05/07/2021

The RMR Group Inc. Announces Second Quarter Fiscal 2021 Results

Net Income Attributable to The RMR Group Inc. of $0.30 Per Diluted Share and Adjusted Net Income Attributable to The RMR Group Inc. of $0.37 Per Diluted Share

NEWTON, Mass.--(BUSINESS WIRE)-- The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended March 31, 2021.

Adam Portnoy, President and Chief Executive Officer, made the following statement regarding the second quarter fiscal 2021 results:

“In the second fiscal quarter, RMR generated total management and advisory services revenues of $42.0 million, which represents our third straight quarter of service revenue growth from early pandemic lows and primarily comes from growth at our Managed Equity REITs. Throughout the pandemic, we have remained focused as an organization on the recovery and repositioning of our clients, which includes recent efforts such as strategically amending the Five Star Senior Living and Diversified Healthcare Trust management agreements, assisting RMR Mortgage Trust and Tremont Mortgage Trust with their agreement to merge into a larger more diversified commercial mortgage REIT and successfully assisting Sonesta in taking on the management of almost 200 Service Properties Trust owned hotels.

We are also cautiously optimistic that we may begin earning incentive fees this calendar year, as Office Properties Income Trust began accruing a $20.8 million estimated incentive fee for calendar 2021 based on its total return per share out-performance relative to its peers. RMR’s balance sheet remains strong, with over $376 million of cash on hand and no debt, leaving us well positioned as we assess capital allocation strategies.”

Second Quarter Fiscal 2021 Highlights:

  • As of March 31, 2021, The RMR Group LLC had $31.8 billion of assets under management, or AUM, compared to $32.1 billion as of March 31, 2020.
  • Total management and advisory services revenues for the quarter ended March 31, 2021, were $42.0 million, including $0.6 million of incentive business management fees from Tremont Mortgage Trust, compared to $44.1 million for the quarter ended March 31, 2020.
  • The RMR Group LLC’s AUM and management and advisory services revenues by source are as follows (dollars in thousands):

 

 

 

 

 

 

Total

 

 

 

 

Management

 

 

 

 

and Advisory

 

 

AUM

 

Services Revenues

As of or for the Three Months Ended March 31, 2021

Managed Public Real Estate Capital (1)

 

$

28,741,109

 

 

90.3

%

 

$

34,483

 

 

82.1

%

Managed Private Real Estate Capital (2)

 

1,146,262

 

 

3.6

%

 

2,134

 

 

5.1

%

Managed Operating Companies (3)

 

1,929,605

 

 

6.1

%

 

5,374

 

 

12.8

%

Total

 

$

31,816,976

 

 

100.0

%

 

$

41,991

 

 

100.0

%

 

 

 

 

 

 

 

 

 

As of or for the Three Months Ended March 31, 2020

Managed Public Real Estate Capital (1)

 

$

29,846,836

 

 

92.8

%

 

$

36,487

 

 

82.7

%

Managed Private Real Estate Capital (2)

 

371,171

 

 

1.2

%

 

1,317

 

 

3.0

%

Managed Operating Companies (3)

 

1,927,491

 

 

6.0

%

 

6,297

 

 

14.3

%

Total

 

$

32,145,498

 

 

100.0

%

 

$

44,101

 

 

100.0

%

(1)

 

Managed Public Real Estate Capital includes: Diversified Healthcare Trust (DHC), Industrial Logistics Properties Trust (ILPT), Office Properties Income Trust (OPI) and Service Properties Trust (SVC), which are collectively referred to as the Managed Equity REITs, as well as Tremont Mortgage Trust (TRMT) and RMR Mortgage Trust (RMRM).

(2)

 

Managed Private Real Estate Capital primarily consists of private entities that own commercial real estate.

(3)

 

Managed Operating Companies includes: Five Star Senior Living Inc. (FVE), Sonesta International Hotels Corporation (Sonesta) and TravelCenters of America Inc. (TA).

