Net Income Attributable to The RMR Group Inc. of $3.22 Per Diluted
Share and Adjusted Net Income Attributable to The RMR Group Inc. of
$0.62 Per Diluted Share
Incentive Business Management Fees Earned For Calendar Year 2018 of
$120.1 Million, or $2.82 Per Diluted Share
NEWTON, Mass.--(BUSINESS WIRE)--
The RMR Group Inc. (Nasdaq: RMR) today announced its financial results
for the fiscal quarter ended December 31, 2018.
Adam Portnoy, President and Chief Executive Officer, made the following
statement regarding the first quarter fiscal 2019 results:
"We are pleased with our first quarter operating results, as adjusted
net income of $0.62 per diluted share was up 3% compared to last year.
During the quarter, we generated net income of $118.1 million, Adjusted
EBITDA of $29.4 million and an Adjusted EBITDA Margin of 58%.
During the quarter, we also successfully helped facilitate the merger
of Government Properties Income Trust and Select Income REIT to form
Office Properties Income Trust, or OPI.
This merger received
significant shareholder support and we look forward to advancing OPI's
investment strategy of owning buildings primarily leased to single
tenants and those with high credit quality characteristics, like
government entities.
At the close of the first fiscal quarter, our balance sheet continues
to leave us well positioned to assess strategic opportunities for future
growth."
First Quarter Fiscal 2019 Highlights:
-
Total management and advisory services revenues for the quarter ended
December 31, 2018 were $168.4 million, including $120.1 million of
incentive business management fees, compared to $205.8 million for the
quarter ended December 31, 2017, which included $155.9 million in
incentive business management fees.
-
We earned management services revenues for the three months ended
December 31, 2018 and 2017 from the following sources (dollars in
thousands):
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
|
2018
|
|
|
2017
|
Managed Equity REITs (1) |
|
|
|
$
|
39,639
|
|
|
83.5
|
%
|
|
|
$
|
40,965
|
|
|
84.3
|
%
|
Managed Operators (2) |
|
|
|
6,785
|
|
|
14.3
|
%
|
|
|
6,741
|
|
|
13.9
|
%
|
Other
|
|
|
|
1,064
|
|
|
2.2
|
%
|
|
|
864
|
|
|
1.8
|
%
|
Total Management Services Revenues
|
|
|
|
47,488
|
|
|
100.0
|
%
|
|
|
48,570
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Managed Equity REITs for the periods presented includes: Hospitality
Properties Trust (HPT), Industrial Logistics Properties Trust
(ILPT), Office Properties Income Trust (OPI), Select Income REIT
(SIR) and Senior Housing Properties Trust (SNH). SIR merged with and
into a subsidiary of OPI (formerly named Government Properties
Income Trust) on December 31, 2018 and the surviving entity merged
with and into OPI, with OPI as the surviving entity.
|
|
|
|
|
|
|
|
(2)
|
|
Managed Operators collectively refers to: Five Star Senior Living
Inc. (FVE), Sonesta International Hotels Corporation (Sonesta) and
TravelCenters of America LLC (TA).
|
|
|
|
|
|
-
For the three months ended December 31, 2018 and December 31, 2017, we
earned incentive business management fees of $120.1 million and $155.9
million, respectively. Incentive business management fees included
fees earned from HPT, SIR and SNH of $53.6 million, $25.8 million and
$40.7 million, respectively, and $74.6 million, $25.6 million and
$55.7 million, respectively, for the three months ended December 31,
2018 and December 31, 2017, respectively.
-
For the three months ended December 31, 2018, net income was $118.1
million and net income attributable to The RMR Group Inc. was $52.2
million, or $3.22 per diluted share, compared to net income of $159.3
million and net income attributable to The RMR Group Inc. of $71.1
million, or $4.39 per diluted share, for the three months
ended December 31, 2017.
-
For the three months ended December 31, 2018, adjusted net income
attributable to The RMR Group Inc. was $10.0 million, or $0.62 per
diluted share, compared to $9.7 million, or $0.60 per diluted share,
for the three months ended December 31, 2017.
