RMR - Earnings call transcript Q1 2018

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Operator

Good morning, and welcome to the RMR Group's First Quarter 2018 Financial Results Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Tim Bonang, Senior Vice President. Please go ahead, sir.

Timothy Bonang

Thank you, Rocco, and good morning, everyone. us joining for you today. Thank the With Adam President CEO are and me Chief on Portnoy; Financial and Jordan. call Officer, Matt In provide will our first moment, our of a quarter and the performance details XXXX. business for just about they take They will then questions. note like recording the call to today's written consent and the prohibited without I prior of of conference that would retransmission is the company. Securities and conference call the the Private within other contains meaning XXXX of laws. statements today's Litigation forward-looking that Act note Also securities Reform of based beliefs RMR's are as expectations and February results today, statements those materially of forward-looking These on actual and XXXX, project. that X, we may from differ no The forward-looking undertakes results made of or revision obligation company publicly statements release call. the to revise conference in the to today's any

contained or with and not reliance rmrgroup.com, are Additional forward-looking information concerning to which any SEC, or Investors statements. undue factors from is our Exchange the Securities in that our Commission, cautioned be place differences could accessed can website. website, any SEC's filings upon cause

non-GAAP business addition, turn items Adam? impacting with to release over And calculations EBITDA, can per including incentive Accounting significant reconciliation and U.S. in and I'd or includes will per of In news to the Jobs begin we Tax and related impact this the and news Portnoy the impact earnings EBITDA The net results call in release to quarterly A incentive and now, share to Tax of numbers be fees this found business Cuts determined our adjusted EBITDA during Adam margin, be or issued to the the accordance Act. review. earned adjusted quarter, like our adjusted also share EBITDA the including management adjustments the GAAP morning. management Act of the adjusted fees. margin Principles we call, this Tax of Act discussing income Accepted Generally

Adam Portnoy

Tim, for and morning. us joining everyone Thanks, to this thank you

XX, share $X.XX of share last $XX.X we on fiscal in $X.XX represents to per increase XXXX, year. reported net XXX% which or first attributable December per RMR of or ended to income which million the quarter compared earnings For share, per

per include items. onetime This a couple share quarter's earnings of

earned RMR SIR for the XX% year the in their equity during fees REITs in SNH business by $X.XX management XXXX. $XXX.X X% SNH. in per First, million respective HPT, industry share and XX% These incentive years calendar from last of managed or HPT, SIR and outperformed three benchmarks

Without these last significant share. impact period tax items of when the results net our a tax items, represent gain per of $X.XX for This million growth operations quarter assets Act income $XX.X our with net On Trust. or Realty the the mortgage on of Mortgage transactions $X.XX almost income net transitional call excluding These liabilities re-measurement to onetime million share compared growth same year onetime of attributable Potomac at these and generated FPO, recurring also for onetime increase million Trust, last $X.X this includes $X.X quarter. our of earnings and earnings $X.XX and the in per largely revenues discussed of launch REIT, combined in per share a The is the First realization from of our of the net to Tremont quarter. income GOV's our lower was per the Tax of basis, acquisition two share rates. or last incremental

a this the of implemented moment. discuss as earnings tax will income in period At assets managed some about represents usually year operating of a for of a detail quarter REIT's a At talk to management on approximately in our tax billion on reflect Tax our our the increase. which rates In addition, compared Act. XX% I end rates the lower more under part were first our quarter, the $XX.X corporate $XX Matt recurring point results same this billion, call, expectations detail. ago, the