  • For the three months ended March 31, 2021, net income was $11.5 million and net income attributable to The RMR Group Inc. was $4.9 million, or $0.30 per diluted share, compared to net income of $14.9 million and net income attributable to The RMR Group Inc. of $6.5 million, or $0.39 per diluted share, for the three months ended March 31, 2020.
  • For the three months ended March 31, 2021, adjusted net income attributable to The RMR Group Inc. was $6.1 million, or $0.37 per diluted share, compared to $7.6 million, or $0.46 per diluted share, for the three months ended March 31, 2020. The adjustments to net income attributable to The RMR Group Inc. this quarter included $1.3 million, or $0.08 per diluted share, of unrealized losses on the equity method investment accounted for under the fair value option, partially offset by $0.2 million, or $0.01 per diluted share, of incentive business management fees.
  • For the three months ended March 31, 2021, Adjusted EBITDA was $21.0 million, Operating Margin was 39.0% and Adjusted EBITDA Margin was 48.1%, compared to Adjusted EBITDA of $24.2 million, Operating Margin of 40.6% and Adjusted EBITDA Margin of 52.1% for the three months ended March 31, 2020.
  • As of March 31, 2021, The RMR Group Inc. had $376.3 million in cash and cash equivalents with no outstanding debt obligations.

Reconciliations to U.S. Generally Accepted Accounting Principles, or GAAP:

Adjusted net income attributable to The RMR Group Inc., EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA less Cash Tax Obligation are non-GAAP financial measures. The GAAP financial measure that is most directly comparable to adjusted net income attributable to The RMR Group Inc. is net income attributable to The RMR Group Inc. The GAAP financial measure that is most directly comparable to EBITDA, Adjusted EBITDA and Adjusted EBITDA less Cash Tax Obligation is net income and the GAAP financial measure that is most directly comparable to Adjusted EBITDA Margin is Operating Margin, which represents operating income divided by total management and advisory services revenues. 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 Operating Margin, Adjusted EBITDA Margin and Adjusted EBITDA less Cash Tax Obligation for each of the three months ended March 31, 2021 and 2020 are presented later in this press release.

Assets Under Management:

The calculation of AUM 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 the Managed Private Real Estate Capital clients plus (ii) the gross book value of real estate assets, property and equipment of the Managed Operating Companies, excluding depreciation, amortization, impairment charges or other non-cash reserves, plus (iii) the managed assets of RMR Mortgage Trust and Tremont Mortgage Trust.

All references in this press release to AUM on, or as of, a date are calculated at a point in time.

For additional information on the calculation of AUM for purposes of the fee provisions of the business management agreements, see The RMR Group Inc.’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020, 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:

On Monday, May 10, 2021 at 1:00 p.m. Eastern Time, 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 second quarter ended March 31, 2021 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 Monday, May 17, 2021. To access the replay, dial (412) 317-0088. The replay pass code is 10153742.

A live audio webcast of the conference call will also be available in a listen only mode on The RMR Group Inc.’s website, at www.rmrgroup.com. Participants wanting to access the webcast should visit The RMR Group Inc.’s website about five minutes before the call. The archived webcast will be available for replay on The RMR Group Inc.’s website following the call for about one week. The transcription, recording and retransmission in any way of The RMR Group Inc.’s fiscal second quarter ended March 31, 2021 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. (Nasdaq: RMR) is a holding company and substantially all of its business is conducted by its majority owned subsidiary, The RMR Group LLC, or RMR. RMR is a leading U.S. alternative asset management company, unique for its focus on commercial real estate (CRE) and related businesses. RMR’s vertical integration is supported by its more than 600 real estate professionals in over 30 offices nationwide who manage approximately $32 billion in assets under management and leverage 35 years of institutional experience in buying, selling, financing and operating CRE. RMR benefits from a scalable platform, a deep and experienced management team and a diversity of direct real estate strategies across its clients. RMR is headquartered in Newton, MA and was founded in 1986. For more information, please visit www.rmrgroup.com.