-
On December 22, 2017, the U.S government enacted comprehensive tax
legislation commonly referred to as the Tax Cuts and Jobs Act, or the
Tax Act. The Tax Act significantly revised the U.S. corporate income
tax system by, among other things, lowering corporate income tax
rates. Since we have a September 30 fiscal year end, our corporate
income tax rates were phased in for our 2018 fiscal year, resulting in
a federal statutory tax rate of approximately 24.5% for the fiscal
year 2018. Beginning October 1, 2018, our federal statutory tax rate
was reduced further to 21.0%.
-
For the three months ended December 31, 2018, Adjusted EBITDA was
$29.4 million and Adjusted EBITDA Margin was 58.0%, compared to
Adjusted EBITDA of $30.5 million and Adjusted EBITDA margin of 58.4%
for the three months ended December 31, 2017.
-
As of December 31, 2018, The RMR Group Inc. had $284.2 million in cash
and cash equivalents with no outstanding debt obligations. We received
the $120.1 million of incentive business management fees earned for
the calendar year ended December 31, 2018 in January 2019.
-
As of December 31, 2018 and December 31, 2017, The RMR Group Inc. had
approximately $29.7 billion and $30.0 billion of total assets under
management, respectively.
Reconciliations to GAAP:
Adjusted net income attributable to The RMR Group Inc., EBITDA, Adjusted
EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures.
Reconciliations of net income attributable to The RMR Group Inc.
determined in accordance with GAAP to adjusted net income attributable
to The RMR Group Inc., and of net income to EBITDA and Adjusted EBITDA
as well as calculations of Adjusted EBITDA Margin for the three months
ended December 31, 2018 to the three months ended December 31, 2017 are
presented later in this press release.
Total Assets Under Management:
The calculation of total assets under management primarily includes: (i)
the gross book value of real estate and related assets, excluding
depreciation, amortization, impairment charges or other non-cash
reserves, of the Managed Equity REITs and ABP Trust, plus (ii) the gross
book value of real estate assets, property and equipment of the Managed
Operators, excluding depreciation, amortization, impairment charges or
other non-cash reserves, plus (iii) the fair value of investments of
Affiliates Insurance Company and the Open End Fund, the managed assets
of RMR Real Estate Income Fund and the equity of TRMT. This calculation
of total assets under management may include amounts in respect of the
Managed Equity REITs that are higher than the calculations of assets
under management used for purposes of calculating fees under the terms
of the business management agreements, which are based, in part, upon
the lesser of the historical cost of real estate assets or total market
capitalization. For information on the calculation of assets under
management of the Managed Equity REITs for purposes of the fee
provisions of the business management agreements, see The RMR Group
Inc.'s Annual Report on Form 10-K filed with the Securities and Exchange
Commission, or SEC. The RMR Group Inc.'s SEC filings are available at
the SEC website: www.sec.gov.
Conference Call:
At 1:00 p.m. Eastern Time this afternoon, President and Chief Executive
Officer, Adam Portnoy, and Executive Vice President, Chief Financial
Officer and Treasurer, Matt Jordan, will host a conference call to
discuss The RMR Group Inc.’s fiscal first quarter ended December 31,
2018 financial results.
The conference call telephone number is (877) 329-4297. Participants
calling from outside the United States and Canada should dial (412)
317-5435. No pass code is necessary to access the call from either
number. Participants should dial in about 15 minutes prior to the
scheduled start of the call. A replay of the conference call will be
available through 11:59 p.m. Eastern Time on Thursday, February 14,
2019. To access the replay, dial (412) 317-0088. The replay pass code is
10127679.
A live audio webcast of the conference call will also be available in a
listen only mode on RMR’s website, at www.rmrgroup.com.
Participants wanting to access the webcast should visit RMR’s website
about five minutes before the call. The archived webcast will be
available for replay on RMR’s website following the call for about one
week. The transcription, recording and retransmission in any way of
The RMR Group Inc.'s fiscal first quarter ended December 31, 2018
financial results conference call are strictly prohibited without the
prior written consent of The RMR Group Inc.
About The RMR Group Inc.
