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This content is a press release from our partner Business Wire. The AP newsroom and editorial departments were not involved in its creation.

The RMR Group Inc. Announces First Quarter Fiscal 2019 Results

February 7, 2019

NEWTON, Mass.--(BUSINESS WIRE)--Feb 7, 2019--The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended December 31, 2018.

Adam Portnoy, President and Chief Executive Officer, made the following statement regarding the first quarter fiscal 2019 results:

“We are pleased with our first quarter operating results, as adjusted net income of $0.62 per diluted share was up 3% compared to last year. During the quarter, we generated net income of $118.1 million, Adjusted EBITDA of $29.4 million and an Adjusted EBITDA Margin of 58%.

During the quarter, we also successfully helped facilitate the merger of Government Properties Income Trust and Select Income REIT to form Office Properties Income Trust, or OPI. This merger received significant shareholder support and we look forward to advancing OPI’s investment strategy of owning buildings primarily leased to single tenants and those with high credit quality characteristics, like government entities.

At the close of the first fiscal quarter, our balance sheet continues to leave us well positioned to assess strategic opportunities for future growth.”

First Quarter Fiscal 2019 Highlights:

Total management and advisory services revenues for the quarter ended December 31, 2018 were $168.4 million, including $120.1 million of incentive business management fees, compared to $205.8 million for the quarter ended December 31, 2017, which included $155.9 million in incentive business management fees. We earned management services revenues for the three months ended December 31, 2018 and 2017 from the following sources (dollars in thousands): For the three months ended December 31, 2018 and December 31, 2017, we earned incentive business management fees of $120.1 million and $155.9 million, respectively. Incentive business management fees included fees earned from HPT, SIR and SNH of $53.6 million, $25.8 million and $40.7 million, respectively, and $74.6 million, $25.6 million and $55.7 million, respectively, for the three months ended December 31, 2018 and December 31, 2017, respectively. For the three months ended December 31, 2018, net income was $118.1 million and net income attributable to The RMR Group Inc. was $52.2 million, or $3.22 per diluted share, compared to net income of $159.3 million and net income attributable to The RMR Group Inc. of $71.1 million, or $4.39 per diluted share, for the three months ended December 31, 2017. For the three months ended December 31, 2018, adjusted net income attributable to The RMR Group Inc. was $10.0 million, or $0.62 per diluted share, compared to $9.7 million, or $0.60 per diluted share, for the three months ended December 31, 2017. On December 22, 2017, the U.S government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act significantly revised the U.S. corporate income tax system by, among other things, lowering corporate income tax rates. Since we have a September 30 fiscal year end, our corporate income tax rates were phased in for our 2018 fiscal year, resulting in a federal statutory tax rate of approximately 24.5% for the fiscal year 2018. Beginning October 1, 2018, our federal statutory tax rate was reduced further to 21.0%. For the three months ended December 31, 2018, Adjusted EBITDA was $29.4 million and Adjusted EBITDA Margin was 58.0%, compared to Adjusted EBITDA of $30.5 million and Adjusted EBITDA margin of 58.4% for the three months ended December 31, 2017. As of December 31, 2018, The RMR Group Inc. had $284.2 million in cash and cash equivalents with no outstanding debt obligations. We received the $120.1 million of incentive business management fees earned for the calendar year ended December 31, 2018 in January 2019. As of December 31, 2018 and December 31, 2017, The RMR Group Inc. had approximately $29.7 billion and $30.0 billion of total assets under management, respectively.

Reconciliations to GAAP:

Adjusted net income attributable to The RMR Group Inc., EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. 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 Adjusted EBITDA Margin for the three months ended December 31, 2018 to the three months ended December 31, 2017 are presented later in this press release.

Total Assets Under Management:

The calculation of total assets under management 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 and the Open End Fund, the managed assets of RMR Real Estate Income Fund and the equity of TRMT. This calculation of total assets under management may include amounts in respect of the Managed Equity REITs that are higher than the calculations of assets under management used for purposes of calculating fees under the terms of the business management agreements, which are based, in part, upon the lesser of the historical cost of real estate assets or total market capitalization. For information on the calculation of assets under management of the Managed Equity REITs 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 1:00 p.m. Eastern Time this afternoon, 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 first quarter ended December 31, 2018 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 Thursday, February 14, 2019. To access the replay, dial (412) 317-0088. The replay pass code is 10127679.