The RMR Group Inc.

Condensed Consolidated Statements of Income

(amounts in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2021

 

2020

 

2021

 

2020

Revenues:

 

 

 

 

 

 

 

 

Management services (1)

 

$

40,242

 

 

$

43,321

 

 

$

80,989

 

 

$

90,596

 

Incentive business management fees

 

620

 

 

 

 

620

 

 

 

Advisory services

 

1,129

 

 

780

 

 

1,715

 

 

1,627

 

Total management and advisory services revenues

 

41,991

 

 

44,101

 

 

83,324

 

 

92,223

 

Reimbursable compensation and benefits

 

13,159

 

 

12,823

 

 

26,384

 

 

25,670

 

Reimbursable equity based compensation

 

1,206

 

 

(290

)

 

4,209

 

 

658

 

Other reimbursable expenses

 

75,208

 

 

84,227

 

 

174,593

 

 

182,202

 

Total reimbursable costs

 

89,573

 

 

96,760

 

 

205,186

 

 

208,530

 

Total revenues

 

131,564

 

 

140,861

 

 

288,510

 

 

300,753

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Compensation and benefits

 

30,586

 

 

30,122

 

 

60,080

 

 

60,319

 

Equity based compensation

 

1,752

 

 

302

 

 

5,313

 

 

1,884

 

Separation costs

 

 

 

385

 

 

4,159

 

 

645

 

Total compensation and benefits expense

 

32,338

 

 

30,809

 

 

69,552

 

 

62,848

 

General and administrative

 

7,104

 

 

7,297

 

 

13,364

 

 

14,343

 

Other reimbursable expenses

 

75,208

 

 

84,227

 

 

174,593

 

 

182,202

 

Transaction and acquisition related costs

 

296

 

 

373

 

 

413

 

 

1,169

 

Depreciation and amortization

 

251

 

 

246

 

 

489

 

 

502

 

Total expenses

 

115,197

 

 

122,952

 

 

258,411

 

 

261,064

 

Operating income

 

16,367

 

 

17,909

 

 

30,099

 

 

39,689

 

Interest and other income

 

204

 

 

1,500

 

 

435

 

 

3,375

 

Equity in earnings of investees

 

303

 

 

324

 

 

727

 

 

579

 

Unrealized (loss) gain on equity method investment accounted for under the fair value option

 

(3,402

)

 

(2,200

)

 

4,720

 

 

(762

)

Income before income tax expense

 

13,472

 

 

17,533

 

 

35,981

 

 

42,881

 

Income tax expense

 

(1,992

)

 

(2,612

)

 

(4,748

)

 

(6,336

)

Net income

 

11,480

 

 

14,921

 

 

31,233

 

 

36,545

 

Net income attributable to noncontrolling interest

 

(6,539

)

 

(8,453

)

 

(17,395

)

 

(20,628

)

Net income attributable to The RMR Group Inc.

 

$

4,941

 

 

$

6,468

 

 

$

13,838

 

 

$

15,917

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic (2)

 

16,256

 

 

16,186

 

 

16,254

 

 

16,181

 

Weighted average common shares outstanding - diluted (2)

 

31,280

 

 

31,186

 

 

31,254

 

 

31,181

 

 

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc. per common share - basic (2)

 

$

0.30

 

 

$

0.40

 

 

$

0.84

 

 

$

0.98

 

Net income attributable to The RMR Group Inc. per common share - diluted (2)

 

$

0.30

 

 

$

0.39

 

 

$

0.81

 

 

$

0.96

 

 

See Notes beginning on page 5.

The RMR Group Inc.