The RMR Group Inc. is a holding company, and substantially all of its
business is conducted by its majority-owned subsidiary, The RMR Group
LLC. The RMR Group LLC is an alternative asset management company that
primarily provides management services to publicly traded REITs and real
estate operating companies. As of December 31, 2018, The RMR Group LLC
had approximately $29.7 billion of total assets under management,
including more than 1,500 properties, and employed over 600 real estate
professionals in more than 30 offices throughout the United States; and
the companies managed by The RMR Group LLC collectively had over 50,000
employees. The RMR Group Inc. is headquartered in Newton, Massachusetts.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND
OTHER SECURITIES LAWS. FORWARD LOOKING STATEMENTS CAN BE IDENTIFIED BY
USE OF WORDS SUCH AS “OUTLOOK”, “BELIEVE”, “EXPECT”, “POTENTIAL”,
“WILL”, “MAY”, “ESTIMATE”, “ANTICIPATE”, AND DERIVATIVES OR NEGATIVES OF
SUCH WORDS OR SIMILAR WORDS. FORWARD LOOKING STATEMENTS IN THIS PRESS
RELEASE ARE BASED UPON PRESENT BELIEFS OR EXPECTATIONS. HOWEVER, FORWARD
LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR
AND MAY NOT OCCUR FOR VARIOUS REASONS, INCLUDING SOME REASONS BEYOND THE
RMR GROUP INC.'S CONTROL. FOR EXAMPLE:
-
THIS PRESS RELEASE REPORTS THAT AGGREGATE INCENTIVE BUSINESS
MANAGEMENT FEES OF $120.1 MILLION AND $155.9 MILLION WERE EARNED FROM
HPT, SIR AND SNH FOR THE CALENDAR YEAR ENDED DECEMBER 31, 2018 AND
2017, RESPECTIVELY. AN IMPLICATION OF THIS STATEMENT MAY BE THAT
INCENTIVE BUSINESS MANAGEMENT FEES MAY BE EARNED IN THE FUTURE. THE
INCENTIVE BUSINESS MANAGEMENT FEES WHICH WE MAY EARN FROM THESE
CLIENTS ARE BASED UPON TOTAL RETURNS REALIZED BY THEIR SHAREHOLDERS
COMPARED TO THE TOTAL SHAREHOLDERS RETURN OF CERTAIN IDENTIFIED
INDICES. WE HAVE LIMITED CONTROL OVER THE TOTAL RETURNS REALIZED BY
SHAREHOLDERS OF OUR CLIENT COMPANIES AND EFFECTIVELY NO CONTROL OVER
INDEXED TOTAL RETURNS. THERE CAN BE NO ASSURANCE THAT WE WILL EARN
INCENTIVE BUSINESS MANAGEMENT FEES IN THE FUTURE.
-
MR. PORTNOY STATES THAT THERE WAS A 3% INCREASE IN ADJUSTED NET INCOME
PER DILUTED SHARE OVER THE FIRST QUARTER OF FISCAL 2018. THIS
STATEMENT MAY IMPLY THAT RMR'S ADJUSTED NET INCOME PER DILUTED SHARE
MAY CONTINUE TO GROW IN FUTURE PERIODS. HOWEVER, RMR'S BUSINESS IS
SUBJECT TO VARIOUS RISKS, INCLUDING RISKS OUTSIDE ITS CONTROL. AS A
RESULT, RMR'S ADJUSTED NET INCOME PER DILUTED SHARE MAY NOT GROW IN
FUTURE PERIODS AND COULD DECLINE.
-
MR. PORTNOY STATES THAT RMR LOOKS FORWARD TO ADVANCING OPI’S
INVESTMENT STRATEGY OF OWNING BUILDINGS LEASED TO SINGLE TENANTS AND
THOSE WITH HIGH CREDIT QUALITY CHARACTERISTICS, LIKE GOVERNMENT
ENTITIES. THIS MAY IMPLY THAT IT WILL BE SUCCESSFUL IN ADVANCING THIS
STRATEGY OR THAT THIS STRATEGY WILL BENEFIT OPI.
