Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

The RMR Group Inc. Announces Fourth Quarter 2020 Results


The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended September 30, 2020.

Adam Portnoy, President and Chief Executive Officer, made the following statement regarding the fourth quarter fiscal 2020 results:

"In the fiscal fourth quarter, we generated net income of $14.4 million, Adjusted EBITDA of $20.8 million and an Adjusted EBITDA Margin of 48.8%. The sequential quarter increases of 6.1% and 170 basis points in Adjusted EBITDA and Adjusted EBITDA Margin, respectively, were primarily driven by an increase in management services revenues, as the majority of our Managed Equity REITs realized increases in fee paying assets under management, and the implementation of targeted cost containment measures.

Despite the challenges presented by the ongoing pandemic, we believe our Client Companies have sufficient resources to weather near-term challenges. More specifically, at our Managed Equity REITs, rent collections remained strong, rent relief requests are declining and leasing activity is improving. As a result, we believe our Client Companies are well-capitalized and, in some cases, are well positioned to be opportunistic in the near term.

We remain focused on assessing opportunities to grow our private capital assets under management, both organically and through possible external acquisitions. To this end, we recently announced the closing of our inaugural private capital investment vehicle with a large, top tier global sovereign wealth fund. The vehicle has initial investments of $680 million in industrial and logistics properties throughout the U.S., and we expect this investment vehicle may substantially grow in the future. We hope that this new private capital investment vehicle marks the beginning of a new line of business for RMR of managing large amounts of private capital on behalf of institutional clients for investments in core real estate assets. We also ended the fiscal year with $369.7 million of cash and continue to have no debt."

Fourth Quarter Fiscal 2020 Highlights:

 

 

Gross

 

Fee Paying

 

Management Services

 

 

AUM

 

AUM

 

Revenues

As of or for the Three Months Ended September 30, 2020

Managed Equity REITs (1)

 

$

29,318,014

 

 

$

17,830,148

 

 

$

32,705

 

 

82.7

%

Managed Operators (2)

 

1,939,100

 

 

1,939,100

 

 

5,676

 

 

14.4

%

Other

 

1,019,040

 

 

830,116

 

 

1,164

 

 

2.9

%

Total

 

$

32,276,154

 

 

$

20,599,364

 

 

$

39,545

 

 

100.0

%

 

 

 

 

 

 

 

 

 

As of or for the Three Months Ended September 30, 2019

Managed Equity REITs (1)

 

$

30,102,924

 

 

$

23,279,051

 

 

$

36,342

 

 

82.0

%

Managed Operators (2)

 

1,909,164

 

 

1,909,164

 

 

6,624

 

 

14.9

%

Other

 

912,408

 

 

790,746

 

 

1,380

 

 

3.1

%

Total

 

$

32,924,496

 

 

$

25,978,961

 

 

$

44,346

 

 

100.0

%

(1)

  Managed Equity REITs for the periods presented includes: Diversified Healthcare Trust (DHC), Industrial Logistics Properties Trust (ILPT), Office Properties Income Trust (OPI) and Service Properties Trust (SVC).

(2)

  Managed Operators collectively refers to: Five Star Senior Living Inc. (FVE), Sonesta International Hotels Corporation (Sonesta) and TravelCenters of America Inc. (TA).

Reconciliations to GAAP:

Adjusted net income attributable to The RMR Group Inc., EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. The GAAP financial measure that is most directly comparable to adjusted net income attributable to The RMR Group Inc. is net income attributable to The RMR Group Inc., the GAAP financial measure that is most directly comparable to EBITDA and Adjusted EBITDA is net income, while the GAAP financial measure that is most directly comparable to Adjusted EBITDA Margin is Operating Margin, which represents operating income divided by total management and advisory services revenues. Reconciliations of net income attributable to The RMR Group Inc. determined in accordance with GAAP to adjusted net income attributable to The RMR Group Inc., and of net income to EBITDA and Adjusted EBITDA as well as calculations of Operating Margin and Adjusted EBITDA Margin for each of the three months ended September 30, 2020 and 2019 are presented later in this press release.

