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The RMR Group(RMR) - 2025 Q3 - Earnings Call Transcript
2025-08-06 18:00
Financial Data and Key Metrics Changes - The company reported adjusted net income of $0.28 per share, distributable earnings of $0.43 per share, and adjusted EBITDA of $20.1 million, all in line with expectations [4][11] - Recurring service revenues were approximately $44 million, a sequential decrease of about $1.5 million, primarily due to lower property management fees at RMR Residential [11] - The company expects service revenues to increase to approximately $45 million next quarter based on favorable trends in managed REITs [11] Business Line Data and Key Metrics Changes - The Managed REITs have seen share price improvements, particularly for DHC and ILPT, which have increased substantially year to date [4] - The private capital business totals over $12 billion, with a focus on retail, residential, credit, and select development opportunities [4] - The retail sector is accumulating a portfolio of value-add multi-tenant retail assets valued at approximately $100 million, with a recent investment of $21 million in a community shopping center [5] Market Data and Key Metrics Changes - DHC's same property cash basis NOI increased by 18.5% year over year, driven by strong sector fundamentals [8] - SVC's RevPAR increased by 40 basis points year over year, outperforming the industry by 90 basis points despite renovation-related revenue displacement [9] - ILPT refinanced $1.2 billion of floating rate debt with new fixed-rate debt at a weighted average interest rate of 6.4% [9] Company Strategy and Development Direction - The company is focused on strategic initiatives for Managed REITs and private capital business, including deleveraging actions through asset sales and refinancings [4] - The residential sector is expected to benefit from decelerating supply growth and favorable migration trends, targeting mid to high teen returns [6] - The company aims to grow private capital AUM over the long term, with recent hiring of a Senior Vice President to enhance capital formation efforts [7] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing economic uncertainty but remains focused on strategic initiatives [4] - The fundraising environment for private capital is challenging but showing signs of improvement, with expectations of continued ramp-up in the next six months [20] - The company anticipates adjusted EBITDA of approximately $20.5 million and distributable earnings between $0.44 and $0.46 per share for the next quarter [15] Other Important Information - The company expects to end the fiscal year with approximately $60 million in cash and no borrowings on its $100 million line of credit [15] - The dividend is funded through two sources: ARMOUR LLC and RMR Inc, with a coverage ratio of 74% from the operating business [45] Q&A Session Summary Question: What is the outlook for the fundraising environment on the private capital side? - Management acknowledged that while the fundraising environment remains challenging, it is improving, with increased meetings with potential capital providers [18][20] Question: Can you elaborate on the RMR Residential Enhanced Growth Venture? - The venture will include five assets, with a total equity investment of just under $100 million, aimed at attracting committed capital from investors [22][24] Question: What is the expected size of the fundraising on the residential side? - The goal is to raise about $300 million of equity for the residential venture, seeded with just under $100 million of assets [29] Question: How does the company view the performance of RMR Residential? - The current run rate is expected to remain steady until the fundraising environment normalizes, with AUM currently at about $4.6 billion [35][55] Question: What is the rationale behind the dividend coverage? - The dividend is funded through operating business contributions and cash reserves, with a focus on maintaining coverage as the business grows [45][47]
Compared to Estimates, RMR Group (RMR) Q3 Earnings: A Look at Key Metrics
ZACKS· 2025-08-06 01:31
Core Insights - RMR Group reported a revenue of $154.73 million for the quarter ended June 2025, reflecting a decline of 24.7% year-over-year and a significant miss of 23.33% against the Zacks Consensus Estimate of $201.8 million [1] - The company's EPS for the quarter was $0.28, unchanged from the consensus estimate, but down from $0.37 in the same quarter last year [1] Revenue Breakdown - Management services revenue was $42.72 million, falling short of the estimated $45.88 million, representing a year-over-year decrease of 10.6% [4] - Advisory services revenue came in at $1.12 million, slightly below the average estimate of $1.14 million, marking a year-over-year decline of 1.1% [4] - Total reimbursable costs were reported at $107.95 million, significantly lower than the estimated $157.25 million, indicating a year-over-year drop of 30.9% [4] - Total management, termination, incentive, and advisory services revenues were $44.07 million, compared to the average estimate of $47.01 million, reflecting a 10.6% decrease year-over-year [4] - Other reimbursable expenses totaled $87.98 million, which was below the two-analyst average estimate of $133.52 million, representing a year-over-year decline of 33.5% [4] Stock Performance - RMR Group's shares have returned -5% over the past month, contrasting with the Zacks S&P 500 composite's +1% change, indicating underperformance relative to the broader market [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the market in the near term [3]
RMR Group (RMR) Meets Q3 Earnings Estimates
ZACKS· 2025-08-06 00:16
Core Insights - RMR Group reported quarterly earnings of $0.28 per share, matching the Zacks Consensus Estimate, but down from $0.37 per share a year ago [1] - The company posted revenues of $154.73 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 23.33% and down from $205.48 million year-over-year [2] - RMR Group shares have declined approximately 21.9% year-to-date, contrasting with the S&P 500's gain of 7.6% [3] Earnings Outlook - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $0.28 on revenues of $211.43 million, and for the current fiscal year, it is $1.17 on revenues of $825.24 million [7] Industry Context - The Real Estate - Operations industry, to which RMR Group belongs, is currently ranked in the top 29% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]
The RMR Group(RMR) - 2025 Q3 - Quarterly Report
2025-08-05 20:19
PART I. Financial Information This part presents the company's unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of The RMR Group Inc. for the periods ended June 30, 2025, and September 30, 2024, including balance sheets, income statements, statements of shareholders' equity, cash flows, and comprehensive notes detailing the company's organization, accounting policies, acquisitions, revenue recognition, loan investments, indebtedness, investments, income taxes, fair value measurements, related person transactions, shareholders' equity, and per common share amounts [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (June 30, 2025 vs. September 30, 2024) | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :--------------------------------------- | :----------------------------- | :------------------------------- | | Total current assets | $221,371 | $294,118 | | Total assets | $648,018 | $700,494 | | Total current liabilities | $97,449 | $133,439 | | Total liabilities | $238,685 | $281,077 | | Total equity | $409,333 | $419,417 | - **Total assets decreased** by **$52,476** thousand (**7.5%**) from September 30, 2024, to June 30, 2025, primarily due to a reduction in current assets, including cash and cash equivalents and amounts due from related parties[9](index=9&type=chunk) - **Total liabilities decreased** by **$42,392** thousand (**15.1%**) over the same period, driven by lower reimbursable accounts payable and accrued expenses[9](index=9&type=chunk) [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This statement details the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--------------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total revenues | $154,728 | $205,670 | $(50,942) | (24.8)% | | Total expenses | $144,755 | $193,419 | $(48,664) | (25.2)% | | Operating income | $9,973 | $12,251 | $(2,278) | (18.6)% | | Net income attributable to The RMR Group Inc. | $4,186 | $4,935 | $(749) | (15.2)% | | Basic EPS | $0.25 | $0.29 | $(0.04) | (13.8)% | Condensed Consolidated Statements of Income (Nine Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--------------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total revenues | $540,872 | $685,314 | $(144,442) | (21.1)% | | Total expenses | $509,951 | $650,318 | $(140,367) | (21.6)% | | Operating income | $30,921 | $34,996 | $(4,075) | (11.6)% | | Net income attributable to The RMR Group Inc. | $14,182 | $17,794 | $(3,612) | (20.3)% | | Basic EPS | $0.83 | $1.06 | $(0.23) | (21.7)% | [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This statement tracks changes in the company's equity, including net income and distributions, over time Shareholders' Equity Changes (Nine Months Ended June 30, 2025) | Item | Amount (in thousands) | | :-------------------------------- | :-------------------- | | Balance at September 30, 2024 | $419,417 | | Net income | $9,295 | | Common share distributions | $(12,395) | | Balance at June 30, 2025 | $409,333 | Shareholders' Equity Changes (Nine Months Ended June 30, 2024) | Item | Amount (in thousands) | | :-------------------------------- | :-------------------- | | Balance at September 30, 2023 | $423,663 | | Net income | $12,404 | | Common share distributions | $(12,329) | | Balance at June 30, 2024 | $421,657 | - **Total equity decreased** from **$419,417** thousand at September 30, 2024, to **$409,333** thousand at June 30, 2025, primarily due to **common share distributions exceeding net income**[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (Nine Months Ended June 30) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | Change ($) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Net cash provided by operating activities | $60,118 | $67,069 | $(6,951) | | Net cash used in investing activities | $(39,217) | $(81,395) | $42,178 | | Net cash used in financing activities | $(41,216) | $(45,687) | $4,471 | | Decrease in cash and cash equivalents | $(20,315) | $(60,013) | $39,698 | | Cash and cash equivalents at end of period | $121,284 | $207,976 | $(86,692) | - **Net cash provided by operating activities decreased** by **$6,951** thousand, primarily due to **unfavorable changes in working capital and a decrease in net income**[19](index=19&type=chunk)[191](index=191&type=chunk) - **Net cash used in investing activities decreased** by **$42,178** thousand, mainly due to the prior period's **acquisition of MPC**, partially offset by the current period's **acquisition of a property near Chicago, IL**[19](index=19&type=chunk)[191](index=191&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Organization](index=14&type=section&id=Note%201.%20Organization) Note 1 details the company's corporate structure and its primary business activities - **The RMR Group Inc. (RMR Inc.) is a holding company, with substantially all business conducted by its majority-owned subsidiary, The RMR Group LLC (RMR LLC)**[22](index=22&type=chunk) - **RMR Inc. owned 52.9% of the economic interest of RMR LLC** as of June 30, 2025, with **ABP Trust holding the remaining 47.1% as a noncontrolling interest**[23](index=23&type=chunk) - **RMR LLC provides management services to four publicly traded equity REITs** (Managed Equity REITs), a **publicly traded mortgage REIT (SEVN)**, AlerisLife Inc., Sonesta International Hotels Corporation, **multiple private funds, joint ventures, and other private capital clients**[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) [Note 2. Basis of Presentation](index=14&type=section&id=Note%202.%20Basis%20of%20Presentation) Note 2 outlines the accounting principles and presentation methods used in the financial statements - The condensed consolidated financial statements are **unaudited and prepared in conformity with U.S. GAAP**, with certain information condensed or omitted[29](index=29&type=chunk) - The company reports results in a **single reportable segment**, reflecting how the chief operating decision maker (CODM) allocates resources and evaluates financial results[32](index=32&type=chunk) - Recent accounting pronouncements, ASU No. 2023-07 (Segment Reporting) and ASU No. 2023-09 (Income Taxes), are **not expected to have a material impact** on consolidated financial statements[33](index=33&type=chunk)[34](index=34&type=chunk) [Note 3. Acquisitions](index=15&type=section&id=Note%203.%20Acquisitions) Note 3 describes recent business and asset acquisitions, including their financial impact - On December 19, 2023, **RMR LLC acquired MPC Partnership Holdings LLC (now RMR Residential) for $99,021 thousand**, accounted for as a business combination[35](index=35&type=chunk) - As part of the MPC acquisition, the company **acquired a 90.0% economic interest in 260 Woodstock Investor, LLC**, and subsequently **sold the Woodstock Property in January 2025** for **$9,800** thousand, **recognizing a $445 thousand gain**[36](index=36&type=chunk) - In Q3 2025, the company **acquired a community shopping center near Chicago, IL, for $21,250 thousand in an all-cash asset acquisition**[37](index=37&type=chunk) [Note 4. Revenue Recognition](index=16&type=section&id=Note%204.%20Revenue%20Recognition) Note 4 explains the company's policies for recognizing revenue from various service offerings - Revenues from services are **recognized over time as performance obligations are satisfied**[40](index=40&type=chunk) Aggregate Base Business Management Fees from Managed Equity REITs | Period | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Three Months Ended June 30 | $19,476 | $20,604 | | Nine Months Ended June 30 | $59,453 | $63,400 | - The company **did not earn incentive business management fees** from Managed Equity REITs for calendar years 2024 or 2023[46](index=46&type=chunk) Aggregate Property Management Fees | Period | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Three Months Ended June 30 | $16,032 | $19,939 | | Nine Months Ended June 30 | $52,570 | $57,402 | - Income from loan investments, net, for the three and nine months ended June 30, 2025, was **$677** thousand and **$1,869** thousand, respectively, with **no income** in the prior year periods[58](index=58&type=chunk) - Rental property revenues **significantly increased** to **$2,033** thousand (Q3 2025) and **$5,080** thousand (9M 2025) from **$191** thousand and **$415** thousand (prior year periods), respectively[60](index=60&type=chunk) [Note 5. Loans Held for Investment, Net](index=19&type=section&id=Note%205.%20Loans%20Held%20for%20Investment,%20Net) Note 5 provides information on the company's loan portfolio, including commitments and credit loss allowances - The company's strategy is to **expand its private capital business by amassing a small portfolio of loans**, **financed through a bank repurchase facility, and bringing in third parties to invest**[65](index=65&type=chunk) Loan Portfolio Statistics | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :------------ | :----------------- | | Number of loans | 2 | 2 | | Total loan commitments | $67,000 | $67,000 | | Unfunded loan commitments | $2,390 | $9,820 | | Principal balance | $64,610 | $57,180 | | Weighted average coupon rate | 8.40% | 9.15% | | Weighted average all in yield | 9.27% | 10.13% | - **The allowance for credit losses increased** to **$526** thousand as of June 30, 2025, from **$343** thousand as of September 30, 2024, with an aggregate provision for credit losses of **$117** thousand for the three months ended June 30, 2025[78](index=78&type=chunk) [Note 6. Indebtedness](index=21&type=section&id=Note%206.%20Indebtedness) Note 6 details the company's financing facilities, principal balances, and maturity profiles - The secured financing facility has an **aggregate maximum capacity of $200,000 thousand**[82](index=82&type=chunk) Secured Financing Facility Summary | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Principal Balance | $47,228 | $41,655 | | Carrying Value | $46,681 | $41,109 | | Weighted average coupon rate | 7.21% | 7.80% | | Weighted average maximum maturity | 1.40 years | 2.10 years | - In January 2025, the company **entered into a $100,000 thousand senior secured revolving credit facility**, with **no amounts outstanding** as of June 30, 2025, or August 1, 2025[86](index=86&type=chunk) [Note 7. Investments](index=22&type=section&id=Note%207.%20Investments) Note 7 describes the company's equity interests in SEVN, joint ventures, and other investment vehicles - Tremont **owned approximately 11.4% of SEVN's outstanding common shares** as of June 30, 2025, with a **market value of $20,617 thousand**[87](index=87&type=chunk) - The company **consolidated Carroll MF VII, LLC (MF VII) in December 2024 due to an increased equity interest (14.3%) and existing influence**, leading to an **unrealized loss of $95 thousand (Q3 2025) and $885 thousand (9M 2025)** related to its investment in Fund VII[89](index=89&type=chunk)[91](index=91&type=chunk) - The company **owns equity interests in two joint ventures** (Pompano JV and Sunrise JV) for residential communities, making an **aggregate equity contribution of $11,134 thousand** during the nine months ended June 30, 2025[92](index=92&type=chunk) [Note 8. Income Taxes](index=23&type=section&id=Note%208.