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RMR GROUP INC. (RMR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 came in slightly below internal expectations: Adjusted Net Income per share was $0.28, Distributable Earnings per share $0.40, Adjusted EBITDA $19.2M with a 40.1% margin, and AUM of $39.8B, as lower REIT capex and deleveraging pressured fee revenues .
  • Versus S&P Global consensus, EPS modestly missed and revenue materially lagged (definition mismatch noted): EPS $0.28 vs $0.31*, Revenue $47.6M vs $214.3M*, with management emphasizing recurring service revenue and non-reimbursable measures as the core performance lens .
  • Forward guide: Next quarter, recurring service revenue expected at $44–$45M, Adjusted EPS $0.28–$0.30, Adjusted EBITDA $19–$20M, and Distributable Earnings per share $0.42–$0.44, underpinning dividend coverage (~79% payout in Q2) and liquidity ($137M cash; no corporate debt) .
  • Strategic catalysts: two Florida multifamily JVs closed (~$196M aggregate), seeding private capital growth; new value‑add retail strategy launched (Chicago center, $21.3M, 77% leased) to build track record for fundraising; $100M revolver adds flexibility for seeding vehicles .

Note: Asterisks denote S&P Global-derived figures; see Estimates Context for definitions and caveats.

What Went Well and What Went Wrong

What Went Well

  • Private capital execution: Closed two South Florida residential JVs (~$196.1M all-in), raised ~$64.3M of third‑party equity with ~$121.5M mortgage financing; RMR as GP retained ~$11.0M equity; earned ~$0.7M acquisition fees and will collect ongoing property management fees and potential carry .
  • Launch of value‑add retail: Acquired a 22‑acre Chicago community shopping center for $21.3M (77% leased) with a plan to lease up and push rents ~20% below market today; targeting mid‑ to high‑teens returns and a ~$100M seeded portfolio to support future fundraising .
  • Managed REITs progress (positives): DHC SHOP NOI up 49% YoY; SVC hotel RevPAR +2.6% YoY with outperformance vs industry and strong triple‑net anchors; ILPT leases +19% rent roll‑ups; SVC’s hotel sales (~$1.1B) advancing deleveraging .

What Went Wrong

  • Top‑line pressure: Recurring service revenues fell sequentially as REIT capex and construction activity slowed and managed equity REIT enterprise values declined; construction management down ~$1.8M QoQ, partly offset by $0.7M acquisition fees .
  • Margin compression: Adjusted EBITDA margin declined to 40.1% (from 42.1% in Q1 and 43.6% YoY) on lower fee revenues and residential platform breakeven; management targets a path back toward ~50% longer term as residential scales .
  • OPI and office headwinds: OPI continues to face sector‑specific challenges and is exploring options for upcoming debt obligations; near‑term deleveraging across managed REITs weighs on base fee revenue .

Financial Results

Results vs Wall Street Consensus (S&P Global)

MetricQ2 FY2025 EstimateQ2 FY2025 ActualSurprise
EPS (Primary)$0.31*$0.28*Miss $0.03*
Revenue ($M)$214.3*$47.6*Miss $166.7*
  • S&P Global values; revenue reflects non‑reimbursable “service and other revenue” definition aligned to consensus reporting, which can differ from GAAP total revenue due to reimbursables (see Estimates Context). Values retrieved from S&P Global.

Key Financial Metrics (oldest → newest)

MetricQ2 FY2024Q1 FY2025Q2 FY2025
AUM ($B)$41.4 —$39.8
Revenue (GAAP total, $M)$217.9 $219.5 $166.7
Net Income ($M)$12.7 $14.1 $7.7
Net Income Margin (%)25.6% 29.8% 16.9%
EPS – GAAP ($)$0.34 $0.38 $0.21
Adjusted Net Income/share ($)$0.39 $0.35 $0.28
Adjusted EBITDA ($M)$22.7 $20.9 $19.2
Adjusted EBITDA Margin (%)43.6% 42.1% 40.1%
Distributable Earnings/share ($)$0.51 $0.46 $0.40
Distribution Payout Ratio (%)64.2% 69.8% 79.5%

Notes: Where AUM not disclosed for Q1, dash shown. GAAP total revenue includes reimbursables; consensus revenue uses a non‑reimbursable definition (see first table and Estimates Context).