Assets Under Management:

The calculation of gross assets under management, or gross AUM, primarily includes: (i) the gross book value of real estate and related assets, excluding depreciation, amortization, impairment charges or other non-cash reserves, of the Managed Equity REITs and ABP Trust, plus (ii) the gross book value of real estate assets, property and equipment of the Managed Operators, excluding depreciation, amortization, impairment charges or other non-cash reserves, plus (iii) the fair value of investments of Affiliates Insurance Company (until its dissolution on February 13, 2020) and the RMR Office Property Fund LP (until its dissolution on July 28, 2020) and the managed assets of RMR Mortgage Trust and Tremont Mortgage Trust. This calculation of gross AUM may include amounts that are higher than the calculations of assets under management used for purposes of calculating fees under the terms of the business management agreements.

The calculation of fee paying assets under management, or fee paying AUM, refers to the fact that base business management fees payable to The RMR Group LLC by the Managed Equity REITs are calculated monthly based upon the lower of the average historical cost of each entity's real estate assets and its average market capitalization. Management fees payable to The RMR Group LLC by other client companies are generally calculated as a percentage of revenues earned, average daily managed assets, equity, net asset value or total premiums paid under active insurance policies in accordance with the applicable management agreement.

All references in this press release to assets under management on, or as of, a date are calculated at a point in time.

For additional information on the calculation of assets under management for purposes of the fee provisions of the business management agreements, see The RMR Group Inc.'s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC. The RMR Group Inc.'s SEC filings are available at the SEC website: www.sec.gov.

Conference Call:

At 10:00 a.m. Eastern Time, President and Chief Executive Officer, Adam Portnoy, and Executive Vice President, Chief Financial Officer and Treasurer, Matt Jordan, will host a conference call to discuss The RMR Group Inc.'s fiscal fourth quarter ended September 30, 2020 financial results.

The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on Friday, November 27, 2020. To access the replay, dial (412) 317-0088. The replay pass code is 10148135.

A live audio webcast of the conference call will also be available in a listen only mode on The RMR Group Inc.'s website, at www.rmrgroup.com. Participants wanting to access the webcast should visit The RMR Group Inc.'s website about five minutes before the call. The archived webcast will be available for replay on The RMR Group Inc.'s website following the call for about one week. The transcription, recording and retransmission in any way of The RMR Group Inc.'s fiscal fourth quarter ended September 30, 2020 financial results conference call are strictly prohibited without the prior written consent of The RMR Group Inc.

About The RMR Group Inc.

The RMR Group Inc. is a holding company, and substantially all of its business is conducted by its majority-owned subsidiary, The RMR Group LLC. The RMR Group LLC is an alternative asset manager that primarily provides management services to publicly traded REITs and real estate operating companies. As of September 30, 2020, The RMR Group LLC had $32.3 billion of assets under management, including over 2,100 properties, and employed over 600 real estate professionals in more than 30 offices throughout the United States; and the companies managed by The RMR Group LLC collectively had approximately 42,500 employees. The RMR Group Inc. is headquartered in Newton, Massachusetts.

 

 

Three Months Ended
September 30,

 

Fiscal Year Ended
September 30,

 

 

2020

 

2019

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

 

Management services (1)

 

$

39,545

 

 

$

44,346

 

 

$

168,766

 

 

$

178,075

 

Incentive business management fees

 

?

 

 

?

 

 

?

 

 

120,094

 

Advisory services

 

659

 

 

824

 

 

2,911

 

 

3,169

 

Total management and advisory services revenues

 

40,204

 

 

45,170

 

 

171,677

 

 

301,338

 

Reimbursable compensation and benefits

 

17,179

 

 

16,622

 

 

57,256

 

 

57,490

 

Other client company reimbursable expenses

 

92,720

 

 

97,452

 

 

360,572

 

 

354,540

 

Total reimbursable costs

 

109,899

 

 

114,074

 

 

417,828

 

 

412,030

 

Total revenues

 

150,103

 

 

159,244

 

 

589,505

 

 

713,368

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Compensation and benefits

 

31,498

 

 

29,006

 

 

121,386

 

 

114,529

 

Equity based compensation (2)

 

4,645

 

 

4,691

 

 

7,828

 

 

9,040

 

Separation costs

 

1,236

 

 

?

