05/04/2022

The RMR Group Inc. Announces Second Quarter Fiscal 2022 Results

Net Income of $0.39 Per Diluted Share, a 30% Increase from Last Year

Adjusted Net Income of $0.50 Per Diluted Share, a 35% Increase from Last Year

$37.7 Billion in Total AUM, with Managed Private Real Estate Capital AUM Increasing to $3.9 Billion

NEWTON, Mass.--(BUSINESS WIRE)-- The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended March 31, 2022.

Adam Portnoy, President and Chief Executive Officer, made the following statement regarding the second quarter fiscal 2022 results:

“For the second fiscal quarter, RMR reported management and advisory services revenue of $49.3 million, a 17% increase from last year, reflecting early success in growing our private capital business and the execution of strategic growth and repositioning strategies at our Managed REITs. Similarly, Net income, Adjusted net income and Adjusted EBITDA all were in line with our second quarter guidance and each measure exceeded prior year results by at least 22%, fueled primarily by the successful integration of ILPT’s acquisition of Monmouth Real Estate Investment Corporation.

During the quarter, DHC closed on a $703 million joint venture with two global institutional investors, increasing RMR’s managed private real estate capital AUM to $3.9 billion. We believe this growth not only showcases our ability to expand our AUM through private capital transactions, but also highlights RMR’s alignment with our clients’ shareholders by expanding their access to capital.

With over $181 million of cash and no debt, we remain well positioned to continue pursuing a range of capital allocation strategies.”

Second Quarter Fiscal 2022 Highlights:

  • The RMR Group LLC’s assets under management, or AUM, and management and advisory services revenue by source are as follows (dollars in thousands):

 

 

 

 

Total Management

 

 

 

 

and Advisory

 

 

AUM

 

Services Revenues (4)

For the Three Months Ended March 31, 2022

 

Managed Public Real Estate Capital (1)

 

$

31,725,815

 

84.2

%

 

$

38,008

 

77.1

%

Managed Private Real Estate Capital (2)

 

 

3,870,292

 

10.3

%

 

 

4,820

 

9.8

%

Managed Operating Companies (3)

 

 

2,069,957

 

5.5

%

 

 

6,460

 

13.1

%

Total

 

$

37,666,064

 

100.0

%

 

$

49,288

 

100.0

%

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2021

 

Managed Public Real Estate Capital (1)

 

$

28,689,804

 

89.8

%

 

$

34,483

 

82.1

%

Managed Private Real Estate Capital (2)

 

 

1,335,050

 

4.2

%

 

 

2,134

 

5.1

%

Managed Operating Companies (3)

 

 

1,929,605

 

6.0

%

 

 

5,374

 

12.8

%

Total

 

$

31,954,459

 

100.0

%

 

$

41,991

 

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 Seven Hills Realty Trust (SEVN) and, until its merger with and into SEVN on September 30, 2021, Tremont Mortgage Trust (TRMT).

(2)

Managed Private Real Estate Capital primarily consists of private entities that own commercial real estate. Some of the Managed Equity REITs own minority interests in those entities.

(3)

Managed Operating Companies include: AlerisLife Inc. (ALR), Sonesta International Hotels Corporation (Sonesta) and TravelCenters of America Inc. (TA).

(4)

Includes construction supervision fees of $3,794 and $1,327 for the three months ended March 31, 2022 and 2021, respectively.

  • For the three months ended March 31, 2022, net income was $14.6 million and net income attributable to The RMR Group Inc. was $6.4 million, or $0.39 per diluted share, compared to net income of $11.5 million and net income attributable to The RMR Group Inc. of $4.9 million, or $0.30 per diluted share, for the three months ended March 31, 2021.
  • For the three months ended March 31, 2022, adjusted net income attributable to The RMR Group Inc. was $8.2 million, or $0.50 per diluted share, compared to $6.1 million, or $0.37 per diluted share, for the three months ended March 31, 2021. The adjustments to net income attributable to The RMR Group Inc. this quarter included $1.7 million, or $0.10 per diluted share, of unrealized losses on our equity method investments in SEVN and TA and $0.1 million, or $0.01 per diluted share, of separation costs.
  • For the three months ended March 31, 2022, Adjusted EBITDA was $25.7 million, Net Income Margin was 29.6% and Adjusted EBITDA Margin was 49.8%, compared to Adjusted EBITDA of $21.0 million, Net Income Margin of 27.3% and Adjusted EBITDA Margin of 48.1% for the three months ended March 31, 2021.
  • As of March 31, 2022, The RMR Group Inc. had $181.7 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., Adjusted net income attributable to The RMR Group Inc. per diluted share, 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 adjusted net income attributable to The RMR Group Inc. per diluted share is net income attributable to The RMR Group Inc. per diluted share. 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 Net Income Margin, which represents net 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., net income attributable to The RMR Group Inc. per diluted share determined in accordance with GAAP to adjusted net income attributable to The RMR Group Inc. per diluted share, and of net income to EBITDA and Adjusted EBITDA, as well as calculations of Net Income Margin, Adjusted EBITDA Margin and Adjusted EBITDA less Cash Tax Obligation for each of the three months ended March 31, 2022 and 2021 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 SEVN. Upon deconsolidation from a Managed Equity REIT, the respective real estate and related assets are characterized as Managed Private Real Estate Capital and their historical cost represents the fair value of the real estate at the time of deconsolidation.

