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RMR Group (RMR) Q2 Earnings and Revenues Lag Estimates
ZACKS· 2025-05-06 23:01
Company Performance - RMR Group reported quarterly earnings of $0.28 per share, missing the Zacks Consensus Estimate of $0.30 per share, and down from $0.39 per share a year ago, representing an earnings surprise of -6.67% [1] - The company posted revenues of $166.67 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 22.23%, and down from $217.75 million year-over-year [2] - RMR Group has not surpassed consensus EPS or revenue estimates over the last four quarters [2] Stock Performance - RMR Group shares have declined approximately 29.9% since the beginning of the year, compared to a decline of -3.9% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.35 on revenues of $204.06 million, and for the current fiscal year, it is $1.35 on revenues of $849.39 million [7] Industry Outlook - The Real Estate - Operations industry, to which RMR Group belongs, is currently ranked in the bottom 36% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact RMR Group's stock performance [5]
The RMR Group(RMR) - 2025 Q2 - Quarterly Report
2025-05-06 20:20
PART I. Financial Information [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements as of March 31, 2025, including balance sheets, income statements, cash flows, and related notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and liabilities decreased as of March 31, 2025, driven by reductions in related party receivables and reimbursable payables Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$649,741** | **$700,494** | | Cash and cash equivalents | $137,186 | $141,599 | | Due from related parties | $95,670 | $143,380 | | Investments | $36,178 | $23,733 | | **Total Liabilities** | **$234,816** | **$281,077** | | Reimbursable accounts payable and accrued expenses | $53,152 | $90,444 | | Secured financing facility, net | $41,084 | $41,109 | | **Total Equity** | **$414,925** | **$419,417** | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Revenues and net income declined for both the three and six-month periods ended March 31, 2025, primarily due to lower reimbursable expenses and management fees Income Statement Highlights (in thousands, except per share amounts) | Metric | Q2 2025 (Three Months) | Q2 2024 (Three Months) | H1 2025 (Six Months) | H1 2024 (Six Months) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$166,668** | **$217,947** | **$386,144** | **$479,644** | | Management services | $44,382 | $48,460 | $90,565 | $93,554 | | Total reimbursable costs | $119,092 | $168,103 | $289,008 | $383,256 | | **Operating Income** | **$7,560** | **$12,127** | **$20,948** | **$22,745** | | **Net Income** | **$7,694** | **$12,713** | **$21,802** | **$28,239** | | Net Income Attributable to RMR Inc. | $3,616 | $5,862 | $9,996 | $12,859 | | **Diluted EPS** | **$0.21** | **$0.34** | **$0.58** | **$0.75** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased for the six months ended March 31, 2025, while significantly lower investing outflows resulted in a smaller overall decrease in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $37,994 | $35,016 | | Net Cash from Investing Activities | ($11,132) | ($80,644) | | Net Cash from Financing Activities | ($31,275) | ($30,253) | | **Decrease in Cash** | **($4,413)** | **($75,881)** | | Cash at End of Period | $137,186 | $192,108 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, the acquisition of RMR Residential, new debt facilities, and key related party transactions - On December 19, 2023, RMR LLC acquired MPC Partnership Holdings LLC (now RMR Residential), subsequently selling an acquired property in January 2025 for **$9.8 million** and realizing a **$445 thousand gain**[32](index=32&type=chunk)[33](index=33&type=chunk) - In January 2025, the company entered into a new **$100 million senior secured revolving credit facility** to enhance financial flexibility for private capital initiatives, with no amounts outstanding as of April 30, 2025[80](index=80&type=chunk) - In April 2025, the company acquired a 77% leased community shopping center in Chicago, IL for **$21.25 million** in an all-cash transaction to expand its private capital business[135](index=135&type=chunk) Quarterly Dividends Declared (per common share) | Declaration Date | Paid Date | Amount per Share | | :--- | :--- | :--- | | 10/16/2024 | 11/14/2024 | $0.45 | | 1/16/2025 | 2/20/2025 | $0.45 | | 10/12/2023 | 11/16/2023 | $0.40 | | 1/11/2024 | 2/15/2024 | $0.40 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a decline in management services revenue due to market conditions and highlights a strategic focus on growing its private capital business [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Revenues and operating income decreased for the three and six-month periods due to lower fees from Managed Equity REITs, partially offset by the RMR Residential acquisition Change in Operating Results (Q2 2025 vs Q2 2024, in thousands) | Line Item | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Management services revenue | $44,382 | $48,460 | ($4,078) | (8.4)% | | Total revenues | $166,668 | $217,947 | ($51,279) | (23.5)% | | Total expenses | $159,108 | $205,820 | ($46,712) | (22.7)% | | Operating income | $7,560 | $12,127 | ($4,567) | (37.7)% | | Net income attributable to RMR Inc. | $3,616 | $5,862 | ($2,246) | (38.3)% | - The decrease in Q2 management services revenue was primarily due to a **$1.7 million decline** in base business management fees