%20Income%20Taxes) Note 8 outlines the company's income tax structure, estimated expenses, and effective tax rate reconciliation - **RMR Inc. is subject to U.S. federal and state income tax on its allocable share of RMR LLC's taxable income**, while **RMR LLC is treated as a partnership for most tax purposes**[94](index=94&type=chunk) Estimated Income Tax Expense | Period | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Three Months Ended June 30 | $1,753 | $3,657 | | Nine Months Ended June 30 | $5,607 | $8,415 | Effective Tax Rate Reconciliation | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income taxes computed at federal statutory rate | **21.0%** | **21.0%** | **21.0%** | **21.0%** | | State taxes, net of federal benefit | **3.1%** | **3.0%** | **3.1%** | **2.8%** | | Net income attributable to noncontrolling interest | (**9.9%**) | (**9.8%**) | (**9.9%**) | (**9.8%**) | | Total effective tax rate | **15.9%** | **22.8%** | **15.3%** | **17.2%** | [Note 9. Fair Value of Financial Instruments](index=24&type=section&id=Note%209.%20Fair%20Value%20of%20Financial%20Instruments) Note 9 explains the fair value hierarchy and valuation techniques for financial instruments - The company uses a **three-tier fair value hierarchy (Level 1, 2, 3)** for financial assets and liabilities[100](index=100&type=chunk)[101](index=101&type=chunk) Fair Value of Financial Instruments Not Carried at Fair Value (June 30, 2025) | Instrument | Carrying Value (in thousands) | Fair Value (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------ | | Loans held for investment | $63,824 | $64,895 | | Secured financing facility | $46,681 | $47,726 | | Mortgage note payable | $45,359 | $46,070 | Level 3 Fair Value Inputs (June 30, 2025) | Instrument | Fair Value (in thousands) | Valuation Technique | Unobservable Input | Range | | :-------------------------------- | :------------------------ | :------------------ | :----------------- | :-------------------- | | Investment in Fund VII | $3,718 | Discounted cash flow | Discount rates | **6.50%** - **7.00%** | | | | | Exit capitalization rates | **5.00%** - **5.50%** | | Investment in joint ventures | $11,134 | Discounted cash flow | Unlevered IRR | **12.02%** - **12.37%** | | Earnout liability | $6,108 | Monte Carlo | Capital deployment volatility | **15.00%** | [Note 10. Related Person Transactions](index=26&type=section&id=Note%2010.%20Related%20Person%20Transactions) Note 10 discloses significant transactions and relationships with related parties, including management fees and receivables - **Adam Portnoy, Chair of the Board, Managing Director, President, and CEO, is the sole trustee and controlling shareholder of ABP Trust**, the company's controlling shareholder[108](index=108&type=chunk) Total Revenues from Related Parties (Three Months Ended June 30) | Client Type | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Perpetual Capital | $122,295 | $168,158 | | Private Capital | $29,723 | $37,321 | | Total revenues from related parties | $152,018 | $205,479 | Amounts Due From Related Parties (June 30, 2025) | Client Type | Accounts Receivable (in thousands) | Reimbursable Costs (in thousands) | Total (in thousands) | | :-------------------------------- | :--------------------------------- | :-------------------------------- | :------------------- | | Perpetual Capital | $22,116 | $44,769 | $66,885 | | Private Capital | $14,676 | $8,793 | $23,469 | | Total | $36,792 | $53,562 | $90,354 | - The company **expects to pay $2,421 thousand to ABP Trust during Q4 fiscal year 2025 under the tax receivable agreement**[119](index=119&type=chunk)[193](index=193&type=chunk) - **Separation costs for officers and employees were $1,880 thousand (Q3 2025) and $5,335 thousand (9M 2025)**, including both cash and equity-based components[123](index=123&type=chunk) [Note 11. Shareholders' Equity](index=31&type=section&id=Note%2011.%20Shareholders'%20Equity) Note 11 details changes in shareholders' equity, including share awards and common share distributions - The company **awards Class A common stock to Directors, officers, and employees**, with **Director awards vesting immediately and others vesting in five equal annual installments**[125](index=125&type=chunk) - For the nine months ended June 30, 2025, **general and administrative expense for Director share awards was $600 thousand**[126](index=126&type=chunk) Common Share Distributions | Period | Total Distributions (in thousands) | | :-------------------------------- | :------------------------------- | | Nine Months Ended June 30, 2025 | $22,756 | | Nine Months Ended June 30, 2024 | $20,897 | [Note 12. Per Common Share Amounts](index=32&type=section&id=Note%2012.%20Per%20Common%20Share%20Amounts) Note 12 explains the calculation of basic and diluted earnings per common share - **Basic EPS is calculated using the two-class method**, treating **unvested Class A Common Shares as participating securities**[133](index=133&type=chunk) - **Diluted EPS is calculated using the treasury stock method for unvested Class A Common Shares and the if-converted method for Class B-2 Common Shares**[136](index=136&type=chunk) Net Income Attributable to The RMR Group Inc. Per Common Share | Period | Basic EPS (2025) | Basic EPS (2024) | Diluted EPS (2025) | Diluted EPS (2024) | | :-------------------------------- | :--------------- | :--------------- | :----------------- | :----------------- | | Three Months Ended June 30 | $0.25 | $0.29 | $0.25 | $0.29 | | Nine Months Ended June 30 | $0.83 | $1.06 | $0.82 | $1.06 | [Note 13. Net Income Attributable to RMR Inc.](index=35&type=section&id=Note%2013.%20Net%20Income%20Attributable%20to%20RMR%20Inc.) Note 13 presents the calculation of net income specifically attributable to The RMR Group Inc Net Income Attributable to RMR Inc. Calculation | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Nine Months Ended June 30, 2025 (in thousands) | Nine Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Income before income tax expense | $11,048 | $16,061 | $36,704 | $49,058 | | Net income attributable to RMR Inc. | $4,186 | $4,935 | $14,182 | $17,794 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of the company's business environment, financial performance, liquidity, and capital resources. It details revenue and expense changes for the three and nine months ended June 30, 2025, compared to the prior year, highlighting impacts from acquisitions, cost containment, and market conditions. It also discusses the company's strategies for private capital growth, market and credit risks, related person transactions, and critical accounting estimates [Overview](index=36&type=section&id=Overview) This section covers overview details - **RMR Inc. operates as a holding company, with RMR LLC conducting substantially all business, managing a diverse portfolio of real estate and real estate-related businesses**[142](index=142&type=chunk) [Business Environment and Outlook](index=36&type=section&id=Business%20Environment%20and%20Outlook) This section covers business environment and outlook details - **Business growth depends on managing Managed Equity REITs, private capital clients, and SEVN to maintain and increase their value, assist AlerisLife and Sonesta, and expand through new ventures and investments**[143](index=143&type=chunk) - **Macroeconomic uncertainty, including U.S. trade and fiscal policy and geopolitical tensions, has caused many commercial real estate (CRE) investors to remain on the sidelines**[144](index=144&type=chunk) - Despite uncertainty, **the company and its clients will pursue growth by executing prudent capital recycling, business arrangement restructurings, and repositioning portfolios**[145](index=145&type=chunk) [Managed Equity REITs](index=36&type=section&id=Managed%20Equity%20REITs) This section covers managed equity reits details - **Base business management fees are calculated monthly based on the lesser of average historical cost of properties or average market capitalization**[146](index=146&type=chunk) Managed Equity REITs - Lesser of Historical Cost of Assets Under Management or Total Market Capitalization | REIT | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :--- | :----------------------------- | :----------------------------- | | DHC | $3,576,962 | $3,845,905 | | ILPT | $4,525,348 | $4,559,824 | | OPI | $2,448,412 | $2,422,103 | | SVC | $6,224,431 | $6,535,337 | | Total| $16,775,153 | $17,363,169 | Managed Equity REITs Fee Revenues (Three Months Ended June 30) | REIT | 2025 Total (in thousands) | 2024 Total (in thousands) | | :--- | :------------------------ | :------------------------ | | DHC | $5,292 | $5,847 | | ILPT | $9,135 | $9,073 | | OPI | $5,781 | $7,307 | | SVC | $9,621 | $10,430 | | Total| $29,829 | $32,657 | [Other Clients](index=38&type=section&id=Other%20Clients) This section covers other clients details - The company **provides business management services to AlerisLife and Sonesta, with fees generally based on a percentage of certain revenues**[151](index=151&type=chunk) - **Management services are also provided to other Private Capital clients, including RMR Residential, earning fees based on average invested capital, property management fees, and construction supervision fees**[152](index=152&type=chunk) Other Clients Management Fee Revenues (Nine Months Ended June 30) | Client Type | 2025 Total (in thousands) | 2024 Total (in thousands) | | :-------------------------------- | :------------------------ | :------------------------ | | AlerisLife | $4,273 | $4,275 | | Sonesta | $6,873 | $6,847 | | RMR Residential | $13,878 | $11,864 | | Other private entities | $15,666 | $16,008 | | SEVN | $58 | $32 | | Total | $40,748 | $39,026 | [Advisory Business](index=39&type=section&id=Advisory%20Business) This section covers advisory business details - **Tremont provides advisory services to SEVN, a publicly traded mortgage REIT, compensated primarily based on a percentage of equity**[154](index=154&type=chunk) Advisory Services and Incentive Fees from SEVN | Revenue Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Nine Months Ended June 30, 2025 (in thousands) | Nine Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Advisory services revenue | $1,115 | $1,127 | $3,360 | $3,378 | | Incentive fees | $229 | $370 | $316 | $729 | [Results of Operations - Three Months Ended June 30, 2025, Compared to the Three Months Ended June 30, 2024](index=40&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030,%202025,%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202024) This section covers results of operations - three months ended june 30, 2025, compared to the three months ended june 30, 2024 details Key Operating Results (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--------------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total revenues | $154,728 | $205,670 | $(50,942) | (24.8)% | | Operating income | $9,973 | $12,251 | $(2,278) | (18.6)% | | Net income attributable to The RMR Group Inc. | $4,186 | $4,935 | $(749) | (15.2)% | - Management services revenue decreased by **$5,045** thousand, primarily due to **lower construction supervision revenues**, **reduced property management revenues from RMR Residential**, and a **decrease in base business management revenues from Managed Equity REITs**[157](index=157&type=chunk) - Rental property revenues **significantly increased** by **$1,842** thousand due to the **acquisition of properties in Denver, CO, and Chicago, IL**[159](index=159&type=chunk) - Total compensation and benefits expense decreased by **$4,843** thousand (**10.2%**), mainly due to **cost containment measures and headcount reductions**[156](index=156&type=chunk)[163](index=163&type=chunk) - Depreciation and amortization increased by **$1,772** thousand (**143.6%**) due to depreciation of newly acquired properties[156](index=156&type=chunk)[168](index=168&type=chunk) [Results of Operations - Nine Months Ended June 30, 2025, Compared to the Nine Months Ended June 30, 2024](index=43&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20June%2030,%202025,%20Compared%20to%20the%20Nine%20Months%20Ended%20June%2030,%202024) This section covers results of operations - nine months ended june 30, 2025, compared to the nine months ended june 30, 2024 details Key Operating Results (Nine Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--------------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total revenues | $540,872 | $685,314 | $(144,442) | (21.1)% | | Operating income | $30,921 | $34,996 | $(4,075) | (11.6)% | | Net income attributable to The RMR Group Inc. | $14,182 | $17,794 | $(3,612) | (20.3)% | - Management services revenue decreased by **$8,034** thousand, primarily due to **lower construction supervision revenues** and **base business management fees from Managed Equity REITs**, partially offset by growth in RMR Residential[174](index=174&type=chunk) - Rental property revenues increased by **$4,665** thousand due to the **acquisition of properties in Denver, CO, and Chicago, IL**[176](index=176&type=chunk) - Depreciation and amortization increased by **$4,930** thousand (**171.2%**) due to **full-period amortization of MPC acquisition-related intangible assets and depreciation of owned properties**[173](index=173&type=chunk)[182](index=182&type=chunk) - Interest income decreased by **$4,554** thousand (**52.5%**) due to **lower investable cash and average interest rates**[173](index=173&type=chunk)[182](index=182&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section covers liquidity and capital resources details Cash and Cash Equivalents | Period | Amount (in thousands) | | :-------------------------------- | :-------------------- | | June 30, 2025 | $121,284 | | September 30, 2024 | $141,599 | - The company is **well-positioned to pursue capital allocation strategies, focusing on private capital business growth, funding operations, cash distributions, and enhancing technology infrastructure**[188](index=188&type=chunk) - Future working capital needs are primarily for operating expenses, quarterly tax distributions to RMR LLC members, and quarterly distributions to shareholders[189](index=189&type=chunk) - A **$100,000 thousand senior secured revolving credit facility was entered into in January 2025, providing enhanced financial flexibility, with no outstanding amounts as of August 1, 2025**[190](index=190&type=chunk) [Market Risk and Credit Risk](index=47&type=section&id=Market%20Risk%20and%20Credit%20Risk) This section covers market risk and credit risk details - The company is **not subject to significant direct market risk related to interest rate changes or commodity price changes due to its floating rate debt structure, which maintains a fixed spread between purchased assets and loans held for investment**[194](index=194&type=chunk) - The company is **exposed to credit risk from borrowers in its loans held for investment, mitigated by comprehensive underwriting, diligence, and ongoing monitoring**[194](index=194&type=chunk) - **Borrowings under the revolving credit facility are subject to SOFR plus a margin of 225 basis points, making the company vulnerable to changes in U.S. dollar-based short-term rates**[195](index=195&type=chunk) [Risks Related to Cash and Short Term Investments](index=47&type=section&id=Risks%20Related%20to%20Cash%20and%20Short%20Term%20Investments) This section covers risks related to cash and short term investments details - **A substantial amount of cash is invested in money market bank accounts, with some U.S. bank account balances exceeding FDIC insurance limits**[197](index=197&type=chunk) - **The company believes its cash and short-term investments are not subject to any material interest rate risk, equity price risk, credit risk, or other market risk**[197](index=197&type=chunk) [Related Person Transactions](index=47&type=section&id=Related%20Person%20Transactions) This section covers related person transactions details - The company has **ongoing relationships and transactions with Adam Portnoy, its clients, and certain employees**, as detailed in Note 10 and other SEC filings[198](index=198&type=chunk) [Critical Accounting Estimates](index=47&type=section&id=Critical%20Accounting%20Estimates) This section covers critical accounting estimates details - **Significant estimates impacting financial statements include revenue recognition, fair value estimations, and principles of consolidation**[199](index=199&type=chunk) - There have been **no significant changes in critical accounting estimates since the fiscal year ended September 30, 2024**[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the market risk and credit risk disclosures provided within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - **Quantitative and qualitative disclosures about market risk are set forth in the 'Market Risk and Credit Risk' subsection of Item 2**[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, under the supervision of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures, concluding they are effective. No material changes to internal control over financial reporting occurred during the quarter - **Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period**[202](index=202&type=chunk) - **No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025**[203](index=203&type=chunk) [Warning Concerning Forward-Looking Statements](index=48&type=section&id=Warning%20Concerning%20Forward-Looking%20Statements) This section advises readers that the report contains forward-looking statements subject to various risks and uncertainties, which could cause actual results to differ materially from expectations. It lists numerous factors that could impact future performance, including dependence on clients, market conditions, interest rates, and the ability to execute business strategies, and states that the company does not intend to update these statements - The report contains forward-looking statements, identified by words like 'believe,' 'expect,' and 'anticipate,' which are **subject to risks and uncertainties**[205](index=205&type=chunk) - **Key risks include dependence on a limited number of clients, variability of revenues, changing market conditions, potential termination of management agreements, and uncertainty surrounding interest rates**[206](index=206&type=chunk) - The company **does not intend to update or change any forward-looking statements** unless required by law[208](index=208&type=chunk) PART II. Other Information This part