamics business, as well as the Property Management business. But the Transactional business is much harder to forecast. We see an unusual correlation between daily interest rate movements and the Capital Markets Transactional business. And until that is not kind of getting back to some normality that people look through those interest rates developments and just focus on the underlying assets and whether that's a good deal or bad deal, it is so hard to predict the volume. So, if the market is coming back on the Transactional side especially within Capital Markets later this year, that will help the performance this year to get us to the upper end of the range and that the markets market continues to be so muted as it was in the first quarter, notwithstanding our own performance, the overall market was very muted then it is more ambitious to get to the upper end. Karen, do you want to add anything?
Karen Brennan: Yeah, the only thing I would add is that, at this stage, we typically have seasonality over the course of individual quarters and at this stage we don't anticipate any material deviation from that seasonality and as the year progresses expect to see similar trends from where we had.
Anthony Palone: Okay. Thank you.
Operator: Your next question comes from the line of Alex Kramm with UBS Financial. Please go ahead.
Alex Kramm: Yes, hello, everyone. Maybe just to dial into to the previous question a little bit more, Christian you made this comment that the marketplace is slowly adjusting to a higher interest rate environment. So, coming back to the guidance for this year, did you think that does it imply any rate cuts? Do you think rate cuts are needed? Or do you think you can perform like you've outlined even if markets have stabilized and rates stay where they are currently?
Christian Ulbrich: Yes, we didn't anticipate that interest rates were coming down so quickly as the total market did. So we were more on the cautious side. And so, our own planning doesn't need any rate cuts. But if the question was more towards what drives us to the upper end of our range and for the upper end of our range, some support from the Transactional side would be helpful. If there is no support, then we will deliver as we planned for it.
Alex Kramm: Right. Good. Thanks for Clarifying. And then, maybe just on the Leasing side, I don't think you mentioned this. But obviously, 2% growth for the year I think last quarter you mentioned that that Leasing should be a similar picture than what you expected in – or what you had in 2023. So, just curious, do you think the environment has gotten better? Do you think this low-single-digit range is a good outlook for the full year? Or do you think kind of flat with last year's is the better way to think about it, which obviously would imply a little bit of a slowdown didn't sound laagered?
Karen Brennan: Yeah, we're early in the year. And so, I think the number you quoted is, we have from our first quarter perspective. And so we continue to expect moderate growth over the course of the year and we're seeing continued pick up in Office and some more softness in Industrial, but we expect that will also return to growth and stabilize towards the end of the year. So, just the pace of acceleration is really what will determine the alternate growth rate. One of the things we keep pointing to over the last couple of quarters is really the level of business confidence. And so we’ve been referencing the OECD Business Confidence Index, because there's a high correlation. But if you look at that globally for the US, on a two to three quarter lag of an uptick in Business Confidence Index and kind of the overall market volumes recovering. So that - so the uptick again in March and we're looking to see what happens in April considering a lot of the negative macro headlines came out during April.
Alex Kramm: Good. Thanks guys.
Operator: Your next question comes from the line of Jade Rahmani with KBW. Please go ahead.
Jade Rahmani: Thank you very much. Do you see a big opportunity in private credits driven by the pullback in the banks? And if so, how do you expect that to manifest in the business? Would you look to acquire any companies? Or retarget brokers on certain key relationships? Just if you could comment on the opportunity in private credit?
Christian Ulbrich: Well, it is correct that traditional lenders are not as active as they have been in the past. And I think it is very likely that this will continue to be the case for the foreseeable future, which obviously offers a lot of opportunity for our non-traditional lenders to come in. What we are actually pretty agnostic to the question where the money is coming from, we have an excellent overview on all the players in the market and are trying to arrange the best debt opportunities for our clients, which are available in the market. So this is for us normal course of business and it doesn't need any kind of M&A on our side to tap into that market.
Jade Rahmani: In terms of the GSA multi-family business, that's another area where banks - certain banks are pulling back. Do you see that as presenting opportunity to gain market share?
Christian Ulbrich: We have a very strong market share in that business already and we still believe that there's room for us to continue to grow. I would be much more optimistic about the lending environment of the multi-family business, because overall, the demographics are in most geographies quite helpful here. And that has demonstrated in the past to be a very, very resistant and resilient business - asset class. And so, I think going back to your previous question, the lending - the changes we see in the lending environment are much more visible in the commercial space than in the multi-family space.