Notes to Condensed Consolidated Statements of Income

(dollars in thousands)

(unaudited)

 

(1)

 

Includes business management fees earned from the Managed Equity REITs monthly 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 March 31, 2021 and 2020, as applicable:

 

 

 

 

Lesser of Historical Cost of Assets

 

 

 

 

Under Management or

 

 

 

 

Total Market Capitalization (a)

 

 

 

 

As of March 31,

REIT

 

Primary Strategy

 

2021

 

2020

DHC

 

Medical office and life science properties, senior living communities and wellness centers

 

$

5,780,436

 

 

$

4,444,325

 

ILPT

 

Industrial and logistics properties

 

1,963,244

 

 

2,514,092

 

OPI

 

Office properties primarily leased to single tenants, including the government

 

3,571,910

 

 

3,566,743

 

SVC

 

Hotels and net lease service and necessity-based retail properties

 

9,154,813

 

 

7,095,656

 

 

 

 

 

$

20,470,403

 

 

$

17,620,816

 

(a)

 

 

The basis on which base business management fees are calculated for the three months ended March 31, 2021 and 2020 may differ from the basis at the end of the periods presented in the table above. As of March 31, 2021, the market capitalization was lower than the historical cost of assets under management for DHC, OPI and SVC. The historical cost of assets under management for DHC, OPI and SVC as of March 31, 2021, were $8,438,364, $5,650,680 and $12,280,777, respectively. For ILPT, the historical cost of assets under management were lower than its market capitalization of $2,377,412 as of March 31, 2021.

The RMR Group Inc.

Notes to Condensed Consolidated Statements of Income (Continued)

(amounts in thousands, except per share amounts)

(unaudited)

 

(2)

 

The RMR Group Inc. calculates earnings per share, or EPS, using the two-class method. As such, earnings attributable to unvested participating shares are excluded from earnings before calculating per share amounts. In addition, diluted EPS includes the assumed issuance of Class A Common Shares pursuant to The RMR Group Inc.’s equity compensation plan and the issuance of Class A Common Shares related to the assumed redemption of the noncontrolling interest’s 15,000 Class A Units using the if-converted method. In computing the dilutive effect, if any, that the aforementioned redemption would have on EPS, The RMR Group Inc. considered that net income available to holders of Class A Common Shares would increase due to elimination of the noncontrolling interest offset by any tax effect, which may be dilutive. For the three and six months ended March 31, 2021 and 2020, the assumed redemption is dilutive to earnings per share as presented in the table below. The calculation of basic and diluted EPS is as follows:

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2021

 

2020

 

2021

 

2020

Numerators:

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

 

$

4,941

 

 

$

6,468

 

 

$

13,838

 

 

$

15,917

 

Income attributable to unvested participating securities

 

(44

)

 

(47

)

 

(121

)

 

(119

)

Net income attributable to The RMR Group Inc. used in calculating basic EPS

 

4,897

 

 

6,421

 

 

13,717

 

 

15,798

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Add back: income attributable to unvested participating securities

 

44

 

 

47

 

 

121

 

 

119

 

Add back: net income attributable to noncontrolling interest

 

6,539

 

 

8,453

 

 

17,395

 

 

20,628

 

Add back: income tax expense

 

1,992

 

 

2,612

 

 

4,748

 

 

6,336

 

Income tax expense assuming redemption of noncontrolling interest’s Class A Units for Class A Common Shares (a)

 

(4,113

)

 

(5,317

)

 

(10,547

)

 

(12,858

)

Net income used in calculating diluted EPS

 

$

9,359

 

 

$

12,216

 

 

$

25,434

 

 

$

30,023

 

 

 

 

 

 

 

 

 

 

Denominators:

 

 

 

 

 

 

 

 

Common shares outstanding

 

16,413

 

 

16,314

 

 

16,413

 

 

16,314

 

Unvested participating securities

 

(157

)

 

(128

)

 

(159

)

 

(133

)

Weighted average common shares outstanding - basic

 

16,256

 

 

16,186

 

 

16,254

 

 

16,181

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Assumed redemption of noncontrolling interest’s Class A Units for Class A Common Shares

 

15,000

 

 

15,000

 

