MARYLAND | 8742 | 47-4122583 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (IRS Employer Identification Number) |
THE RMR GROUP INC. | ||
Date: December 15, 2016 | By: | /s/ Matthew P. Jordan |
Name: | Matthew P. Jordan | |
Title: | Chief Financial Officer and Treasurer |
FOR IMMEDIATE RELEASE | Contact: |
Timothy A. Bonang, Senior Vice President | |
(617) 796-8230 |
• | As of September 30, 2016, The RMR Group Inc. had approximately $26.9 billion of total assets under management for all client companies. An explanation of this calculation appears later in this press release. |
• | The RMR Group Inc. earned real estate business and property management services revenues for the three months ended September 30, 2016 and 2015 from the following sources (dollars in thousands): |
As of the three months ended | ||||||||||||||
September 30, 2016 | September 30, 2015 | |||||||||||||
Managed REITs | $ | 36,719 | 84.0 | % | $ | 32,889 | 82.6 | % | ||||||
Managed Operators | 6,636 | 15.2 | % | 6,276 | 15.7 | % | ||||||||
Other | 365 | 0.8 | % | 672 | 1.7 | % | ||||||||
Total Management Services Revenues | $ | 43,720 | 100.0 | % | $ | 39,837 | 100.0 | % |
• | For the three months ended September 30, 2016, net income was $18.8 million and net income attributable to The RMR Group Inc. was $7.4 million, or $0.46 per share, compared to net income of $16.3 million and net income attributable to The RMR Group Inc. of $6.3 million, or $0.40 per share, for the three months ended September 30, 2015. |
• | For the three months ended September 30, 2016, Adjusted EBITDA was $27.4 million and Adjusted EBITDA Margin was 58.3% compared to Adjusted EBITDA of $24.3 million and Adjusted EBITDA Margin of 56.9% for the three months ended September 30, 2015. Adjusted EBITDA Margin equals Adjusted EBITDA divided by the contractual management and advisory fees earned from The RMR Group LLC’s client companies. These contractual management and advisory fees are calculated pursuant to The RMR Group LLC’s contracts with its client companies and do not deduct non-cash asset amortization recognized in accordance with U.S. generally accepted accounting principles, or GAAP, as a reduction to management services revenues and do not include any incentive business management fees which may be earned based upon certain calendar year end calculations. |
• | As of September 30, 2016, The RMR Group Inc. had cash and cash equivalents of $65.8 million and no indebtedness. |
• | MR. PORTNOY’S STATEMENT THAT THE RMR GROUP INC. EXPERIENCED INCREASES IN TOTAL REVENUES, NET INCOME AND ADJUSTED EBITDA MAY IMPLY THAT THE RMR GROUP INC.’S TOTAL REVENUES, NET INCOME AND ADJUSTED EBITDA MAY CONTINUE TO INCREASE. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE RMR GROUP INC. WILL REALIZE GROWTH IN TOTAL REVENUES, NET INCOME OR ADJUSTED EBITDA. IN FACT, THE RMR GROUP INC.’S TOTAL REVENUES, NET INCOME AND ADJUSTED EBITDA MAY DECLINE. |
• | MR. PORTNOY FURTHER STATES THAT THE ACQUISITION OF TREMONT REALTY CAPITAL MAY PROVIDE A PLATFORM FOR GROWTH IN THE COMMERCIAL REAL ESTATE FINANCE INDUSTRY. INTEGRATION AND EXPANSION INTO NEW BUSINESSES CAN BE DIFFICULT, TIME CONSUMING AND/OR MORE EXPENSIVE THAN ANTICIPATED, AND MAY NOT PRODUCE THE BENEFITS THAT ARE EXPECTED AND MAY LEAD TO INCREASED LIABILITIES. |
• | MR. PORTNOY ALSO STATES THAT THE RMR GROUP INC. IS WELL POSITIONED TO TAKE ADVANTAGE OF POSSIBLE FUTURE GROWTH OPPORTUNITIES. THIS STATEMENT MAY IMPLY THAT THE RMR GROUP INC. WILL REALIZE FUTURE GROWTH. IN FACT, THERE CAN BE NO ASSURANCE THE RMR GROUP INC. WILL REALIZE FUTURE GROWTH AND ITS BUSINESS COULD DECLINE. |
Three Months Ended September 30, | Fiscal Year Ended September 30, | ||||||||||||||
