RMR GROUP INC. (RMR)·Q4 2025 Earnings Summary

Executive Summary

• Q4 results were in line with company expectations but soft versus Street on EPS and “revenue,” with Adjusted EBITDA slightly ahead: Adjusted EPS $0.22, Distributable Earnings/share $0.44, Adjusted EBITDA $20.5m; Street EPS $0.30 vs actual $0.22; Street “Revenue” $213.7m vs actual $52.9m; Street EBITDA $20.6m vs actual $21.1m (beat) . EPS/Revenue consensus from S&P Global estimates.*
• Operating trends were supported by higher enterprise values at DHC/ILPT/SVC, incremental NOI from recent residential acquisitions, and capital markets execution across managed REITs; potential year-end incentive fees from DHC/ILPT approximated $22m if the September 30 measurement applied .
• Liquidity remained strong: $162.3m total, including $62.3m cash and $100m undrawn revolver; dividend maintained at $0.45/share with a 71.6% payout ratio on Distributable Earnings .
• Near-term guide lowered: next quarter service revenues ~$42.5m, Adjusted EBITDA $18–$20m, DE/share $0.42–$0.44, Adjusted EPS $0.16–$0.18, driven by sale/wind-down of a life-science-related contract and higher interest expense from new residential mortgages .

What Went Well and What Went Wrong

• What Went Well

  • Capital markets execution and client deleveraging: ~$2B of accretive debt financings and >$300m of asset sales at managed REITs; SVC executed a zero-coupon bond raising $490m net to address 2026 maturities and repay its revolver .
  • Residential growth and diversification: Closed two garden-style acquisitions (Raleigh, NC and Orlando, FL) for ~$143–147m to seed the RMR Residential Enhanced Growth Venture; owned RE portfolio expected to contribute >$3m quarterly NOI run-rate as assets season .
  • Potential incentive fees from DHC/ILPT (~$22m if 9/30 were the measurement date), reflecting improved public market performance of certain managed equity REITs .
  • Quote: “We completed nearly $2 billion of accretive debt financings... and over $300 million in asset sales... These share price improvements have resulted in DHC and ILPT both accruing potential incentive fees... approximately $22 million in 2025.” — Adam Portnoy, CEO .

• What Went Wrong

  • EPS pressure from higher depreciation/interest and non-GAAP headwinds: adjusted EPS fell to $0.22 from $0.28 sequentially and $0.34 YoY as private capital balance-sheet investments add depreciation/interest, and Street still anchors to EPS .
  • Lower revenue trajectory near-term: guidance cut on recurring service revenues (~$42.5m next quarter) due to sale/wind-down of a life-science-related business and lower enterprise values from client deleveraging .
  • OPI restructuring: Chapter 11 RSA underscores office headwinds; while RMR retains management with a fixed $14m/year fee for first two years post-emergence, uncertainty remains into 1H26 emergence timing .

Financial Results

Core Results vs Prior Periods and Estimates

Street Estimates vs Actuals (S&P Global)

Values retrieved from S&P Global.*

Note: Company-disclosed “Total revenues” include reimbursable costs ($159.4m). The Street “Revenue” comparator often maps to service revenues excluding reimbursables; S&P shows $52.9m vs company service-revenue proxies in the ~$49–53m range this quarter .

Segment Mix – Management & Advisory Services Revenues by Source ($mm)

KPIs and Capital

Guidance Changes

Drivers: sale/wind-down of a life-science-related contract (lost fee rev), higher interest expense from residential mortgages, and near-term impacts from client deleveraging .

Earnings Call Themes & Trends

Management Commentary

• “Distributable earnings of $0.44 per share, adjusted net income of $0.22 per share, and adjusted EBITDA of $20.5 million... we completed nearly $2 billion of accretive debt financings... and over $300 million in asset sales.” — CEO Adam Portnoy .
• “If September 30 was the end of the measurement period, we would earn incentive fees from DHC and ILPT of approximately $22 million in the aggregate.” — CFO Matt Brown .
• “OPI... entered into a restructuring support agreement... As part of the RSA, RMR will receive a flat business management fee during the first two years of $14 million per year...” — CEO Adam Portnoy .
• “Next quarter, we expect recurring service revenues to decrease to approximately $42.5 million... Adjusted EBITDA to be between $18–$20 million, distributable earnings to be between $0.42–$0.44 per share, and adjusted net income to be between $0.16–$0.18 per share.” — CFO Matt Brown .

