08/05/2021

The RMR Group Inc. Announces Third Quarter Fiscal 2021 Results

Net Income of $19.0 Million, or $0.50 Per Diluted Share

Adjusted Net Income of $0.47 Per Diluted Share, a 27% Sequential Quarter Increase and a 24% Increase from Last Year

Adjusted EBITDA of $24.4 Million, a 16% Sequential Quarter Increase and a 25% Increase from Last Year

NEWTON, Mass.--(BUSINESS WIRE)-- The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended June 30, 2021.

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

“This quarter, management and advisory services revenues were $45.5 million, an increase of 16% from the same time last year, when the pandemic was having its most severe impacts on our clients. This quarter’s results, which also saw significant increases in earnings per share, cash flows and EBITDA margins, reflect post pandemic tailwinds across many of the sectors we operate in. More specifically, this quarter saw meaningful increases in the enterprise values at our Managed Equity REITs, solid operating results at Sonesta, as travel volumes increased across the country, and a strong quarter from both fuel and non-fuel revenues at TravelCenters of America. Additionally, Adjusted EBITDA Margin was 51.1% this quarter, a sequential quarter increase of 300 basis points, which we believe showcases RMR’s operating leverage and earnings potential amidst the ongoing economic recovery.

We remain optimistic that we may begin earning incentive fees this calendar year, as Office Properties Income Trust’s potential 2021 incentive fee increased by $1.4 million to $22.2 million, based on its total return per share out-performance relative to its peers through June. With almost $400 million of cash and no debt, we remain well positioned to pursue numerous capital allocation strategies, including the potential return of shareholder capital.”

Third Quarter Fiscal 2021 Highlights:

  • As of June 30, 2021, The RMR Group LLC had $32.4 billion of assets under management, or AUM, compared to $32.1 billion as of June 30, 2020.
  • Total management and advisory services revenues for the quarter ended June 30, 2021, were $45.5 million, compared to $39.3 million for the quarter ended June 30, 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 June 30, 2021

Managed Public Real Estate Capital (1)

 

$

29,300,994

 

 

90.5

%

 

$

36,396

 

 

80.0

%

Managed Private Real Estate Capital (2)

 

1,147,414

 

 

3.5

%

 

2,138

 

 

4.7

%

Managed Operating Companies (3)

 

1,950,830

 

 

6.0

%

 

6,976

 

 

15.3

%

Total

 

$

32,399,238

 

 

100.0

%

 

$

45,510

 

 

100.0

%

 

 

 

 

 

 

 

 

 

As of or for the Three Months Ended June 30, 2020

Managed Public Real Estate Capital (1)

 

$

29,834,697

 

 

92.8

%

 

$

32,742

 

 

83.4

%

Managed Private Real Estate Capital (2)

 

371,180

 

 

1.2

%

 

1,231

 

 

3.1

%

Managed Operating Companies (3)

 

1,935,607

 

 

6.0

%

 

5,277

 

 

13.5

%

Total

 

$

32,141,484

 

 

100.0

%

 

$

39,250

 

 

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

  • For the three months ended June 30, 2021, net income was $19.0 million and net income attributable to The RMR Group Inc. was $8.2 million, or $0.50 per diluted share, compared to net income of $15.4 million and net income attributable to The RMR Group Inc. of $6.7 million, or $0.41 per diluted share, for the three months ended June 30, 2020.
  • For the three months ended June 30, 2021, adjusted net income attributable to The RMR Group Inc. was $7.8 million, or $0.47 per diluted share, compared to $6.2 million, or $0.38 per diluted share, for the three months ended June 30, 2020. The adjustments to net income attributable to The RMR Group Inc. this quarter primarily included $0.5 million, or $0.03 per diluted share, of unrealized gains on the equity method investment accounted for under the fair value option.
  • For the three months ended June 30, 2021, Adjusted EBITDA was $24.4 million, Operating Margin was 45.9% and Adjusted EBITDA Margin was 51.1%, compared to Adjusted EBITDA of $19.6 million, Operating Margin of 38.6% and Adjusted EBITDA Margin of 47.1% for the three months ended June 30, 2020.
  • As of June 30, 2021, The RMR Group Inc. had $397.8 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 June 30, 2021 and 2020 are presented later in this press release.