 

15,000

 

 

15,000

 

Incremental unvested shares

 

24

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

31,280

 

 

31,186

 

 

31,254

 

 

31,181

 

 

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc. per common share - basic

 

$

0.30

 

 

$

0.40

 

 

$

0.84

 

 

$

0.98

 

Net income attributable to The RMR Group Inc. per common share - diluted

 

$

0.30

 

 

$

0.39

 

 

$

0.81

 

 

$

0.96

 

(a)

Income tax expense assumes the hypothetical conversion of the noncontrolling interest, which results in estimated tax rates of 30.5% and 30.3% for the three months ended March 31, 2021 and 2020, respectively, and 29.3% and 30.0% for the six months ended March 31, 2021 and 2020, respectively.

The RMR Group Inc.

Reconciliation of Adjusted Net Income and Adjusted Net Income Per Diluted Share

(amounts in thousands, except per share amounts)

(unaudited)

The RMR Group Inc. is providing the reconciliations below regarding certain individually significant items occurring or impacting its financial results for the three months ended March 31, 2021 and 2020 for supplemental informational purposes in order to enhance the 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.

 

 

Net Income

Attributable

to The RMR

Group Inc.

 

Add:

Net Income

Attributable to

Noncontrolling

Interest

 

Add:

Income Tax

Expense

 

Income

Before

Income Tax

Expense

 

Less:

Estimated

Income Tax

Expense (1)

 

Net Income

Used in

Calculating

Diluted EPS

 

Weighted

Average

Common

Shares

Outstanding -

Diluted

 

Net Income

Attributable to

The RMR

Group Inc. per

Common Share -

Diluted

Three Months Ended March 31, 2021:

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

$

4,941

 

$

6,539

 

$

1,992

 

$

13,472

 

$

(4,113

)

$

9,359

 

31,280

$

0.30

 

Unrealized loss on equity method investment accounted for under the fair value option

 

1,275

 

 

1,624

 

 

503

 

 

3,402

 

 

(1,039

)

 

2,363

 

31,280

 

0.08

 

Incentive business management fees

 

(232

)

 

(296

)

 

(92

)

 

(620

)

 

189

 

 

(431

)

31,280

 

(0.01

)

Transaction and acquisition related costs

 

111

 

 

141

 

 

44

 

 

296

 

 

(90

)

 

206

 

31,280

 

 

Adjusted net income attributable to The RMR Group Inc.

$

6,095

 

$

8,008

 

$

2,447

 

$

16,550

 

$

(5,053

)

$

11,497

 

31,280

$

0.37

 

 

Three Months Ended March 31, 2020:

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

$

6,468

 

$

8,453

 

$

2,612

 

$

17,533

 

$

(5,317

)

$

12,216

 

31,186

$

0.39

 

Unrealized loss on equity method investment accounted for under the fair value option

 

818

 

 

1,054

 

 

328

 

 

2,200

 

 

(667

)

 

1,533

 

31,186

 

0.05

 

Separation costs

 

144

 

 

184

 

 

57

 

 

385

 

 

(117

)

 

268

 

31,186

 

0.01

 

Transaction and acquisition related costs

 

138

 

 

179

 

 

56

 

 

373

 

 

(113

)

 

260

 

31,186

 

0.01

 

Adjusted net income attributable to The RMR Group Inc.

$

7,568

 

$

9,870

 

$

3,053

 

$

20,491

 

$

(6,214

)

$

14,277

 

31,186

$

0.46

 

(1)

Estimated income tax expense assumes the hypothetical conversion of the noncontrolling interest and the resulting consolidated entities’ estimated tax rate of approximately 30.5% and 30.3% for the three months ended March 31, 2021 and 2020, respectively.

The RMR Group Inc.

