Good day and thank you for standing by. Welcome to the Jones Lang LaSalle Incorporated Fourth Quarter 2018 Earnings Conference Call. For your information, this conference call is being recorded. I would now like to turn the conference over to Grace Chang, Managing Director of Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to our fourth quarter 2018 conference call for Jones Lang LaSalle Incorporated. Earlier this morning, we issued our earnings release, which is available on the Investor Relations section of our website, ir.jll.com, along with a slide presentation intended to supplement our prepared remarks. During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures where appropriate to GAAP in our earnings release and supplemental slides. As a reminder, today's call is being webcast live and recorded. A transcript of this conference call will also be posted on our website. Any statements made about future results and performance or about 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 the Annual Report on Form 10-K of the fiscal year ended December 31, 2017, and in other reports filed with the SEC. The company disclaims any undertaking to publicly update or revise any forward-looking statements. And with that, I would like to turn the call over to Christian Ulbrich, our Chief Executive Officer, for opening remarks.

Thank you, Grace, and welcome to all of you joining this review of our 2018 results for the fourth quarter and full-year. Our Chief Administration Officer, and Interim CFO, Trish Maxson, is also with us and she will discuss and she will discuss details of our financial results in a few minutes. Let me start by summarizing our performance. We had a record quarter and full-year, the product of outstanding performance particularly in our leasing business, Corporate Solutions and at LaSalle. Revenue and fee revenue both achieved record levels increasing 13% in U.S. dollars for the quarter and full-year. Revenue totaled $4.9 billion for the quarter and $16.3 billion for the full-year. Fee revenue reached $2.1 billion for the quarter and $6.5 billion for the year. We produced strong diversified growth in real estate services led by leasing whose revenues up 16% year-on-year compared with a 5% increase for the market as a whole. Within Corporate Solutions, the tremendous effort and focus to accelerate top-line growth and more importantly expand margins reflect strong progress and continued momentum. On top of our record performance in our real estate services business, LaSalle also had an exceptional year and earned record incentive fees of $216 million. Adjusted net income reached $276 million for the quarter, up from $208 million and $563 million for the year compared with $426 million in 2017. Adjusted diluted earnings per share were $5.99 per share for the quarter, up from $4.53 a year ago. For the full-year, adjusted diluted earnings per share reached $12.25 compared with $9.31 in 2017. Adjusted EBITDA totaled $418 million for the quarter increasing from $331 million last year and $953 million for the full-year compared with $771 million in 2017. We are especially proud that next to all the financial and operating success…

Thank you, Christian. It's a pleasure to report the details of such a strong finish to 2018. Our fourth quarter exceeded expectations and significantly contributed to the record full-year results. As Christian noted, we grew revenue by double-digits for both the quarter and the year. On a local currency basis, consolidated revenue and fee revenue increased 15% and 16% respectively compared to fourth quarter 2017 and on a full-year basis, revenue grew 13%. All segments achieved growth in revenue and nearly all of that was organic. For the year, total organic growth was stronger compared to organic growth achieved in 2017. The increase was primarily driven by strong performance in Leasing, Corporate Solutions, and LaSalle incentive fees. Consolidated adjusted EBITDA margin expanded by 130 basis points despite reduced capital markets revenues and continued platform and technology investments. A reminder as we turn to service line and segment results, we report percentage changes in local currency except for capital markets which aligns with U.S. dollar denominated research data. Consolidated leasing fee revenue grew at a very impressive 27% for the quarter, the outcome of outstanding performance across our real estate services segments. This was exceptional considering the 7% decline in global market gross absorption. Year-to-date, leasing fee revenue grew 15% also outpacing the modest 5% increase in full-year gross absorption. All geographic segments experienced growth most notably the Americas. Our consolidated capital markets fee revenue declined 12% against fourth quarter 2017 primarily the result of reduced investment sales in EMEA and Asia-Pacific. On a full-year basis, capital markets fee revenue declined by 1% against the 4% increase in global investment sales. Our year-on-year underperformance against the market is attributable to our outsized growth in the prior year. In 2017, we benefited from investments in the Americas capital markets debt business, the…