-
MR. PORTNOY ALSO STATES THAT RMR CONTINUES TO ASSESS STRATEGIC
OPPORTUNITIES TO UTILIZE ITS BALANCE SHEET TO CREATE FUTURE GROWTH
OPPORTUNITIES. THIS STATEMENT MAY IMPLY THAT RMR WILL BE ABLE TO GROW
ITS BUSINESS AND ITS PROFITS. HOWEVER, THERE CAN BE NO ASSURANCE RMR
WILL BE SUCCESSFUL IN GROWING ITS BUSINESS AND, IN FACT, ITS BUSINESS
AND PROFITS MAY DECLINE.
THE INFORMATION CONTAINED IN THE RMR GROUP INC.’S FILINGS WITH THE SEC,
INCLUDING UNDER THE CAPTION “RISK FACTORS” IN THE RMR GROUP INC.’S
PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES IMPORTANT FACTORS
THAT COULD CAUSE DIFFERENCES FROM THE FORWARD LOOKING STATEMENTS IN THIS
PRESS RELEASE. THE RMR GROUP INC.’S FILINGS WITH THE SEC ARE AVAILABLE
ON ITS WEBSITE AT WWW.SEC.GOV.
EXCEPT AS REQUIRED BY LAW, THE RMR GROUP INC. UNDERTAKES NO OBLIGATION
TO UPDATE ANY FORWARD LOOKING STATEMENT, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
|
The RMR Group Inc.
|
Condensed Consolidated Statements of Income
|
(amounts in thousands, except per share amounts)
|
(unaudited)
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
|
2018
|
|
|
2017
|
Revenues:
|
|
|
|
|
|
|
|
Management services (1) |
|
|
|
$
|
47,488
|
|
|
|
$
|
48,570
|
|
Incentive business management fees
|
|
|
|
120,094
|
|
|
|
155,881
|
|
Advisory services
|
|
|
|
782
|
|
|
|
1,382
|
|
Total management and advisory services revenues
|
|
|
|
168,364
|
|
|
|
205,833
|
|
Reimbursable compensation and benefits
|
|
|
|
13,873
|
|
|
|
12,708
|
|
Other client company reimbursable expenses(2) |
|
|
|
98,076
|
|
|
|
—
|
|
Total reimbursable costs
|
|
|
|
111,949
|
|
|
|
12,708
|
|
Total revenues
|
|
|
|
280,313
|
|
|
|
218,541
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
|
28,012
|
|
|
|
26,197
|
|
Equity based compensation
|
|
|
|
1,811
|
|
|
|
2,721
|
|
Separation costs
|
|
|
|
6,397
|
|
|
|
—
|
|
Total compensation and benefits expense
|
|
|
|
36,220
|
|
|
|
28,918
|
|
General and administrative
|
|
|
|
7,320
|
|
|
|
6,706
|
|
Other client company reimbursable expenses(2) |
|
|
|
98,076
|
|
|
|
—
|
|
Transaction costs
|
|
|
|
184
|
|
|
|
142
|
|
Depreciation and amortization
|
|
|
|
255
|
|
|
|
380
|
|
Total expenses
|
|
|
|
142,055
|
|
|
|
36,146
|
|
Operating income
|
|
|
|
138,258
|
|
|
|
182,395
|
|
Interest and other income
|
|
|
|
1,526
|
|
|
|
784
|
|
Tax receivable agreement remeasurement
|
|
|
|
—
|
|
|
|
24,710
|
|
Income before income tax expense and equity in earnings (losses) of
investees
|
|
|
|
139,784
|
|
|
|
207,889
|
|
Income tax expense
|
|
|
|
(18,970
|
)
|
|
|
(48,343
|
)
|
Unrealized loss on equity method investment accounted for under the
fair value option
|
|
|
|
(2,769
|
)
|
|
|
—
|
|
Equity in earnings (losses) of investees
|
|
|
|
35
|
|
|
|
(222
|
)
|
Net income
|
|
|
|
118,080
|
|
|
|
159,324
|
|
Net income attributable to noncontrolling interest
|
|
|
|
(65,871
|
)
|
|
|
(88,204
|
)
|
Net income attributable to The RMR Group Inc.