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, 2021, 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 Thursday, May 5, 2022 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, 2022 financial results.

The conference call telephone number is (877) 270-2148. Participants calling from outside the United States and Canada should dial (412) 902-6510. 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, May 12, 2022. To access the replay, dial (412) 317-0088. The replay pass code is 7287848.

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, 2022 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 (Nasdaq: 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 nearly 600 real estate professionals in over 30 offices nationwide who manage over $37 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,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Management services (1)

 

$

48,151

 

 

$

40,242

 

 

$

93,048

 

 

$

80,989

 

Incentive business management fees

 

 

 

 

 

620

 

 

 

 

 

 

620

 

Advisory services

 

 

1,137

 

 

 

1,129

 

 

 

2,255

 

 

 

1,715

 

Total management and advisory services revenues

 

 

49,288

 

 

 

41,991

 

 

 

95,303

 

 

 

83,324

 

Reimbursable compensation and benefits

 

 

13,506

 

 

 

13,159

 

 

 

27,903

 

 

 

26,384

 

Reimbursable equity based compensation

 

 

1,367

 

 

 

1,206

 

 

 

2,965

 

 

 

4,209

 

Other reimbursable expenses

 

 

133,493

 

 

 

75,208

 

 

 

253,051

 

 

 

174,593

 

Total reimbursable costs

 

 

148,366

 

 

 

89,573

 

 

 

283,919

 

 

 

205,186

 

Total revenues

 

 

197,654

 

 

 

131,564

 

 

 

379,222

 

 

 

288,510

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

31,710

 

 

 

30,586

 

 

 

63,501

 

 

 

60,080

 

Equity based compensation

 

 

1,988

 

 

 

1,752

 

 

 

4,207

 

 

 

5,313

 

Separation costs

 

 

217

 

 

 

 

 

 

217

 

 

 

4,159

 

Total compensation and benefits expense

 

 

33,915

 

 

 

32,338

 

 

 

67,925

 

 

 

69,552

 

General and administrative

 

 

8,470

 

 

 

7,104

 

 

 

16,141

 

 

 

13,364

 

Other reimbursable expenses

 

 

133,493

 

 

 

75,208

 

 

 

253,051

 

 

 

174,593

 

Transaction and acquisition related costs

 

 

 

 

 

296

 

 

 

 

 

 

413

 

Depreciation and amortization

 

 

242

 

 

 

251

 

 

 

478

 

 

 

489

 

Total expenses

 

 

176,120

 

 

 

115,197

 

 

 

337,595

 

 

 

258,411

 

Operating income

 

 

21,534

 

 

 

16,367

 

 

 

41,627

 

 

 

30,099

 

Interest and other income

 

 

66

 

 

 

204

 

 

 

123

 

 

 

435

 

Equity in earnings of investees

 

 

 

 

 

303

 

 

 

 

 

 

727

 

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

 

 

(4,560

)

 

 

(3,402

)

 

 

(3,364

)

 

 

4,720

 

Income before income tax expense

 

 

17,040

 

 

 

13,472

 

 

 

38,386

 

 

 

35,981

 

Income tax expense

 

 

(2,451

)

 

 

(1,992

)

 

 

(5,505

)

 

 

(4,748

)

Net income

 

 

14,589

 

 

 

11,480

 

 

 

32,881

 

 

 

31,233

 

Net income attributable to noncontrolling interest

 

 

(8,197

)

 

 

(6,539

)

 

 

(18,447

)

 

 

(17,395

)

Net income attributable to The RMR Group Inc.