Assets Under Management:

The calculation of AUM primarily includes: (i) the historical cost 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 carrying value of loans held for investment at 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 Friday, August 6, 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 third quarter ended June 30, 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 Friday, August 13, 2021. To access the replay, dial (412) 317-0088. The replay pass code is 10157598.

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 third quarter ended June 30, 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 over $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 June 30,

 

Nine Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

Revenues:

 

 

 

 

 

 

 

 

Management services (1)

 

$

44,376

 

 

 

$

38,625

 

 

 

$

125,365

 

 

 

$

129,221

 

 

Incentive business management fees

 

 

 

 

 

 

 

620

 

 

 

 

 

Advisory services

 

1,134

 

 

 

625

 

 

 

2,849

 

 

 

2,252

 

 

Total management and advisory services revenues

 

45,510

 

 

 

39,250

 

 

 

128,834

 

 

 

131,473

 

 

Reimbursable compensation and benefits

 

13,069

 

 

 

13,013

 

 

 

39,453

 

 

 

38,683

 

 

Reimbursable equity based compensation

 

1,402

 

 

 

736

 

 

 

5,611

 

 

 

1,394

 

 

Other reimbursable expenses

 

85,263

 

 

 

85,650

 

 

 

259,856

 

 

 

267,852

 

 

Total reimbursable costs

 

99,734

 

 

 

99,399

 

 

 

304,920

 

 

 

307,929

 

 

Total revenues

 

145,244

 

 

 

138,649

 

 

 

433,754

 

 

 

439,402

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Compensation and benefits

 

30,530

 

 

 

29,569

 

 

 

90,610

 

 

 

89,888

 

 

Equity based compensation

 

1,954

 

 

 

1,299

 

 

 

7,267

 

 

 

3,183

 

 

Separation costs

 

 

 

 

 

 

 

4,159

 

 

 

645

 

 

Total compensation and benefits expense

 

32,484

 

 

 

30,868

 

 

 

102,036

 

 

 

93,716

 

 

General and administrative

 

6,320

 

 

 

6,335

 

 

 

19,684

 

 

 

20,678

 

 

Other reimbursable expenses

 

85,263

 

 

 

85,650

 

 

 

259,856

 

 

 

267,852

 

 

Transaction and acquisition related costs

 

61

 

 

 

427

 

 

 

474

 

 

 

1,596

 

 

Depreciation and amortization

 

245

 

 

 

229

 

 

 

734

 

 

 

731

 

 

Total expenses

 

124,373

 

 

 

123,509

 

 

 

382,784

 

 

 

384,573

 

 

Operating income

 

20,871

 

 

 

15,140

 

 

 

50,970

 

 

 

54,829

 

 

Interest and other income

 

179

 

 

 

727

 

 

 

614

 

 

 

4,102

 

 

Equity in earnings of investees

 

28

 

 

 

458

 

 

 

755

 

 

 

1,037

 

 

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

 

1,312

 

 

 

1,678

 

 

 

6,032

 

 

 

916

 

 

Income before income tax expense

 

22,390

 

 

 

18,003

 

 

 

58,371

 

 

 

60,884

 

 

Income tax expense

 

(3,361

)

 

 

(2,608

)

 

 

(8,109

)

 

 

(8,944

)

 

Net income

 

19,029

 

 

 

15,395

 

 

 

50,262

 

 

 

51,940

 

 

Net income attributable to noncontrolling interest

 

(10,797

)

 

 

(8,678

)

 

 

(28,192

)

 

 

(29,306

)

 

Net income attributable to The RMR Group Inc.

 

$

8,232

 

 

 

$

6,717

 

 

 

$

22,070

 

 

 

$

22,634

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic (2)

 

16,269

 

 

 

16,198

 

 

 

16,259

 

 

 

16,187

 

 

Weighted average common shares outstanding - diluted (2)

 

31,308

 

 

 

31,198

 

 

 

31,271

 

 

 

31,187

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.50

 

 

 

$

0.41

 

 

 

$

1.35

 

 

 

$

1.39

 

 

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

 

$

0.50

 

 

 

$

0.41

 

 

 

$

1.31

 

 

 

$

1.37

 

 

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 June 30, 2021 and 2020, as applicable:

 

 

 

 

Lesser of Historical Cost of Assets

 

 

 

 

Under Management or

 

 

 

 

Total Market Capitalization (a)

 

 

 

 

As of June 30,

REIT

 

Primary Strategy

 

2021

 

2020

DHC

 

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

 