|
|
|
|
52,209
|
|
|
|
71,120
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
|
16,120
|
|
|
|
16,060
|
|
Weighted average common shares outstanding - diluted
|
|
|
|
16,131
|
|
|
|
16,084
|
|
|
|
|
|
|
|
|
|
Net income attributable to The RMR Group Inc. per common share -
basic(3) |
|
|
|
$
|
3.22
|
|
|
|
$
|
4.40
|
|
Net income attributable to The RMR Group Inc. per common share -
diluted(3) |
|
|
|
$
|
3.22
|
|
|
|
$
|
4.39
|
|
(1)
|
|
Includes business management fees earned from the Managed Equity
REITs based upon the lower of (i) the average historical cost of
each REIT’s properties and (ii) each REIT’s average market
capitalization. The following table presents a summary of each
Managed Equity REIT's primary strategy and the lesser of the
historical cost of its assets under management and its market
capitalization as of December 31, 2018 and 2017, as applicable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lesser of Historical Cost of Assets
|
|
|
|
|
|
|
Under Management or Market Capitalization
(a)
|
|
|
|
|
|
|
As of December 31,
|
REIT
|
|
Primary Strategy
|
|
|
|
2018
|
|
|
2017
|
HPT
|
|
Hotels and travel centers
|
|
|
|
$
|
8,153,868
|
|
|
|
$
|
8,953,822
|
ILPT
|
|
Industrial and logistics properties
|
|
|
|
1,578,306
|
|
|
|
—
|
OPI
|
|
Office properties leased to single tenants, including the government (b) |
|
|
|
4,651,888
|
|
|
|
3,611,068
|
SIR
|
|
Office properties primarily leased to single tenants (b) |
|
|
|
—
|
|
|
|
4,887,524
|
SNH
|
|
Senior living, medical office and life science properties
|
|
|
|
6,469,758
|
|
|
|
8,253,932
|
|
|
|
|
|
|
$
|
20,853,820
|
|
|
|
$
|
25,706,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The basis on which our base business management fees are calculated
for the three months ended December 31, 2018 and 2017 may differ
from the basis at the end of the periods presented in the table
above. As of December 31, 2018, the market capitalization was lower
than the historical costs of assets under management for HPT, OPI,
and SNH; the historical costs of assets under management for HPT,
OPI and SNH as of December 31, 2018, were $10,273,642, $6,752,097
and $8,597,740, respectively. For ILPT, the historical costs of
assets under management were lower than their market capitalization
of $1,741,771, calculated as of December 31, 2018.
|
|
|
|
|
|
|
|
(b)
|
|
SIR merged with OPI (formerly named Government Properties Income
Trust) on December 31, 2018.
|
|
|
|
|
|
(2)
|
|
Reflects the prospective adoption of Accounting Standards Update, or
ASU, No. 2014-09, Revenue from Contracts with Customers, which has
been codified as Accounting Standard Codification, or ASC, 606,
effective October 1, 2018. Under ASC 606, beginning October 1, 2018,
we account for the costs of services provided by third parties to
our client companies, and the related reimbursement, on a gross
basis.
|
|
|
|
(3)
|
|
We calculate earnings per share using the two-class method as
calculated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
|
2018
|
|
|
2017
|
Basic EPS
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net income attributable to RMR Inc.
|
|
|
|
$
|
52,209
|
|
|
|
$
|
71,120
|
|
Income attributable to unvested participating securities
|
|
|
|
(353
|
)
|
|
|
(457
|
)
|
Net income attributable to RMR Inc. used in calculating basic EPS
|
|
|
|
$
|
51,856
|
|
|
|
$
|
70,663
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
|
16,120
|
|
|
|
16,060
|
|
Net income attributable to RMR Inc. per common share - basic
|
|
|
|
$
|
3.22
|
|
|
|
$
|
4.40
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net income attributable to RMR Inc.
|
|
|
|
$
|
52,209
|
|
|
|
$
|
71,120
|
|
Income attributable to unvested participating securities
|
|
|
|
(353
|
)
|
|
|
(457
|
)
|
Net income attributable to RMR Inc. used in calculating diluted EPS
|
|
|
|
$
|
51,856
|
|
|
|
$
|
70,663
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
|
16,120
|
|
|
|
16,060
|
|
Dilutive effect of incremental unvested shares
|
|
|
|
11
|
|
|
|
24
|
|
Weighted average common shares outstanding - diluted
|
|
|
|
16,131
|
|
|
|
16,084
|
|
Net income attributable to RMR Inc. per common share - diluted
|
|
|
|
$
|
3.22
|
|
|
|
$
|
4.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The RMR Group Inc.