includes additional disclosures such as risk factors, equity sales, and required exhibits [Item 1A. Risk Factors](index=50&type=page&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report - **No material changes to the risk factors** from those previously provided in the 2024 Annual Report[210](index=210&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's purchases of its equity securities during the quarter ended June 30, 2025, which were primarily Class A Common Share withholdings and purchases to satisfy tax withholding and payment obligations related to share awards Issuer Purchases of Equity Securities (Quarter Ended June 30, 2025) | Calendar Month | Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :------------------------- | :--------------------------- | | April 1 - April 30, 2025 | 1,993 | $16.44 | | May 1 - May 31, 2025 | 4,396 | $14.57 | | June 1 - June 30, 2025 | 2,321 | $16.17 | | Total | 8,710 | $15.42 | - These share purchases were made to **satisfy tax withholding and payment obligations** in connection with the vesting of Class A Common Share awards[211](index=211&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including articles of amendment, bylaws, share certificates, registration rights agreements, certifications, and XBRL-related documents - The exhibits include various corporate governance documents such as Articles of Amendment and Restatement, Bylaws, and a Registration Rights Agreement[212](index=212&type=chunk) - Certifications required by Rule 13a-14(a) and Section 1350 are filed herewith[212](index=212&type=chunk) - XBRL (eXtensible Business Reporting Language) documents, including the Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase, are also included[213](index=213&type=chunk) [Signatures](index=52&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission on behalf of the registrant by an authorized officer - The report was duly signed on behalf of the registrant by Matthew P. Jordan, Executive Vice President, Chief Financial Officer, and Treasurer, on August 5, 2025[215](index=215&type=chunk)[216](index=216&type=chunk)
The RMR Group(RMR) - 2025 Q3 - Quarterly Results
2025-08-05 20:17
[Quarterly Results](index=3&type=section&id=QUARTERLY%20RESULTS) The RMR Group Inc. reported strong third-quarter fiscal 2025 results, driven by cost control and strategic private capital expansion [Third Quarter Fiscal 2025 Highlights](index=5&type=section&id=Third%20Quarter%20Fiscal%202025%20Highlights) The RMR Group Inc. reported third-quarter fiscal 2025 results in line with expectations, driven by cost control, seasonal strength, and expanded private capital initiatives - The RMR Group Inc. announced third quarter fiscal 2025 financial results, with Net Income per share of **$0.25**, Adjusted Net Income per share of **$0.28**, and Distributable Earnings per share of **$0.43**, which were in line with expectations[7](index=7&type=chunk)[16](index=16&type=chunk) Third Quarter Fiscal 2025 Key Financial Highlights | Metric | Value | | :------------------------------------------ | :------------ | | Assets Under Management | $39.7 billion | | Net income | $9.3 million | | Net income attributable to The RMR Group Inc. | $4.2 million | | Net income attributable to The RMR Group Inc. per diluted share | $0.25 | | Adjusted Net Income Attributable to The RMR Group Inc. | $4.8 million | | Adjusted Net Income Attributable to The RMR Group Inc. per diluted share | $0.28 | | Distributable Earnings | $13.9 million | | Distributable Earnings per diluted share | $0.43 | | Adjusted EBITDA | $20.1 million | | Adjusted EBITDA Margin | 43.5% | | Quarterly Dividend Declared | $0.45 per share | - RMR expanded its private capital initiatives by acquiring a 77% leased, 22-acre community shopping center near Chicago, IL for **$21 million** in April 2025, expected to contribute approximately **$1 million** to Adjusted EBITDA in the first year, as part of a strategic plan to establish a track record in value-add retail for future fundraising[8](index=8&type=chunk)[16](index=16&type=chunk) - The company is under contract to purchase two residential communities in North Carolina and Florida for approximately **$147 million**, expected to close in August 2025, as part of private capital business expansion for contribution to a managed fund or traditional joint venture[8](index=8&type=chunk)[16](index=16&type=chunk) [Financials](index=6&type=section&id=FINANCIALS) This section provides a comprehensive overview of the company's financial performance, including key GAAP and Non-GAAP metrics, AUM, and revenue [Key Financial Data](index=7&type=section&id=Key%20Financial%20Data) This section provides a snapshot of key GAAP and Non-GAAP financial measures for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, highlighting trends in net income, adjusted net income, EBITDA, distributable earnings, and per-share metrics Key Financial Data (Three Months Ended, in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | **GAAP Financial Measures** | | | | | Net Income | $9,295 | $7,694 | $12,404 | | Net Income Margin | 21.1% | 16.9% | 25.2% | | Net Income Attributable to The RMR Group Inc. | $4,186 | $3,616 | $4,935 | | **Non-GAAP Financial Measures** | | | | | Adjusted Net Income Attributable to The RMR Group Inc. | $4,792 | $4,709 | $6,256 | | Adjusted EBITDA | $20,081 | $19,201 | $20,972 | | Adjusted EBITDA Margin | 43.5% | 40.1% | 40.9% | | Distributable Earnings | $13,857 | $12,825 | $14,389 | | Distribution Payout Ratio | 73.6% | 79.5% | 71.5% | | **Per Share Metrics** | | | | | Net Income Attributable to The RMR Group Inc. | $0.25 | $0.21 | $0.29 | | Adjusted Net Income Attributable to The RMR Group Inc. | $0.28 | $0.28 | $0.37 | | Distributable Earnings | $0.43 | $0.40 | $0.45 | [Adjusted Net Income Attributable to The RMR Group Inc. Bridge](index=8&type=section&id=Adjusted%20Net%20Income%20Attributable%20to%20The%20RMR%20Group%20Inc.%20Bridge) The bridge illustrates the changes in Adjusted Net Income per share from Q2 2025 to Q3 2025, showing contributions from lower property acquisition fees, higher G&A cost containment, higher business management fees, and seasonal revenue increases at Sonesta, offset by joint venture depreciation and other net impacts - Adjusted Net Income Attributable to The RMR Group Inc. per share remained **stable at $0.28** from Q2 2025 to Q3 2025[23](index=23&type=chunk) - Positive contributions to Adjusted Net Income per share included **lower property acquisition fees ($0.03)**, **higher G&A cost containment measures and headcount reductions ($0.06)**, and **higher business management fees** due to seasonal revenue increases at Sonesta **($0.04)**[23](index=23&type=chunk) - Offsetting factors included joint venture depreciation in the prior period (**$-0.01**) and other net impacts (**$-0.02**)[23](index=23&type=chunk) [AUM by Source](index=9&type=section&id=AUM%20by%20Source) Assets Under Management (AUM) for The RMR Group totaled $39.7 billion as of June 30, 2025, a decrease from $41.3 billion as of June 30, 2024. Perpetual Capital continues to represent the majority of AUM, while Fee-Earning AUM also saw a slight decrease year-over-year Assets Under Management (AUM) by Source | AUM Category | As of June 30, 2025 (in thousands) | As of June 30, 2024 (in thousands) | Change (YoY) | | :------------- | :--------------------------------- | :--------------------------------- | :----------- | | Perpetual Capital | $27,395,622 | $28,437,358 | -3.66% | | Private Capital | $12,263,583 | $12,877,139 | -4.76% | | **Total AUM** | **$39,659,205** | **$41,314,497** | **-4.01%** | | Fee-Earning AUM (Perpetual Capital) | $17,424,310 | $17,989,527 | -3.14% | | Fee-Earning AUM (Private Capital) | $9,084,191 | $9,704,050 | -6.49% | | **Total Fee-Earning AUM** | **$26,508,501** | **$27,693,577** | **-4.28%** | - As of June 30, 2025, Perpetual Capital constituted **69%** of total AUM, while Private Capital accounted for **31%**[26](index=26&type=chunk) - Key Perpetual Capital clients include Service Properties Trust (**$11.38 billion AUM**), Diversified Healthcare Trust (**$7.36 billion AUM**), and Office Properties Income Trust (**$5.36 billion AUM**), while major Private Capital clients include Residential Real Estate Funds (**$4.54 billion AUM**) and Industrial Real Estate Funds (**$3.96 billion AUM**)[28](index=28&type=chunk) [Management and Advisory Services Revenues by Source](index=11&type=section&id=Management%20and%20Advisory%20Services%20Revenues%20by%20Source) Total management and advisory services revenues decreased to $43.8 million for Q3 2025 from $48.9 million in Q3 2024, primarily driven by a reduction in Perpetual Capital revenues and construction supervision revenues. Private Capital revenues remained relatively stable year-over-year but saw a slight decrease quarter-over-quarter Management and Advisory Services Revenues by Source (Three Months Ended, in thousands) | Revenue Category | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | **Base Business Management & Advisory Revenues** | | | | | Perpetual