Thank you, Trish. Slide 19 lists a few of our recent wins across service lines and geographies. Our Corporate Solutions business maintained its win rate momentum in 2018 winning 145 new assignments, expanding existing relationships with another 78 clients, and renewing 52 contracts. These 275 wins totaled 570 million square feet across all regions. For the year, we achieved a 69% win rate for new business, expansions, and renewals. One highlight, Merck, a leading global healthcare company retained us for integrated facility management services at 125 locations in 63 countries around the world. Representative wins in capital markets included in the U.S. a $400 million sale of the Hammes Medical Office Portfolio, a diverse group of 23 Class A outpatient properties in nine states totaling nearly one million square feet of space. In Poland, we advised Unibail Rodamco on the sale of a 484,000 square foot Lumen and Skylight Office Buildings for €190 million. And in Australia we represented Blackstone in the sale of Melbourne's Waverly Gardens Shopping Centre for 178 million Australian Dollars. In leasing & management activity in India, we represented WPP Marketing Communications to consolidate more than 15 business groups into 256,000 square feet in the single facility in Mumbai. In Texas, we represented Hewlett Packard Enterprise in a 568,000 square foot lease at two buildings in Springwoods Village in Houston. In Poland, we represented Venus, a leading provider of logistics services to lease 441,000 square feet of warehouse space near Warsaw. At LaSalle, assets under management totaled $60.5 billion at year-end. As Trish mentioned in her remarks in November LaSalle completed the acquisition of Aviva's Multi-Manager business with $6 billion in assets under management to create a new business line, LaSalle Global Partner Solutions. And in January, LaSalle closed the majority acquisition of the $1.2 billion…

Certainly. [Operator Instructions]. Your first question comes from Mitch Germain with JMP Securities. Your line is open.

Nice quarter. Christian, two years in change into your tenure and I remember you established some strategic framework for what you wanted to accomplish. How do you stand in terms of what has been done at the company and what should we expect for the next few years?

Well 2018 was an exceptional year for us because we really made a lot of progress in that change program more than we had hoped for at the beginning of the year. Obviously, we are very much supported by that strong economic environment we are operating as a company and we go with a lot of headwind into 2019 and we will continue to drive those changes. I think change will be a common pattern for every corporate in this world. And so we should take it as a normal course of doing business that you have to constantly transform and adapt your operations.

Great, thank you. I know Christian you mentioned pipelines, Corporate Solutions were strong but I'm curious about the transaction business 4Q being highly volatile particularly here in the U.S., did that impact the growth of your pipelines in the transaction business as we enter 2019?

Well I mean the U.S. is very, very strong and we started the year with a strong backlog into the first quarter in the U.S. and Europe, the situation is a bit more muted obviously that whole debate around Brexit has an impact. Although I have to say that our UK business in the fourth quarter did really well and they also had a pretty good start into the first quarter now. But overall, we can't dismiss that Brexit has an impact on mood. In Asia-Pacific, the situation was more within JLL. We had some challenges, we had to deal with in our transaction business especially around the capital markets front and but we have sorted that out and we're starting the year with a much, much stronger team than we had during the course of last year. So we're fairly optimistic for that piece of the business in our Asia-Pacific business for 2019.

Great. Last one for me, I know you guys had referenced Capital Markets being influenced by some tough comps from the prior year here in 2018. I'm curious the success you had in Leasing and how should we think about potentially the comps as we head into 2019?

Well Leasing was a very strong year in 2018 but frankly speaking, we don't expect anything else from 2019. We have built just a really, really strong platform with a great team which are delivering outstanding services and the momentum into 2019 is brilliant. And on the Capital Markets side, we did some great hires also in the U.S., we took over a very large team in New York. And so our outlook for 2019 is pretty irrespective of the market outlook, very optimistic.

Your next question comes from Tony Paolone with JPMorgan. Your line is open.

Thank you and nice quarter. First I just want to clarify something --

Good morning, Tony.

Hi, Christian. I want to make sure I caught your comments towards the end of your remarks properly. The 6% to 8% organic the revenue growth was that for 2019, I missed the timeframe that you put on that?

Yes, that was for 2019.

Okay, great.

In our real estate services business.

Okay got it. Okay. And then just on leasing as we go into 2019, you mentioned a fairly constant backdrop and I think the commentary was 5% gross absorption and you all were able to grow, I think 15% and so, that's quite a bit of market share pickup. I mean how do you think about the ability to continue to gain that much share as we look into 2019?

Well we have been picking up a lot of market share over the last couple of years continuously and frankly speaking at the moment, we believe that we still have headroom to continue to do so. We don't see any reason for any pause coming to us. As I said to Mitch already, we have built a very, very strong platform and that's kind of to reinvigorate itself all the time when you have great people working for you, other great people want to join and that creates a very strong momentum.

Okay. And then I guess same thing on Capital Markets following up on I think some of the comments from Mitch, do you think that recruiting in market share is enough to produce growth in what you laid out as being a bit of a shrinking backdrop for 2019?