 

 

1,881

 

 

7,050

 

Total compensation and benefits expense

 

37,379

 

 

33,697

 

 

131,095

 

 

130,619

 

General and administrative

 

5,836

 

 

6,594

 

 

26,514

 

 

28,706

 

Other client company reimbursable expenses

 

92,720

 

 

97,452

 

 

360,572

 

 

354,540

 

Transaction and acquisition related costs

 

22

 

 

425

 

 

1,618

 

 

698

 

Depreciation and amortization

 

237

 

 

255

 

 

968

 

 

1,017

 

Total expenses

 

136,194

 

 

138,423

 

 

520,767

 

 

515,580

 

Operating income

 

13,909

 

 

20,821

 

 

68,738

 

 

197,788

 

Interest and other income

 

349

 

 

2,368

 

 

4,451

 

 

8,770

 

Impairment loss on Tremont Mortgage Trust investment

 

?

 

 

?

 

 

?

 

 

(6,213)

 

Equity in earnings of investees

 

508

 

 

401

 

 

1,545

 

 

719

 

Unrealized gain (loss) on equity method investment accounted for
under the fair value option

 

2,235

 

 

(1,722)

 

 

3,151

 

 

(4,700)

 

Income before income tax expense

 

17,001

 

 

21,868

 

 

77,885

 

 

196,364

 

Income tax expense

 

(2,608)

 

 

(2,985)

 

 

(11,552)

 

 

(27,320)

 

Net income

 

14,393

 

 

18,883

 

 

66,333

 

 

169,044

 

Net income attributable to noncontrolling interest

 

(8,235)

 

 

(10,529)

 

 

(37,541)

 

 

(94,464)

 

Net income attributable to The RMR Group Inc.

 

$

6,158

 

 

$

8,354

 

 

$

28,792

 

 

$

74,580

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic (3)

 

16,214

 

 

16,149

 

 

16,194

 

 

16,132

 

Weighted average common shares outstanding - diluted (3)

 

16,214

 

 

16,149

 

 

31,194

 

 

16,143

 

 

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc. per common share - basic (3)

 

$

0.38

 

 

$

0.51

 

 

$

1.77

 

 

$

4.59

 

Net income attributable to The RMR Group Inc. per common share - diluted (3)

 

$

0.38

 

 

$

0.51

 

 

$

1.75

 

 

$

4.59

 

See Notes beginning on page 6.

The RMR Group Inc.
Notes to Consolidated Statements of Income
(dollars in thousands, except per share amounts)
(unaudited)

(1)

  Includes business management fees earned from the Managed Equity REITs monthly based upon the lower of (i) the average historical cost of each REIT's properties and (ii) each REIT's average market capitalization. The following table presents a summary of each Managed Equity REIT's primary strategy and the lesser of the historical cost of its assets under management and its market capitalization as of September 30, 2020 and 2019, as applicable:

 

 

 

 

Lesser of Historical Cost of Assets

 

 

 

 

Under Management or

 

 

 

 

Total Market Capitalization (a)

 

 

 

 

As of September 30,

REIT

 

Primary Strategy

 

2020

 

2019

DHC

 

Medical office and life science properties, senior living communities and wellness centers

 

$

4,381,749

 

 

$

5,889,907

 

ILPT

 

Industrial and logistics properties

 

2,613,338

 

 

2,530,811

 

OPI

 

Office properties primarily leased to single tenants, including the government

 

3,244,624

 

 

4,074,202

 

SVC

 

Hotels and net lease service and necessity-based retail properties

 

7,590,437

 

 

10,784,131

 

 

 

 

 

$

17,830,148

 

 

$

23,279,051

 

(a)   The basis on which base business management fees are calculated for the three months ended September 30, 2020 and 2019 may differ from the basis at the end of the periods presented in the table above. As of September 30, 2020, the market capitalization was lower than the historical costs of assets under management for DHC, OPI and SVC. The historical costs of assets under management for DHC, OPI and SVC as of September 30, 2020, were $8,486,147, $5,755,652 and $12,462,877, respectively. For ILPT, the historical costs of assets under management were lower than its market capitalization of $2,805,113 as of September 30, 2020.