Reconciliation of Adjusted Net
Income Attributable to The RMR Group Inc. from
Net
Income Attributable to The RMR Group Inc.
(dollars in
thousands, except per share amounts)
(unaudited)
|
|
The RMR Group Inc. is providing the below reconciliation and
information regarding certain individually significant items
occurring or impacting its financial results for the three months
ended December 31, 2018 and 2017 for supplemental informational
purposes and to enhance understanding of The RMR Group Inc.'s
condensed consolidated statements of income and to facilitate a
comparison of The RMR Group Inc.'s current operating performance
with its historical operating performance. This information should
be considered in conjunction with net income, net income
attributable to The RMR Group Inc. and operating income as presented
in The RMR Group Inc.'s condensed consolidated statements of income.
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2018
|
|
|
|
|
Impact on Net Income
Attributable to The RMR
Group
Inc.
|
|
|
Impact on Net Income
Attributable to The RMR
Group
Inc. Per Common
Share - Diluted
|
Net income attributable to The RMR Group Inc.
|
|
|
|
$
|
52,209
|
|
|
|
$
|
3.22
|
|
Incentive business management fees (1) |
|
|
|
(45,744
|
)
|
|
|
(2.82
|
)
|
Separation costs (2) |
|
|
|
2,437
|
|
|
|
0.15
|
|
Unrealized loss on equity method investment accounted for under the
fair value option (3) |
|
|
|
1,055
|
|
|
|
0.07
|
|
Transaction costs (4) |
|
|
|
70
|
|
|
|
—
|
|
Adjusted net income attributable to The RMR Group Inc.
|
|
|
|
$
|
10,027
|
|
|
|
$
|
0.62
|
|
|
|
(1)
|
|
Includes $120,094 in incentive business management fees, adjusted to
reflect amounts attributable to the noncontrolling interest and for
tax at a rate of approximately 13.8%.
|
|
|
|
|
|
|
|
(2)
|
|
Includes $6,397 of separation costs related to former officers,
adjusted to reflect amounts attributable to the noncontrolling
interest and for tax at a rate of approximately 13.8%.
|
|
|
|
|
|
|
|
(3)
|
|
Includes $2,769 in unrealized losses on our investment in TA common
shares, adjusted to reflect amounts attributable to the
noncontrolling interest and for tax at a rate of approximately 13.8%.
|
|
|
|
|
|
|
|
(4)
|
|
Includes $184 of transaction costs, adjusted to reflect amounts
attributable to the noncontrolling interest and for tax at a rate of
approximately 13.8%.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2017
|
|
|
|
|
Impact on Net Income
Attributable to The RMR
Group
Inc.
|
|
|
Impact on Net Income
Attributable to The RMR
Group
Inc. Per Common
Share - Diluted
|
Net income attributable to The RMR Group Inc.
|
|
|
|
$
|
71,120
|
|
|
|
$
|
4.39
|
|
Incentive business management fees (1) |
|
|
|
(56,542
|
)
|
|
|
(3.49
|
)
|
Tax receivable agreement remeasurement due to the Tax Act(2)(3) |
|
|
|
(24,710
|
)
|
|
|
(1.53
|
)
|
Effect of tax rate changes on deferred tax asset due to the Tax Act(2) |
|
|
|
19,817
|
|
|
|
1.23
|
|
Adjusted net income attributable to The RMR Group Inc.
|
|
|
|
$
|
9,685
|
|
|
|
$
|
0.60
|
|
|
|
(1)
|
|
Includes $155,881 of incentive business management fees, adjusted to
reflect amounts attributable to the noncontrolling interest and for
tax at a rate of approximately 15.6%.
