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The RMR Group(RMR) - 2025 Q2 - Quarterly Results
The RMR GroupThe RMR Group(US:RMR)2025-05-06 20:18

Quarterly Results 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 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 margins8 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 hand9 - A quarterly dividend of $0.45 per share on Class A Common Stock and Class B-1 Common Stock was declared11 Second Quarter Fiscal 2025 Highlights 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 fees15 - 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 properties15 Financials This section details The RMR Group's key financial performance metrics, including GAAP results, non-GAAP adjustments, and dividend coverage Key Financial Data 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 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 202522 - 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 costs22 - Acquisition fees and annual director share grants contributed positively, while recurring general and administrative savings also had a minor impact22 Assets Under Management (AUM) by Source 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 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 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 $3,611k31 Revenue Breakdown by Client 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 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 years35 GAAP Results: Condensed Consolidated Statements of Income 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 properties74 GAAP Results: Earnings Per Common Share 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, 202444 GAAP Results: Condensed Consolidated Balance Sheets 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 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 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 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 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 This section provides definitions for non-GAAP financial measures and includes a warning concerning forward-looking statements Non-GAAP Financial Measures and Certain Definitions 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 performance87 - 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 decisions87 - 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 businesses87 - 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 clients90 Warning Concerning Forward-Looking Statements 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 practices91 - 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 capital92 - Readers are cautioned not to place undue reliance on forward-looking statements, and RMR does not intend to update them unless legally required94