Executive Summary

Q3 FY25 delivered stable fundamentals: GAAP EPS $0.25, Adjusted EPS $0.28, Distributable Earnings (DE) $0.43 per share, and Adjusted EBITDA $20.1M (43.5% margin), reflecting tight cost control and seasonal strength at Sonesta .
Against S&P Global consensus, RMR missed on EPS and revenue: EPS $0.28 vs $0.36 estimate (one estimate), and revenue $46.8M vs $201.8M estimate (one estimate). Note: Revenue definitions vary due to large reimbursable pass-throughs; figures marked with “*” are from S&P Global and may not align with GAAP totals (see Estimates Context) [Values retrieved from S&P Global].
Management pointed to improving trends at key Managed REITs (DHC, ILPT) including potential year-end incentive fee accruals >$17M, and private capital momentum with $21M retail purchase closed and two Sunbelt multifamily acquisitions (~$147M) expected to close in August .
Q4 FY25 (next quarter) guidance: recurring service revenues ~$45M, Adjusted EBITDA ~$20.5M, DE $0.44–$0.46/sh, Adjusted EPS $0.21–$0.23; interest expense ~$1.7M, owned real estate contribution ~$2.2M Adjusted EBITDA; expected FY-end cash ≈$60M and no revolver draw .
Dividend held at $0.45, supported by 73.6% payout ratio on DE and ~$22M cash at RMR Inc. available to supplement distributions for 3+ years at current rate .

What Went Well and What Went Wrong

What Went Well
- Cost actions protected margins: Adjusted EBITDA margin rose to 43.5% (from 40.1% in Q2) as recurring cash compensation fell by ~$3.5M sequentially and G&A declined .
- Positive developments at Managed REITs: DHC beat consensus on almost all measures with strong SHOP NOI growth; ILPT refinanced $1.2B of debt into 5-year fixed at 6.4% and raised its dividend; potential year-end incentive fees >$17M accruing to RMR if year-end conditions hold .
- Private capital execution: Closed first value-add retail asset ($21M) and detailed two pending Sunbelt multifamily acquisitions ($147M), targeting mid-teens returns and seeding a Residential Enhanced Growth Venture .
What Went Wrong
- Headwinds to revenue: “Recurring service revenues” declined to ~$44.1M (down QoQ and YoY) due to lower property management fees at RMR Residential and muted capex/construction activity at REIT clients .
- Estimate misses: Primary EPS $0.28 vs $0.36 est.; revenue $46.8M vs $201.8M est. (single estimate each), reflecting estimate definitional differences and ongoing deleveraging/activity constraints at clients [Values retrieved from S&P Global] .
- Residential platform mix/scale: Residential fees stable, but breakeven profitability at RMR Residential continues to weigh on consolidated margin vs historical 50% target (management highlighted margin rebuild needs tied to residential growth) .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025	Consensus (Q3 2025)	Surprise vs Cons
Total Revenues (GAAP, $M)	$205.67	$166.67	$154.73	—	—
“Core” Revenue (Mgmt + Incentive + Advisory + Loan + Rental, $M)	$50.76	$47.58	$46.78	$201.80*	(155.02)
GAAP EPS ($)	$0.29	$0.21	$0.25	—	—
Primary EPS (Normalized, $)	—	$0.28	$0.28	$0.36*	(0.08)
Adjusted EPS (RMR non-GAAP, $)	$0.37	$0.28	$0.28	—	—
Adjusted EBITDA ($M)	$20.97	$19.20	$20.08	—	—
Adjusted EBITDA Margin (%)	40.9%	40.1%	43.5%	—	—
Net Income Margin (%)	25.2%	16.9%	21.1%	—	—

Notes: “Core” Revenue shown to align with S&P Global “actual” construct that excludes reimbursable costs; GAAP Total Revenues include large reimbursables that are pass-through in nature . Asterisks (*) denote values from S&P Global; see Estimates Context. Values retrieved from S&P Global.