Well, I mean you can either recruit and grow market share or you can do M&A. We are looking at all ways of growing our business in our Capital Markets services. As you know, this is one of our strategic growth areas which we have pointed out at Investor Day and we're working on that topic.

Okay. With 0.3 times net debt and an appetite to do strategic M&A, I mean what does that pipeline look like? Is it better or worse than it was three, six months ago?

Well there's a lot of availability in the market at the moment to do M&A but one very important factor is that you'll keep your discipline on capital allocation and whether we have low debt or higher debt levels, we always keep the same discipline here. And so that's what we are doing.

Okay. And then last question for me, I think if I look at your margin build-up year-over-year and I look at what you spent on technology and other investments that that impacted margins, it seems like the dollar figure is something in the 60 or so million dollar mark, 60 or so million dollar range. How do you think that looks in 2019? I guess is one part of the question. And then the other is what is that as a growth rate percentage particularly as we think about technology spending like it was in the up 2% number, 10% number, I mean how are those expenses growing?

Well, first and foremost, we have been very transparent around our journey up to 2025. We started off with a margin profile between 12% and 14% as an adjusted EBITDA margin and in that range depending on what the market allows us to do, we are investing heavily into our organization and technology and going digital is a big chunk of it. And we have as we called out here raised our margin profile now to 12.5% to 14.5% because we are starting to see benefits coming in from all that investments, so that we can continue that investment path and at the same time increase our margin profile. And that's how you should think for 2019 and going forward, we have laid out a journey to 2025 what we want to do with a company and with a margin profile of the company and as we move forward, we will continue to increase that and at the same time continue to invest in the platform and especially into the technology.

Your next question comes from Jade Rahmani with KBW. Your line is open.

Thanks very much. I was wondering if you could give some color on the expectation for a 5% to 10% decline in investment activity in the market. For example can you give any color on whether you saw any volatility in December and even January perhaps relative to typical seasonality or your expectations?

Well, in December, there was a bit more volatility in the market because our markets are also influenced by overall sentiment. And as you know the public markets in December were pretty volatile and that drives into our world as well. January has started pretty strongly as the public markets have improved in January. So though I don't want to make a connection which is too close between the public market and our markets business, there is a slight correlation there. With regards to the outlook for 2019, the 5% to 10% this is the number which our researchers have come up with and we always should keep in mind that we are currently trading at a very high volume level. This is true for Leasing and for Capital Markets. So when I see those numbers which predicted 5% to 10% decline frankly that is not at all concerning to me because it's a decline from a very, very high-level. And then with regards to Capital Markets specifically for JLL, as you know, our market share in Capital Markets in the U.S. is still not where we wanted to be. So this 5% to 10% wouldn't be an excuse for us for not growing our business.

And just to stay on the market for another moment, in terms of bid list on transactions. Are you seeing any changes of note, are you seeing any decline in the number of bidders or perhaps concentrations in pricing perhaps at the lower end?

Well, this is not straightforward. Sometimes, you see a little bit of a decrease in the bidder queue on a building and then you have another product in the market and one of a sudden they're all going for that product again and you have a very strong bidding list. Overall, there is still a lot of capital which is trying to get into the real estate market as you know overall; we are at new record levels of capital which is sitting up the sideline which wants to get into the real estate market. So I think the fundamental underlying trend is still very, very strong. And as I said, we had a bit of a volatility in December but as we have seen now generally coming in at the moment it is going back to normal and that may also be influenced that obviously the expectations around interest rates in the U.S. have slightly changed with regards to the amount of increase we will see in 2019.

In terms of target market share for the U.S. Capital Markets, I agree that's really large opportunity for JLL, is that going to be executed based on strategic M&A or more strategic hiring?

Well for the time being, we do a lot of strategic hiring and if we have an opportunity for Strategic M&A, we would be very happy to do so. But as I said before, only if we can stick to our principles around really disciplined capital allocation.

And what's the target in terms of market share, I think right now you're probably ranked 6 or so?

Yes, we don't have a target in itself. Usually in areas like Capital Markets and Leasing, we want to be number one or number two in any market in the world which we have as our strategic markets. Now we are far off in the U.S., so we have still a long way to go and we're working on it. Just stay tuned with us on that.

And in terms of operating leverage in the U.S. Capital Markets business is quite significant because of the number of leasing offices that you already have open, can you hire Capital Markets brokers and put them in those same office or do you need to make any fixed cost investment?

I mean we have a very strong office footprint in the U.S. So we don't need to open any further offices over and above the existing ones. So on that end, we can use our existing platform. The challenge is that you have to find talent with the right values, with the right culture, and with that kind of clear discipline to try to get to an outstanding results for the clients. And if we can identify those type of people and get them into the organization then that is a good outcome for us.