Capital | $20,591 | $20,682 | $21,731 | | Private Capital | $7,216 | $6,579 | $7,226 | | **Total Base Business Management & Advisory Revenues** | **$27,807** | **$27,261** | **$28,957** | | **Base Property Management & Other Revenues** | | | | | Perpetual Capital | $9,211 | $9,318 | $9,207 | | Private Capital | $5,198 | $7,112 | $7,165 | | **Total Base Property Management & Other Revenues** | **$14,409** | **$16,430** | **$16,372** | | **Construction Supervision Revenues** | | | | | Perpetual Capital | $1,158 | $1,281 | $2,860 | | Private Capital | $465 | $514 | $707 | | **Total Construction Supervision Revenues** | **$1,623** | **$1,795** | **$3,567** | | **Total Management & Advisory Services Revenues** | **$43,839** | **$45,486** | **$48,896** | - Total Management & Advisory Services Revenues decreased by **10.3%** year-over-year from **$48.9 million** in Q3 2024 to **$43.8 million** in Q3 2025[32](index=32&type=chunk) - Construction Supervision Revenues experienced the most significant year-over-year decline, falling from **$3.6 million** in Q3 2024 to **$1.6 million** in Q3 2025, a **54.5% decrease**[32](index=32&type=chunk) [Well-Covered Dividend](index=12&type=section&id=Well-Covered%20Dividend) The RMR Group Inc. declared a well-covered quarterly dividend of $0.45 per share, supported by strong distributable earnings and cash balance - The RMR Group Inc. declared a quarterly dividend of **$0.45 per share** for its Class A Common Stock and Class B-1 Common Stock[10](index=10&type=chunk) Dividend Funding and Payout Ratio (Three Months Ended June 30, 2025, in thousands) | Metric | Amount | Per Share | Payout Ratio | | :------------------------------------- | :-------------------- | :-------- | :----------- | | Distributable Earnings | $13,857 | $0.43 | | | Dividend Funded by The RMR Group LLC | $10,201 | $0.32 | 73.6% | | Dividend Funded by The RMR Group Inc. cash balance | $2,194 | $0.13 | | | **Total Dividend** | **$12,395** | **$0.45** | | - As of June 30, 2025, The RMR Group Inc. held **$121.3 million** in consolidated cash and cash equivalents, including **$22.1 million** accumulated from tax distributions, providing ample capacity to sustain current dividend levels for more than three years when combined with The RMR Group LLC's distributable earnings[36](index=36&type=chunk) [GAAP Results: Condensed Consolidated Statements of Income](index=13&type=section&id=GAAP%20Results%3A%20Condensed%20Consolidated%20Statements%20of%20Income) The condensed consolidated statements of income show a decrease in total revenues to $154.7 million for Q3 2025 from $205.7 million in Q3 2024, primarily due to lower reimbursable costs. Operating income also decreased year-over-year, while net income attributable to The RMR Group Inc. was $4.2 million for Q3 2025 Condensed Consolidated Statements of Income (Three Months Ended, in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | Total revenues | $154,728 | $166,668 | $205,670 | | Total expenses | $144,755 | $159,108 | $193,419 | | Operating income | $9,973 | $7,560 | $12,251 | | Income before income tax expense | $11,048 | $9,072 | $16,061 | | Net income | $9,295 | $7,694 | $12,404 | | Net income attributable to The RMR Group Inc. | $4,186 | $3,616 | $4,935 | - Total revenues decreased by **24.8%** year-over-year, from **$205.7 million** in Q3 2024 to **$154.7 million** in Q3 2025, largely driven by a reduction in other reimbursable expenses[39](index=39&type=chunk) - Operating income decreased by **18.6%** year-over-year, from **$12.3 million** in Q3 2024 to **$10.0 million** in Q3 2025[39](index=39&type=chunk) [GAAP Results: Earnings Per Common Share](index=15&type=section&id=GAAP%20Results%3A%20Earnings%20Per%20Common%20Share) Net income attributable to The RMR Group Inc. per common share (basic and diluted) was $0.25 for the three months ended June 30, 2025, an increase from $0.21 in the prior quarter but a decrease from $0.29 year-over-year Earnings Per Common Share (Three Months Ended, in thousands, except per share amounts) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | Net income attributable to The RMR Group Inc. | $4,186 | $3,616 | $4,935 | | Weighted average common shares outstanding - basic and diluted | 16,660 | 16,616 | 16,542 | | Net income attributable to The RMR Group Inc. per common share - basic and diluted | $0.25 | $0.21 | $0.29 | - Diluted EPS for Net income attributable to The RMR Group Inc. increased by **19.0%** quarter-over-quarter from **$0.21** in Q2 2025 to **$0.25** in Q3 2025[45](index=45&type=chunk) [GAAP Results: Condensed Consolidated Balance Sheets](index=16&type=section&id=GAAP%20Results%3A%20Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show a decrease in total assets from $700.5 million as of September 30, 2024, to $648.0 million as of June 30, 2025. This was primarily driven by a reduction in cash and cash equivalents held by The RMR Group LLC and amounts due from related parties. Total liabilities also decreased, while total equity saw a slight reduction Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | September 30, 2024 | | :------------------------------------- | :------------ | :----------------- | | Total current assets | $221,371 | $294,118 | | Total assets | $648,018 | $700,494 | | Total current liabilities | $97,449 | $133,439 | | Total liabilities | $238,685 | $281,077 | | Total equity | $409,333 | $419,417 | - Total assets decreased by **7.5%** from **$700.5 million** as of September 30, 2024, to **$648.0 million** as of June 30, 2025[49](index=49&type=chunk) - Cash and cash equivalents held by The RMR Group LLC decreased by **16.2%** from **$118.4 million** to **$99.2 million**, and amounts due from related parties decreased by **37.0%** from **$134.0 million** to **$84.3 million**[49](index=49&type=chunk) [Non-GAAP Financial Measures](index=17&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section provides detailed reconciliations and calculations for key Non-GAAP financial measures, including Adjusted Net Income, EBITDA, and Distributable Earnings [Reconciliation of Adjusted Net Income and Adjusted Net Income Per Diluted Share](index=18&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Income%20and%20Adjusted%20Net%20Income%20Per%20Diluted%20Share) This section provides detailed reconciliations of Net Income Attributable to The RMR Group Inc. to Adjusted Net Income Attributable to The RMR Group Inc. for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, by adjusting for individually significant items such as incentive fees, gains/losses on investments, separation costs, and changes in fair value of Earnout liability - For Q3 2025, Net Income Attributable to The RMR Group Inc. of **$4.2 million** was adjusted by adding back separation costs (**$1.9 million**) and transaction and acquisition related costs (**$0.8 million**), and adjusting for incentive fees (**$-0.2 million**) and change in fair value of Earnout liability (**$-1.2 million**), resulting in Adjusted Net Income Attributable to The RMR Group Inc. of **$4.8 million**[54](index=54&type=chunk) Adjusted Net Income Attributable to The RMR Group Inc. per Diluted Share | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--------------------------------------------------- | :------------ | :------------- | :------------ | | Net income attributable to The RMR Group Inc. per diluted share | $0.25 | $0.21 | $0.29 | | Adjusted net income attributable to The RMR Group Inc. per diluted share | $0.28 | $0.28 | $0.37 | [Reconciliation of EBITDA and Adjusted EBITDA from Net Income](index=21&type=section&id=Reconciliation%20of%20EBITDA%20and%20Adjusted%20EBITDA%20from%20Net%20Income) This section reconciles Net Income to EBITDA and Adjusted EBITDA, showing adjustments for income tax expense, depreciation and amortization, interest expense, and other non-recurring or non-cash items. Adjusted EBITDA for Q3 2025 was $20.1 million, a slight increase from Q2 2025 but a decrease from Q3 2024 Reconciliation of EBITDA and Adjusted EBITDA from Net Income (Three Months Ended, in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | Net income | $9,295 | $7,694 | $12,404 | | EBITDA | $15,116 | $12,400 | $17,375 | | Adjusted EBITDA | $20,081 | $19,201 | $20,972 | - Adjusted EBITDA increased by **4.6%** quarter-over-quarter from **$19.2 million** in Q2 2025 to **$20.1 million** in Q3 2025, but decreased by **4.2%** year-over-year from **$21.0 million** in Q3 2024[61](index=61&type=chunk) - Key adjustments from EBITDA to Adjusted EBITDA for Q3 2025 included adding back other asset amortization (**$2.4 million**), operating expenses paid in common shares (**$0.5 million**), separation costs (**$1.9 million**), and transaction and acquisition related costs (**$0.8 million**), while subtracting the change in fair value of Earnout liability (**$-1.2 million**)[61](index=61&type=chunk) [Calculation of Net Income Margin, Adjusted EBITDA Margin, Distributable Earnings and Distributable Earnings Per