$

5,337,144

 

 

$

4,596,718

 

ILPT

 

Industrial and logistics properties

 

1,997,990

 

 

2,612,328

 

OPI

 

Office properties primarily leased to single tenants, including the government

 

3,962,573

 

 

3,474,277

 

SVC

 

Hotels and net lease service and necessity-based retail properties

 

9,277,211

 

 

7,400,127

 

 

 

 

 

$

20,574,918

 

 

$

18,083,450

 

(a)

The basis on which base business management fees are calculated for the three months ended June 30, 2021 and 2020 may differ from the basis at the end of the periods presented in the table above. As of June 30, 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 June 30, 2021, were $8,414,221, $6,151,466 and $12,287,857, respectively. For ILPT, the historical cost of assets under management were lower than its market capitalization of $2,601,308 as of June 30, 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 nine months ended June 30, 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 June 30,

 

Nine Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

Numerators:

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

 

$

8,232

 

 

 

$

6,717

 

 

 

$

22,070

 

 

 

$

22,634

 

 

Income attributable to unvested participating securities

 

(72

)

 

 

(48

)

 

 

(194

)

 

 

(166

)

 

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

 

8,160

 

 

 

6,669

 

 

 

21,876

 

 

 

22,468

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Add back: income attributable to unvested participating securities

 

72

 

 

 

48

 

 

 

194

 

 

 

166

 

 

Add back: net income attributable to noncontrolling interest

 

10,797

 

 

 

8,678

 

 

 

28,192

 

 

 

29,306

 

 

Add back: income tax expense

 

3,361

 

 

 

2,608

 

 

 

8,109

 

 

 

8,944

 

 

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

 

(6,686

)

 

 

(5,313

)

 

 

(17,346

)

 

 

(18,114

)

 

Net income used in calculating diluted EPS

 

$

15,704

 

 

 

$

12,690

 

 

 

$

41,025

 

 

 

$

42,770

 

 

 

 

 

 

 

 

 

 

 

Denominators:

 

 

 

 

 

 

 

 

Common shares outstanding

 

16,408

 

 

 

16,315

 

 

 

16,408

 

 

 

16,315

 

 

Unvested participating securities

 

(139

)

 

 

(117

)

 

 

(149

)

 

 

(128

)

 

Weighted average common shares outstanding - basic

 

16,269

 

 

 

16,198

 

 

 

16,259

 

 

 

16,187

 

 

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

 

39

 

 

 

 

 

 

12

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

31,308

 

 

 

31,198

 

 

 

31,271

 

 

 

31,187

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.50

 

 

 

$

0.41

 

 

 

$

1.35

 

 

 

$

1.39

 

 

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

 

$

0.50

 

 

 

$

0.41

 

 

 

$

1.31

 

 

 

$

1.37

 

 

(a)

Income tax expense assumes the hypothetical conversion of the noncontrolling interest, which results in estimated tax rates of 29.9% and 29.5% for the three months ended June 30, 2021 and 2020, respectively, and 29.7% and 29.8% for the nine months ended June 30, 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 June 30, 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 June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

 

$

8,232

 

 

 

$

10,797

 

 

 

$

3,361

 

 

 

$

22,390

 

 

 

$

(6,686

)

 

 

$

15,704

 

 

 

31,308

 

 

$

0.50

 

 

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

 

(488

)

 

 

(627

)

 

 

(197

)

 

 

(1,312

)

 

 

392

 

 

 

(920

)

 

 

31,308

 

 

(0.03

)

 

Transaction and acquisition related costs

 

23

 

 

 

29

 

 

 

9

 

 

 

61

 

 

 

(18

)

 

 

43

 

 

 

31,308

 

 

 

 

Adjusted net income attributable to The RMR Group Inc.

 

$

7,767

 

 

 

$

10,199

 

 

 

$

3,173

 

 

 

$

21,139

 

 

 

$

(6,312

)

 

 

$

14,827

 

 

 

31,308

 

 

$

0.47

 

 

Three Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

 

$

6,717

 

 

 

$

8,678

 

 

 

$

2,608

 

 

 

$

18,003

 

 

 

$

(5,313

)

 

 

$

12,690

 

 

 

31,198

 

 

$

0.41

 

 

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

 

(631

)

 

 

(804

)

 

 

(243

)

 

 

(1,678

)

 

 

495

 

 

 

(1,183

)

 

 

31,198

 

 

(0.04

)

 

Transaction and acquisition related costs

 

160

 

 

 

205

 

 

 

62

 

 

 

427

 

 

 

(126

)

 

 

301

 

 

 

31,198

 

 

0.01

 

 

Adjusted net income attributable to The RMR Group Inc.