In terms of the dramatic growth that we have been seeing particularly the second half of 2018, how much of it is driven by co-working and how much is also driven by the technology sector more broadly and finally how much is driven by new construction completions?

Well, clearly, I can say for us that the Flex based companies as we would call them have become important client base for us and so quite a significant proportion of that additional growth is coming from them. And the other piece you already pointed it out the technology sector we have a high market share in the technology -- technology sector and they have been very active in the market. And that was another part of our growth. But we are focusing also on other industries which are doing really well. I mean what you see is that despite all the talk about a potential decline in the economy, the successful companies are doing really well and we tend to have a very strong client base amongst those companies. And so with that, we are also able to have that strong growth as we have shown in 2018.

Can you comment on the trends you're seeing in the APAC segment particularly with respect to concerns about China's growth slowing?

I'm not quite sure whether I understood the first part of your sentence, what was the first part of your sentence?

What's your view regarding the overall macro environment in the APAC segment?

Okay, okay.

And specifically with respect to concerns about China's growth slowing?

Well, I mean there are a lot of smart people who are analyzing the growth of China. What we can see so far is that we still have a very healthy business. We added a significant amount of employees into our China business and they are very busy. I think there is for our industry still a tremendous room to grow because Chinese companies are professionalizing, they also have high ambitions on their corporate real estate and the way they want to place their people in offices. And so there is a tremendous amount of services which we can deliver, if anything slows us down on China, it's the lack of talent and we employ currently around 16,000 people in China and we would be very happy to employ more if we could just find them. And so -- so far we haven't seen any impact from that that discussions around China slowing down or the trade discussions between U.S. and China. But if that is going to come into play going forward, we may see something but so far so good I would say.

Okay. I'm turning to the LaSalle segment the fee revenue performance in the fourth quarter dramatically exceeded our projections but adjusted EBITDA was close to what we modeled. So I'm wondering if in the expense lines whether there was an increase driven by the acquisitions you completed in that segment or whether there was any mark-to-market impact within the securities business?

Well it is partly driven by the fact that we had lower equity earnings and that is driving that result in a different way than you might have expected it. I mean there's also some timing with regard to expenses which have come into the fourth quarter and still going forward, I mean as much as we obviously like those outsized incentive fees. But going forward LaSalle's business will be much more normal again in its performance. So we are on a trajectory to increase our margin on the underlying annuity income and we have made great progress over the last couple of years and that will continue but we will see obviously less incentive fees in 2019 than we had in 2018.

Your next question comes from David Ridley-Lane with Bank of America Merrill Lynch. Your line is open.

Thank you. Wondering if you could provide a little more color on the Real Estate Services margins in 2019, I know that Integral has stabilized, do you have a sense of how much of a margin drag that was in 2018 that won't now be repeating in 2019?

Well I can give you a high level answer. We made tremendous progress on our Real Estate Services margin from 2017 to 2018 about 80 basis points. And we are pretty optimistic that we will continue to make progress on that in 2019. I can't give you the detail how much of that will be driven by a further improvement of Integral. Frankly speaking I mean as much as it is an important investment in Europe for the overall company. The impact is not that strong that we would have that percentage up hand whether that's how much of that progress will be driven by Integral.

Understood. And then I will ask on the European technology spending question sort of a slightly different way. I know you've already been asked that but is that an incremental drag to margins in 2019?

You said European technology spending? Oh, ERP.

Yes.

Yes.

ERP sorry, I'm a European, so I thought as European. You mean ERP; I will leave the question to Trish.

Yes, so this year it was about -- it was about half of our technology drag for 2018 and so looking into 2019, we do need to complete the EMEA and Asia-Pacific implementation for PeopleSoft. That actually will continue to be a spin for us. We don't anticipate that has a tremendous increase over 2018 but we still may have some, some expenses that come in for that because we do as I said we are completing that implementation in 2019.

And then last one really quickly for me, when you say you expect LaSalle incentive fees to normalize. Can you remind all of us the level you expect or the level you would characterize as normal for incentive fees and transaction fees?

Yes, so for I mentioned this earlier, we expect LaSalle incentive fees to come somewhere in the range of $30 million to $50 million. That's a little bit lower than what you might think of as normal though that's difficult to really define given the volatility.

Your next question comes from Stephen Sheldon with William Blair. Your line is open.

Good morning. Thank you.

Hi, Stephen.