Segment revenue mix (Total Management & Advisory Services Revenues):

Segment Revenue ($M)	Q3 2024	Q2 2025	Q3 2025
Perpetual Capital (Managed REITs + SEVN)	$33.80	$31.28	$30.96
Private Capital	$15.10	$14.21	$12.88
Total Mgmt & Advisory Services Revenues	$48.90	$45.49	$43.84

Key KPIs:

KPI	Q3 2024	Q2 2025	Q3 2025
AUM ($B)	$41.31	$39.84	$39.66
Fee-Earning AUM ($B)	$27.69	$26.57	$26.51
Distributable Earnings/Share ($)	$0.45	$0.40	$0.43
Dividend/Share ($)	$0.45	$0.45	$0.45
Distribution Payout Ratio (LLC)	71.5%	79.5%	73.6%
Total Consolidated Cash ($M)	—	$137.19 (as of 3/31/25)	$121.28 (as of 6/30/25)

Guidance Changes

Metric	Period	Previous Guidance (from Q2 call for Q3)	Current Guidance (from Q3 call for Q4)	Change
Recurring Service Revenues	Next Quarter	$44–$45M	≈$45M	Maintained
Adjusted EBITDA	Next Quarter	$19–$20M	≈$20.5M	Raised
Distributable Earnings/Share	Next Quarter	$0.42–$0.44	$0.44–$0.46	Raised
Adjusted EPS	Next Quarter	$0.28–$0.30	$0.21–$0.23	Lowered (mix shifts, higher D&A/interest)
Interest Expense	Next Quarter	N/A	≈$1.7M (with leveraged resi acquisitions)	Introduced
Owned RE (Adj. EBITDA)	Next Quarter	~$0.35M/qtr from retail asset in FY25	≈$2.2M (owned real estate aggregate)	Raised
Year-end Cash / Revolver	FY-end	Strong liquidity; $137M cash; no corporate debt	≈$60M cash; no revolver draw expected	Updated
Dividend	Ongoing	$0.45/quarter	$0.45/quarter; “well covered”	Maintained

Why: EPS guide lower largely reflects increased depreciation/interest from balance sheet investments; management emphasized DE and Adjusted EBITDA as more relevant comparatives as on-balance-sheet initiatives ramp .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 FY25)	Current Period (Q3 FY25)	Trend
Private capital fundraising	Challenging but progressing; seeded resi JVs (~$196M) with ~$64M LP equity; credit vehicle in market; revolver added for flexibility	Environment still tough but improving with more LP meetings and potential rate tailwinds; added Head of Capital Formation	Improving
Residential strategy	JV-led growth targeting mid-teens returns; aim to raise committed fund in 2026; possible selective balance-sheet seeds	Two Sunbelt acquisitions (~$147M) expected to close Aug; seeding “Residential Enhanced Growth Venture” with ~$100M GP/owned equity	Scaling/Executing
Value-add retail	Announced $21M Chicago-area center; plan ~$100M portfolio over 6–12 months to build track record	$21M closed; expect ~$1M Adj. EBITDA in Y1; using balance sheet to seed, then fundraise	Early momentum
Managed REITs	Deleveraging, capex cuts pressured fees; DHC, SVC beat/inline; ILPT strong leasing; OPI challenged	DHC strength, ILPT refinancing/dividend; year-end incentive fees could exceed $17M; OPI headwinds persist	Mixed-to-Improving
Dividend coverage	“Well-covered” with 79% payout; sizable cash and no corp debt; slide added to explain coverage	Coverage ~~74%; RMR Inc. cash (~~$22M) supplements ~$0.13/share for 3+ years at current rate	Stable
Macro/interest rates	Elevated rates weighed on capex; 2025 improvement expected; liquidity enhanced for opportunities	Possible rate relief aiding fundraising; continued deleveraging at clients; fixed refis (e.g., ILPT)	Gradual tailwind