(2)

  Equity based compensation expense for the three months ended September 30, 2020 consists of $1,127 related to shares granted by The RMR Group Inc. to certain of its officers and employees and $3,518 related to Client Companies' shares granted to certain of The RMR Group Inc.'s officers and employees.
   
  Equity based compensation related to shares granted by Client Companies is based on the fair value as of the grant date for those shares that have vested, with subsequent changes in the fair value of the unvested grants being recognized over the requisite service periods.
   
  Equity based compensation related to shares granted by The RMR Group Inc. is based on the market value on the date of grant, with the aggregate value of the shares granted amortized over the applicable vesting period. Shares issued each September vest in five equal, consecutive annual installments, with the first installment vesting on the date of grant. During the three months ended September 30, 2020, The RMR Group Inc. granted 93,700 shares to certain of its officers and employees. As of September 30, 2020, The RMR Group Inc. had 143,990 unvested shares outstanding which are scheduled to vest as follows:

 

 

Number of

 

Weighted Average

Year

 

Shares Vesting

 

Grant Date Fair Value

2021

 

50,560

 

$49.74

2022

 

41,930

 

$49.47

2023

 

32,760

 

$36.72

2024

 

18,740

 

$29.79

The RMR Group Inc.
Notes to Consolidated Statements of Income (Continued)
(amounts in thousands, except per share amounts)
(unaudited)

(3)

  The RMR Group Inc. calculates earnings per share, or EPS, using the two-class method. As such, earnings attributable to unvested participating shares are excluded from earnings before calculating per share amounts. In addition, diluted EPS includes the assumed issuance of Class A Common Shares pursuant to The RMR Group Inc.'s equity compensation plan and the issuance of Class A Common Shares related to the assumed redemption of the noncontrolling interest's 15,000 Class A Units using the if-converted method. The calculation of basic and diluted EPS is as follows:

 

 

Three Months Ended September 30,

 

Fiscal Year Ended September 30,

 

 

2020

 

2019

 

2020

 

2019

Numerators:

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc.

 

$

6,158

 

 

$

8,354

 

 

$

28,792

 

 

$

74,580

 

Income attributable to unvested participating securities

 

(43)

 

 

(50)

 

 

(209)

 

 

(482)

 

Net income attributable to The RMR Group Inc. used in
calculating basic EPS

 

6,115

 

 

8,304

 

 

28,583

 

 

74,098

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Add back: net income attributable to noncontrolling interest

 

?

 

 

?

 

 

37,541

 

 

?

 

Add back: income tax expense

 

?

 

 

?

 

 

11,552

 

 

?

 

Income tax expense at enacted tax rates assuming redemption
of noncontrolling interest's Class A Units for Class A
Common Shares

 

?

 

 

?

 

 

(23,183)

 

 

?

 

Net income attributable to The RMR Group Inc. used in
calculating diluted EPS

 

$

6,115

 

 

$

8,304

 

 

$

54,493

 

 

$

74,098

 

 

 

 

 

 

 

 

 

 

Denominators:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

16,214

 

 

16,149

 

 

16,194

 

 

16,132

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Assumed redemption of noncontrolling interest's Class A Units
for Class A Common Shares (a)

 

?

 

 

?

 

 

15,000

 

 

?

 

Incremental unvested shares

 

?

 

 

?

 

 

?

