The RMR Group(RMR) - 2025 Q2 - Quarterly Report

PART I. Financial Information Financial Statements (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 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 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 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 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][33] - 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] - 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] 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 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 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] 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] Liquidity and Capital Resources 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] - 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] - 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][17] Quantitative and Qualitative Disclosures About Market Risk 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][199] - 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] - 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] Controls and Procedures 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] - 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] PART II. Other Information Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Other Information 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] - 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] - 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] Exhibits 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]