So you have given some commentary on tax spending but just looking for a little more detail, I think you've been spending close to 8% fee revenue on both base IT costs and strategic tech investments. So I guess would you expect that to continue in 2019. And will the composition between those two categories base IT and strategic look much different. I guess specifically are you seeing leverage in base IT costs that will allow you to invest more in the strategic tech side this year?

Exactly, that’s what we are working for and that's what's happening. We have made tremendous progress over the last couple of years on our what you call base IT cost infrastructure. And we are making strides in pushing that down as a percentage to revenue. And at the same time, we are increasing our investment in client facing applications. And that will continue to do so. I mean we are targeting a spend which is where 8% is at the higher end but you mentioned 8%. But within that percentage spend, the client application fees is going up and the infrastructure base IT fees is going down.

Got it, that's helpful. And then you talked about hiring in China and Japan that should help trends in 2019 in Asia-Pacific. Can you provide some detail on which service lines you've been hiring?

In China specifically around Capital Markets and the broader kind of transaction services, we have a very, very strong facility management and property management business there and we are continue to build more the transactional side of services. And Japan is across the board but again predominantly on the Leasing and Capital Markets side, we still have a long way to grow in Japan considering the overall GDP of Japan, the size of the economy, our business can continue to grow for many, many years at the same rate as it has been.

Got it. And then last one from me, I guess just any update on the CFO search?

Well I have a great CFO sitting next to me and she's smiling at me, so that's a good start. Now we are working on it and we are making good progress, I would say. But again it's quite similar to the discipline we are having around capital allocations. We are keeping our discipline here to find the person which is ideally the perfect fit for us. We are under no pressure to doing it because we are a great team as we are currently. But we are still working on it. Unfortunately, Trish will not continue as our CFO going forward.

Your next question comes from Marc Riddick with Sidoti. Your line is open.

So several of my questions were actually answered on some of the prior questions but I did want to follow-up a little bit on the acquisition marketplace as opposed, just wanted to get your general sense I mean I can understand the commentary around keeping your discipline on what you're looking for but I guess wanted to get maybe just sort of a high level view on kind of what you see is available out there and I mean how you feel about the current multiples of things that might be attractive to you? Thank you.

Well at least in my career; I've never seen a market which has so many availabilities with regards to M&A as it currently has. I think that's probably quite normal. We are at a late cycle moment in a long upturn swing and so a lot of companies are currently interested in finding a new home. And so we have quite a lot of work going on in analyzing the different opportunity. But we have been pretty clear which areas of interest to us at our Investor Day and that hasn't really changed. With regards to multiple great companies are expecting a strong multiple and less than great companies we're not interested in. And so that’s the obvious squeeze on the one hand, you don't want to overpay on the other hand you only want to buy really outstanding companies who are a good fit for JLL.

Okay. And then one thing I did want to circle back on is and I appreciated the commentary around the IT spending and the commentary around the ERP needs going into 2019. I was wondering if there was any particular concentration of spend that we should be thinking about or how it might flow through the year to sort of be prepared for? Thank you.

Well as we said, I mean Trish just alluded to it, we are finishing up our ERP platform on the finance side in EMEA and APAC, we already finished on the HR side. So that is one area of concentration still. And then with regards to client applications, we have given now for the first time a bit of information around the revenues we are expecting from those type of client applications. And we have pretty strong additions on that going forward and so that will continue to be a real priority for us to invest into client applications which are driving direct revenues into the organization, next to those applications which are supporting kind of existing revenue streams which we have like the next room Trish mentioned.

Your next question comes from Jade Rahmani with KBW. Your line is open.

Thanks very much. On the strategic M&A side, do you see any compelling rationale for mergers between public companies in the commercial real estate services sector?

Well whether those companies are public on or whether they are not public doesn't really make a difference for us. The question is whether they are a great fit for us and so on that end that isn't anything which would bother us whether they are public or whether they are not public. I think your question goes more directly to the question, is it -- does it make sense to kind of merge with a company which provides exactly the same services or whether you are complementing your services. And those can drive value obviously complementing is an easier one to say yes to but also doing something which is offering the same type of service. It makes sense, if it offers you scale in a way which really then helps you to drive your costs down and strengthen your market position. We have done that only once to my knowledge of size and that was in 2011 when we did in the UK King Sturge. King Sturge was doing exactly what we were doing in the UK, they were pretty much exactly the same size. And it really boosted our UK business at the time and it was a great decision doing it but that happens relatively rarely that you have those type of opportunities which makes sense and drive value for your shareholders.

There are no further questions at this time. I'll now turn the call back over to management for closing comments.

Well, thank you. With no further questions, we close today's call. Thank you for participating and we look forward to speaking with you again following the first quarter.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a wonderful day.