 

 

11

 

Weighted average common shares outstanding - diluted

 

16,214

 

 

16,149

 

 

31,194

 

 

16,143

 

 

 

 

 

 

 

 

 

 

Net income attributable to The RMR Group Inc. per common
share - basic

 

$

0.38

 

 

$

0.51

 

 

$

1.77

 

 

$

4.59

 

Net income attributable to The RMR Group Inc. per common
share - diluted

 

$

0.38

 

 

$

0.51

 

 

$

1.75

 

 

$

4.59

 

(a)   For the fiscal year ended September 30, 2020, the assumed redemption of the noncontrolling interest's Class A Units for Class A Common Shares is dilutive to EPS. For the three months ended September 30, 2020 and the three months and fiscal year ended September 30, 2019, such redemption is not reflected in diluted EPS as the assumed redemption would be anti-dilutive.

The RMR Group Inc.
Reconciliation of Adjusted Net Income Attributable to The RMR Group Inc. from
Net Income Attributable to The RMR Group Inc.
(dollars in thousands, except per share amounts)
(unaudited)

The RMR Group Inc. is providing the reconciliations below and information regarding certain individually significant items occurring or impacting its financial results for the three months ended September 30, 2020 and 2019 for supplemental informational purposes in order to enhance the understanding of The RMR Group Inc.'s consolidated statements of income and to facilitate a comparison of The RMR Group Inc.'s current operating performance with its historical operating performance. This information should be considered in conjunction with net income, net income attributable to The RMR Group Inc. and operating income as presented in The RMR Group Inc.'s consolidated statements of income.

 

Three Months Ended September 30, 2020

 

 

Impact on Net Income
Attributable to The
RMR Group Inc.

 

Impact on Net Income
Attributable to The RMR
Group Inc. Per Common
Share - Diluted

Net income attributable to The RMR Group Inc.

 

$

6,158

 

 

$

0.38

 

Unrealized gain on equity method investment accounted for under the fair
value option (1)

 

(824)

 

 

(0.05)

 

Certain compensation adjustments, net of reimbursements (2)

 

557

 

 

0.03

 

Separation costs (3)

 

455

 

 

0.03

 

Transaction and acquisition related costs (4)

 

8

 

 

?

 

Adjusted net income attributable to The RMR Group Inc.

 

$

6,354

 

 

$

0.39

 

(1)

  Includes $2,235 in unrealized gains on The RMR Group Inc.'s investment in TA common shares, adjusted to reflect amounts attributable to the noncontrolling interest and income tax expense at a rate of approximately 15.3%.

(2)

  Includes $1,511 of certain compensation adjustments related to annual bonus estimates, adjusted to reflect amounts attributable to the noncontrolling interest and income tax expense at a rate of approximately 15.3%.

(3)

  Includes $1,236 of separation costs, adjusted to reflect amounts attributable to the noncontrolling interest and income tax expense at a rate of approximately 15.3%.

(4)

  Includes $22 of transaction and acquisition related costs, adjusted to reflect amounts attributable to the noncontrolling interest and income tax expense at a rate of approximately 15.3%.

 

Three Months Ended September 30, 2019

 

 

Impact on Net Income
Attributable to The
RMR Group Inc.

 

Impact on Net Income
Attributable to The RMR
Group Inc. Per Common
Share - Diluted

Net income attributable to The RMR Group Inc.

 

$

8,354

 

 

$

0.51

 

Unrealized loss on equity method investment accounted for under the fair
value option (1)

 

662

 

 

0.04

 

Certain compensation adjustments, net of reimbursements (2)

 

371

 

 

0.03

 

Transaction and acquisition related costs (3)

 

163

 

 

0.01

 

Adjusted net income attributable to The RMR Group Inc.

 

$

9,550

 

 

$

0.59

 

(1)

  Includes $1,722 in unrealized losses on The RMR Group Inc.'s investment in TA common shares, adjusted to reflect amounts attributable to the noncontrolling interest and income tax expense at a rate of approximately 13.7%.

(2)

  Includes $966 of certain compensation adjustments related to annual bonus estimates, adjusted to reflect amounts attributable to the noncontrolling interest and income tax expense at a rate of approximately 13.7%.

(3)

  Includes $425 of transaction and acquisition related costs, adjusted to reflect amounts attributable to the noncontrolling interest and income tax expense at a rate of approximately 13.7%.

