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8-K - 8-K - RMR GROUP INC.a16-10818_18k.htm

Exhibit 99.1

 

 

 

 

FOR IMMEDIATE RELEASE

 

Contact:

 

 

Timothy A. Bonang, Senior Vice President

 

 

(617) 796-8230

 

The RMR Group Inc. Announces Second Quarter Fiscal 2016 Results

 

$0.38 Per Share of Net Income Attributable to The RMR Group Inc.

 

 

Newton, MA (May 10, 2016). The RMR Group Inc. (NASDAQ: RMR) today announced its financial results for the quarter ended March 31, 2016.

 

Adam Portnoy, President and Chief Executive Officer, made the following statement regarding today’s announcement:

 

“The RMR Group’s second quarter results continue to demonstrate the stability of our revenue base and the ability of our platform to deliver strong operating margins. We remain focused on growing our business with existing client companies. Also, our strong balance sheet, which includes significant cash and no indebtedness, may allow us to consider strategic opportunities to further diversify our revenue sources.”

 

Second Quarter Fiscal 2016 Highlights:

 

·                  As of March 31, 2016, The RMR Group Inc. had approximately $22.0 billion of assets under management.

 

·                  The RMR Group Inc. earned real estate business and property management services revenues (excluding reimbursable payroll and related costs as well as advisory services revenues) for the three months ended March 31, 2016 from the following sources (dollars in thousands):

 

Managed REITs

 

$

32,696

 

83.8

%

Managed Operators

 

5,998

 

15.4

%

Other

 

320

 

0.8

%

Total Management Services Revenues

 

$

39,014

 

100.0

%

 

·                  For the three months ended March 31, 2016, net income was $15.7 million and net income attributable to The RMR Group Inc. was $6.1 million, or $0.38 per share.

 

·                  For the three months ended March 31, 2016, Adjusted EBITDA was $23.1 million and Adjusted EBITDA Margin was 55.2%.

 

·                  As of March 31, 2016, The RMR Group Inc. had cash and cash equivalents of $70.6 million and no indebtedness.

 

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Summary Results for the Quarter and Six Months Ended March 31, 2016:

 

Total revenues for the quarter ended March 31, 2016 were $48.3 million. Net income attributable to The RMR Group Inc. for the quarter ended March 31, 2016 was $6.1 million, or $0.38 per share. Adjusted EBITDA for the quarter ended March 31, 2016 was $23.1 million.

 

Total revenues for the six months ended March 31, 2016 were $158.5 million. Net income attributable to The RMR Group Inc. for the six months ended March 31, 2016 were $23.2 million, or $1.45 per share. Adjusted EBITDA for the six months ended March 31, 2016 was $46.4 million (excluding $62.3 million of incentive management fees earned during the first fiscal quarter ended December 31, 2015).

 

Adjusted Revenues, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. Reconciliations of revenues determined in accordance with U.S. generally accepted accounting principles, or GAAP, to Adjusted Revenues and of net income determined in accordance with GAAP to EBITDA and Adjusted EBITDA as well as a calculation of Adjusted EBITDA Margin appear later in this press release.

 

Comparisons of The RMR Group Inc.’s revenues, Adjusted Revenues, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and net income for the three and six months ended March 31, 2016 to the three and six months ended March 31, 2015 are presented later in this press release. However, when considering the financial data for the three and six months ended March 31, 2016 in comparison to the financial data for the three and six months ended March 31, 2015, investors should note that the businesses which now comprise the Company were privately owned by ABP Trust or its owners until June 5, 2015 and that The RMR Group Inc. did not become a publicly listed company until December 14, 2015. Prior to the reorganization which created the Company on June 5, 2015 and the public listing on December 14, 2015, the Company’s assets, structure and operations differed in several respects and such differences impact period to period comparisons. For further information regarding the reorganization and related changes, see The RMR Group Inc.’s filings with the Securities Exchange Commission, or SEC, including the Annual Report on Form 10-K filed on December 18, 2015, the Proxy Statement filed on January 22, 2016, and the Registration Statement (including the Prospectus) for the public distribution of the Company’s shares dated November 16, 2015, which are available at the SEC’s website, www.sec.gov.