X.X% in SIR. well being believe in-place been are implied XXth that quarterly results RMR December the I leasing September fifth FFO, share. assets core expand in times ILPT unlock has managed as We and These value In of yearend at all a common RMR almost our a XX balance offering sheet in client can of our a sale themes of $XXX or the acquisition ILPT sheet notes XX living capacity years helped On leases December, senior accretive REITs These properties companies, issued equity Industrial activities SNH we than gain HPT and quarter SIR's as on logistics communities of our publically XX and senior future. yearends, the the rents Sunrise industrial as as $XXX during Senior some square X.X by XX because ILPT well has owns positioned were significant have Hawaii, In compared of That square XX on and of located from announced. intends equity e-commerce. of SIR's unsecured per higher for basis, X.X% perspective, will value shares this overarching leases by $XX across at an multiple for managed low debt this located a in million states. resulted have capital opportunities talk to approximately a transaction realized due a of at From our behalf almost leases initial focusing other results X.X priced proceeds Properties for for to low XX-year for With its cost in than RMR these leverage our for properties RMR's markets about of client FFO. SNH's average provide in over and ILPT from industrial $XXX the growth Trust four sale. public announced Living potential funded of notes approximately combined REIT, REITs. a space same $XXX the strengthening growth may with less X.XX% for and based business senior of the million prior that during properties, Logistics times on rates with managed of average launch said, companies growth. with help as reporting and based quarter. rental on However, benefit advance capital million million that January, of feet. terms industrial arranged million and balance XX the coordinated million, the feet ILPT, quarter, of redeemed these XXXX. GAAP

of an are due that on the senior million additional XX, In notes announced year X.XXX% HPT January unsecured it addition, that in XXXX. priced $XXX

capacity I've rate opportunities. to cash will speak past. us and As growing in with we Well, no pursue debt. our this at seeking client collected companies, business subject income We our to as that Further In consistent management providing ended with remain January, in almost operations, can't it provide relates we RMR's communicated time a I the we as corporate opportunities additional quarter the future. growth additional incentive to to to earlier, focused grow well cash opportunities revenue sources. diversify free tax the possible $XXX on lower fees, as million what specific outlined announced and existing flows in the

platform. growing be current opportunities seeking continues our capital Our growth beyond securities for management estate possible and areas the space the real focus for managed to private REITs

our us, review of ILPT Officer, the I now Financial With possible coming the the to financial that Chief for quarter. more growth launch few our new I'll hope will who call opportunities the about over Jordan, behind information months. over turn Matt results

Matthew Jordan

million $XX.X Thanks, morning, quarter of a everyone. sequential increase Adam. and of Good a for Adjusted was million increase representing $X.X million. the $X.X quarter year-over-year EBITDA

of margin EBITDA sequential points basis a and quarter points on adjusted was XXX on basis XXX an year-over-year Our of basis. basis XX.X% increase a

on of revenue equity well a the primarily On as million, to increased from to companies management client year-over-year revenues companies public to offering this services fees sequential of share managed incentive initial driven which of growth scale the services from excluding $X.X $X.X quarter increases Management HPT. primarily and Advisory due All notably XXXX. the million offering and property client price management economies growth basis, year-over-year a and maximize GOV's most FPO, platform GOV's revenues acquisition of represents quarter, shared-services basis $XXX,XXX, quarter incremental our of related of as from our REITs, risk on Tremeont's result and acquisition realize primarily occurred. revenues FPO. by sequential these which REITs both increase $XX.X our September ability increased than improvements of more as in with were closed at our were primarily in a business basis revenues million of

non-cash are Both of an management headcount in which $X.X million, year-over-year FPO and basis the properties. of $X.X a Turning $X.X million is increases of supportive REITs, $XX.X million expense compensation to growth employees primarily basis. onboarding million the and sequential due and on to Total support additions of payments. $XX.X expenses compensation $XX.X notably to a million the recently benefits for property acquired most managed includes cash Cash compensation of million quarter. was on increase GOV's and quarter share-based

be region, all on of Looking part roles the of operational the reimbursable. filled mid-Atlantic ahead XXXX, be remainder as there of will the properties to taking to remain FPO fiscal in fully which

XX% other rate of inflation a the in of per are positions fees, costs an quarter fee to $XX.X payroll to all $XX.X reimbursement improved be expense headcount of reimbursed headcount modest support $XX normalized represents growth. our earning as is property recoverable are by $XXX,XXX $XXX,XXX and due from cash sequentially driven quarter. approximately is group shared-service The that to of which of million would compensation XX% represents as million from reimbursement well being rate, these $X.X professional up operations last other G&A which we costs million and expect Tremont. filled, As increase and to are now ancillary fully fact million of we Total quarter. increases per

fiscal the As will tax we XXXX. year a phased year included. with a rate in our rate, rate XX% this state the federal fiscal periods decreased XX.X% from income will it year were Tax decline statutory X, to full Beginning tax January starting fiscal of corporate Act U.S. federal September to XX% at taxes blended all significantly statutory resulting income in state corporate when our tax XXXX, the be lower the XX% and XX Since rate approximately rate XX.X% have end, or are for to taxes included. relates income for XX%