Revenues | 2016 | 2015 | 2016 | 2015 | |||||||||||
Management services | $ | 43,720 | $ | 39,837 | $ | 226,660 | $ | 162,326 | |||||||
Reimbursable payroll and related costs | 11,667 | 7,695 | 37,660 | 28,230 | |||||||||||
Advisory services | 879 | 579 | 2,620 | 2,380 | |||||||||||
Total revenues | 56,266 | 48,111 | 266,940 | 192,936 | |||||||||||
Expenses | |||||||||||||||
Compensation and benefits | 26,401 | 19,301 | 91,985 | 83,456 | |||||||||||
Separation costs | — | — | 1,358 | 116 | |||||||||||
General and administrative | 6,019 | 7,878 | 25,129 | 26,535 | |||||||||||
Depreciation and amortization | 435 | 455 | 1,768 | 2,117 | |||||||||||
Total expenses | 32,855 | 27,634 | 120,240 | 112,224 | |||||||||||
Operating income | 23,411 | 20,477 | 146,700 | 80,712 | |||||||||||
Interest and other income | 90 | 34 | 234 | 1,732 | |||||||||||
Unrealized losses attributable to changes in fair value of stock | |||||||||||||||
accounted for under the fair value option | — | — | — | (290 | ) | ||||||||||
Income before income tax expense and equity in earnings of investee | 23,501 | 20,511 | 146,934 | 82,154 | |||||||||||
Income tax expense | (4,669 | ) | (4,194 | ) | (24,573 | ) | (4,848 | ) | |||||||
Equity in earnings of investee | — | — | — | 115 | |||||||||||
Net income | 18,832 | 16,317 | 122,361 | 77,421 | |||||||||||
Net income attributable to noncontrolling interest | (11,458 | ) | (9,984 | ) | (85,121 | ) | (70,118 | ) | |||||||
Net income attributable to The RMR Group Inc. | $ | 7,374 | $ | 6,333 | $ | 37,240 | $ | 7,303 | |||||||
Weighted average common shares outstanding - basic and diluted | 16,010 | 16,000 | 16,005 | 16,000 | |||||||||||
Net income attributable to The RMR Group Inc. per common share - | |||||||||||||||
basic and diluted | $ | 0.46 | $ | 0.40 | $ | 2.33 | $ | 0.46 |
Three Months Ended September 30, | Fiscal Year Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: | |||||||||||||||
Net Income | $ | 18,832 | $ | 16,317 | $ | 122,361 | $ | 77,421 | |||||||
Plus: income tax expense | 4,669 | 4,194 | 24,573 | 4,848 | |||||||||||
Plus: depreciation and amortization | 435 | 455 | 1,768 | 2,117 | |||||||||||
EBITDA | 23,936 | 20,966 | 148,702 | 84,386 | |||||||||||
Plus: other asset amortization | 2,354 | 2,354 | 9,416 | 2,999 | |||||||||||
Plus: operating expenses paid in RMR Inc. common shares | 758 | — | 933 | — | |||||||||||
Plus: separation costs | — | — | 1,358 | 116 | |||||||||||
Plus: transaction and acquisition related costs | 326 | 1,954 | 1,966 | 5,454 | |||||||||||
Less: incentive business management fees earned | — | — | (62,263 | ) | — | ||||||||||
Less: unrealized losses attributable to changes in fair value of | |||||||||||||||
stock accounted for under the fair value option | — | — | — | 290 | |||||||||||
Less: certain one time adjustments | — | (954 | ) | — | (954 | ) | |||||||||
Adjusted EBITDA | $ | 27,374 | $ | 24,320 | $ | 100,112 | $ | 92,291 | |||||||
Calculation of Adjusted EBITDA Margin: | |||||||||||||||
Contractual management and advisory fees (excluding any | |||||||||||||||
incentive business management fees)(2) | $ | 46,953 | $ | 42,770 | $ | 176,433 | $ | 167,705 | |||||||
Adjusted EBITDA | $ | 27,374 | $ | 24,320 | $ | 100,112 | $ | 92,291 | |||||||
Adjusted EBITDA Margin | 58.3 | % | 56.9 | % | 56.7 | % | 55.0 | % |