 

$

6,246

 

 

 

$

8,079

 

 

 

$

2,427

 

 

 

$

16,752

 

 

 

$

(4,944

)

 

 

$

11,808

 

 

 

31,198

 

 

$

0.38

 

 

(1)

Estimated income tax expense assumes the hypothetical conversion of the noncontrolling interest and the resulting consolidated entities’ estimated tax rate of approximately 29.9% and 29.5% for the three months ended June 30, 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 June 30,

 

Nine Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Reconciliation of EBITDA and Adjusted EBITDA from net income:

 

 

 

 

 

 

 

Net income

$

19,029

 

 

 

$

15,395

 

 

 

$

50,262

 

 

 

$

51,940

 

Income tax expense

3,361

 

 

 

2,608

 

 

 

8,109

 

 

 

8,944

 

Depreciation and amortization

245

 

 

 

229

 

 

 

734

 

 

 

731

 

EBITDA

22,635

 

 

 

18,232

 

 

 

59,105

 

 

 

61,615

 

Other asset amortization

2,354

 

 

 

2,354

 

 

 

7,062

 

 

 

7,062

 

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

552

 

 

 

658

 

 

 

2,427

 

 

 

2,353

 

Separation costs

 

 

 

 

 

 

4,159

 

 

 

645

 

Transaction and acquisition related costs

61

 

 

 

427

 

 

 

474

 

 

 

1,596

 

Straight line office rent

13

 

 

 

52

 

 

 

60

 

 

 

124

 

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

(1,312

)

 

 

(1,678

)

 

 

(6,032

)

 

 

(916

)

Equity in earnings of investees

(28

)

 

 

(458

)

 

 

(755

)

 

 

(1,037

)

Distributions from equity method investment

160

 

 

 

16

 

 

 

1,024

 

 

 

721

 

Incentive business management fees earned

 

 

 

 

 

 

(620

)

 

 

 

Certain other net adjustments

 

 

 

 

 

 

 

 

 

(13

)

Adjusted EBITDA

$

24,435

 

 

 

$

19,603

 

 

 

$

66,904

 

 

 

$

72,150

 

 

Calculation of Operating Margin:

 

 

 

 

 

 

 

Total management and advisory services revenues

$

45,510

 

 

 

$

39,250

 

 

 

$

128,834

 

 

 

$

131,473

 

 

Operating income

$

20,871

 

 

 

$

15,140

 

 

 

$

50,970

 

 

 

$

54,829

 

 

Operating Margin

45.9

 

%

 

38.6

 

%

 

39.6

 

%

 

41.7

 

%

 

Calculation of Adjusted EBITDA Margin:

 

 

 

 

 

 

 

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

$

47,864

 

 

 

$

41,604

 

 

 

$

135,276

 

 

 

$

138,535

 

 

Adjusted EBITDA

$

24,435

 

 

 

$

19,603

 

 

 

$

66,904

 

 

 

$

72,150

 

 

Adjusted EBITDA Margin

51.1

 

%

 

47.1

 

%

 

49.5

 

%

 

52.1

 

%

 

Calculation of Adjusted EBITDA less Cash Tax Obligation:

 

 

 

 

 

 

 

Adjusted EBITDA

$

24,435

 

 

 

$

19,603

 

 

 

$

66,904

 

 

 

$

72,150

 

Less: Tax distributions to members (4)

(7,775

)

 

 

(6,270

)

 

 

(23,201

)

 

 

(23,062

)

Adjusted EBITDA less Cash Tax Obligation

$

16,660

 

 

 

$

13,333

 

 

 

$

43,703

 

 

 

$

49,088

 

Common share distributions

$

10,737

 

 

 

$

10,700

 

 

 

$

32,197

 

 

 

$

32,089

 

(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 June 30, 2021 and 2020, or $7,062 for each of the nine months ended June 30, 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 nine months ended June 30, 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 nine months ended June 30, 2021 and 2020, RMR LLC made required quarterly tax distributions as follows:

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

RMR LLC tax distributions to The RMR Group Inc.