from Managed Equity REITs and a **$1.8 million drop** in construction supervision revenues[157](index=157&type=chunk) Change in Operating Results (H1 2025 vs H1 2024, in thousands) | Line Item | H1 2025 | H1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Management services revenue | $90,565 | $93,554 | ($2,989) | (3.2)% | | Total revenues | $386,144 | $479,644 | ($93,500) | (19.5)% | | Total expenses | $365,196 | $456,899 | ($91,703) | (20.1)% | | Operating income | $20,948 | $22,745 | ($1,797) | (7.9)% | | Net income attributable to RMR Inc. | $9,996 | $12,859 | ($2,863) | (22.3)% | - For the six-month period, the decrease in management services revenue was driven by a **$3.7 million drop** in construction supervision fees and a **$2.8 million decline** in base business management fees, partially offset by **$3.2 million in revenue growth** from the MPC acquisition[175](index=175&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $137.2 million in cash and a new $100 million credit facility to fund operations and growth - As of March 31, 2025, the company had cash and cash equivalents of **$137.2 million**[191](index=191&type=chunk) - A new **$100 million senior secured revolving credit facility** was established in January 2025 to support growth in the private capital business; as of April 30, 2025, no amount was outstanding[194](index=194&type=chunk) - Net cash from operating activities increased to **$38.0 million** for the six months ended March 31, 2025, up from $35.0 million in the prior year period, reflecting favorable working capital changes[195](index=195&type=chunk)[17](index=17&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market exposures are interest rate risk on its floating-rate debt and credit risk within its loan portfolio - The company is subject to **interest rate risk** on its floating-rate debt and new revolving credit facility, both of which are based on SOFR[198](index=198&type=chunk)[199](index=199&type=chunk) - The company is exposed to **credit risk** from borrowers in its 'loans held for investment' portfolio, which it seeks to mitigate through a comprehensive underwriting and monitoring process[198](index=198&type=chunk) - A substantial amount of cash is invested in money market bank accounts, with some balances **exceeding FDIC insurance limits**, but the company believes this does not pose a material risk[201](index=201&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2025[205](index=205&type=chunk) - There were **no changes in internal control** over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[206](index=206&type=chunk) PART II. Other Information [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K - There have been **no material changes** to the risk factors from those previously provided in the 2024 Annual Report[212](index=212&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased shares during the quarter to satisfy tax withholding obligations related to vested employee stock awards Issuer Purchases of Equity Securities (March 2025) | Calendar Month | Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 1 - March 31, 2025 | 1,377 | $16.70 | - The share repurchases were conducted to **satisfy tax withholding and payment obligations** in connection with the vesting of Class A Common Share awards[216](index=216&type=chunk) [Other Information](index=47&type=section&id=Item%205.%20Other%20Information) The Board adopted the RMR Residential Promote Program, a new long-term incentive plan for senior employees involved with RMR Residential - The Board adopted the **RMR Residential Promote Program** on May 2, 2025, to incentivize senior employees and enable them to participate in the financial success of RMR Residential[217](index=217&type=chunk) - Participants will be granted interests in RMR Employee Carry Holdco LLC, which are subject to a **four-year service-based vesting schedule** and certain restrictive covenants[218](index=218&type=chunk) - The Compensation Committee approved allocations for named executive officers, including up to **6.5% of aggregate participants' interests** for the CEO and CFO in each RMR Residential investment[220](index=220&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including material contracts, equity plans, and required certifications - A list of exhibits filed with the report is provided, including corporate governance documents, material contracts, and required certifications[222](index=222&type=chunk)
The RMR Group(RMR) - 2025 Q2 - Quarterly Results
2025-05-06 20:18
[Quarterly Results](index=3&type=section&id=QUARTERLY%20RESULTS) This section provides an overview of The RMR Group's Q2 Fiscal 2025 financial performance, highlighting key results, operational achievements, and strategic initiatives [Q2 Fiscal 2025 Financial Results Overview](index=4&type=section&id=The%20RMR%20Group%20Inc.