(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. and operating income. 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 historical amounts, such as income tax, depreciation and amortization, incentive business management fees, other asset amortization, operating expenses paid in RMR Inc. common shares, transaction and acquisition related costs, certain separation costs, unrealized gains or losses attributable to changes in fair value of stock accounted for under the fair value option and certain one time adjustments, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin may facilitate a comparison of current operating performance with RMR’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. or operating income as an indicator of The RMR Group Inc.’s financial performance or as a measure of The RMR Group Inc.’s liquidity. These measures should be considered in conjunction with net income, net income attributable to The RMR Group Inc. or operating income as presented in our consolidated statements of comprehensive income. Also, other asset management businesses may calculate EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin differently than The RMR Group Inc. does. |
(2) | These contractual management fees are the base business management fees, property management fees and advisory fees The RMR Group Inc. earns pursuant to its management and investment advisory agreements with its client companies. These amounts are calculated pursuant to these contracts and do not deduct other asset amortization of $2,354 and $9,416 for the three months and fiscal year ended September 30, 2016, respectively, and the $2,354 and $2,999 of amortization for the three months and fiscal year ended September 30, 2015, required to be recognized as a reduction to management services revenues in accordance with GAAP and do not include the incentive business management fee of $62,263 that The RMR Group Inc. earned under such contracts during the fiscal year ended September 30, 2016. |
September 30, | September 30, | |||||||
Assets | 2016 | 2015 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 65,833 | $ | 34,497 | ||||
Due from related parties | 24,862 | 17,986 | ||||||
Prepaid and other current assets | 4,690 | 2,863 | ||||||
Total current assets | 95,385 | 55,346 | ||||||
Furniture and equipment | 5,024 | 5,307 | ||||||
Leasehold improvements | 1,077 | 852 | ||||||
Capitalized software costs | 4,250 | 4,292 | ||||||
Total property and equipment | 10,351 | 10,451 | ||||||
Accumulated depreciation | (6,549 | ) | (5,772 | ) | ||||
3,802 | 4,679 | |||||||
Due from related parties, net of current portion | 7,754 | 6,446 | ||||||
Goodwill | 2,295 | — | ||||||
Intangible assets, net of amortization | 1,085 | — | ||||||
Deferred tax asset | 45,819 | 46,614 | ||||||
Other assets, net of amortization | 181,391 | 190,807 | ||||||
Total assets | $ | 337,531 | $ | 303,892 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable, accrued expenses and deposits | $ | 20,579 | $ | 18,439 | ||||
Total current liabilities | 20,579 | 18,439 | ||||||
Long term portion of deferred rent payable, net of current portion | 778 | 450 | ||||||
Amounts due pursuant to tax receivable agreement, net of current portion | 62,029 | 64,905 | ||||||
Employer compensation liability, net of current portion | 7,754 | 6,446 | ||||||
Total liabilities | 91,140 | 90,240 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 31,600,000 and 31,000,000 shares authorized; | ||||||||
15,082,432 and 15,000,000 shares issued and outstanding at September 30, 2016 and 2015, 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 | 94,266 | 93,425 | ||||||
Retained earnings | 44,543 | 7,303 | ||||||
Cumulative other comprehensive income | 83 | 73 | ||||||
Cumulative common distributions | (17,209 | ) | - | |||||
Total shareholders’ equity | 121,714 | 100,832 | ||||||
Noncontrolling interest | 124,677 | 112,820 | ||||||
Total equity | 246,391 | 213,652 | ||||||
Total liabilities and equity | $ | 337,531 | $ | 303,892 |
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