Management & Advisory Services Revenues by Source (oldest → newest)

Source ($M)Q2 FY2024Q1 FY2025Q2 FY2025
Perpetual Capital (Managed REITs + SEVN)$35.31$33.72$31.28
Private Capital (incl. Residential, Sonesta, AlerisLife, other)$14.28$13.61$14.21
Total Mgmt & Advisory Services Revenues$49.59$47.32$45.49

Additional detail:

  • Construction supervision revenues fell from $3.83M (Q1) and $3.61M (Q2’24) to $1.80M (Q2), reflecting lower client capex .
  • Base property management & other revenues rose QoQ to $16.43M from $15.15M (Q1), but below $16.99M YoY .

KPIs and Balance Sheet

KPIQ2 FY2025Prior Period
Cash & cash equivalents (consolidated, $M)$137.2 —
Dividend per share (declared)$0.45 (Record 4/22; Pay ~5/15) —
Fee‑Earning AUM ($M)$26,566 $28,194 (Q2 FY2024)
Net income attributable to RMR Inc ($M)$3.6 $6.4 (Q1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Recurring Service RevenuesQ2 FY2025 (given Feb 6)~$46M —n/a
Adjusted EPSQ2 FY2025 (given Feb 6)$0.29–$0.30 —n/a
Adjusted EBITDAQ2 FY2025 (given Feb 6)~ $20M —n/a
Distributable Earnings/shareQ2 FY2025 (given Feb 6)$0.42–$0.43 —n/a
Recurring Service RevenuesQ3 FY2025 (given May 7)—$44–$45M Lower vs prior quarter actual/guide
Adjusted EPSQ3 FY2025 (given May 7)—$0.28–$0.30 Maintained low-$0.30s range
Adjusted EBITDAQ3 FY2025 (given May 7)—$19–$20M ~Flat/slightly lower
Distributable Earnings/shareQ3 FY2025 (given May 7)—$0.42–$0.44 ~Maintained
DividendOngoing$0.45 declared for Q2 Well‑covered; ~79% payout in Q2 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024, Q1 FY2025)Current Period (Q2 FY2025)Trend
Private Capital – ResidentialBuilding pipeline; first Denver asset; aim to scale in 2025; LP interest rising post-rate cuts; target mid‑teens IRRs; GP to seed, then fund raise Closed two South FL JVs (~$196M), $64.3M LP equity, $11M GP; $0.7M fees; more pipeline; LPs want higher returns; 2025 deployment up to ~$1B across private initiatives Accelerating deployment; fundraising elongated but active
Private Credit VehicleUBS $200M repo; $67M commitments; mid‑teens returns; plan to seed ~$100M loans Ongoing fundraising in crowded space; still confident; 2026 more likely for committed fund ramp Steady; timing pushed to 2026
Value‑Add Retail StrategyIdentified strategy areas (industrial/retail/dev); potential on‑balance sheet seeds First deal in Chicago; plan ~$100M portfolio seeded to enable fundraising; target mid‑high teen returns New initiative launched
Managed REIT DeleveragingActive OPI/SVC/DHC balance sheet actions, asset sales, refinancing SVC hotel sales (~$1.1B) on track; ILPT lease‑ups; OPI headwinds; DHC strong SHOP NOI Continued deleveraging; mixed fundamentals by sector
Construction Spend & FeesSeasonally strong Q4; expect Q1 drop; fee pressure Seasonally and strategically lower capex; construction fees down materially QoQ; expect muted for a couple quarters Near‑term headwind persists
Dividend Coverage & Liquidity~$150M cash expected; strong coverage; $100M revolver added Payout ratio ~79%; $137M cash; no corporate debt; guide supports coverage Stable/covered

Management Commentary

  • “RMR’s second quarter results were slightly below our expectations as a result of reduced capital spending, the impact of strategic asset sales and deleveraging activities at our Managed REITs.” – Adam Portnoy, CEO .
  • “Adjusted net income came in at $0.28 per share and distributable earnings of $0.40 per share… next quarter we expect recurring service revenues to be between $44 million and $45 million… adjusted EPS $0.28 to $0.30… adjusted EBITDA $19 to $20 million and distributable earnings $0.42 to $0.44 per share.” – Matt Jordan, CFO .
  • “We closed 2 joint venture acquisitions of residential communities in South Florida… aggregate transaction value of approximately $196 million… RMR raised an aggregate $64.3 million in equity… retained equity interests totaling $11.0 million.” .
  • On value‑add retail: “$21 million community shopping center… 77% occupied… rents ~20% below market… target returns over 5‑year hold mid‑ to high teens… build ~$100 million seed portfolio from balance sheet to fundraise around later.” – Adam Portnoy .
  • Dividend: “Payout ratio approximately 79%… we feel very comfortable with our payout… this is always the low point seasonally.” – Management .