|
|
|
|
|
|
|
|
(2)
|
|
In connection with the Tax Act and the resulting lower federal
statutory tax rate applicable to The RMR Group Inc., we remeasured
the amounts due pursuant to our tax receivable agreement and we
remeasured our deferred tax asset. The tax receivable agreement and
deferred tax asset are recorded at The RMR Group Inc. holding
company level and are not allocated to the noncontrolling interest.
|
|
|
|
|
|
|
|
(3)
|
|
The adjustment related to the remeasurement of the amounts due
pursuant to the tax receivable agreement is not taxable.
|
|
|
|
|
|
|
The RMR Group Inc.
|
Reconciliation of EBITDA and Adjusted EBITDA from Net Income
|
and Calculation of Adjusted EBITDA Margin
(1)
|
(dollars in thousands)
|
(unaudited)
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
|
2018
|
|
|
2017
|
Reconciliation of EBITDA and Adjusted EBITDA from net income:
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
118,080
|
|
|
|
$
|
159,324
|
|
Plus: income tax expense
|
|
|
|
18,970
|
|
|
|
48,343
|
|
Plus: depreciation and amortization
|
|
|
|
255
|
|
|
|
380
|
|
EBITDA
|
|
|
|
137,305
|
|
|
|
208,047
|
|
Plus: other asset amortization
|
|
|
|
2,354
|
|
|
|
2,354
|
|
Plus: operating expenses paid in The RMR Group Inc.'s common shares
|
|
|
|
495
|
|
|
|
566
|
|
Plus: separation costs
|
|
|
|
6,397
|
|
|
|
—
|
|
Plus: transaction costs
|
|
|
|
184
|
|
|
|
142
|
|
Plus: business email compromise fraud costs
|
|
|
|
—
|
|
|
|
225
|
|
Plus: unrealized loss on equity method investment accounted for
under the fair value option
|
|
|
|
2,769
|
|
|
|
—
|
|
Less: tax receivable agreement remeasurement due to the Tax Cuts and
Jobs Act
|
|
|
|
—
|
|
|
|
(24,710
|
)
|
Less: incentive business management fees earned
|
|
|
|
(120,094
|
)
|
|
|
(155,881
|
)
|
Certain other net adjustments
|
|
|
|
(35
|
)
|
|
|
(203
|
)
|
Adjusted EBITDA
|
|
|
|
$
|
29,375
|
|
|
|
$
|
30,540
|
|
|
|
|
|
|
|
|
|
Calculation of Adjusted EBITDA Margin:
|
|
|
|
|
|
|
|
Contractual management and advisory fees (excluding any
incentive business management fees) (2) |
|
|
|
$
|
50,624
|
|
|
|
$
|
52,306
|
|
Adjusted EBITDA
|
|
|
|
$
|
29,375
|
|
|
|
$
|
30,540
|
|
Adjusted EBITDA Margin
|
|
|
|
58.0
|
%
|
|
|
58.4
|
%
|
(1)
|
|
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP
financial measures calculated as presented in the tables above. The
RMR Group Inc. considers EBITDA, Adjusted EBITDA and Adjusted EBITDA
Margin to be appropriate supplemental measures of its operating
performance, along with net income, net income attributable to The
RMR Group Inc. and operating income. The RMR Group Inc. believes
that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin provide
useful information to investors because by excluding the effects of
certain amounts, such as those outlined in the tables above, EBITDA,
Adjusted EBITDA and Adjusted EBITDA Margin may facilitate a
comparison of current operating performance with The RMR Group
Inc.’s historical operating performance and with the performance of
other asset management businesses. In addition, The RMR Group Inc.
believes that providing Adjusted EBITDA Margin may help investors
assess The RMR Group Inc.’s performance of its business by providing
the margin that Adjusted EBITDA represents to its contractual
management and advisory fees (excluding any incentive business
management fees). EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
do not represent cash generated by operating activities in
accordance with GAAP and should not be considered as alternatives to
net income, net income attributable to The RMR Group Inc. or
operating income as an indicator of The RMR Group Inc.’s financial
performance or as a measure of The RMR Group Inc.’s liquidity. These
measures should be considered in conjunction with net income, net
income attributable to The RMR Group Inc. and operating income as
presented in The RMR Group Inc.'s condensed consolidated statements
of income. Also, other asset management businesses may calculate
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin differently than
The RMR Group Inc. does.