 

Dividends:

 

On April 13, 2016, The RMR Group Inc. declared a cash dividend on its shares of Class A Common Stock and Class B-1 Common Stock payable to its shareholders in the amount of $0.2993 per share, which represents a regular quarterly dividend of $0.25 per share for the quarter ended March 31, 2016 ($1.00 per share per year) plus a pro rata dividend of $0.0493 for the period from December 14, 2015 (the date the public distribution of The RMR Group Inc.’s shares was completed) to December 31, 2015. This dividend will be paid on or about May 19, 2016 to RMR’s shareholders of record as of the close of business on April 25, 2016.

 

Conference Call:

 

At 1:00 p.m. Eastern Time today, President and Chief Executive Officer, Adam Portnoy, and Chief Financial Officer and Treasurer, Matt Jordan, will host a conference call to discuss The RMR Group Inc.’s fiscal second quarter 2016 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 Tuesday, May 17, 2016. To access the replay, dial (412) 317-0088. The replay pass code is 10084426.

 

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

 

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services to publicly traded REITs and real estate operating companies.  As of March 31, 2016, The RMR Group LLC had approximately $22 billion of real estate assets under management including more than 1,300 properties and employed over 400 real estate professionals in 25 offices throughout the United States; the companies managed by The RMR Group LLC collectively had over 50,000 employees.  The RMR Group Inc. is headquartered in Newton, Massachusetts.

 

3



 

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. OUR FORWARD LOOKING STATEMENTS CAN BE IDENTIFIED BY USE OF WORDS SUCH AS “OUTLOOK”, “BELIEVE”, “EXPECT”, “POTENTIAL”, “WILL”, “MAY”, “ESTIMATE”, “ANTICIPATE”, DERIVATIVES OR NEGATIVES OF SUCH WORDS OR COMPARABLE WORDS. OUR FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT BELIEFS OR EXPECTATIONS. HOWEVER, OUR FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS, INCLUDING SOME REASONS BEYOND OUR CONTROL.  FOR EXAMPLE:

 

·                  MR. PORTNOY’S STATEMENT THAT THE SECOND QUARTER RESULTS DEMONSTRATED THE STABILITY OF THE RMR GROUP INC.’S REVENUE BASE AND THE ABILITY OF THE RMR GROUP INC.’S PLATFORM TO DELIVER STRONG OPERATING MARGINS IS BASED UPON THE FACT THAT THE RMR GROUP INC. PROVIDES SERVICES TO SEVERAL CLIENT COMPANIES AND THAT THE RMR GROUP INC.’S CONTRACTS WITH SOME OF THESE CLIENT COMPANIES ARE LONG TERM.  HOWEVER, NOT ALL OF THE RMR GROUP INC.’S CLIENT CONTRACTS ARE LONG TERM AND EVEN THE RMR GROUP INC.’S LONG TERM CLIENT CONTRACTS MAY BE TERMINATED IN CERTAIN CIRCUMSTANCES. ALSO, THE RMR GROUP INC.’S MANAGEMENT FEES ARE BASED IN LARGE PART ON THE VALUE OF ASSETS OWNED BY THE RMR GROUP INC.’S CLIENT COMPANIES, THE MARKET CAPITALIZATION OF THE RMR GROUP INC.’S CLIENT COMPANIES OR THE REVENUES REALIZED BY THE RMR GROUP INC.’S CLIENT COMPANIES. THE LOSS OF ANY OF THE RMR GROUP INC.’S CLIENT CONTRACTS OR A DECLINE IN THE ASSETS, MARKET CAPITALIZATION OR REVENUES OF THE RMR GROUP INC.’S CLIENT COMPANIES MAY HAVE A MATERIAL ADVERSE IMPACT ON THE RMR GROUP INC.’S REVENUES AND MATERIALLY REDUCE THE RMR GROUP INC.’S OPERATING MARGINS AND CASH FLOWS.

 

·                  MR. PORTNOY ALSO STATES THAT THE RMR GROUP INC. REMAINS FOCUSED ON GROWING ITS BUSINESS WITH EXISTING CLIENT COMPANIES AND MAY CONSIDER WAYS TO FURTHER DIVERSIFY ITS REVENUE SOURCES. INCREASING BUSINESS WITH THE RMR GROUP INC.’S EXISTING CLIENT COMPANIES MAY NOT OCCUR. IN FACT, THE RMR GROUP INC. MAY REALIZE REDUCED REVENUES FROM ITS EXISTING CLIENT COMPANIES IN THE FUTURE. IN ADDITION, THERE CAN BE NO ASSURANCE THAT THE RMR GROUP INC. WILL BE ABLE TO FURTHER DIVERSIFY ITS REVENUE SOURCES OR THAT THE REVENUES IT MAY RECEIVE FROM ANY STRATEGIC INVESTMENTS IT MAY MAKE WILL INCREASE PROFITS OR CASH FLOWS TO THE RMR GROUP INC.