Share](index=22&type=section&id=Calculation%20of%20Net%20Income%20Margin%2C%20Adjusted%20EBITDA%20Margin%2C%20Distributable%20Earnings%20and%20Distributable%20Earnings%20Per%20Share) This section details the calculation of key profitability and distribution metrics. Net Income Margin was 21.1% for Q3 2025, while Adjusted EBITDA Margin was 43.5%. Distributable Earnings were $13.9 million, leading to Distributable Earnings Per Share of $0.43 Key Profitability and Distribution Metrics (Three Months Ended, in thousands, except per share amounts) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | Net Income Margin | 21.1% | 16.9% | 25.2% | | Adjusted EBITDA Margin | 43.5% | 40.1% | 40.9% | | Distributable Earnings | $13,857 | $12,825 | $14,389 | | Distributable Earnings Per Share | $0.43 | $0.40 | $0.45 | - Distributable Earnings are calculated as Adjusted EBITDA less tax distributions to members, with tax distributions to members for Q3 2025 totaling **$6.2 million**[64](index=64&type=chunk) - Distributable Earnings Per Share increased by **7.5%** quarter-over-quarter from **$0.40** in Q2 2025 to **$0.43** in Q3 2025, but decreased by **4.4%** year-over-year from **$0.45** in Q3 2024[64](index=64&type=chunk) [Appendix](index=23&type=section&id=APPENDIX) This appendix provides supplementary notes on revenue sources, dividend funding, GAAP results, and definitions of Non-GAAP financial measures [Notes to Management and Advisory Services Revenues by Source](index=24&type=section&id=Notes%20to%20Management%20and%20Advisory%20Services%20Revenues%20by%20Source) This section provides a detailed breakdown of management and advisory services revenues by client for Perpetual Capital and Private Capital, excluding incentive fees. It categorizes revenues into Base Business Management & Advisory, Base Property Management & Other, and Construction Supervision revenues, showing trends across different client types Total Management & Advisory Services Revenues by Client (Three Months Ended, in thousands) | Client Category | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | **Perpetual Capital** | | | | | DHC | $5,292 | $5,432 | $5,847 | | ILPT | $9,135 | $9,058 | $9,073 | | OPI | $5,781 | $5,861 | $7,307 | | SVC | $9,621 | $9,805 | $10,430 | | SEVN | $1,131 | $1,125 | $1,141 | | **Total Perpetual Capital** | **$30,960** | **$31,281** | **$33,798** | | **Private Capital** | | | | | AlerisLife | $1,452 | $1,421 | $1,442 | | Sonesta | $2,628 | $2,021 | $2,624 | | RMR Residential | $3,454 | $5,259 | $5,688 | | Other private entities | $5,345 | $5,504 | $5,344 | | **Total Private Capital** | **$12,879** | **$14,205** | **$15,098** | | **Total Management & Advisory Services Revenues** | **$43,839** | **$45,486** | **$48,896** | - Perpetual Capital revenues decreased by **8.4%** year-over-year, from **$33.8 million** in Q3 2024 to **$31.0 million** in Q3 2025, with OPI and SVC showing notable declines[70](index=70&type=chunk) - Private Capital revenues decreased by **14.7%** year-over-year, from **$15.1 million** in Q3 2024 to **$12.9 million** in Q3 2025, primarily due to a significant reduction in RMR Residential revenues[70](index=70&type=chunk) [Notes to Well-Covered Dividend](index=26&type=section&id=Notes%20to%20Well-Covered%20Dividend) This section clarifies the tax structure and tax distribution mechanism for The RMR Group LLC and The RMR Group Inc., detailing how tax distributions are made to members based on estimated tax liabilities and respective ownership percentages - The RMR Group Inc. (C-Corp) has an effective combined federal and state cash income tax rate of approximately **20.00%**[74](index=74&type=chunk) - The RMR Group LLC (Partnership) is required to make quarterly pro rata cash distributions to The RMR Group Inc. and its noncontrolling interest, based on each entity's estimated tax liabilities and respective ownership percentages[78](index=78&type=chunk) The RMR Group LLC Tax Distributions to Members (Three Months Ended, in thousands) | Recipient | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------- | :------------ | | The RMR Group LLC tax distributions to The RMR Group Inc. | $3,273 | $3,348 | $3,524 | | The RMR Group LLC tax distributions to noncontrolling interest | $2,951 | $3,028 | $3,059 | | **Total tax distributions to members from The RMR Group LLC** | **$6,224** | **$6,376** | **$6,583** | [Notes to GAAP Results and Non-GAAP Calculations](index=26&type=section&id=Notes%20to%20GAAP%20Results%20and%20Non-GAAP%20Calculations) This section provides additional context and definitions for Non-GAAP financial measures, including how contractual management and advisory fees are calculated and the basis for management services revenues earned from Managed Equity REITs - Contractual management and advisory fees are the base business management fees, property management fees, and advisory fees earned by RMR or its subsidiaries, calculated pursuant to contractual formulas and not deducting other asset amortization[78](index=78&type=chunk) - Management services revenues from Managed Equity REITs are calculated monthly based on the lower of (i) the average historical cost of each REIT's properties and (ii) each REIT's average market capitalization[79](index=79&type=chunk) - As of June 30, 2025, for Service Properties Trust (SVC), the lower of historical cost (**$11.47 billion**) and market capitalization (**$6.22 billion**) was market capitalization, which is used for fee calculation, while for Diversified Healthcare Trust (DHC), Office Properties Income Trust (OPI), and Industrial Logistics Properties Trust (ILPT), historical cost was the lower basis[80](index=80&type=chunk) [Non-GAAP Financial Measures and Certain Definitions](index=28&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Certain%20Definitions) This section defines key Non-GAAP financial measures and related terms, explaining their calculation methodologies and purpose - Adjusted Net Income Attributable to The RMR Group Inc. and its per diluted share equivalent exclude the effects of certain individually significant items not expected to be regularly recurring or related to gains or losses, aiming to enhance understanding and comparability of RMR's operating performance[84](index=84&type=chunk) - Distributable Earnings is calculated as Adjusted EBITDA less tax distributions to members, providing a measure of operating performance that more accurately reflects earnings available for distribution to shareholders[84](index=84&type=chunk) - Assets Under Management (AUM) is calculated based on the historical cost of real estate and related assets for Managed Equity REITs and certain Private Capital clients, gross book value for AlerisLife and Sonesta, carrying value for SEVN, and fair value for RMR Residential, with Fee-Earning AUM for Managed Equity REITs based on the lower of average historical cost and average market capitalization[87](index=87&type=chunk) [Warning Concerning Forward-Looking Statements](index=30&type=section&id=WARNING%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section cautions readers that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially - The presentation contains forward-looking statements that are subject to risks and uncertainties, which could cause actual results, performance, or achievements to differ materially from expected outcomes[88](index=88&type=chunk)[89](index=89&type=chunk) - Key risks include RMR's dependence on a limited number of clients, variability of revenues, changing market conditions (e.g., interest rates, inflation), potential terminations of management agreements, and the ability to obtain or create new business[89](index=89&type=chunk) - Readers should not place undue reliance on forward-looking statements, and RMR does not intend to update or change them as a result of new information, future events, or otherwise, except as required by law[91](index=91&type=chunk)
RMR Group: Diversified Real Estate Manager With Low Leverage
Seeking Alpha· 2025-07-10 12:06
Group 1 - Albert Anthony is a Croatian-American business author and media contributor on platforms like Seeking Alpha and Investing.com, with a book titled "Financial Markets: The Next Generation" set to launch in 2025 [1] - He has a non-traditional financial background, having worked as an analyst in the IT sector for Fortune 500 companies, which has aided in the establishment of his equities research firm, Albert Anthony & Company, in 2021 [1] - The firm operates 100% remotely, reflecting a modern approach to financial analysis and research [1] Group 2 - Albert Anthony has participated in numerous business and innovation conferences in Croatia, contributing to the growth of the southern European economy [1] - He has completed degrees and ongoing training from institutions like Drew University and the Corporate Finance Institute, enhancing his expertise in financial markets [1] - In addition to his writing, he is launching a YouTube show called "Financial Markets with Albert Anthony" in 2025, where he will provide market commentary similar to his written work [1]
Is the Options Market Predicting a Spike in The RMR Group Stock?