%20Announces%20Second%20Quarter%20Fiscal%202025%20Financial%20Results) The RMR Group Inc. reported Q2 Fiscal 2025 results slightly below expectations, driven by reduced capital spending and strategic asset sales - Q2 Fiscal 2025 results were slightly below expectations due to reduced capital spending, strategic asset sales, and deleveraging activities at Managed REITs. The company focused on controlling expenses to mitigate impact on margins[8](index=8&type=chunk) Q2 Fiscal 2025 Per Share Financials | Metric | Amount | | :-------------------------------- | :----- | | Net income per share | $0.21 | | Adjusted Net Income per share | $0.28 | | Distributable Earnings per share | $0.40 | - RMR closed two joint venture acquisitions in Florida totaling **$196 million** as part of its private capital initiatives and ended the quarter with over **$137 million** of cash on hand[9](index=9&type=chunk) - A quarterly dividend of **$0.45 per share** on Class A Common Stock and Class B-1 Common Stock was declared[11](index=11&type=chunk) [Second Quarter Fiscal 2025 Highlights](index=5&type=section&id=Second%20Quarter%20Fiscal%202025%20Highlights) The RMR Group reported **$39.8 billion** in AUM, **$3.6 million** net income, and **$19.2 million** Adjusted EBITDA, while expanding private capital initiatives Q2 Fiscal 2025 Key Financial Highlights | Metric | Amount | | :--------------------------------------- | :------------- | | Assets Under Management (AUM) | $39.8 billion | | Net income | $7.7 million | | Net income attributable to The RMR Group Inc. | $3.6 million | | Net income attributable to The RMR Group Inc. (per diluted share) | $0.21 | | Adjusted Net Income Attributable to The RMR Group Inc. | $4.7 million | | Adjusted Net Income Attributable to The RMR Group Inc. (per diluted share) | $0.28 | | Distributable Earnings | $12.8 million | | Distributable Earnings (per diluted share) | $0.40 | | Adjusted EBITDA | $19.2 million | | Adjusted EBITDA Margin | 40.1% | - RMR closed two joint venture acquisitions of residential communities in Florida with an aggregate transaction value of **$196.1 million**, raising **$64.3 million** in equity and securing **$121.5 million** in mortgage financing. RMR retained **$11.0 million** in equity interests and recognized **$0.7 million** in acquisition fees[15](index=15&type=chunk) - In April 2025, RMR acquired a 77% leased, 22-acre community shopping center in Chicago for **$21.3 million**, as part of a strategic initiative to expand its private capital business and establish a track record in value-add retail properties[15](index=15&type=chunk) [Financials](index=6&type=section&id=FINANCIALS) This section details The RMR Group's key financial performance metrics, including GAAP results, non-GAAP adjustments, and dividend coverage [Key Financial Data](index=7&type=section&id=Key%20Financial%20Data) The RMR Group experienced a decline in key financial metrics for Q2 Fiscal 2025 compared to prior periods, with Net Income, Adjusted Net Income, and Distributable Earnings decreasing Key Financial Data (Q2 2025 vs. Q1 2025 vs. Q2 2024) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :----------------------------------------- | :------------- | :---------------- | :------------- | | **GAAP Financial Measures** | | | | | Net Income (in thousands) | $7,694 | $14,108 | $12,713 | | Net Income Margin | 16.9% | 29.8% | 25.6% | | Net Income Attributable to The RMR Group Inc. (in thousands) | $3,616 | $6,380 | $5,862 | | **Non-GAAP Financial Measures** | | | | | Adjusted Net Income Attributable to The RMR Group Inc. (in thousands) | $4,709 | $5,840 | $6,854 | | Adjusted EBITDA (in thousands) | $19,201 | $20,923 | $22,661 | | Adjusted EBITDA Margin | 40.1% | 42.1% | 43.6% | | Distributable Earnings (in thousands) | $12,825 | $14,720 | $16,100 | | Distribution Payout Ratio | 79.5% | 69.8% | 64.2% | | **Per Share Metrics** | | | | | Net Income Attributable to The RMR Group Inc. | $0.21 | $0.38 | $0.34 | | Adjusted Net Income Attributable to The RMR Group Inc. | $0.28 | $0.35 | $0.39 | | Distributable Earnings | $0.40 | $0.46 | $0.51 | [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) Adjusted Net Income per share decreased from **$0.35** to **$0.28** in Q2 Fiscal 2025, primarily due to lower business management fees and reduced construction management costs - Adjusted Net Income per share decreased from **$0.35** in Q1 2025 to **$0.28** in Q2 2025[22](index=22&type=chunk) - The primary driver for the decrease was lower business management fees, mainly due to Managed Equity REITs enterprise value declines and lower third-party construction management costs[22](index=22&type=chunk) - Acquisition fees and annual director share grants contributed positively, while recurring general and administrative savings also had a minor impact[22](index=22&type=chunk) [Assets Under Management (AUM) by Source](index=9&type=section&id=AUM%20by%20Source) As of March 31, 2025, RMR's total AUM decreased to **$39.8 billion** from **$41.4 billion** a year prior, with reductions in both Perpetual and Private Capital segments Assets Under Management (AUM) by Source (in thousands) | Category | As of March 31, 2025 | % of Total | As of March 31, 2024 | % of Total | | :---------------- | :------------------- | :--------- | :------------------- | :--------- | | Perpetual Capital | $27,456,405 | 69% | $28,295,844 | 68% | | Private Capital | $12,385,889 | 31% | $13,111,701 | 32% | | **Total AUM** | **$39,842,294** | **100%** | **$41,407,545** | **100%** | Fee-Earning AUM by Source (in thousands) | Category | As of March 31, 2025 | % of Total | As of March 31, 2024 | % of Total | | :---------------- | :------------------- | :--------- | :------------------- | :--------- | | Perpetual Capital | $17,357,601 | 65% | $18,340,383 | 65% | | Private Capital | $9,208,876 | 35% | $9,853,514 | 35% | | **Total Fee-Earning AUM** | **$26,566,477** | **100%** | **$28,193,897** | **100%** | [Detailed AUM Breakdown by Sector/Strategy](index=10&type=section&id=Detailed%20AUM%20Breakdown%20by%20Sector%2FStrategy) This section provides a granular breakdown of Assets Under Management and Fee-Earning AUM across various commercial real estate sectors and