Act is That net million the the for the liabilities quarter. the tax million $X.X written earlier, turn Tax lower remarks. $XX.X this also highlighted our generated tax our liability by our one-time rates provided resulted gain of Tax you line net Act. This concludes a tax which open million to Operator, the and Adam gain formal in reduced, this down the result receivable assets at questions? our due of in and quarter deferred of As please would assets agreement by in $XX.X tax being to being income re-measurement

Operator

you. Thank

session. We will Maher Instructions] Riley. begin first of from question-and-answer now [Operator question Please the Today's Bryan go ahead. B. comes

Bryan Maher

you've so behind kind bit, cash, to the Good on big ability little of your now have that you get which to touched with morning, Couple the wanting the Adam, what But specifics done questions, not do of thought relative a higher? the can building has upon really dividend that. side, to position been guys. cash drive understand into and the this your is and, how far and small and how I measure you process

Adam Portnoy

Bryan Thanks, question. for that

It of we've well the trying grow we are in than for new been remarks, is be time, and some our for used management as to I two that we're could majority $XXX If said the successful when successful currently platform. tax. year. the we're And of We'll than private have cash contemplating I money. very the I about of as Again, focused things I that that areas past. up the endeavors that short-term, about to the using have initiatives probably we access could prepared we're half with upwards good of talking up, first - short-term here. pretty we'll meaning or terms talked market, at focused as been, the plus think will of really say the and going we larger in the some in to - be we're cash in the those be the of incentive my certainly million think we've think trying the securities capital to company on indications on whether I built fees be amount the it net

to has a bias, along the additional board put find pretty a a revenues long-term. towards ways all the recurring mean, clear the I I've for So to strong I fee bias very company been to that, on cash trying to pretty have I think strong generate work accretively

that's But primary focus because - recurring up recurring do fee think is cash our generating focus something only that our over towards large cash that don't don't - year. moment we board dividend increased focus, everyone's I over that's time. months, so, it to board to continues With whether to Not oriented dividend where It the the in the fee change regards be onetime could we coming the been has have the adjusted. the dividends, a at has needs think cash is at recurring businesses, - is - to flow some right built about future, I I but do And be think our balance. a to we're the for generate last the our now. very head board trying recurring at. I think, fair think of moment the for

And an we made so, that there perhaps think dividend. in could our about should recurring argument adjusting be -

we at the do adjust we that the dividend, I recurring in have a I think interest think So the think think I moment oriented about we onetime more less it's towards dividend? dividend. as

work the focused more securities your that over think to private that a cash majority I the business of the business. on we're to in capital trying upwards are months answers and to management next the towards of question. oriented initiatives growth Hopefully, side some few put

Bryan Maher

the expecting my just last money that. with then ILPT offerings where us Can you IPO, raising it Potomac, offerings equity think what for priced. think thanks you on Yeah, little then, GOV resulted question and second those have month now, is, in below far when which people many on I color of that these give two pretty in, And surprised done with beforehand? coming were been was for First us saw, were are I the what last a

Adam Portnoy

to Yeah, - one I with dynamics each of deals. have regards I going you think different ILPT, in and GOV specifically the those on think

in company. the I think the to probably tell ILPT, institutional recent. and GOV that level for on I'll interesting more of into been - me I the was thing the the was amount frustrated. book, surprised of and a institutional the the the of quality frankly, focus it's support of at relevant think ILPT you was in orders that level came small was that because I allocated heavy little institutional I'll that I've the more demand, the offering. deal retail

performance show pricing, though I with fundamentals has all terms the price management Since there. with we think road compared that offering business, that ILPT. growth, think been opportunity core frustrated in and during all range. priced frustrated still am intact it much well for the the very the growth, as ILPT ultimately the the we the of as internal are discussed the to external I the I optimistic where quite were of somewhat