ZACKS· 2025-06-20 13:50
Company Overview - The RMR Group Inc. (RMR) is currently experiencing significant attention in the options market, particularly with the Jul 18, 2025 $25.00 Put option showing high implied volatility, indicating expectations of a substantial price movement [1] Analyst Sentiment - The RMR Group holds a Zacks Rank of 5 (Strong Sell) within the Real Estate - Operations industry, which is positioned in the bottom 30% of the Zacks Industry Rank [3] - Over the past 60 days, no analysts have raised their earnings estimates for the current quarter, while one analyst has lowered their estimate, resulting in a decrease in the Zacks Consensus Estimate from 35 cents per share to 31 cents [3] Options Market Dynamics - The high implied volatility surrounding The RMR Group suggests that options traders may be anticipating a significant price movement, which could indicate a developing trading opportunity [4] - Seasoned options traders often seek out options with high implied volatility to sell premium, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected by expiration [4]
The RMR Group(RMR) - 2025 Q2 - Earnings Call Transcript
2025-05-07 18:02
Financial Data and Key Metrics Changes - The company reported adjusted net income of $0.28 per share and distributable earnings of $0.40 per share, which were slightly below expectations [5][13] - Recurring service revenues were $45,500,000, a sequential decrease of approximately $1,800,000, primarily due to lower capital spending and declines in enterprise values of managed equity REITs [13] - The company expects recurring service revenues for the next quarter to be between $44,000,000 and $45,000,000 [13] Business Line Data and Key Metrics Changes - The company closed two joint venture acquisitions of residential communities in South Florida for an aggregate transaction value of approximately $196,000,000 [6] - A value-add community shopping center in Chicago was acquired for $21,000,000, which is currently 77% occupied, with plans to increase occupancy and rents [8] - The company anticipates the Chicago acquisition to generate EBITDA of approximately $350,000 per quarter in fiscal 2025 [13] Market Data and Key Metrics Changes - The company noted a decrease in new supply in the residential sector, which is expected to positively impact rent growth and occupancy gains heading into 2026 [6] - The company highlighted strong performance from public capital clients, with DHC's SHOP segment seeing a 49% year-over-year improvement in consolidated NOI [9] - SVC's RevPAR improved by 2.6% year-over-year, outpacing the industry despite renovation activities [10] Company Strategy and Development Direction - The company aims to take advantage of investment opportunities in the current economic volatility, particularly in the residential sector and value-add retail [5][6] - The strategy includes diversifying the client base and growing private capital assets under management (AUM), which have grown from essentially zero to over $12,000,000,000 in less than five years [9] - The company plans to leverage its expertise in retail to establish a track record in the value-add retail sector [8][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current economic volatility and its impact on capital expenditures and revenues [5] - They expressed confidence in the ability to grow private capital AUM despite a challenging fundraising environment [9] - Management believes that the current quarter represents a low point for revenue and expects improvements as AUM grows and REIT share prices recover [33] Other Important Information - The company has $137,000,000 in cash on hand and no corporate debt, positioning it well for strategic opportunities [15] - The dividend payout ratio is approximately 79%, and management feels comfortable with the current coverage [15][33] - The company published its annual sustainability report, detailing its commitment to sustainability across its portfolio [15] Q&A Session Summary Question: Can you provide more details on the strategic rationale for the value-add retail acquisition? - Management explained that this acquisition is a new direction for the company, leveraging their expertise in retail to generate high returns in community shopping centers [19][22] Question: Is the current run rate for construction fees sustainable? - Management indicated that the first calendar quarter is typically low, and the current run rate may persist due to capital constraints at REIT clients [26] Question: How do you feel about the coverage for dividends? - Management expressed confidence in the dividend coverage, noting it is currently at 79% and that this is a low point for the company [30][33] Question: What are potential partners looking for in the current environment? - Management noted that partners are seeking higher returns and that the fundraising environment is challenging but improving [36][37] Question: What is the size of the value-add shopping center portfolio? - Management stated that the current investment is $21,000,000, with plans to grow it to approximately $100,000,000 in aggregate assets [42]
The RMR Group(RMR) - 2025 Q2 - Earnings Call Transcript
2025-05-07 18:00
Financial Data and Key Metrics Changes - The company reported adjusted net income of $0.28 per share and distributable earnings of $0.40 per share, which were slightly below expectations [5][13] - Recurring service revenues were $45,500,000, a sequential decrease of approximately $1,800,000, primarily due to lower capital spending and declines in enterprise values of managed equity REITs [13] - The company expects recurring service revenues for the next quarter to be between $44,000,000 and $45,000,000 [13] Business Line Data and Key Metrics Changes - The company closed two joint venture acquisitions of residential communities in South Florida for an aggregate transaction value of approximately $196,000,000 [6] - A value-add community shopping center in Chicago was acquired for $21,000,000, which is currently 77% occupied, with plans to increase occupancy and rents [7][8] - The company anticipates the Chicago acquisition to generate EBITDA of approximately $350,000 per quarter in fiscal 2025 [13] Market Data and Key Metrics Changes - The company noted a decrease in new supply in the residential sector, which is expected to support rent growth and occupancy gains heading into 2026 [6] - The company highlighted strong performance from public capital clients, with DHC's SHOP segment seeing a 49% year-over-year improvement in consolidated NOI [9] - SVC's RevPAR improved by 2.6% year over year, outpacing the industry despite renovation activities [10] Company Strategy and Development Direction - The company aims to take advantage of investment opportunities in a volatile market, particularly in the residential sector and value-add retail [5][6] - The strategy includes leveraging existing expertise in retail to establish a track record in value-add retail investments [7][20] - The company plans to grow private capital AUM, which has increased from essentially zero to over $12,000,000,000 in less than five years [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic volatility affecting capital expenditures and revenues but remains optimistic about future investment opportunities [5] - The company expects the current fundraising environment to improve as stability returns to interest rates [37] - Management expressed confidence in the sustainability of the dividend, with a payout ratio of approximately 79% [15][32] Other Important Information - The company has $137,000,000 in cash on hand and no corporate debt, positioning it well for strategic opportunities [15] - An annual sustainability report was published, detailing the company's commitment to sustainability across its portfolio [15] Q&A Session Summary Question: Details on the value-add retail acquisition - Management explained that the acquisition is part of a strategy to leverage retail expertise and generate high returns, with plans to build a track record before seeking third-party capital [18][20][23] Question: Outlook on lower construction fees and REIT spending - Management indicated that the current run rate for capital spending is expected to remain low for a couple of quarters due to capital constraints at REIT clients [26] Question: Dividend coverage and capital allocation - Management reassured that the dividend is well covered and emphasized the importance of providing returns to shareholders while also pursuing high-return investments [30][32] Question: Timeline for increased equity capital availability - Management noted that private capital investors are seeking higher returns and expect a more stable environment to encourage increased allocations [36][37] Question: Size of the value-add shopping center portfolio - Management confirmed the Chicago acquisition is a $21,000,000 investment and indicated plans to grow the portfolio to approximately $100,000,000 [42] Question: Impact of asset dispositions on construction supervision revenue - Management clarified that the current revenue figures account for all planned spending and active disposition activities [44]
Compared to Estimates, RMR Group (RMR) Q2 Earnings: A Look at Key Metrics
ZACKS· 2025-05-07 01:00
Core Insights - RMR Group reported a revenue of $166.67 million for the quarter ended March 2025, which is a decrease of 23.5% compared to the same period last year [1] - The earnings per share (EPS) for the quarter was $0.28, down from $0.39 in the year-ago quarter, and below the consensus estimate of $0.30, resulting in an EPS surprise of -6.67% [1] - The reported revenue fell short of the Zacks Consensus Estimate of $214.32 million, leading to a revenue surprise of -22.23% [1] Revenue Breakdown - Management services revenue was reported at $44.38 million, slightly below the average estimate of $45.70 million, reflecting a year-over-year decline of 8.4% [4] - Advisory services revenue came in at $1.10 million, compared to the average estimate of $1.15 million, marking a year-over-year change of -2% [4] - Total reimbursable costs were reported at $119.09 million, significantly lower than the average estimate of $167.46 million, representing a year-over-year decline of 29.2% [4] - Total management, termination, incentive, and advisory services revenues were $45.51 million, below the estimated $46.88 million, indicating an 8.3% decrease year-over-year [4] - Other reimbursable expenses totaled $97.35 million, compared to the average estimate of $144.75 million, showing a year-over-year decline of 33% [4] Stock Performance - RMR Group's shares have returned -6.5% over the past month, contrasting with the Zacks S&P 500 composite's increase of +11.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]