08/04/2022

The RMR Group Inc. Announces Third Quarter Fiscal 2022 Results

Net Income of $17.3 Million, or $0.46 Per Diluted Share, both an 18% Sequential Quarter Increase

Adjusted Net Income of $0.59 Per Diluted Share, an 18% Sequential Quarter Increase

Adjusted EBITDA of $29.4 Million, a 14% Sequential Quarter Increase

NEWTON, Mass.--(BUSINESS WIRE)-- The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended June 30, 2022.

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

“For the third fiscal quarter, RMR reported management and advisory services revenues of $53.0 million, a 16% increase from last year and a 7% sequential quarter increase, primarily driven by the increase in assets under management, growth in construction management revenues and increases in management fees from some of our Managed Operating Companies. Despite inflationary and geopolitical headwinds, we generated $17.3 million of Net Income, or a 32.6% Net Income Margin, and $29.4 million of Adjusted EBITDA, or a 53.1% Adjusted EBITDA Margin. We believe these results continue to reflect the benefits of RMR’s operating leverage, our diverse client base and our overall fee durability.

Our dividend remains well covered, and with almost $196 million of cash and no debt, we remain well positioned to continue pursuing a range of capital allocation strategies to advance continued long term growth.”

Third 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)

 

As of or for the Three Months Ended June 30, 2022

 

Managed Public Real Estate Capital (1)

 

$

30,918,739

 

83.0%

 

$

39,509

 

74.6%

 

Managed Private Real Estate Capital (2)

 

 

3,856,386

 

10.4%

 

 

5,276

 

10.0%

 

Managed Operating Companies (3)

 

 

2,470,780

 

6.6%

 

 

8,171

 

15.4%

 

Total

 

$

37,245,905

 

100.0%

 

$

52,956

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

As of or for the Three Months Ended June 30, 2021

 

Managed Public Real Estate Capital (1)

 

$

29,240,087

 

89.9%

 

$

36,396

 

80.0%

 

Managed Private Real Estate Capital (2)

 

 

1,336,872

 

4.1%

 

 

2,138

 

4.7%

 

Managed Operating Companies (3)

 

 

1,950,830

 

6.0%

 

 

6,976

 

15.3%

 

Total

 

$

32,527,789

 

100.0%

 

$

45,510

 

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 $4,596 and $2,178 for the three months ended June 30, 2022 and 2021, respectively.

  • For the three months ended June 30, 2022, net income was $17.3 million and net income attributable to The RMR Group Inc. was $7.6 million, or $0.46 per diluted share, compared to net income of $19.0 million and net income attributable to The RMR Group Inc. of $8.2 million, or $0.50 per diluted share, for the three months ended June 30, 2021.
  • For the three months ended June 30, 2022, adjusted net income attributable to The RMR Group Inc. was $9.8 million, or $0.59 per diluted share, compared to $7.8 million, or $0.47 per diluted share, for the three months ended June 30, 2021. The adjustments to net income attributable to The RMR Group Inc. this quarter included $2.1 million, or $0.12 per diluted share, of unrealized losses on its equity method investments in SEVN and TA and $0.2 million, or $0.01 per diluted share, of separation costs.
  • For the three months ended June 30, 2022, Adjusted EBITDA was $29.4 million, Net Income Margin was 32.6% and Adjusted EBITDA Margin was 53.1%, compared to Adjusted EBITDA of $24.4 million, Net Income Margin of 41.8% and Adjusted EBITDA Margin of 51.1% for the three months ended June 30, 2021.
  • As of June 30, 2022, The RMR Group Inc. had $195.9 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 June 30, 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 Friday, August 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 third quarter ended June 30, 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 Friday, August 12, 2022. To access the replay, dial (412) 317-0088. The replay pass code is 9494221.