 

·                  THIS PRESS RELEASE STATES THAT THE RMR GROUP INC.’S REGULAR QUARTERLY DIVIDEND IS $0.25 PER SHARE FOR THE QUARTER ENDED MARCH 31, 2016. ALL FUTURE DIVIDENDS WILL BE DECLARED AND PAID WITHIN THE DISCRETION OF THE RMR GROUP INC.’S BOARD OF DIRECTORS. WHEN DECIDING WHETHER TO DECLARE AND PAY FUTURE DIVIDENDS, THE RMR GROUP INC.’S BOARD MAY TAKE ACCOUNT OF THE RMR GROUP INC.’S CURRENT AND PROJECTED EARNINGS, CASH FLOWS AND ALTERNATIVE USES FOR ANY AVAILABLE  CASH. THE RMR GROUP INC. BOARD MAY DECIDE TO LOWER OR EVEN ELIMINATE THE RMR GROUP INC.’S DIVIDENDS THERE CAN BE NO ASSURANCE THAT THE RMR GROUP INC. WILL CONTINUE TO PAY ANY REGULAR DIVIDENDS OR WITH REGARD TO THE AMOUNT OF DIVIDENDS IT MAY PAY.

 

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THE INFORMATION CONTAINED IN THE RMR GROUP INC.’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, OR THE “SEC,” INCLUDING UNDER THE CAPTION “RISK FACTORS” IN THE RMR GROUP INC.’S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM THE RMR GROUP INC.’S FORWARD LOOKING STATEMENTS. THE RMR GROUP INC.’S FILINGS WITH THE SEC ARE AVAILABLE ON ITS WEBSITE AT WWW.SEC.GOV.

 

THE RMR GROUP INC. UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE DEVELOPMENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW.

 

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The RMR Group Inc.

Condensed Consolidated Statements of Income

(dollars in thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

2016

 

2015

 

2016

 

2015

 

Revenues

 

 

 

 

 

 

 

 

 

Management services

 

$

39,014

 

$

42,123

 

$

141,073

 

$

81,333

 

Reimbursable payroll and related costs

 

8,759

 

7,074

 

16,249

 

14,108

 

Advisory services

 

560

 

613

 

1,141

 

1,205

 

Total revenues

 

48,333

 

49,810

 

158,463

 

96,646

 

Expenses

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

21,561

 

20,714

 

42,865

 

43,559

 

Separation expense

 

 

 

163

 

116

 

General and administrative

 

6,488

 

4,672

 

13,000

 

9,687

 

Depreciation expense

 

501

 

571

 

984

 

1,150

 

Total expenses

 

28,550

 

25,957

 

57,012

 

54,512

 

Operating income

 

19,783

 

23,853

 

101,451

 

42,134

 

Interest and other income

 

51

 

665

 

76

 

1,163

 

Unrealized gains attributable to changes in fair value of stock accounted for under the fair value option

 

 

596

 

 

1,437

 

Income before income tax expense and equity in earnings of investee

 

19,834

 

25,114

 

101,527

 

44,734

 

Income tax expense

 

(4,086

)

(3

)

(15,400

)

(3

)

Equity in earnings of investee

 

 

72

 

 

100

 

Net income

 

15,748

 

$

25,183

 

 

86,127

 

$

44,831

 

Net income attributable to noncontrolling interest

 

(9,634

)

 

 

(62,959

)

 

 

Net income attributable to The RMR Group Inc.

 

$

6,114

 

 

 

$

23,168

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

16,002

 

 

 

16,001

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.38

 

 

 

$

1.45

 

 

 

 

6



 

The RMR Group Inc.

Reconciliation of Adjusted Revenues, EBITDA and Adjusted EBITDA and Calculation of Adjusted EBITDA Margin(1)

(dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

Reconciliation of Adjusted Revenues:

 

 

 

 

 

 

 

 

 

Total revenues

 

$

48,333

 

$

49,810

 

$

158,463

 

$

96,646

 

Plus: other asset amortization

 

2,354

 

 

4,708

 

 

Less: incentive business management fees earned

 

 

 

(62,263

)

 

Less: reimbursable payroll and related costs

 

(8,759

)

(7,074

)

(16,249

)

(14,108

)

Adjusted Revenues

 

$

41,928

 

$

42,736

 

$

84,659

 