 

$

4,180

 

 

$

3,321

 

 

$

12,327

 

 

$

12,127

 

RMR LLC tax distributions to non-controlling interest

 

3,595

 

 

2,949

 

 

10,874

 

 

10,935

 

Total RMR LLC tax distributions to members

 

$

7,775

 

 

$

6,270

 

 

$

23,201

 

 

$

23,062

 

 

The RMR Group Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 

 

June 30,

 

September 30,

 

 

2021

 

2020

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

397,801

 

 

 

$

369,663

 

 

Due from related parties

 

87,619

 

 

 

82,605

 

 

Prepaid and other current assets

 

5,467

 

 

 

3,877

 

 

Total current assets

 

490,887

 

 

 

456,145

 

 

 

 

 

 

 

Property and equipment, net

 

2,303

 

 

 

2,299

 

 

Due from related parties, net of current portion

 

11,902

 

 

 

7,764

 

 

Equity method investment

 

7,198

 

 

 

7,467

 

 

Equity method investment accounted for under the fair value option

 

18,184

 

 

 

12,152

 

 

Goodwill and intangible assets, net of amortization

 

2,104

 

 

 

2,136

 

 

Operating lease right of use assets

 

33,429

 

 

 

34,663

 

 

Deferred tax asset

 

21,917

 

 

 

23,900

 

 

Other assets, net of amortization

 

136,665

 

 

 

143,727

 

 

Total assets

 

$

724,589

 

 

 

$

690,253

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Other reimbursable expenses

 

$

61,730

 

 

 

$

56,079

 

 

Accounts payable and accrued expenses

 

35,713

 

 

 

16,984

 

 

Operating lease liabilities

 

4,868

 

 

 

4,407

 

 

Employer compensation liability

 

1,440

 

 

 

4,298

 

 

Total current liabilities

 

103,751

 

 

 

81,768

 

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

30,395

 

 

 

32,030

 

 

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

 

27,789

 

 

 

27,789

 

 

Employer compensation liability, net of current portion

 

11,902

 

 

 

7,764

 

 

Total liabilities

 

173,837

 

 

 

149,351

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,407,933 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

 

109,281

 

 

 

106,622

 

 

Retained earnings

 

308,319

 

 

 

286,249

 

 

Cumulative common distributions

 

(115,680

)

 

 

(96,983

)

 

Total shareholders’ equity

 

301,951

 

 

 

295,919

 

 

Noncontrolling interest

 

248,801

 

 

 

244,983

 

 

Total equity

 

550,752

 

 

 

540,902

 

 

Total liabilities and equity

 

$

724,589

 

 

 

$

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 this quarter, management and advisory services revenues were $45.5 million, an increase of 16% from the same time last year, when the pandemic was having its most severe impacts on The RMR Group Inc.’s clients. Mr. Portnoy also states that this quarter’s results saw significant increases in earnings per share, cash flows and EBITDA margins, reflecting post pandemic tailwinds across many of the sectors The RMR Group Inc. operates in. More specifically, he states that this quarter saw meaningful increases in the enterprise values at the Managed Equity REITs, solid operating results at Sonesta, as travel volumes increased across the country, and a strong quarter from both fuel and non-fuel revenues at TravelCenters of America. These statements may imply that The RMR Group Inc. will continue to earn increased management and advisory services revenues, earnings per share, cash flows and EBITDA margin in the future. However, The RMR Group Inc.’s and its clients’ 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 economic conditions could deteriorate for a prolonged period and negatively impact The RMR Group Inc’s and its clients’ businesses operating and financial results;
  • Mr. Portnoy states that The RMR Group Inc. remains optimistic that it may begin earning incentive fees this calendar year, as Office Properties Income Trust’s potential 2021 incentive fee increased by $1.4 million to $22.2 million, based on its total return per share out-performance relative to its peers through June. 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; and
  • Mr. Portnoy states that The RMR Group Inc. remains well positioned to pursue numerous capital allocation strategies, including the return of shareholder capital. These statements may imply that The RMR Group Inc. will successfully identify and execute one or more capital allocation strategies, including that it will return capital to shareholders, and that any capital allocation strategy it may pursue will be successful and benefit it and its shareholders. However, identifying and executing on capital allocation strategies are subject to various uncertainties and risks and may take an extended period to realize any resulting benefit to its business. In addition, RMR may elect to not pursue a capital allocation strategy, including returning shareholder capital, or abandon any such strategy 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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