 

$

6,392

 

 

$

4,941

 

 

$

14,434

 

 

$

13,838

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic (2)

 

 

16,329

 

 

 

16,256

 

 

 

16,327

 

 

 

16,254

 

Weighted average common shares outstanding - diluted (2)

 

 

31,331

 

 

 

31,280

 

 

 

31,328

 

 

 

31,254

 

 

 

 

 

 

 

 

 

 

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

 

$

0.39

 

 

$

0.30

 

 

$

0.88

 

 

$

0.84

 

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

 

$

0.39

 

 

$

0.30

 

 

$

0.88

 

 

$

0.81

 

Substantially all revenues are earned from related parties. See Notes beginning on page 6.

The RMR Group Inc.
Notes to Condensed Consolidated Statements of Income
(dollars in thousands)
(unaudited)

(1)

Includes base 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, 2022 and 2021, as applicable:

 

 

 

 

Lesser of Historical Cost of Assets

 

 

 

 

Under Management or

 

 

 

 

Total Market Capitalization (a)

 

 

 

 

As of March 31,

REIT

 

Primary Strategy

 

2022

 

2021

DHC

 

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

 

$

4,383,059

 

$

5,780,436

ILPT

 

Industrial and logistics properties

 

 

5,632,464

 

 

1,963,244

OPI

 

Office properties primarily leased to single tenants, including the government

 

 

3,855,970

 

 

3,571,910

SVC

 

Hotels and net lease service and necessity-based retail properties

 

 

8,657,762

 

 

9,154,813

 

 

 

 

$

22,529,255

 

$

20,470,403

(a)

The basis on which base business management fees are calculated for the three months ended March 31, 2022 and 2021 may differ from the basis at the end of the periods presented in the table above. As of March 31, 2022, 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, 2022, were $7,120,120, $6,111,024 and $12,276,681, respectively. For ILPT, the historical cost of assets under management were lower than its market capitalization of $5,939,517 as of March 31, 2022.

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, 2022 and 2021, 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,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Numerators:

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

 

$

6,392

 

 

$

4,941

 

 

$

14,434

 

 

$

13,838

 

Income attributable to unvested participating securities

 

 

(62

)

 

 

(44

)

 

 

(140

)

 

 

(121

)

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

 

 

6,330

 

 

 

4,897

 

 

 

14,294

 

 

 

13,717

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Add back: income attributable to unvested participating securities

 

 

62

 

 

 

44

 

 

 

140

 

 

 

121

 

Add back: net income attributable to noncontrolling interest

 

 

8,197

 

 

 

6,539

 

 

 

18,447

 

 

 

17,395

 

Add back: income tax expense

 

 

2,451

 

 

 

1,992

 

 

 

5,505

 

 

 

4,748

 

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

 

 

(4,894

)

 

 

(4,113

)

 

 

(10,909

)

 

 

(10,547

)

Net income used in calculating diluted EPS

 

$

12,146

 

 

$

9,359

 

 

$

27,477

 

 

$

25,434

 

 

 

 

 

 

 

 

 

 

Denominators:

 

 

 

 

 

 

 

 

Common shares outstanding

 

 

16,502

 

 

 

16,413

 

 

 

16,502

 

 

 

16,413

 

Unvested participating securities

 

 

(173

)

 

 

(157

)

 

 

(175

)

 

 

(159

)

Weighted average common shares outstanding - basic

 

 

16,329

 

 

 

16,256

 

 

 

16,327

 

 

 

16,254

 

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

 

 

2

 

 

 

24

 

 

 

1

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

31,331

 

 

 

31,280

 

 

 

31,328

 

 

 

31,254

 

 

 

 

 

 

 

 

 

 

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

 

$

0.39

 

 

$

0.30

 

 

$

0.88

 

 

$

0.84

 

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

 

$

0.39

 

 

$

0.30

 

 

$

0.88

 

 

$

0.81

 

(a)

Income tax expense assumes the hypothetical conversion of the noncontrolling interest, which results in estimated tax rates of 28.7% and 30.5% for the three months ended March 31, 2022 and 2021, respectively, and 28.4% and 29.3% for the six months ended March 31, 2022 and 2021, 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, 2022 and 2021 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., net income attributable to The RMR Group Inc. per diluted share and operating income as presented in The RMR Group Inc.’s condensed consolidated statements of income.

The following tables present the impact of certain individually significant items on the financial results for the three months ended March 31, 2022 and 2021, assuming the redemption of the noncontrolling interest’s 15,000 Class A Units is dilutive to earnings per share as presented in Note 2 on page 7:

 

 

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, 2022:

 

Net income attributable to The RMR Group Inc.