strategies AUM and Fee-Earning AUM by Sector/Strategy (as of March 31, 2025, in thousands) | Commercial Real Estate Sector / Strategy | AUM | Fee-Earning AUM | | :--------------------------------------- | :------------ | :-------------- | | **Perpetual Capital** | | | | Service Properties Trust (Hotels & Net Leased Service-Focused Retail) | $11,363,702 | $6,211,123 | | Diversified Healthcare Trust (Medical Office, Life Science & Senior Living) | $7,416,599 | $3,469,383 | | Office Properties Income Trust (Office) | $5,352,300 | $2,468,647 | | Industrial Logistics Properties Trust (Industrial) | $2,646,087 | $4,530,731 | | Seven Hills Realty Trust (Diversified) | $677,717 | $677,717 | | **Total Perpetual Capital** | **$27,456,405** | **$17,357,601** | | **Private Capital** | | | | Residential Real Estate Funds (Value Add / Core Plus) | $4,679,905 | $4,679,905 | | Industrial Real Estate Funds (Core Plus) | $3,954,680 | $896,807 | | Medical Office & Life Science Real Estate Funds (Core Plus) | $2,434,645 | $2,434,645 | | Hotel Real Estate (Sonesta) (Core) | $493,108 | $493,108 | | Senior Living Real Estate (AlerisLife) (Core) | $251,057 | $251,057 | | Other Real Estate (Core Plus) | $513,914 | $394,774 | | Private Credit (Diversified) (Value Add / Core Plus) | $58,580 | $58,580 | | **Total Private Capital** | **$12,385,889** | **$9,208,876** | | **Total** | **$39,842,294** | **$26,566,477** | [Management and Advisory Services Revenues by Source](index=11&type=section&id=Management%20and%20Advisory%20Services%20Revenues%20by%20Source) Total Management & Advisory Services Revenues for Q2 Fiscal 2025 decreased to **$45.5 million**, primarily due to a significant reduction in Construction Supervision Revenues Management and Advisory Services Revenues by Source (in thousands) | Revenue Type | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :----------------------------------- | :------------- | :---------------- | :------------- | | Base Business Management & Advisory Revenues | $27,261 | $28,347 | $28,985 | | Base Property Management & Other Revenues | $16,430 | $15,148 | $16,990 | | Construction Supervision Revenues | $1,795 | $3,829 | $3,611 | | **Total Management & Advisory Services Revenues** | **$45,486** | **$47,324** | **$49,586** | - Construction Supervision Revenues experienced a significant quarter-over-quarter decrease from **$3,829k** to **$1,795k**, and a year-over-year decrease from **$3,611k**[31](index=31&type=chunk) [Revenue Breakdown by Client](index=24&type=section&id=Revenue%20Breakdown%20by%20Client) This section provides a detailed breakdown of Management & Advisory Services Revenues categorized by Perpetual Capital and Private Capital clients Total Management & Advisory Services Revenues by Client (in thousands) | Client | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | :------------- | | **Perpetual Capital** | | | | | DHC | $5,432 | $6,594 | $6,089 | | ILPT | $9,058 | $9,310 | $9,289 | | OPI | $5,861 | $6,546 | $7,708 | | SVC | $9,805 | $10,106 | $11,090 | | SEVN | $1,125 | $1,162 | $1,135 | | **Total Perpetual Capital** | **$31,281** | **$33,718** | **$35,311** | | **Private Capital** | | | | | AlerisLife | $1,421 | $1,400 | $1,451 | | Sonesta | $2,021 | $2,224 | $2,000 | | RMR Residential | $5,259 | $5,165 | $5,462 | | Other private entities | $5,504 | $4,817 | $5,362 | | **Total Private Capital** | **$14,205** | **$13,606** | **$14,275** | | **Total Management & Advisory Services Revenues** | **$45,486** | **$47,324** | **$49,586** | [Well-Covered Dividend](index=12&type=section&id=Well-Covered%20Dividend) The RMR Group Inc. declared a quarterly dividend of **$0.45 per share**, well-covered by Distributable Earnings, with a **79.5%** payout ratio and ample cash reserves Dividend Funding for Q2 Fiscal 2025 (in thousands, except per share amounts) | Metric | Amount | Per Share | Payout Ratio | | :------------------------------------ | :----- | :-------- | :----------- | | Distributable Earnings | $12,825 | $0.40 | | | Dividend Funded by The RMR Group LLC | $10,190 | $0.32 | 79.5% | | Dividend Funded by The RMR Group Inc. cash balance | $2,190 | $0.13 | | | **Total Dividend** | **$12,380** | **$0.45** | | - As of March 31, 2025, The RMR Group Inc. had **$137,186k** in consolidated cash and cash equivalents, including **$21,317k** accumulated from tax distributions, providing ample capacity to continue dividends at current levels for more than three years[35](index=35&type=chunk) [GAAP Results: Condensed Consolidated Statements of Income](index=13&type=section&id=GAAP%20Results%3A%20Condensed%20Consolidated%20Statements%20of%20Income) For Q2 Fiscal 2025, The RMR Group reported total revenues of **$166.7 million**, a significant decrease, with operating income at **$7.6 million** and net income attributable to RMR Inc. at **$3.6 million** Condensed Consolidated Statements of Income (in thousands) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :----------------------------------------- | :------------- | :---------------- | :------------- | | Revenues: | | | | | Management services | $44,382 | $46,183 | $48,460 | | Incentive fees | $19 | $66 | $60 | | Advisory services | $1,104 | $1,141 | $1,126 | | Total management, incentive and advisory services revenues | $45,505 | $47,392 | $49,646 | | Total reimbursable costs | $119,092 | $169,916 | $168,103 | | **Total revenues** | **$166,668** | **$219,476** | **$217,947** | | Expenses: | | | | | Total compensation and benefits expense | $47,112 | $42,688 | $45,278 | | General and administrative | $11,246 | $11,284 | $11,693 | | Other reimbursable expenses | $97,349 | $148,556 | $145,232 | | **Total expenses** | **$159,108** | **$206,088** | **$205,820** | | **Operating income** | **$7,560** | **$13,388** | **$12,127** | | Change in fair value of Earnout liability | $1,270 | $3,410 | $(300) | | **Net income** | **$7,694** | **$14,108** | **$12,713** | | **Net income attributable to The RMR Group Inc.