|
|
|
|
(2)
|
|
These contractual management fees are the base business management
fees, property management fees and advisory fees The RMR Group Inc.
earns pursuant to its management and investment advisory agreements
with its client companies. These amounts are calculated pursuant to
the contractual formulas and do not deduct other asset amortization
of $2,354 for each of the three months ended December 31, 2018 and
2017, required to be recognized as a reduction to management
services revenues in accordance with GAAP and do not include the
incentive business management fees of $120,094 and $155,881 that The
RMR Group Inc. recognized under GAAP during the three months ended
December 31, 2018 and 2017, respectively, which were earned for the
calendar years 2018 and 2017, respectively.
|
|
|
|
|
The RMR Group Inc.
|
Condensed Consolidated Balance Sheets
|
(dollars in thousands, except per share amounts)
|
(unaudited)
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2018
|
|
|
2018
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
284,159
|
|
|
|
$
|
256,848
|
|
Due from related parties
|
|
|
|
190,785
|
|
|
|
28,846
|
|
Prepaid and other current assets
|
|
|
|
6,855
|
|
|
|
10,392
|
|
Total current assets
|
|
|
|
481,799
|
|
|
|
296,086
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
2,442
|
|
|
|
2,589
|
|
Due from related parties, net of current portion
|
|
|
|
5,131
|
|
|
|
8,183
|
|
Equity method investment
|
|
|
|
7,086
|
|
|
|
7,051
|
|
Equity method investment accounted for under the fair value option
|
|
|
|
5,613
|
|
|
|
—
|
|
Goodwill
|
|
|
|
1,859
|
|
|
|
1,859
|
|
Intangible assets, net of amortization
|
|
|
|
362
|
|
|
|
375
|
|
Deferred tax asset
|
|
|
|
25,802
|
|
|
|
25,726
|
|
Other assets, net of amortization
|
|
|
|
160,205
|
|
|
|
162,559
|
|
Total assets
|
|
|
|
$
|
690,299
|
|
|
|
$
|
504,428
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
$
|
115,748
|
|
|
|
$
|
28,307
|
|
Total current liabilities
|
|
|
|
115,748
|
|
|
|
28,307
|
|
Long term portion of deferred rent payable, net of current portion
|
|
|
|
1,283
|
|
|
|
1,229
|
|
Amounts due pursuant to tax receivable agreement, net of current
portion
|
|
|
|
32,048
|
|
|
|
32,048
|
|
Employer compensation liability, net of current portion
|
|
|
|
5,131
|
|
|
|
8,183
|
|
Total liabilities
|
|
|
|
154,210
|
|
|
|
69,767
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Class A common stock, $0.001 par value; 31,600,000 shares
authorized; 15,229,687 and 15,229,957 shares issued and outstanding,
respectively
|
|
|
|
15
|
|
|
|
15
|
|
Class B-1 common stock, $0.001 par value; 1,000,000 shares
authorized, issued and outstanding
|
|
|
|
1
|
|
|
|
1
|
|
Class B-2 common stock, $0.001 par value; 15,000,000 shares
authorized, issued and outstanding
|
|
|
|
15
|
|
|
|
15
|
|
Additional paid in capital
|
|
|
|
100,808
|
|
|
|
99,239
|
|
Retained earnings
|
|
|
|
235,086
|
|
|
|
182,877
|
|
Cumulative other comprehensive income
|
|
|
|
80
|
|
|
|
82
|
|
Cumulative common distributions
|
|
|
|
(55,147
|
)
|
|
|
(49,467
|
)
|
Total shareholders’ equity
|
|
|
|
280,858
|
|
|
|
232,762
|
|
Noncontrolling interest
|
|
|
|
255,231
|
|
|
|
201,899
|
|
Total equity
|
|
|
|
536,089
|
|
|
|
434,661
|
|
Total liabilities and equity
|
|
|
|
$
|
690,299
|
|
|
|
$
|
504,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190207005223/en/
Timothy A. Bonang, Senior Vice President
(617) 796-8230
Source: The RMR Group Inc.