The RMR Group Inc.
Reconciliation of EBITDA and Adjusted EBITDA from Net Income
and Calculation of Operating Margin and Adjusted EBITDA Margin (1)
(dollars in thousands)
(unaudited)

 

 

Three Months Ended
September 30,

 

Fiscal Year Ended
September 30,

 

2020

 

2019

 

2020

 

2019

Reconciliation of EBITDA and Adjusted EBITDA from net income:

 

 

 

 

 

 

 

Net income

$

14,393

 

 

$

18,883

 

 

$

66,333

 

 

$

169,044

 

Income tax expense

2,608

 

 

2,985

 

 

11,552

 

 

27,320

 

Depreciation and amortization

237

 

 

255

 

 

968

 

 

1,017

 

EBITDA

17,238

 

 

22,123

 

 

78,853

 

 

197,381

 

Other asset amortization

2,354

 

 

2,354

 

 

9,416

 

 

9,416

 

Operating expenses paid in the form of The RMR Group Inc.'s
common shares

1,127

 

 

1,183

 

 

3,480

 

 

3,363

 

Separation costs

1,236

 

 

?

 

 

1,881

 

 

7,050

 

Transaction and acquisition related costs

22

 

 

425

 

 

1,618

 

 

698

 

Straight line office rent

30

 

 

?

 

 

154

 

 

?

 

Impairment loss on Tremont Mortgage Trust investment

?

 

 

?

 

 

?

 

 

6,213

 

Unrealized (gain) loss on equity method investment accounted for
under the fair value option

(2,235)

 

 

1,722

 

 

(3,151)

 

 

4,700

 

Equity in earnings of investees

(508)

 

 

(401)

 

 

(1,545)

 

 

(719)

 

Certain compensation adjustments, net of reimbursements

1,511

 

 

966

 

 

?

 

 

?

 

Incentive business management fees earned

?

 

 

?

 

 

?

 

 

(120,094)

 

Certain other net adjustments

?

 

 

225

 

 

(13)

 

 

384

 

Adjusted EBITDA

$

20,775

 

 

$

28,597

 

 

$

90,693

 

 

$

108,392

 

Calculation of Operating Margin:

 

 

 

 

 

 

 

Total management and advisory services revenues

$

40,204

 

 

$

45,170

 

 

$

171,677

 

 

$

301,338

 

Operating income

$

13,909

 

 

$

20,821

 

 

$

68,738

 

 

$

197,788

 

Operating Margin

34.6

%

 

46.1

%

 

40.0

%

 

65.6

%

Calculation of Adjusted EBITDA Margin:

 

 

 

 

 

 

 

Contractual management and advisory fees (excluding any
incentive business management fees) (2)

$

42,558

 

 

$

47,524

 

 

$

181,093

 

 

$

190,660

 

Adjusted EBITDA

$

20,775

 

 

$

28,597

 

 

$

90,693

 

 

$

108,392

 

Adjusted EBITDA Margin

48.8

%

 

60.2

%

 

50.1

%

 

56.9

%

(1)

  EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures calculated as presented in the tables above. The RMR Group Inc. considers EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to be appropriate supplemental measures of its operating performance, along with net income, net income attributable to The RMR Group Inc., operating income and operating margin. The RMR Group Inc. believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors because by excluding the effects of certain amounts, such as those outlined in the tables above, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin may facilitate a comparison of current operating performance with The RMR Group Inc.'s historical operating performance and with the performance of other asset management businesses. In addition, The RMR Group Inc. believes that providing Adjusted EBITDA Margin may help investors assess The RMR Group Inc.'s performance of its business by providing the margin that Adjusted EBITDA represents to its contractual management and advisory fees (excluding any incentive business management fees). EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income, net income attributable to The RMR Group Inc., operating income or operating margin as an indicator of The RMR Group Inc.'s financial performance or as a measure of The RMR Group Inc.'s liquidity. Other asset management businesses may calculate EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin differently than The RMR Group Inc. does.