A live audio webcast of the conference call will also be available in a listen only mode on RMR’s website, at www.rmrgroup.com. Participants wanting to access the webcast should visit RMR’s website about five minutes before the call. The archived webcast will be available for replay on RMR’s website following the call for about one week. The transcription, recording and retransmission in any way of The RMR Group Inc.’s fiscal first quarter ended December 31, 2018 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 management company that primarily provides management services to publicly traded REITs and real estate operating companies. As of December 31, 2018, The RMR Group LLC had approximately $29.7 billion of total assets under management, including more than 1,500 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 over 50,000 employees. The RMR Group Inc. is headquartered in Newton, Massachusetts.

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:

THIS PRESS RELEASE REPORTS THAT AGGREGATE INCENTIVE BUSINESS MANAGEMENT FEES OF $120.1 MILLION AND $155.9 MILLION WERE EARNED FROM HPT, SIR AND SNH FOR THE CALENDAR YEAR ENDED DECEMBER 31, 2018 AND 2017, RESPECTIVELY. AN IMPLICATION OF THIS STATEMENT MAY BE THAT INCENTIVE BUSINESS MANAGEMENT FEES MAY BE EARNED IN THE FUTURE. THE INCENTIVE BUSINESS MANAGEMENT FEES WHICH WE MAY EARN FROM THESE CLIENTS ARE BASED UPON TOTAL RETURNS REALIZED BY THEIR SHAREHOLDERS COMPARED TO THE TOTAL SHAREHOLDERS RETURN OF CERTAIN IDENTIFIED INDICES. WE HAVE LIMITED CONTROL OVER THE TOTAL RETURNS REALIZED BY SHAREHOLDERS OF OUR CLIENT COMPANIES AND EFFECTIVELY NO CONTROL OVER INDEXED TOTAL RETURNS. THERE CAN BE NO ASSURANCE THAT WE WILL EARN INCENTIVE BUSINESS MANAGEMENT FEES IN THE FUTURE. MR. PORTNOY STATES THAT THERE WAS A 3% INCREASE IN ADJUSTED NET INCOME PER DILUTED SHARE OVER THE FIRST QUARTER OF FISCAL 2018. THIS STATEMENT MAY IMPLY THAT RMR’S ADJUSTED NET INCOME PER DILUTED SHARE MAY CONTINUE TO GROW IN FUTURE PERIODS. HOWEVER, RMR’S BUSINESS IS SUBJECT TO VARIOUS RISKS, INCLUDING RISKS OUTSIDE ITS CONTROL. AS A RESULT, RMR’S ADJUSTED NET INCOME PER DILUTED SHARE MAY NOT GROW IN FUTURE PERIODS AND COULD DECLINE. MR. PORTNOY STATES THAT RMR LOOKS FORWARD TO ADVANCING OPI’S INVESTMENT STRATEGY OF OWNING BUILDINGS LEASED TO SINGLE TENANTS AND THOSE WITH HIGH CREDIT QUALITY CHARACTERISTICS, LIKE GOVERNMENT ENTITIES. THIS MAY IMPLY THAT IT WILL BE SUCCESSFUL IN ADVANCING THIS STRATEGY OR THAT THIS STRATEGY WILL BENEFIT OPI. MR. PORTNOY ALSO STATES THAT RMR CONTINUES TO ASSESS STRATEGIC OPPORTUNITIES TO UTILIZE ITS BALANCE SHEET TO CREATE FUTURE GROWTH OPPORTUNITIES. THIS STATEMENT MAY IMPLY THAT RMR WILL BE ABLE TO GROW ITS BUSINESS AND ITS PROFITS. HOWEVER, THERE CAN BE NO ASSURANCE RMR WILL BE SUCCESSFUL IN GROWING ITS BUSINESS AND, IN FACT, ITS BUSINESS AND PROFITS MAY DECLINE.

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 AT WWW.SEC.GOV.

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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20190207005223/en/

CONTACT: Timothy A. Bonang, Senior Vice President

(617) 796-8230

KEYWORD: UNITED STATES NORTH AMERICA MASSACHUSETTS

INDUSTRY KEYWORD: REIT CONSTRUCTION & PROPERTY COMMERCIAL BUILDING & REAL ESTATE RESIDENTIAL BUILDING & REAL ESTATE

SOURCE: The RMR Group Inc.

Copyright Business Wire 2019.

PUB: 02/07/2019 07:00 AM/DISC: 02/07/2019 07:01 AM

http://www.businesswire.com/news/home/20190207005223/en