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, 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 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 approximately 600 real estate professionals in more than 30 offices nationwide who manage over $37 billion in assets under management and leverage more than 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,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Management services (1)

 

$

51,819

 

 

$

44,376

 

 

$

144,867

 

 

$

125,365

 

Incentive business management fees

 

 

 

 

 

 

 

 

 

 

 

620

 

Advisory services

 

 

1,137

 

 

 

1,134

 

 

 

3,392

 

 

 

2,849

 

Total management and advisory services revenues

 

 

52,956

 

 

 

45,510

 

 

 

148,259

 

 

 

128,834

 

Reimbursable compensation and benefits

 

 

14,189

 

 

 

13,069

 

 

 

42,092

 

 

 

39,453

 

Reimbursable equity based compensation

 

 

(69

)

 

 

1,402

 

 

 

2,896

 

 

 

5,611

 

Other reimbursable expenses

 

 

144,012

 

 

 

85,263

 

 

 

397,063

 

 

 

259,856

 

Total reimbursable costs

 

 

158,132

 

 

 

99,734

 

 

 

442,051

 

 

 

304,920

 

Total revenues

 

 

211,088

 

 

 

145,244

 

 

 

590,310

 

 

 

433,754

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

32,170

 

 

 

30,530

 

 

 

95,671

 

 

 

90,610

 

Equity based compensation

 

 

512

 

 

 

1,954

 

 

 

4,719

 

 

 

7,267

 

Separation costs

 

 

400

 

 

 

 

 

 

617

 

 

 

4,159

 

Total compensation and benefits expense

 

 

33,082

 

 

 

32,484

 

 

 

101,007

 

 

 

102,036

 

General and administrative

 

 

8,323

 

 

 

6,320

 

 

 

24,464

 

 

 

19,684

 

Other reimbursable expenses

 

 

144,012

 

 

 

85,263

 

 

 

397,063

 

 

 

259,856

 

Transaction and acquisition related costs

 

 

 

 

 

61

 

 

 

 

 

 

474

 

Depreciation and amortization

 

 

253

 

 

 

245

 

 

 

731

 

 

 

734

 

Total expenses

 

 

185,670

 

 

 

124,373

 

 

 

523,265

 

 

 

382,784

 

Operating income

 

 

25,418

 

 

 

20,871

 

 

 

67,045

 

 

 

50,970

 

Interest and other income

 

 

279

 

 

 

179

 

 

 

402

 

 

 

614

 

Equity in earnings of investees

 

 

 

 

 

28

 

 

 

 

 

 

755

 

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

 

 

(5,489

)

 

 

1,312

 

 

 

(8,853

)

 

 

6,032

 

Income before income tax expense

 

 

20,208

 

 

 

22,390

 

 

 

58,594

 

 

 

58,371

 

Income tax expense

 

 

(2,943

)

 

 

(3,361

)

 

 

(8,448

)

 

 

(8,109

)

Net income

 

 

17,265

 

 

 

19,029

 

 

 

50,146

 

 

 

50,262

 

Net income attributable to noncontrolling interest

 

 

(9,695

)

 

 

(10,797

)

 

 

(28,142

)

 

 

(28,192

)

Net income attributable to The RMR Group Inc.

 

$

7,570

 

 

$

8,232

 

 

$

22,004

 

 

$

22,070

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic (2)

 

 

16,343

 

 

 

16,269

 

 

 

16,332

 

 

 

16,259

 

Weighted average common shares outstanding - diluted (2)

 

 

31,353

 

 

 

31,308

 

 

 

31,342

 

 

 

31,271

 

 

 

 

 

 

 

 

 

 

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

 

$

0.46

 

 

$

0.50

 

 

$

1.33

 

 

$

1.35

 

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

 

$

0.46

 

 

$

0.50

 

 

$

1.33

 

 

$

1.31

 

 

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 June 30, 2022 and 2021, as applicable:

 

 

 

 

Lesser of Historical Cost of Assets

 

 

 

 

Under Management or

 

 

 

 

Total Market Capitalization (a)

 

 

 

 

As of June 30,

REIT

 

Primary Strategy

 

2022

 

2021

DHC

 

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

 

$

3,541,918

 

$

5,337,144

ILPT

 

Industrial and logistics properties

 

 

5,372,641

 

 

1,997,990

OPI

 

Office properties primarily leased to single tenants, including the government

 