(2)

  Contractual management and advisory fees are the base business management fees, property management fees and advisory fees The RMR Group Inc. or its subsidiaries earns pursuant to its management and investment advisory agreements with its client companies. These amounts are calculated pursuant to the contractual formulas and do not deduct other asset amortization of $2,354 for each of the three months ended September 30, 2020 and 2019, or $9,416 for each of the fiscal years ended September 30, 2020 and 2019, required to be recognized as a reduction to management services revenues in accordance with GAAP and do not include the incentive business management fees of $120,094 that The RMR Group Inc. recognized under GAAP during the fiscal year ended September 30, 2019, which were earned for the calendar year 2018.

The RMR Group Inc.

Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

September 30,

 

 

2020

 

2019

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

369,663

 

 

$

358,448

 

Due from related parties

 

82,605

 

 

93,521

 

Prepaid and other current assets

 

3,877

 

 

5,848

 

Total current assets

 

456,145

 

 

457,817

 

 

 

 

 

 

Property and equipment, net

 

2,299

 

 

2,383

 

Due from related parties, net of current portion

 

7,764

 

 

9,238

 

Equity method investment

 

7,467

 

 

6,658

 

Equity method investment accounted for under the fair value option

 

12,152

 

 

3,682

 

Goodwill

 

1,859

 

 

1,859

 

Intangible assets, net of amortization

 

277

 

 

323

 

Operating lease right of use assets

 

34,663

 

 

?

 

Deferred tax asset

 

23,900

 

 

25,729

 

Other assets, net of amortization

 

143,727

 

 

153,143

 

Total assets

 

$

690,253

 

 

$

660,832

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Other client company reimbursable expenses

 

$

56,079

 

 

$

65,909

 

Accounts payable and accrued expenses

 

16,984

 

 

20,266

 

Operating lease liabilities

 

4,407

 

 

?

 

Employer compensation liability

 

4,298

 

 

4,814

 

Total current liabilities

 

81,768

 

 

90,989

 

 

 

 

 

 

Deferred rent payable, net of current portion

 

?

 

 

1,620

 

Operating lease liabilities, net of current portion

 

32,030

 

 

?

 

Amounts due pursuant to tax receivable agreement, net of current portion

 

27,789

 

 

29,950

 

Employer compensation liability, net of current portion

 

7,764

 

 

9,238

 

Total liabilities

 

149,351

 

 

131,797

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,395,641 and
15,302,710 shares issued and outstanding, respectively

 

15

 

 

15

 

Class B-1 common stock, $0.001 par value; 1,000,000 shares authorized, issued and outstanding

 

1

 

 

1

 

Class B-2 common stock, $0.001 par value; 15,000,000 shares authorized, issued and outstanding

 

15

 

 

15

 

Additional paid in capital

 

106,622

 

 

103,360

 

Retained earnings

 

286,249

 

 

257,457

 

Cumulative common distributions

 

(96,983)

 

 

(72,194)

 

Total shareholders' equity

 

295,919

 

 

288,654

 

Noncontrolling interest

 

244,983

 

 

240,381

 

Total equity

 

540,902

 

 

529,035

 

Total liabilities and equity

 

$

690,253

 

 

$

660,832

 

WARNING CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements can be identified by use of words such as "outlook," "believe," "expect," "potential," "will," "may," "estimate," "anticipate" and derivatives or negatives of such words or similar words. Forward-looking statements in this press release are based upon present beliefs or expectations. However, forward-looking statements and their implications are not guaranteed to occur and may not occur for various reasons, including some reasons beyond The RMR Group Inc.'s control. For example:

The information contained in The RMR Group Inc.'s filings with the SEC, including under the caption "Risk Factors" in The RMR Group Inc.'s periodic reports, or incorporated therein, identifies important factors that could cause differences from the forward-looking statements in this press release. The RMR Group Inc.'s filings with the SEC are available on its website and at www.sec.gov.

You should not place undue reliance on forward-looking statements.

Except as required by law, The RMR Group Inc. undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.


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