 

$

6,392

 

 

$

8,197

 

 

$

2,451

 

 

$

17,040

 

 

$

(4,894

)

 

$

12,146

 

 

31,331

 

$

0.39

 

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

 

 

1,733

 

 

 

2,171

 

 

 

656

 

 

 

4,560

 

 

 

(1,310

)

 

 

3,250

 

 

31,331

 

 

0.10

 

Separation costs

 

 

83

 

 

 

103

 

 

 

31

 

 

 

217

 

 

 

(62

)

 

 

155

 

 

31,331

 

 

0.01

 

Adjusted net income attributable to The RMR Group Inc.

 

$

8,208

 

 

$

10,471

 

 

$

3,138

 

 

$

21,817

 

 

$

(6,266

)

 

$

15,551

 

 

31,331

 

$

0.50

 

 

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

 

(1)

Estimated income tax expense assumes the hypothetical conversion of the noncontrolling interest and the resulting consolidated entities’ estimated tax rate of approximately 28.7% and 30.5% for the three months ended March 31, 2022 and 2021, respectively.

 

The RMR Group Inc.

Reconciliation of EBITDA and Adjusted EBITDA from Net Income

and Calculation of Net Income 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,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Reconciliation of EBITDA and Adjusted EBITDA from net income:

 

 

 

 

Net income

$

14,589

 

 

$

11,480

 

 

$

32,881

 

 

$

31,233

 

Income tax expense

 

2,451

 

 

 

1,992

 

 

 

5,505

 

 

 

4,748

 

Depreciation and amortization

 

242

 

 

 

251

 

 

 

478

 

 

 

489

 

EBITDA

 

17,282

 

 

 

13,723

 

 

 

38,864

 

 

 

36,470

 

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

 

1,168

 

 

 

1,317

 

 

 

1,789

 

 

 

1,875

 

Separation costs

 

217

 

 

 

 

 

 

217

 

 

 

4,159

 

Transaction and acquisition related costs

 

 

 

 

296

 

 

 

 

 

 

413

 

Straight line office rent

 

(85

)

 

 

32

 

 

 

(151

)

 

 

47

 

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

 

4,560

 

 

 

3,402

 

 

 

3,364

 

 

 

(4,720

)

Equity in earnings of investees

 

 

 

 

(303

)

 

 

 

 

 

(727

)

Distributions from equity method investments

 

208

 

 

 

847

 

 

 

208

 

 

 

864

 

Incentive business management fees earned

 

 

 

 

(620

)

 

 

 

 

 

(620

)

Adjusted EBITDA

$

25,704

 

 

$

21,048

 

 

$

48,999

 

 

$

42,469

 

 

Calculation of Net Income Margin:

 

 

 

 

 

 

 

Total management and advisory services revenues

$

49,288

 

 

$

41,991

 

 

$

95,303

 

 

$

83,324

 

Net income

$

14,589

 

 

$

11,480

 

 

$

32,881

 

 

$

31,233

 

Net Income Margin

 

29.6

%

 

 

27.3

%

 

 

34.5

%

 

 

37.5

%

 

Calculation of Adjusted EBITDA Margin:

 

 

 

 

 

 

 

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

$

51,642

 

 

$

43,725

 

 

$

100,011

 

 

$

87,412

 

Adjusted EBITDA

$

25,704

 

 

$

21,048

 

 

$

48,999

 

 

$

42,469

 

Adjusted EBITDA Margin

 

49.8

%

 

 

48.1

%

 

 

49.0

%

 

 

48.6

%

 

Calculation of Adjusted EBITDA less Cash Tax Obligation:

 

 

 

 

 

 

 

Adjusted EBITDA

$

25,704

 

 

$

21,048

 

 

$

48,999

 

 

$

42,469

 

Less: Tax distributions to members (4)

 

(9,028

)

 

 

(9,571

)

 

 

(13,186

)

 

 

(15,426

)

Adjusted EBITDA less Cash Tax Obligation

$

16,676

 

 

$

11,477

 

 

$

35,813

 

 

$

27,043

 

Common share distributions

$

10,765

 

 

$

10,730

 

 

$

21,529

 

 

$

21,460

 

(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 net income 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. or net income 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, 2022 and 2021, or $4,708 for each of the six months ended March 31, 2022 and 2021, 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, 2022 and 2021, RMR LLC made required quarterly tax distributions as follows:

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2022

 

2021

 

2022

 

2021

RMR LLC tax distributions to The RMR Group Inc.