 

3,481,695

 

 

3,962,573

SVC

 

Hotels and net lease service and necessity-based retail properties

 

 

7,363,672

 

 

9,277,211

 

 

 

 

$

19,759,926

 

$

20,574,918

(a)

The basis on which base business management fees are calculated for the three months ended June 30, 2022 and 2021 may differ from the basis at the end of the periods presented in the table above. As of June 30, 2022, the market capitalization was lower than the historical cost of assets under management for the Managed Equity REITs. The historical cost of assets under management for DHC, ILPT, OPI and SVC as of June 30, 2022, were $7,198,520, $5,644,407, $6,076,279 and $11,368,553, respectively.

 

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 using the treasury stock method 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, 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 June 30,

 

Nine Months Ended June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Numerators:

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

 

$

7,570

 

 

$

8,232

 

 

$

22,004

 

 

$

22,070

 

Less: income attributable to unvested participating securities

 

 

(72

)

 

 

(72

)

 

 

(213

)

 

 

(194

)

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

 

 

7,498

 

 

 

8,160

 

 

 

21,791

 

 

 

21,876

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Add back: income attributable to unvested participating securities

 

 

72

 

 

 

72

 

 

 

213

 

 

 

194

 

Add back: net income attributable to noncontrolling interest

 

 

9,695

 

 

 

10,797

 

 

 

28,142

 

 

 

28,192

 

Add back: income tax expense

 

 

2,943

 

 

 

3,361

 

 

 

8,448

 

 

 

8,109

 

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

 

 

(5,851

)

 

 

(6,686

)

 

 

(16,833

)

 

 

(17,346

)

Net income used in calculating diluted EPS

 

$

14,357

 

 

$

15,704

 

 

$

41,761

 

 

$

41,025

 

 

 

 

 

 

 

 

 

 

Denominators:

 

 

 

 

 

 

 

 

Common shares outstanding

 

 

16,501

 

 

 

16,408

 

 

 

16,501

 

 

 

16,408

 

Unvested participating securities

 

 

(158

)

 

 

(139

)

 

 

(169

)

 

 

(149

)

Weighted average common shares outstanding - basic

 

 

16,343

 

 

 

16,269

 

 

 

16,332

 

 

 

16,259

 

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

 

 

10

 

 

 

39

 

 

 

10

 

 

 

12

 

Weighted average common shares outstanding - diluted

 

 

31,353

 

 

 

31,308

 

 

 

31,342

 

 

 

31,271

 

 

 

 

 

 

 

 

 

 

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

 

$

0.46

 

 

$

0.50

 

 

$

1.33

 

 

$

1.35

 

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

 

$

0.46

 

 

$

0.50

 

 

$

1.33

 

 

$

1.31

 

(a)

Income tax expense assumes the hypothetical conversion of the noncontrolling interest, which results in estimated tax rates of 29.0% and 29.9% for the three months ended June 30, 2022 and 2021, respectively, and 28.7% and 29.7% for the nine months ended June 30, 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 June 30, 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 assume the redemption of the noncontrolling interest’s 15,000 Class A Units is dilutive to earnings per share as presented 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 June 30, 2022:

Net income attributable to The RMR Group Inc.

 

$

          7,570

 

 

$

                9,695

 

 

$

         2,943

 

 

$

       20,208

 

 

$

             (5,851

)

 

$

            14,357

 

 

              31,353

 

$

                0.46

 

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

 

 

            2,074

 

 

 

                  2,614

 

 

 

               801

 

 

 

            5,489

 

 

 

               (1,593

)

 

 

                3,896

 

 

              31,353

 

 

                  0.12

 

Separation costs

 

 

                152

 

 

 

                      190

 

 

 

                 58

 

 

 

               400

 

 

 

                  (116

)

 

 

                    284

 

 

              31,353

 

 

                  0.01

 

Adjusted net income attributable to The RMR Group Inc.