** | **$3,616** | **$6,380** | **$5,862** | - Management services revenues are calculated monthly based on the lower of the average historical cost or average market capitalization of each Managed Equity REIT's properties[74](index=74&type=chunk) [GAAP Results: Earnings Per Common Share](index=15&type=section&id=GAAP%20Results%3A%20Earnings%20Per%20Common%20Share) For Q2 Fiscal 2025, basic and diluted earnings per common share attributable to The RMR Group Inc. were **$0.21**, a decrease from prior periods Earnings Per Common Share (in thousands, except per share amounts) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :----------------------------------------- | :------------- | :---------------- | :------------- | | Net income attributable to The RMR Group Inc. | $3,616 | $6,380 | $5,862 | | Net income attributable to The RMR Group Inc. per common share - basic | $0.21 | $0.38 | $0.35 | | Net income attributable to The RMR Group Inc. per common share - diluted | $0.21 | $0.38 | $0.34 | | Weighted average common shares outstanding - diluted | 16,616 | 16,613 | 31,539 | - The assumed redemption of **15,000,000** Class A Units was anti-dilutive to earnings per share for the three months ended March 31, 2025, and December 31, 2024, but was dilutive for the three months ended March 31, 2024[44](index=44&type=chunk) [GAAP Results: Condensed Consolidated Balance Sheets](index=16&type=section&id=GAAP%20Results%3A%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, The RMR Group's total assets decreased to **$649.7 million**, primarily due to a reduction in amounts due from related parties Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 | September 30, 2024 | | :----------------------------------------- | :------------- | :----------------- | | Assets: | | | | Cash and cash equivalents | $137,186 | $141,599 | | Due from related parties | $90,022 | $134,030 | | Total current assets | $243,889 | $294,118 | | **Total assets** | **$649,741** | **$700,494** | | Liabilities and Equity: | | | | Reimbursable accounts payable and accrued expenses | $53,152 | $90,444 | | Total current liabilities | $97,168 | $133,439 | | **Total liabilities** | **$234,816** | **$281,077** | | **Total equity** | **$414,925** | **$419,417** | [Non-GAAP Financial Measures](index=17&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section provides reconciliations and definitions for The RMR Group's key non-GAAP financial measures, including Adjusted Net Income, EBITDA, and Distributable Earnings [Adjusted Net Income Attributable to The RMR Group Inc. Reconciliation](index=18&type=section&id=Adjusted%20Net%20Income%20Reconciliation) The reconciliation shows Adjusted Net Income Attributable to The RMR Group Inc. at **$4.7 million** (**$0.28** per diluted share) for Q2 Fiscal 2025, after various adjustments Adjusted Net Income Attributable to The RMR Group Inc. Reconciliation (Q2 Fiscal 2025, in thousands, except per share amounts) | Metric | Amount | Per Share | | :----------------------------------------- | :----- | :-------- | | Net income attributable to The RMR Group Inc. | $3,616 | $0.21 | | Adjustments: | | | | Incentive fees | $(7) | | | Loss on investments | $267 | $0.02 | | Gain on sale of real estate | $(167) | $(0.01) | | Separation costs | $1,303 | $0.08 | | Change in fair value of Earnout liability | $(479) | $(0.03) | | Reversal of credit losses | $(31) | - | | Transaction and acquisition related costs | $207 | $0.01 | | **Adjusted net income attributable to The RMR Group Inc.** | **$4,709** | **$0.28** | Adjusted Net Income Attributable to The RMR Group Inc. (Q1 Fiscal 2025 & Q2 Fiscal 2024, in thousands, except per share amounts) | Metric | December 31, 2024 | March 31, 2024 | | :----------------------------------------- | :---------------- | :------------- | | Net income attributable to The RMR Group Inc. | $6,380 | $5,862 | | **Adjusted net income attributable to The RMR Group Inc.** | **$5,840** | **$6,854** | | Adjusted net income attributable to The RMR Group Inc. per diluted share | $0.35 | $0.39 | [EBITDA and Adjusted EBITDA Reconciliation](index=21&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) The RMR Group's Net Income of **$7.7 million** for Q2 Fiscal 2025 reconciles to an EBITDA of **$12.4 million** and an Adjusted EBITDA of **$19.2 million** EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :----------------------------------------- | :------------- | :---------------- | :------------- | | Net income | $7,694 | $14,108 | $12,713 | | Income tax expense | $1,378 | $2,476 | $2,120 | | Depreciation and amortization | $2,457 | $2,347 | $1,223 | | Interest expense | $871 | $43 | $80 | | **EBITDA** | **$12,400** | **$18,974** | **$16,136** | | Other asset amortization | $2,354 | $2,354 | $2,354 | | Operating expenses paid in common shares | $1,074 | $558 | $1,058 | | Separation costs | $3,455 | - | $410 | | Transaction and acquisition related costs | $549 | $787 | $2,328 | | Change in fair value of Earnout liability | $(1,270) | $(3,410) | $300 | | Reversal of credit losses | $(81) | $(72) | - | | Gain on sale of real estate | $(445) | - | - | | Loss (gain) on investments | $709 | $1,071 | $(563) | | Distributions from investments | $598 | $598 | $597 | | Technology transformation investments | - | $273 | $167 | | Incentive fees | $(19) | $(66) | $(60) | | **Adjusted EBITDA** | **$19,201** | **$20,923** | **$22,661** | [Distributable Earnings and Margin Calculation](index=22&type=section&id=Distributable%20Earnings%20and%20Margin%20Calculation) The RMR Group's Net Income Margin was **16.9%** and Adjusted EBITDA Margin was **40.1%** for Q2 Fiscal 2025, with Distributable Earnings at **$12.8 million** (**$0.40** per share) Net Income Margin, Adjusted EBITDA Margin, Distributable Earnings (in thousands, except per share amounts) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :----------------------------------------- | :------------- | :---------------- | :------------- | | Total management, incentive and advisory services revenue | $45,505 | $47,392 | $49,646 | | Net income | $7,694 | $14,108 | $12,713 | | **Net Income Margin** | **16.9%** | **29.8%** | **25.6%** | | Contractual management and advisory fees | $47,840 | $49,678 | $51,940 | | Adjusted EBITDA | $19,201 | $20,923 | $22,661 | | **Adjusted EBITDA Margin** | **40.1%** | **42.1%** | **43.6%** | | Adjusted EBITDA | $19,201 | $20,923 | $22,661 | | Less: Tax distributions to members | $(6,376) | $(6,203) | $(6,561) | | **Distributable Earnings** | **$12,825** | **$14,720** | **$16,100** | | Class A and Class B-1 Common Share Distributions | $7,580 | $7,581 | $6,684 | | Class A Units Distributions | $4,800 | $4,800 | $4,800 | | **Total Distributions** | **$12,380** | **$12,381** | **$11,484** | | **Distributable Earnings Per Share** | **$0.40** | **$0.46** | **$0.51** | [Appendix](index=23&type=section&id=APPENDIX) This section provides definitions for non-GAAP financial measures and includes a warning concerning forward-looking statements [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, including Adjusted Net Income, Distributable Earnings, EBITDA, and AUM, to enhance understanding of RMR's operating performance - Adjusted Net Income Attributable to The RMR Group Inc. excludes individually significant items not expected to be regularly recurring, special projects, or gains/losses, to enhance understanding of operating performance[87](index=87&type=chunk) - Distributable Earnings is calculated as Adjusted EBITDA less tax distributions to members, reflecting earnings available for distribution to shareholders and used by the Board of Directors for dividend decisions[87](index=87&type=chunk) - EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin are supplemental measures used to assess operating performance by excluding certain non-recurring gains and losses, aiding comparison with historical performance and other asset management businesses[87](index=87&type=chunk) - Assets Under Management (AUM) is calculated based on historical cost or gross book value of real estate and related assets, or fair value for certain entities. Fee-Earning AUM is calculated monthly for Managed Equity REITs based on the lower of average historical cost or market capitalization, and equals AUM for other clients[90](index=90&type=chunk) [Warning Concerning Forward-Looking Statements](index=30&type=section&id=WARNING%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section serves as a standard disclaimer, highlighting that the presentation contains forward-looking statements subject to risks and uncertainties, cautioning against undue reliance - The presentation contains forward-looking statements regarding RMR's business strategy, economic and industry conditions, liquidity, private capital initiatives, and sustainability practices[91](index=91&type=chunk) - These statements are subject to risks and uncertainties, including dependence on a limited number of clients, revenue variability, changing market conditions, potential management agreement terminations, interest rate uncertainty, and the ability to obtain new capital[92](index=92&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, and RMR does not intend to update them unless legally required[94](index=94&type=chunk)
RMR Group (RMR) Expected to Beat Earnings Estimates: Can the Stock Move Higher?
ZACKS· 2025-04-29 15:07
Core Viewpoint - The market anticipates a year-over-year decline in RMR Group's earnings due to lower revenues, with a focus on how actual results will compare to estimates [1][3]. Earnings Expectations - RMR Group is expected to report quarterly earnings of $0.30 per share, reflecting a year-over-year decrease of 23.1%, and revenues are projected to be $214.32 million, down 1.6% from the previous year [3]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a positive Earnings ESP of +1.70% for RMR Group, suggesting analysts have recently become more optimistic about the company's earnings prospects [10]. - A positive Earnings ESP is a strong indicator of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [8]. Historical Performance - RMR Group has not been able to beat consensus EPS estimates in any of the last four quarters, with the last reported quarter matching expectations exactly at $0.35 per share [12][13]. Investment Considerations - While an earnings beat may not solely dictate stock movement, betting on stocks expected to exceed earnings expectations can enhance the likelihood of success [14][15]. - RMR Group is viewed as a compelling candidate for an earnings beat, but investors should consider other influencing factors before making investment decisions [16].
