8-K: JLL Recasts Financials, Updates Non-GAAP Measures Following SEC Comment

Jones Lang LaSalle Incorporated (JLL) has released recast financial information to reflect changes in reporting definitions for Adjusted EBITDA, Adjusted net income, and Assets Under Management (AUM), along with the discontinuation of certain non-GAAP measures.

Summary

• JLL has updated its financial reporting, effective January 1, 2024, which includes changes to the definitions of Adjusted EBITDA and Adjusted net income attributable to common shareholders.
• These changes exclude equity earnings/losses associated with JLL Technologies and LaSalle investments.
• The company has also revised the calculation of assets under management (AUM) to include uncalled committed capital and cash held, aligning with industry standards.
• These changes have been applied retrospectively to quarterly results, with Adjusted EBITDA and Adjusted net income recast back to the first quarter of 2020, and AUM recast back to the first quarter of 2023.
• JLL will no longer report the non-GAAP measures 'Fee revenue' and 'Fee-based operating expenses' following a comment letter from the Securities and Exchange Commission (SEC) in February 2024.
• As a result of the absence of Fee revenue, JLL will also no longer report Adjusted EBITDA margin.
• These reporting changes do not impact how JLL manages its business, its Net income attributable to common shareholders, Earnings per share (EPS), or cash flow.
• The recast financial information is available on JLL's Investor Relations website at ir.jll.com.

Sentiment

Score: 7

Explanation: The document is neutral to slightly positive. While there are changes in reporting, they are presented as necessary adjustments to align with industry standards and SEC guidance. The company emphasizes that core financial metrics are not impacted, which is reassuring.

Positives

• The changes to AUM calculation align with industry standards, providing better comparability.
• The company has provided recast financials for historical periods, enhancing transparency.
• The reporting changes do not impact the company's core financial metrics such as Net income, EPS, or cash flow.

Negatives

• The discontinuation of 'Fee revenue' and 'Fee-based operating expenses' may reduce the level of detail available to investors.
• The removal of Adjusted EBITDA margin may make it harder to assess profitability trends.

Risks

• The changes in reporting may cause some confusion among investors initially.
• The discontinuation of certain non-GAAP measures may make it more difficult to compare JLL's performance with previous periods or with competitors who still use those measures.

Future Outlook

The document does not provide specific forward-looking statements or guidance, but it does indicate that the company will continue to report financial results using the new reporting format.

Management Comments

• It is important to note this reporting change has no impact on how we manage our business, our Net income attributable to common shareholders, our Earnings per share (EPS) or our cash flow.
• Nearly all of the information we previously provided will be included in, or can be directly calculated from, the new reporting format beginning with our first quarter 2024 reporting cycle.

Industry Context

The changes in AUM calculation reflect a move towards greater standardization within the real estate investment industry, aligning with definitions developed by NCREIF, INREV, and ANREV. The discontinuation of certain non-GAAP measures may be part of a broader trend towards more transparent and GAAP-compliant reporting.

Comparison to Industry Standards

• The change in AUM calculation to include uncalled committed capital and cash held aligns JLL with industry standards set by NCREIF, INREV, and ANREV.
• This change makes JLL's AUM figures more comparable to those of other real estate investment managers who adhere to these standards.
• The document does not provide specific comparisons to other companies, but the changes are intended to improve comparability within the industry.
• Other companies such as CBRE and Cushman & Wakefield also report AUM, but the specific methodologies may vary, making direct comparisons challenging without detailed analysis.

Stakeholder Impact

• Shareholders will need to understand the changes in reporting to accurately assess JLL's financial performance.
• Employees may not be directly impacted by these changes, as the company states that it does not affect how they manage the business.
• Customers and suppliers are unlikely to be directly impacted by these reporting changes.
• Creditors will need to review the recast financials to understand the company's financial position under the new reporting framework.

Next Steps

• JLL will report its first quarter 2024 results using the new reporting format.
• Investors should review the recast financials on the Investor Relations website to understand the impact of the changes.

Key Dates

Keywords

Adjusted EBITDA, Assets Under Management, AUM, Non-GAAP Measures, Financial Reporting, Recast Financials, SEC, Fee Revenue, Real Estate, JLL Technologies, LaSalle