 

$

          9,796

 

 

$

              12,499

 

 

$

         3,802

 

 

$

       26,097

 

 

$

             (7,560

)

 

$

            18,537

 

 

              31,353

 

$

                0.59

 

 

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

 

(1)

Estimated income tax expense assumes the hypothetical conversion of the noncontrolling interest and the resulting consolidated entities’ estimated tax rate of approximately 29.0% and 29.9% for the three months ended June 30, 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 June 30,

 

Nine Months Ended June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Reconciliation of EBITDA and Adjusted EBITDA from net income:

 

 

 

 

 

 

 

Net income

$

17,265

 

 

$

19,029

 

 

$

50,146

 

 

$

50,262

 

Income tax expense

 

2,943

 

 

 

3,361

 

 

 

8,448

 

 

 

8,109

 

Depreciation and amortization

 

253

 

 

 

245

 

 

 

731

 

 

 

734

 

EBITDA

 

20,461

 

 

 

22,635

 

 

 

59,325

 

 

 

59,105

 

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

 

581

 

 

 

552

 

 

 

2,370

 

 

 

2,427

 

Separation costs

 

400

 

 

 

 

 

 

617

 

 

 

4,159

 

Transaction and acquisition related costs

 

 

 

 

61

 

 

 

 

 

 

474

 

Straight line office rent

 

(96

)

 

 

13

 

 

 

(247

)

 

 

60

 

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

 

5,489

 

 

 

(1,312

)

 

 

8,853

 

 

 

(6,032

)

Equity in earnings of investees

 

 

 

 

(28

)

 

 

 

 

 

(755

)

Distributions from equity method investments

 

207

 

 

 

160

 

 

 

415

 

 

 

1,024

 

Incentive business management fees earned

 

 

 

 

 

 

 

 

 

 

(620

)

Adjusted EBITDA

$

29,396

 

 

$

24,435

 

 

$

78,395

 

 

$

66,904

 

Calculation of Net Income Margin:

 

 

 

 

 

 

 

Total management and advisory services revenues

$

52,956

 

 

$

45,510

 

 

$

148,259

 

 

$

128,834

 

Net income

$

17,265

 

 

$

19,029

 

 

$

50,146

 

 

$

50,262

 

Net Income Margin

 

32.6

%

 

 

41.8

%

 

 

33.8

%

 

 

39.0

%

Calculation of Adjusted EBITDA Margin:

 

 

 

 

 

 

 

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

$

55,310

 

 

$

47,864

 

 

$

155,321

 

 

$

135,276

 

Adjusted EBITDA

$

29,396

 

 

$

24,435

 

 

$

78,395

 

 

$

66,904

 

Adjusted EBITDA Margin

 

53.1

%

 

 

51.1

%

 

 

50.5

%

 

 

49.5

%

Calculation of Adjusted EBITDA less Cash Tax Obligation:

 

 

 

 

 

 

 

Adjusted EBITDA

$

29,396

 

 

$

24,435

 

 

$

78,395

 

 

$

66,904

 

Less: Tax distributions to members (4)

 

(8,783

)

 

 

(7,775

)

 

 

(21,969

)

 

 

(23,201

)

Adjusted EBITDA less Cash Tax Obligation

$

20,613

 

 

$

16,660

 

 

$

56,426

 

 

$

43,703

 

Common share distributions

$

11,401

 

 

$

10,737

 

 

$

32,930

 

 

$

32,197

 

(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 June 30, 2022 and 2021, or $7,062 for each of the nine months ended June 30, 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 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, 2022 and 2021, RMR LLC made required quarterly tax distributions as follows:

 

 

 

Three Months Ended June 30,

 

Nine Months Ended June 30,

 

 

 

2022

 

2021

 

2022

 

2021

 

RMR LLC tax distributions to The RMR Group Inc.