The RMR Group: Stable Revenue Base Is Intact
Seeking Alpha· 2025-04-08 16:22
Group 1 - The RMR Group Inc. (NASDAQ: RMR) is identified as an attractive stock amidst falling market prices, showing resilience against reciprocal tariffs [1] - The author expresses a value investing approach, focusing on emerging markets and seeking low-risk, high-uncertainty investment opportunities [1] - The investment philosophy is influenced by notable economists and authors, indicating a shift towards Austrian economic principles in future writings [1] Group 2 - The article emphasizes the importance of maintaining an investment journal to track successes and learn from failures [1] - The author graduated from NYU Stern with a Bachelor's in Business and a concentration in Finance, highlighting a solid educational background in finance [1]
The RMR Group(RMR) - 2025 Q1 - Earnings Call Transcript
2025-02-06 19:51
Financial Data and Key Metrics Changes - The RMR Group Inc. reported adjusted net income of $0.35 per share and distributable earnings of $0.46 per share for Q1 2025, with net income at $0.38 per share [7][20] - Adjusted EBITDA for the quarter was approximately $21 million, with expectations for the next quarter to be around $20 million [7][24] - Recurring service revenues decreased to $47.3 million, down approximately $700,000 sequentially, with expectations of around $46 million for the next quarter [21][22] Business Line Data and Key Metrics Changes - Recurring cash compensation was $42.6 million, reflecting a decline of approximately $1.5 million sequentially due to headcount actions and technology investments [23] - Recurring G&A expenses were $11.1 million, with expectations to remain at or slightly below this level in the next quarter [24] Market Data and Key Metrics Changes - The company has established a $100 million line of credit to enhance liquidity for growth initiatives, with nearly $150 million in cash on hand and no outstanding corporate debt [8][25] - The company is optimistic about the commercial real estate market improving in 2025, with a focus on residential, credit strategies, and development initiatives [9][10] Company Strategy and Development Direction - The RMR Group Inc. aims to raise a committed fund focused on residential investments and is currently executing a value-add business strategy on newly acquired properties [12][11] - The company is exploring development opportunities within its portfolio, including redeveloping obsolete structures into industrial or multifamily residential spaces [38][42] Management's Comments on Operating Environment and Future Outlook - Management believes the cyclical bottom for commercial real estate is likely behind, with improving fundamentals across most real estate sectors [8][9] - The company expects to see a return to growth in earnings metrics after the upcoming quarter, despite seasonal headwinds impacting Q1 results [65][76] Other Important Information - The company executed $1.8 billion in financings, including a debt exchange transaction related to OPI's 2025 debt maturity [15] - Seven Hills Realty Trust achieved a total shareholder return of over 12%, outperforming its industry benchmark [18] Q&A Session Summary Question: Can you elaborate on the RMR residential JV investments and the pipeline? - Management indicated a gross investment of about $200 million in residential joint ventures, with expected returns in the mid-teens and a target of $500 million to $1 billion in total investments for fiscal 2025 [31][32] Question: What are the development opportunities mentioned? - Management highlighted opportunities to redevelop older structures into industrial or multifamily residential spaces, with significant projects underway in Nashville and Boston [38][40] Question: What is the likelihood of utilizing the revolver in 2025? - Management stated there is less than a 50% chance of drawing on the revolver, as current cash balances are sufficient for planned investments [82][84] Question: What is the outlook for EBITDA margins? - Management aims to return EBITDA margins to the 50% range, currently impacted by the residential platform's performance [74][75] Question: How will the company approach residential investments moving forward? - Management expects to pursue both joint venture deals and potential on-balance sheet investments, with a strong bias towards joint ventures [88][90]
The RMR Group(RMR) - 2025 Q1 - Earnings Call Presentation
2025-02-06 19:47
The RMR Group Inc. Announces First Quarter Fiscal 2025 Financial Results February 5, 2025 THE RMR GROUP INC. ANNOUNCES FIRST QUARTER FISCAL 2025 FINANCIAL RESULTS Newton, MA (February 5, 2025). The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended December 31, 2024. Dividend RMR has declared a quarterly dividend on its Class A Common Stock and Class B-1 Common Stock of $0.45 per share to shareholders of record as of the close of business on January 27, 2025. Thi ...