Reconciliation of EBITDA and Adjusted EBITDA from Net Income

and Calculation of Operating Margin, Adjusted EBITDA Margin

and Adjusted EBITDA less Cash Tax Obligation (1) (2)

(dollars in thousands)

(unaudited)

 

Three Months Ended March 31,

Six Months Ended March 31,

 

2021

2020

2021

2020

Reconciliation of EBITDA and Adjusted EBITDA from net income:

 

 

 

Net income

$

11,480

 

$

14,921

 

$

31,233

 

$

36,545

 

Income tax expense

 

1,992

 

 

2,612

 

 

4,748

 

 

6,336

 

Depreciation and amortization

 

251

 

 

246

 

 

489

 

 

502

 

EBITDA

 

13,723

 

 

17,779

 

 

36,470

 

 

43,383

 

Other asset amortization

 

2,354

 

 

2,354

 

 

4,708

 

 

4,708

 

Operating expenses paid in the form of The RMR Group Inc.'s common shares

 

1,317

 

 

1,061

 

 

1,875

 

 

1,695

 

Separation costs

 

 

 

385

 

 

4,159

 

 

645

 

Transaction and acquisition related costs

 

296

 

 

373

 

 

413

 

 

1,169

 

Straight line office rent

 

32

 

 

37

 

 

47

 

 

72

 

Unrealized (gain) loss on equity method investment accounted for under the fair value option

 

3,402

 

 

2,200

 

 

(4,720

)

 

762

 

Equity in earnings of investees

 

(303

)

 

(324

)

 

(727

)

 

(579

)

Distributions from equity method investment

 

847

 

 

353

 

 

864

 

 

705

 

Incentive business management fees earned

 

(620

)

 

 

 

(620

)

 

 

Certain other net adjustments

 

 

 

(13

)

 

 

 

(13

)

Adjusted EBITDA

$

21,048

 

$

24,205

 

$

42,469

 

$

52,547

 

Calculation of Operating Margin:

 

 

 

 

Total management and advisory services revenues

$

41,991

 

$

44,101

 

$

83,324

 

$

92,223

 

Operating income

$

16,367

 

$

17,909

 

$

30,099

 

$

39,689

 

Operating Margin

 

39.0

%

 

40.6

%

 

36.1

%

 

43.0

%

Calculation of Adjusted EBITDA Margin:

 

 

 

 

Contractual management and advisory fees (excluding incentive business management fees, if any) (3)

$

43,725

 

$

46,455

 

$

87,412

 

$

96,931

 

Adjusted EBITDA

$

21,048

 

$

24,205

 

$

42,469

 

$

52,547

 

Adjusted EBITDA Margin

 

48.1

%

 

52.1

%

 

48.6

%

 

54.2

%

Calculation of Adjusted EBITDA less Cash Tax Obligation:

 

 

 

 

Adjusted EBITDA

$

21,048

 

$

24,205

 

$

42,469

 

$

52,547

 

Less: Tax distributions to members (4)

 

(9,571

)

 

(8,799

)

 

(15,426

)

 

(16,792

)

Adjusted EBITDA less Cash Tax Obligation

$

11,477

 

$

15,406

 

$

27,043

 

$

35,755

 

Common share distributions

$

10,730

 

$

10,694

 

$

21,460

 

$

21,389

 

(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., operating income and operating margin. 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 incentive business management fees, if any). 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., operating income or operating margin as an indicator of The RMR Group Inc.’s financial performance or as a measure of The RMR Group Inc.’s liquidity. Other asset management businesses may calculate EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin differently than The RMR Group Inc. does.

(2)

 

Adjusted EBITDA less Cash Tax Obligation is a non-GAAP financial measure calculated as presented in the table above. The RMR Group Inc. considers Adjusted EBITDA less Cash Tax Obligation to be an appropriate measure of its operating performance, along with net income attributable to The RMR Group Inc. The RMR Group Inc. believes that Adjusted EBITDA less Cash Tax Obligation provides useful information to investors because by excluding amounts payable for tax obligations, it increases comparability between periods and more accurately reflects earnings that may be available for distribution to shareholders. Adjusted EBITDA less Cash Tax Obligation is among the factors The RMR Group Inc.’s Board of Directors considers when determining the amount of dividends to its shareholders. Other asset management businesses may calculate Adjusted EBITDA less Cash Tax Obligation differently than The RMR Group Inc. does.