 

$

4,629

 

$

4,180

 

$

11,559

 

$

12,327

 

RMR LLC tax distributions to non-controlling interest

 

 

4,154

 

 

3,595

 

 

10,410

 

 

10,874

 

Total RMR LLC tax distributions to members

 

$

8,783

 

$

7,775

 

$

21,969

 

$

23,201

 

The RMR Group Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

June 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

195,936

 

 

$

159,835

 

Due from related parties

 

 

93,939

 

 

 

88,661

 

Prepaid and other current assets

 

 

6,003

 

 

 

6,021

 

Total current assets

 

 

295,878

 

 

 

254,517

 

 

 

 

 

 

Property and equipment, net

 

 

2,629

 

 

 

2,218

 

Due from related parties, net of current portion

 

 

15,167

 

 

 

14,331

 

Equity method investments accounted for under the fair value option

 

 

39,677

 

 

 

39,476

 

Goodwill and intangible assets, net of amortization

 

 

2,066

 

 

 

2,094

 

Operating lease right of use assets

 

 

29,567

 

 

 

32,293

 

Deferred tax asset

 

 

18,803

 

 

 

18,671

 

Other assets, net of amortization

 

 

127,249

 

 

 

134,311

 

Total assets

 

$

531,036

 

 

$

497,911

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Reimbursable accounts payable and accrued expenses

 

$

67,320

 

 

$

55,115

 

Accounts payable and accrued expenses

 

 

32,063

 

 

 

15,027

 

Operating lease liabilities

 

 

4,867

 

 

 

4,922

 

Employer compensation liability

 

 

2,804

 

 

 

6,076

 

Total current liabilities

 

 

107,054

 

 

 

81,140

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

 

26,230

 

 

 

29,148

 

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

 

 

25,577

 

 

 

25,577

 

Employer compensation liability, net of current portion

 

 

15,167

 

 

 

14,331

 

Total liabilities

 

 

174,028

 

 

 

150,196

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,500,716 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

 

 

112,396

 

 

 

109,910

 

Retained earnings

 

 

343,949

 

 

 

321,945

 

Cumulative common distributions

 

 

(255,896

)

 

 

(236,766

)

Total shareholders’ equity

 

 

200,481

 

 

 

195,120

 

Noncontrolling interest

 

 

156,527

 

 

 

152,595

 

Total equity

 

 

357,008

 

 

 

347,715

 

Total liabilities and equity

 

$

531,036

 

 

$

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 third fiscal quarter, management and advisory services revenues of $53.0 million increased 16% from last year and 7% from last quarter, primarily driven by the increase in assets under management, growth in construction management revenues and increases in management fees from some of the Managed Operating Companies. Mr. Portnoy also states that despite inflationary and geopolitical headwinds, The RMR Group Inc. generated $17.3 million of Net Income, or a 32.6% Net Income Margin, and $29.4 million of Adjusted EBITDA, or a 53.1% Adjusted EBITDA Margin. These statements may imply that The RMR Group Inc. will continue to earn increased management and advisory services revenues and improved financial results 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 increasing interest rates, inflation and adverse geopolitical conditions, for a prolonged period and negatively impact The RMR Group Inc.’s and its clients’ businesses and operating and financial results;
  • Mr. Portnoy refers to the benefits of The RMR Group Inc.’s operating leverage, diverse client base and overall fee durability. These references may imply that The RMR Group Inc.’s business will realize steady, or avoid significantly decreased or negative, operating results and returns as a result of these characteristics that it believes its business has. However, these characteristics may not be as certain as The RMR Group Inc. may believe and they may not be sufficient to adequately prevent future events or conditions, including those outside its control, from negatively impacting The RMR Group Inc.’s business and operating results; and
  • Mr. Portnoy states that The RMR Group Inc.’s dividend remains well covered and with almost $196 million of cash and no debt, The RMR Group Inc. remains well positioned to continue pursuing a range of capital allocation strategies to advance continued long term growth. This statement may imply that The RMR Group Inc. will continue to pay a regular quarterly dividend at the current rate and 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 and advance its long term growth. However, there can be no assurance that The RMR Group Inc. will continue to pay any regular dividends or that it will continue to pay dividends at the current rate. The RMR Group Inc. may decide to lower or even eliminate its dividends. Further, identifying and executing on capital allocation strategies are subject to various uncertainties and risks, it may take an extended period of time to realize any benefits and there can be no assurance that any capital allocation strategy that it does pursue will advance continued long term growth. 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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