RMR Group (RMR) Reports Q1 Earnings: What Key Metrics Have to Say
ZACKS· 2025-02-06 01:30
Core Insights - RMR Group reported a revenue of $219.48 million for the quarter ended December 2024, reflecting a 16.1% decline year-over-year and a significant miss of 16.71% against the Zacks Consensus Estimate of $263.5 million [1] - The company's EPS was $0.35, down from $0.49 in the same quarter last year, aligning with the consensus EPS estimate, indicating no surprise in earnings [1] Revenue Breakdown - Management services revenue was $46.18 million, slightly below the average estimate of $48.63 million, representing a year-over-year increase of 2.4% [4] - Total management, termination, incentive, and advisory services revenues amounted to $47.39 million, compared to the two-analyst average estimate of $50.05 million, showing a year-over-year increase of 1.9% [4] - Total reimbursable costs from other reimbursable expenses were reported at $148.56 million, significantly lower than the average estimate of $190.50 million, marking a year-over-year decline of 24.2% [4] - Advisory services revenue was $1.14 million, slightly below the average estimate of $1.18 million, with a year-over-year increase of 1.4% [4] Stock Performance - RMR Group's shares have returned -2.1% over the past month, contrasting with the Zacks S&P 500 composite's increase of 1.7%, indicating potential underperformance in the near term [3]
RMR Group (RMR) Matches Q1 Earnings Estimates
ZACKS· 2025-02-06 00:25
Core Viewpoint - RMR Group reported quarterly earnings of $0.35 per share, matching the Zacks Consensus Estimate, but down from $0.49 per share a year ago, indicating a decline in profitability [1] - The company missed revenue expectations, posting $219.48 million, which was 16.71% below the consensus estimate and down from $261.67 million year-over-year [2] Financial Performance - RMR Group has not surpassed consensus EPS estimates in the last four quarters, indicating consistent underperformance [2] - The company’s shares have decreased by approximately 8% since the beginning of the year, contrasting with the S&P 500's gain of 2.7% [3] Future Outlook - The company's earnings outlook is critical for assessing future stock performance, with current consensus EPS estimates at $0.36 for the next quarter and $1.51 for the current fiscal year [7] - The Zacks Rank for RMR Group is currently 5 (Strong Sell), suggesting expected underperformance in the near future [6] Industry Context - The Real Estate - Operations industry, to which RMR Group belongs, is currently ranked in the bottom 16% of over 250 Zacks industries, which may negatively impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, emphasizing the importance of monitoring these revisions [5]
The RMR Group(RMR) - 2025 Q1 - Quarterly Report
2025-02-05 21:18
Acquisition and Growth - RMR Inc. completed the acquisition of MPC Partnership Holdings LLC for a total consideration of $99,021, enhancing its residential capabilities[133] - Management services revenue increased by $1,089, or 2.4%, primarily due to growth from the acquisition of MPC[2] - Reimbursable compensation and benefits rose by $4,962, or 29.5%, due to a full quarter of RMR Residential's operations following the MPC acquisition[3] Financial Performance - Total revenues decreased by $44,363, or 17.0%, from $261,697 in Q4 2023 to $219,476 in Q4 2024[1] - Operating income increased by $2,770, or 26.1%, from $10,618 in Q4 2023 to $13,388 in Q4 2024[1] - Net income attributable to The RMR Group Inc. decreased by $617, or 8.8%, from $6,997 in Q4 2023 to $6,380 in Q4 2024[1] Market Trends and Economic Outlook - The Managed Equity REITs' total market capitalization decreased from $18,588,598 in 2023 to $17,105,736 in 2024, reflecting a decline of approximately 8%[136] - The company anticipates that the U.S. economy is likely headed for a "soft-landing," with inflation possibly having peaked, which may influence future investment decisions[131] - Special servicing rates for commercial mortgage-backed securities (CMBS) and CRE collateralized loan obligations have continued to increase, indicating ongoing challenges in the commercial real estate sector[132] Cash Management and Financial Flexibility - Cash and cash equivalents increased from $141,599 as of September 30, 2024, to $147,580 as of December 31, 2024[1] - The company entered into a $100,000 senior secured revolving credit facility to enhance financial flexibility[1] - The company maintains a substantial amount of cash in money market bank accounts, primarily in U.S. banks, with some balances exceeding FDIC insurance limits, mitigating material interest rate risk[172] Debt and Interest Rate Exposure - As of December 31, 2024, the company has floating rate debt governed by a master repurchase agreement with UBS AG, with interest paid at SOFR plus a premium[169] - The company entered into a credit agreement in January 2025, with interest on borrowings at SOFR plus a margin of 225 basis points, indicating vulnerability to changes in U.S. dollar short-term rates[170] Risk Management - The company is subject to credit risk from borrowers related to loans held for investment, which is mitigated through comprehensive underwriting and ongoing monitoring[169] - The company has relationships with related persons, including the Chair of the Board, which may pose risks as outlined in the 2024 Annual Report[173] - The company has not experienced material changes in risk factors since the previous annual report, indicating stability in its operational environment[186] Operational Controls and Accounting - The company emphasizes the importance of maintaining effective disclosure controls and procedures, as evaluated by its management[177] - There have been no significant changes in critical accounting estimates since the fiscal year ended September 30, 2024, impacting the financial statements[175] Revenue Generation - Base business management revenues from Managed Equity REITs for the three months ended December 31, 2024, totaled $20,399, compared to $21,550 for the same period in 2023, indicating a decrease of about 5.3%[138] - AlerisLife and Sonesta generated management fee revenues of $1,400 and $2,224 respectively for the three months ended December 31, 2024, showing slight increases from $1,382 and $2,223 in 2023[141] - Tremont earned advisory services revenue of $1,141 for the three months ended December 31, 2024, up from $1,125 in 2023, reflecting a growth of 1.4%[143] Strategic Outlook - The company believes it can grow real estate-based businesses despite national trends, reflecting a strategic outlook on market conditions[180]