Q&A Highlights

• OPI fee construct and timeline: Fixed $14m/year business management fee for two years post-emergence; property management unchanged; emergence roughly 1H26; potential longer-term equity-aligned incentive/profit share (2% upfront, up to 8% performance promote) .
• Strategy for retail value-add: Build an on-balance-sheet track record (grocery/neighborhood centers) then raise third-party capital; low new supply and healthy demand support returns .
• SEVN rights offering and loan sales: RMR selling its two loans at par to SEVN to accelerate deployment; backstop likely limited to RMR’s ~11% ownership, with potential to go modestly higher; intent is to secure SEVN dividend and growth pipeline .
• Q1 guide bridge: Major headwind is the sale/wind-down of a life-science-related business (~$1.0m revenue hit in Q1 and another ~$0.4m in Q2), plus higher interest expense from residential mortgages .
• Owned real estate contribution: Owned residential and retail assets contributed ~$0.65m of EBITDA in Q4; expected to scale to just over $3m per quarter on a run-rate basis as acquisitions season .

Estimates Context

• Versus consensus (S&P Global): EPS missed ($0.22 vs $0.30*) and “Revenue” missed ($52.9m* vs $213.7m*), while EBITDA slightly beat ($21.1m vs $20.6m*) . Values retrieved from S&P Global.*
• Mix/definition nuance likely contributed to the revenue miss optics: company “Total revenues” are $159.4m including reimbursables; the Street often tracks service revenues ex-reimbursables (~$49–53m) .
• Forward estimates likely need trimming for service revenues, adjusted EPS and EBITDA near-term, consistent with the company’s lowered guide tied to the life-science contract wind-down and higher interest expense from new residential mortgages .

Key Takeaways for Investors

• Quality of cash flow remains resilient: DE/share steady at $0.44 with a 71.6% payout ratio and ample liquidity ($162m), supporting the $0.45 dividend through the transition to more private-capital earnings .
• Incentive fee optionality: Potential $()22m year-end incentive fees from DHC/ILPT (if Sept 30 were year-end) provide upside to cash flow visibility if market performance holds .
• Strategic pivot to private capital continues: New multifamily seeds and value-add retail strategy should diversify revenues and lift fee and NOI contribution over time, albeit with interim EPS headwinds from interest/depreciation .
• Managed REIT deleveraging should reduce risk and stabilize fees over time, though near-term fee pressure persists as clients cut leverage and recycle assets (lower enterprise values reduce base fees) .
• OPI RSA reduces tail risk and locks in a fixed fee stream; long-run structure may include equity-like incentives, aligning RMR with new OPI owners through a multi-year recovery cycle .
• Near-term setup: Lower guide (service revenues, EBITDA, EPS) creates a reset; catalysts include closing the SEVN rights offering and fund-raising progress for Enhanced Growth Venture and credit strategies .
• Trading implications: Expect estimates to drift lower near-term; stock reaction likely driven by (i) progress on incentive fees into year-end, (ii) residential NOI ramp from new assets, and (iii) visibility on fundraising and OPI emergence timeline .

---

References

• Q4 2025 8-K and presentation (financials, KPIs, segment data, dividend):
• Q4 2025 earnings call (prepared remarks, guidance, OPI/SEVN updates, Q&A):
• Q3 2025 8-K/presentation and call (trend context & prior guidance):
• Q2 2025 8-K/presentation and call (trend context):

S&P Global Estimates (values marked with asterisks): EPS, Revenue, EBITDA consensus vs actual for Q4 2025. Values retrieved from S&P Global.*