Jade Rahmani: Thanks very much. And finally, just on JLL Technologies that the slowdown in sales was so much surprising. I know the profitability still requires additional scale. But was that different from your prior outlook or was that anticipated? And when do you expect that trend could reverse itself?
Christian Ulbrich: Well, I mentioned it in our third quarter earnings call that we took actions on the sales and marketing expense and that that will have an impact going forward. So what you have seen in the first quarter is, part of that impact. That was also then kind of complemented - unfortunately complemented by some delayed decisions by several large of our technology solution clients who kind of scales back on this feet of new implementations. What is important to notice that the SaaS business within JLL Technologies performed reasonably well. And so, we would expect that this shortage is going on for, maybe one or two more quarters before we obviously pick up again. But more importantly, as we pointed out already last year, we have decided in the current uncertain environment that we are putting probability above top-line growth. And so, we are very, very focused on the bottom-line. And once we have that business back to this kind of at least a breakeven point, and then we will look at the overall market environment and if the overall market environment is then in the situation, which would encourage us to kind of go stronger on sales and marketing expenses, we will do so and that will then drive stronger top-line growth again.
Jade Rahmani: Thanks very much.
Operator: [Operator Instructions] And your next question comes from the line of Patrick O'Shaughnessy with Raymond James. Please go ahead.
Patrick O'Shaughnessy: Good morning. What are you guys seeing right now in terms of average office lease duration? Are companies more willing to sign longer leases at this point in the cycle?
Karen Brennan: Hi Patrick. Good morning. I'll give some stats around the US office market, that's easiest to get the data on that. So, for the first quarter, we didn't see much movement from the - from what we had last year. The weighted average lease term overall was 7.8 years, which was the same as it was for all of 2023. If you go back, it's still below pre-pandemic levels on a total basis, if you go back to 2019, the weighted average lease term was 8.6 years. I will say that due to the increased sublease selectivity that I mentioned earlier, so people leasing - taking subleases instead of the direct leases, that is actually pulling down the overall weighted average lease term. And we expect that will continue, while the market works through some of that that space overall. If I look at the direct, to give you an example, if I look at the direct weighted average lease term that's 8.3 and the sublease weighted average lease term is 4.3 years, so quite a big difference.
Patrick O'Shaughnessy: Got it. That’s helpful. Thank you. And then, have your changes in financial reporting methodology is due to your communications with the SEC? Have those changes impacted how you're managing the business in any way? Do you guys still think about margins internally?
Karen Brennan: No, so it hasn't changed how we manage the business internally or how we think about things. So along with a host of other KPIs, we still use both direct – the fee revenue and adjusted EBITDA margin metrics internally. And our management team is still compensated in part under the adjusted EBITDA margin calculated and we disclosed that in our proxy statement. So we'll continue to do that. And then, just to highlight that the information needed to calculate both of these is still available in all of our earnings release information that we provide.
Patrick O'Shaughnessy: Terrific. Thank you.
Operator: Your next question comes from the line of Anthony Palone with JP Morgan. Please go ahead.
Anthony Palone: Yes, thanks. I just had a follow-up on JLL Tech. I know it's not a big revenue line, but when I look at that, I was thinking of like building engines and such where when the client adopted, it's likely a pretty recurring business. But it was down a bunch and so, I don't know maybe help me out with that just to understand what was happening there and how to think about it on a go-forward basis?
Christian Ulbrich: Anthony, as I just stated, the JLLT revenue bucket is mostly built up by our SaaS revenue products. One of them is building engines, Keurig was another one. And then, of our Technology Solutions business where we usually help clients by implementing third-party software and service that. And that third-party software business, that declined this quarter quite significantly for the two reasons I stated. We reduced our sales and marketing teams as stated in the third quarter call last year and we had some delays in decision-making from clients for new assignments. On the SaaS business, that has been relatively steady this quarter. You mentioned building engines, building engines is very often connected to transactions. The owner of a building is changing and the new owner is implementing building engines. And so with the Transactional markets, relatively muted, that has an impact on building engines, but on the other hand, we have brought that product now into Asia, very successful implementation in Australia. And so medium to longer term, we are very bullish that the closed numbers will come back again to the levels where we expect them to be.
Anthony Palone: Okay. Thanks for the color.
Operator: That concludes our Q&A session. I will now turn the conference back over to Christian Ulbrich for closing remarks.
Christian Ulbrich: Thank you. With no further questions, we will close today's call. On behalf of the entire JLL team, we thank you all for participating on the call today. Karen and I look forward to speaking with you again following the second quarter.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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