Q&A Highlights

  • Value‑add retail rationale: Leverage deep internal retail capabilities; low new supply and strong demand keep vacancies tight and rent growth favorable; seed a track record on balance sheet before fundraise .
  • Construction fee run‑rate: Q1 (calendar) seasonally low; expect muted construction activity for a couple of quarters given client capital discipline; $1.8M sequential decline in construction fees .
  • Dividend strategy: Comfortable with ~79% payout; prioritize stable dividend alongside high‑return balance‑sheet investments; liquidity ample (cash, undrawn revolver) .
  • Fundraising tone/timing: LPs require higher returns; environment remains challenging vs 5 years ago; more stability in rates should help; 2026 more likely for committed funds; continue to seed with JVs/on‑balance sheet .
  • Revolver usage: <50% chance to draw in CY’25 absent accelerated seeding; revolver provides flexibility if seeding needs to scale quickly .

Estimates Context

  • Q2 FY2025 vs S&P Global consensus: EPS $0.28 vs $0.31* (miss $0.03*); Revenue $47.6M vs $214.3M* (miss $166.7M*). Management emphasizes recurring service revenue and non‑reimbursable measures, and consensus revenue definitions can differ due to the inclusion/exclusion of reimbursable costs .
  • Implications: Given management’s guidance for continued muted construction/capex at clients and sequentially lower recurring service revenue, near‑term estimate revisions may skew modestly lower on revenue and flat to slightly down on Adjusted EBITDA/EPS, with potential upside in 2H as private capital deployments accrue and REIT trends stabilize .

Asterisks denote values retrieved from S&P Global.

Key Takeaways for Investors

  • Core earnings softness reflects transitory capex/construction seasonality and deliberate deleveraging at managed REITs; management cost controls helped preserve margins (40.1% Adjusted EBITDA margin) .
  • Dividend appears defensible near‑term (79.5% payout; $137M cash; no corporate debt), supported by Q3 guidance and liquidity options (new $100M revolver) .
  • Private capital is the growth vector: two multifamily JVs closed, on‑balance sheet retail seeding underway; these should build fee streams (management/property fees, potential promote) and AUM resilience over time .
  • Managed REITs: Progress at DHC/SVC/ILPT offsets OPI office headwinds; continued deleveraging should ultimately support enterprise values and base fees, but timing remains a risk .
  • Near‑term model: Expect recurring service revenue ~$44–$45M, Adjusted EPS $0.28–$0.30, DE/share $0.42–$0.44 next quarter; monitor construction activity and LP fundraising cadence as key swing factors .
  • Trading lens: Any signs of accelerating private capital closes or better‑than‑expected REIT enterprise values are positive catalysts; conversely, further CapEx pullbacks or OPI‑specific stress could pressure revenue/margins .

Appendix: Additional Data Points

  • Q2 GAAP revenue detail (for comparability): Management/advisory/incentive revenues $45.5M; income from loan investments $0.65M; rental property revenues $1.43M; reimbursables $119.1M; total GAAP revenue $166.7M .
  • Cash and dividend coverage illustration: $137.2M cash; presentation shows funding mix of dividends from LLC distributable earnings and RMR Inc. cash balance .
  • Fee‑Earning AUM composition: $26.57B at Q2, with Perpetual Capital (Managed REITs/SEVN) and Private Capital breakdown provided .

All citations:

  • Q2 FY2025 8‑K and earnings presentation:
  • Q2 FY2025 earnings call transcript:
  • Q1 FY2025 earnings call transcript:
  • Q4 FY2024 earnings call transcript:
  • Dividend PR and revolver PR:

S&P Global data noted with asterisks. Values retrieved from S&P Global.