 

$

4,751

 

$

5,112

 

$

6,930

 

$

8,147

RMR LLC tax distributions to non-controlling interest

 

 

4,277

 

 

4,459

 

 

6,256

 

 

7,279

Total RMR LLC tax distributions to members

 

$

9,028

 

$

9,571

 

$

13,186

 

$

15,426

The RMR Group Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

March 31,

 

September 30,

 

 

2022

 

2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

181,740

 

 

$

159,835

 

Due from related parties

 

 

96,212

 

 

 

88,661

 

Prepaid and other current assets

 

 

6,051

 

 

 

6,021

 

Total current assets

 

 

284,003

 

 

 

254,517

 

 

 

 

 

 

Property and equipment, net

 

 

2,604

 

 

 

2,218

 

Due from related parties, net of current portion

 

 

25,244

 

 

 

14,331

 

Equity method investments accounted for under the fair value option

 

 

35,904

 

 

 

39,476

 

Goodwill and intangible assets, net of amortization

 

 

2,075

 

 

 

2,094

 

Operating lease right of use assets

 

 

30,752

 

 

 

32,293

 

Deferred tax asset

 

 

18,394

 

 

 

18,671

 

Other assets, net of amortization

 

 

129,603

 

 

 

134,311

 

Total assets

 

$

528,579

 

 

$

497,911

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Reimbursable accounts payable and accrued expenses

 

$

64,897

 

 

$

55,115

 

Accounts payable and accrued expenses

 

 

22,528

 

 

 

15,027

 

Operating lease liabilities

 

 

5,066

 

 

 

4,922

 

Employer compensation liability

 

 

3,386

 

 

 

6,076

 

Total current liabilities

 

 

95,877

 

 

 

81,140

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

 

27,312

 

 

 

29,148

 

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

 

 

25,577

 

 

 

25,577

 

Employer compensation liability, net of current portion

 

 

25,244

 

 

 

14,331

 

Total liabilities

 

 

174,010

 

 

 

150,196

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,501,536 and 15,485,236 shares issued and outstanding, respectively

 

 

16

 

 

 

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

 

 

111,667

 

 

 

109,910

 

Retained earnings

 

 

336,379

 

 

 

321,945

 

Cumulative common distributions

 

 

(249,295

)

 

 

(236,766

)

Total shareholders’ equity

 

 

198,783

 

 

 

195,120

 

Noncontrolling interest

 

 

155,786

 

 

 

152,595

 

Total equity

 

 

354,569

 

 

 

347,715

 

Total liabilities and equity

 

$

528,579

 

 

$

497,911

 

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 for the second fiscal quarter, management and advisory services revenues of $49.3 million increased 17% from last year, reflecting early success in growing The RMR Group Inc.’s private capital business and the execution of strategic growth and repositioning strategies at the Managed REITs. Mr. Portnoy also states that similarly, net income, adjusted net income and Adjusted EBITDA all were in line with second quarter guidance and each measure exceeded prior year results by at least 22%, fueled primarily by the successful integration of ILPT’s acquisition of Monmouth Real Estate Investment Corporation. These statements may imply that The RMR Group Inc. will continue to earn increased management and advisory services revenues, net income, adjusted net income and Adjusted EBITDA 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, including as a result of inflation, for a prolonged period and negatively impact The RMR Group Inc.’s and its clients’ businesses operating and financial results;
  • Mr. Portnoy states that during the quarter, DHC closed on a $703 million joint venture with two global institutional investors, increasing The RMR Group Inc.’s managed private real estate capital AUM to $3.9 billion. In addition, Mr. Portnoy also states that he believes this growth not only showcases The RMR Group Inc.’s ability to expand its AUM through private capital transactions, but also highlights The RMR Group Inc.’s alignment with its clients’ shareholders by expanding their access to capital. These statements may imply that the DHC joint venture will be successful and that it will benefit DHC and The RMR Group Inc. as a result. However, this transaction may not be successful and the fees earned from clients may decline or not meet expectations as a result. In addition, The RMR Group Inc. may not succeed in expanding its AUM through private transactions in the future and any such expansion may not realize the benefits to it and its clients; and
  • Mr. Portnoy states that The RMR Group Inc. has over $181 million of cash and no debt, and that it remains well positioned to continue pursuing a range of capital allocation strategies. This statement may imply that The RMR Group Inc. will successfully identify and execute one or more capital allocation strategies 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 it may take an extended period of time to realize any benefits. In addition, The RMR Group Inc. may elect to not continue pursuing a capital allocation strategy 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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