Management Commentary

“Third quarter results were in line with our expectations driven by cost control measures and seasonal strength at Sonesta… Adjusted Net Income per share of $0.28 and Distributable Earnings per share of $0.43… over $121 million of cash on hand.” — Adam Portnoy, CEO
“Potential incentive fees… could result in a payment to RMR at year end that is in excess of $17,000,000.” — Portnoy
“Next quarter we expect adjusted EBITDA to be approximately $20.5 million, distributable earnings to be between $0.44 and $0.46 per share and adjusted earnings per share to be between $0.21 and $0.23 per share.” — Matt Jordan, CFO
“As RMR uses its balance sheet to acquire real estate… certain financial metrics like adjusted earnings per share will be adversely impacted… we believe cash flow measures such as adjusted EBITDA and distributable earnings are becoming more relevant.” — Jordan

Q&A Highlights

Fundraising backdrop: “Overall challenging… but improving,” with increased meetings and potential rate relief; LPs prefer seeded vehicles enabling day-one deployment .
Residential outlook: AUM expected relatively stable near term; JV-heavy acquisition pace to support seed portfolio; targeting ~$300M equity for the fund with RMR GP 5–10% retained .
Dividend mechanics: Coverage split between RMR LLC (≈$0.32/sh) and RMR Inc. cash (≈$0.13/sh); RMR Inc. receives excess tax distributions, supporting >3 years of cushion at current rate .
Guidance clarifications: Q4 interest expense rising to ~$1.7M with leveraged resi deals; owned real estate expected to contribute ~$2.2M Adjusted EBITDA next quarter .

Estimates Context

EPS: Primary EPS actual $0.28 vs consensus $0.36 (1 estimate) → miss of $0.08*. Values retrieved from S&P Global.
Revenue: Actual $46.78M vs consensus $201.8M (1 estimate) → miss of ~~$155M*. Note: RMR’s GAAP total revenue includes sizable reimbursable costs (~~$108M this quarter) that many investors treat as pass-through; RMR emphasizes “Total management, incentive and advisory services revenues” ($44.07M) and margins calculated on revenues excluding reimbursables . Values retrieved from S&P Global.
Takeaway: With only one estimate and definitional differences (ex-reimbursables vs total), estimate comparability is limited; investors should anchor on EPS/DE/Adjusted EBITDA and contractual fee trajectory.

Key Takeaways for Investors

Mix shift matters: As RMR seeds more assets on balance sheet, Adjusted EPS will compress while DE and Adjusted EBITDA better reflect underlying cash generation; trade the stock on DE/EBITDA trajectory rather than EPS prints .
Near-term catalysts: Potential >$17M year-end incentive fees, closing of two Sunbelt acquisitions (~$147M), and any updates on fundraising progress (Residential/credit) .
Managed REITs are turning: DHC and ILPT improvements (and ILPT’s fixed refi/dividend) support fee stability; OPI remains a watch item .
Dividend support looks durable: ~74% payout on DE, plus ~$22M at RMR Inc. to supplement ~$0.13/sh quarterly for 3+ years under current assumptions .
Guidance tilts positive on cash metrics: Q4 guide raises DE and Adjusted EBITDA while lowering Adjusted EPS due to interest/depreciation—consistent with the strategic shift .
Execution focus: Watch leasing/fee trends at Managed REITs, pace of retail portfolio build toward ~$100M, and conversion of seeded assets into committed funds in 2026 .

References:

Q3 FY25 8-K and earnings presentation excerpts .
Q3 FY25 earnings call transcript .
Prior quarters (trend/context): Q2 FY25 8-K/presentation and call ; Q1 FY25 8-K/presentation and call .
S&P Global consensus (Primary EPS, Revenue): Q3 FY25 EPS $0.36 est. vs $0.28 actual; Revenue $201.8M est. vs $46.78M actual; single estimate count in both cases. Values retrieved from S&P Global.*

RMR GROUP INC. (RMR)·Q3 2025 Earnings Summary