$

82,538

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of EBITDA and Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Net Income

 

$

15,748

 

$

25,183

 

$

86,127

 

$

44,831

 

Plus: income tax expense

 

4,086

 

3

 

15,400

 

3

 

Plus: depreciation expense

 

501

 

571

 

984

 

1,150

 

EBITDA

 

20,335

 

25,757

 

102,511

 

45,984

 

Plus: other asset amortization

 

2,354

 

 

4,708

 

 

Plus: separation expense

 

 

 

163

 

116

 

Plus: transaction and acquisition related costs

 

455

 

 

1,313

 

 

Less: incentive business management fees earned

 

 

 

(62,263

)

 

Less: unrealized gains attributable to changes in fair value of stock accounted for under the fair value option

 

 

(596

)

 

(1,437

)

Adjusted EBITDA

 

$

23,144

 

$

25,161

 

$

46,432

 

$

44,663

 

 

 

 

 

 

 

 

 

 

 

Calculation of Adjusted EBITDA Margin:

 

 

 

 

 

 

 

 

 

Adjusted Revenues

 

$

41,928

 

$

42,736

 

$

84,659

 

$

82,538

 

Adjusted EBITDA

 

$

23,144

 

$

25,161

 

$

46,432

 

$

44,663

 

Adjusted EBITDA Margin

 

55.2

%

58.9

%

54.8

%

54.1

%

 


(1)         Adjusted Revenues, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures calculated as presented in the tables above. The RMR Group Inc. considers Adjusted Revenues, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to be appropriate measures of its operating performance, along with net income, net income attributable to The RMR Group Inc., operating income and cash flow from operating activities. The RMR Group Inc. believes that Adjusted Revenues, 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 and depreciation expenses, incentive business management fees, other asset amortization, transaction and acquisition related costs, certain separation expenses and unrealized gains attributable to changes in fair value of stock accounted for under the fair value option, Adjusted Revenues, 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. Adjusted Revenues, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin do not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to total revenues, net income, net income attributable to The RMR Group Inc., operating income or cash flow from operating activities determined in accordance with GAAP, or as an indicator of financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of The RMR Group Inc.’s needs. These measures should be considered in conjunction with total revenues, net income, net income attributable to The RMR Group Inc., operating income and cash flow from operating activities as presented in our consolidated statements of comprehensive income and consolidated statements of cash flows. Also, other asset management businesses may calculate Adjusted Revenues, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin differently than The RMR Group Inc. does.

 

7



 

The RMR Group Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except share data)

(Unaudited)

 

 

 

March 31, 

 

September 30, 

 

 

 

2016

 

2015

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

70,568

 

$

34,497

 

Due from related parties

 

22,748

 

17,986

 

Prepaid and other current assets

 

4,006

 

2,863

 

Total current assets

 

97,322

 

55,346

 

 

 

 

 

 

 

Furniture and equipment

 

4,745

 

5,307

 

Leasehold improvements

 

1,065

 

852

 

Capitalized software costs

 

4,250

 

4,292

 

Total property and equipment

 

10,060

 

10,451

 

Accumulated depreciation

 

(5,842

)

(5,772

)

 

 

4,218

 

4,679

 

Due from related parties, net of current portion

 

5,258

 

6,446

 

Deferred tax asset

 

45,834

 

46,614

 

Other assets, net of amortization

 

186,099

 

190,807

 

Total assets

 

$

338,731

 

$

303,892

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable, accrued expenses and deposits

 

$

29,464

 

$

18,439

 

Total current liabilities

 

29,464

 

18,439

 

Long term portion of deferred rent payable, net of current portion

 

632

 

450

 

Amounts due pursuant to tax receivable agreement

 

64,905

 

64,905

 

Employer compensation liability, net of current portion

 

5,258

 

6,446

 

Total liabilities

 

100,259

 

90,240

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Class A common stock, $0.001 par value; 31,600,000 and 31,000,000 shares authorized; 15,007,500 and 15,000,000 shares issued and outstanding at March 31, 2016 and September 30, 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

 

93,600

 

93,425

 

Retained earnings

 

30,471

 

7,303

 

Cumulative other comprehensive income

 

83

 

73

 

Cumulative common distributions

 

(8,416

)

 

Total shareholders’ equity

 

115,769

 

100,832

 

Noncontrolling interest

 

122,703

 

112,820

 

Total equity

 

238,472

 

213,652

 

Total liabilities and equity

 

$

338,731

 

$

303,892

 

 

8