The RMR Group(RMR) - 2025 Q3 - Quarterly Results

Quarterly Results 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 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][16] 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][16] - 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][16] 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 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 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] - 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 ($0.04)[23] - Offsetting factors included joint venture depreciation in the prior period ($-0.01) and other net impacts ($-0.02)[23] AUM by Source 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] - 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] Management and Advisory Services Revenues by Source 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] - 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] Well-Covered Dividend 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] 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] GAAP Results: Condensed Consolidated Statements of Income 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] - Operating income decreased by 18.6% year-over-year, from $12.3 million in Q3 2024 to $10.0 million in Q3 2025[39] GAAP Results: Earnings Per Common Share 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] GAAP Results: Condensed Consolidated Balance Sheets 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] - 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] Non-GAAP Financial Measures 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 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] 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 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] - 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] Calculation of Net Income Margin, Adjusted EBITDA Margin, Distributable Earnings and Distributable Earnings Per Share 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] - 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] 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 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] - 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] Notes to Well-Covered Dividend 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] - 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] 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 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] - 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] - 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] Non-GAAP Financial Measures and Certain Definitions 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] - 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] - 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] Warning Concerning Forward-Looking Statements 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][89] - 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] - 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]