(3)

 

Contractual management and advisory fees are the base business management fees, property management fees and advisory fees The RMR Group Inc. or its subsidiaries earns pursuant to its management agreements. 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 March 31, 2021 and 2020, or $4,708 for each of the six months ended March 31, 2021 and 2020, 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 $620 that The RMR Group Inc. recognized under GAAP for the three and six months ended March 31, 2021.

(4)

 

Under the RMR LLC operating agreement, RMR LLC is required to make quarterly pro rata cash distributions to The RMR Group Inc. and its noncontrolling interest based on each’s estimated tax liabilities and respective ownership percentages. Estimated tax liabilities are determined quarterly on a cumulative basis. As such, there may be fluctuations from quarter to quarter to account for prior periods where pro rata cash distributions were more or less than amounts determined cumulatively through a particular quarter. For the three and six months ended March 31, 2021 and 2020, RMR LLC made required quarterly tax distributions as follows:

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2021

 

2020

 

2021

 

2020

RMR LLC tax distributions to The RMR Group Inc.

 

$

5,112

 

 

$

4,643

 

 

$

8,147

 

 

$

8,806

 

RMR LLC tax distributions to non-controlling interest

 

4,459

 

 

4,156

 

 

7,279

 

 

7,986

 

Total RMR LLC tax distributions to members

 

$

9,571

 

 

$

8,799

 

 

$

15,426

 

 

$

16,792

 

The RMR Group Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

March 31,

 

September 30,

 

 

2021

 

2020

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

376,252

 

 

$

369,663

 

Due from related parties

 

81,189

 

 

82,605

 

Prepaid and other current assets

 

8,554

 

 

3,877

 

Total current assets

 

465,995

 

 

456,145

 

 

 

 

 

 

Property and equipment, net

 

2,319

 

 

2,299

 

Due from related parties, net of current portion

 

11,428

 

 

7,764

 

Equity method investment

 

7,330

 

 

7,467

 

Equity method investment accounted for under the fair value option

 

16,872

 

 

12,152

 

Goodwill

 

1,859

 

 

1,859

 

Intangible assets, net of amortization

 

256

 

 

277

 

Operating lease right of use assets

 

34,085

 

 

34,663

 

Deferred tax asset

 

22,466

 

 

23,900

 

Other assets, net of amortization

 

139,019

 

 

143,727

 

Total assets

 

$

701,629

 

 

$

690,253

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Other reimbursable expenses

 

$

50,587

 

 

$

56,079

 

Accounts payable and accrued expenses

 

27,750

 

 

16,984

 

Operating lease liabilities

 

4,735

 

 

4,407

 

Employer compensation liability

 

2,463

 

 

4,298

 

Total current liabilities

 

85,535

 

 

81,768

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

31,171

 

 

32,030

 

Amounts due pursuant to tax receivable agreement, net of current portion

 

27,789

 

 

27,789

 

Employer compensation liability, net of current portion

 

11,428

 

 

7,764

 

Total liabilities

 

155,923

 

 

149,351

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,413,191 and 15,395,641 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

 

108,932

 

 

106,622

 

Retained earnings

 

300,087

 

 

286,249

 

Cumulative common distributions

 

(109,443

)

 

(96,983

)

Total shareholders’ equity

 

299,607

 

 

295,919

 

Noncontrolling interest

 

246,099

 

 

244,983

 

Total equity

 

545,706

 

 

540,902

 

Total liabilities and equity

 

$

701,629

 

 

$

690,253

 

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:

  • Mr. Portnoy states that in the second fiscal quarter, The RMR Group Inc. generated total management and advisory services revenues of $42.0 million, which represents its third straight quarter of service revenue growth from early pandemic lows and primarily comes from growth at its Managed Equity REITs. However, The RMR Group Inc.’s and the Managed Equity REITs’ businesses are subject to various risks, including risks outside its and their control. Further, the impact and duration of the COVID-19 pandemic is not known and the current difficult economic conditions may continue and could deteriorate further and such adverse conditions may continue for a prolonged period. Accordingly, The RMR Group Inc.’s management services revenues may not grow in future periods and could decline;
  • Mr. Portnoy states that The RMR Group Inc. has remained focused as an organization on the recovery and repositioning of its clients, which includes recent efforts such as strategically amending the Five Star Senior Living and Diversified Healthcare Trust management agreements, assisting RMR Mortgage Trust and Tremont Mortgage Trust with their agreement to merge into a larger more diversified commercial mortgage REIT and successfully assisting Sonesta in taking on the management of almost 200 Service Properties Trust owned hotels. These statements may imply that The RMR Group Inc.’s business will grow and that its operating performance and financial results will improve as a result of these actions. However, these efforts may not be successful and may not result in The RMR Group Inc. improving its operating performance or its financial results or realizing the returns it expects, and The RMR Group Inc. may realize losses as a result;
  • Mr. Portnoy states that The RMR Group Inc. is cautiously optimistic that it may begin earning incentive fees this calendar year, as Office Properties Income Trust began accruing a $20.8 million estimated incentive fee for calendar 2021 based on its total return per share out-performance relative to its peers. This statement may imply that The RMR Group Inc. may earn incentive business management fees for calendar 2021 or in future years. The incentive business management fees that The RMR Group Inc. may earn from its Managed Equity REITs are based upon total returns realized by the REITs’ shareholders compared to the total shareholders return of certain identified indices. The RMR Group Inc. has only limited control over the total returns realized by shareholders of the Managed Equity REITs and effectively no control over indexed total returns. There can be no assurance that The RMR Group Inc. will earn any incentive business management fees from its Managed Equity REITs in the future;
  • This press release also reports that incentive business management fees of $0.6 million were earned from TRMT for the quarter ended March 31, 2021. An implication of this statement may be that incentive business management fees may be earned from TRMT and RMRM in the future. However, there can be no assurance that The RMR Group Inc. will earn any incentive business management fees from TRMT or RMRM in the future; and
  • Mr. Portnoy states that The RMR Group Inc.’s balance sheet remains strong and leaves it well positioned as it accesses capital allocation strategies. These statements may imply that The RMR Group Inc. will successfully identify and execute one or more capital allocation strategies and that it will profitably grow its business. However, identifying and executing on these capital allocation strategies are subject to various uncertainties and risks and may take an extended period to realize any resulting benefit to its business. Further, The RMR Group Inc. may not be successful in profitably managing any capital allocation strategies or growth initiatives it may pursue.

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 and at www.sec.gov.

You should not place undue reliance on forward-looking statements.

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.

Michael Kodesch, Director, Investor Relations
(617) 796-8230

Source: The RMR Group Inc.

Cautionary Language

The information appearing in RMR's website includes statements which constitute forward looking statements. These forward looking statements are based upon RMR's present intents, beliefs or expectations, but forward looking statements are not guaranteed to occur and may not occur. RMR's actual results may differ materially from those contained in RMR's forward looking statements. The information contained in RMR's filings with the Securities and Exchange Commission (SEC), including under “Risk Factors” and “Warnings Concerning Forward Looking Statements” in RMR's periodic reports and other filings, identifies important factors that could cause RMR's actual results to differ materially from those stated or implied in RMR's forward looking statements. RMR's filings with the SEC are available on the SEC’s website at www.sec.gov and are also accessible on RMR's website at the following link: SEC Filings. You should not place undue reliance upon forward looking statements. Except as required by law, RMR does not intend to update or change any forward looking statements as a result of new information, future events or otherwise.

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