stock optimistic - are exactly priced performed for. relative And the where it's month will basically we priced hasn't over that's even I hopeful price it's with, also But it one where We early I'm So and how was were is been, days, they the today improve. since one, it. think time we what since we're disappointed range that IPO. to that

the over months So better. hopefully perform will the stock coming

Bryan Maher

or to comp to when think trade and assets the related mean the people REITs traded I abnormally a the that's to look as monopolize think one, your peers. you They externally discount, But set peers? on relative at you managed that, don't as fee. Thanks. and do just some that some relates an external most will quality one basis, don't and due these how they last tell what be management, people the And and I suspect call, termination classify about your multiple big you but to where of may would like I what that to some it investors versus of

Adam Portnoy

sense Well, our of bit discount we've peers. doing - any peers of we many total a are statement outperformed very to at companies REITs the discount. candidly, something quite very try we But hard time. the that fair managing in collected, equity that think, right three it's it three because are close something over the that hard four a I that that's REIT discount working of on the least testament think, to our I our our we I say and compared years businesses. during we traded fees that incentive a And think, to think, think, a working and last a to try think little I close I to obviously sometimes that peers So are it's with in I basis, testament of doing to we we've right managed return was our And to we're a

As know It is traded. where been it's how coming much of ILPT as with Bryan, service are those you as has - trading and trading, better assets than we're disappointed where out right much priced service. is still it the and

been So the companies. our process long assets a uplift, to in there some market educate I we the quality that on of own it's think, has the

real certainly many a is the trade board some where I may that better companies the go of the quality than peers. think is across have of high, quality peers not believe as case, in lower our our market one the trading, are. each than our of companies. than if better could But us estate I I explain good you of we why the each the I necessarily why through can't multiple may exceptionally and have

motto, part the big story And are is that of - manage very will every what hard. we do job we a telling and and our it's story and REITs tell our working and these so become we that's to day

Bryan Maher

Adam. Thanks,

Operator

Mitch go comes next from [Operator question with Instructions] JMP. Germain ahead. Today's Please

Mitchell Germain

Good morning, guys.

So you about mortgage, first when got commercial out. talked we've this that took public, checked Adam, you vehicle one

securities you've your of how growing revenues. growth? out those that that's include seems of that the diversifying diversified office, thinking to you're about your like you the happened. your talked The talking is on one and But PC kind you're the you You is sector, move fund, you're about by of boxes check kind want for where taking public. SIR [ph] kind in is really still if AUM revenues It next underpenetrated where

Adam Portnoy

we that's and can that think, place We've is It the think I really the we plausible we the a our private office growing a and office area, think expertise Yes. then around private business side to built If execute strategy very organization about of to I and in something an for and side thinking focused up of a about in it. have lot of is talked lot well. business, we on. certainly it about us the a were grow around side the

Mitchell Germain

on horizon that's else potentially? you. Got Anything the

Adam Portnoy

securities would and focused also is grown there on Well, of but ordering the we're it. in say, to do think and I bit, we've management a order we're business, on I focused things - more how it. that little in there

many don't We fold - it it, look we a could cash. lot focused a focus a haven't of And we're could way on we raising this somebody hinted on been But, we we've could office business. I strategic it. the in to area management block already about that, our opportunities, think them questions first in the estate, do that securities We after we talked that look commercial and call. mainly lot think, to the area. we think, we next business. asked do acquire and be into private thing do about trying about the on have - an real haven't grow around I is side of and capital And

that's grow I think anything around We in statements But we in certainly don't to saying It's the my to think of also in in this a I something a I medium business short we we've medium securities very lot business, I not to opportunities that's lot around going looked hard we've by been at at. certainly for And be that that that I forward. the opportunities. tempered something and see do that of acquire and the - look it's short way could to a - businesses term But management could see future. I'm a something in predict. that. in different the lot mentioning could that business evaluate doing we term. - and happening of I things

Mitchell Germain

GOV And, you. helpful. turnover talking FPO retained going? of Got how staffing, A, and versus the of there how terms - much were much And just That's is then, about how what with integration kind the B, that in was? FPO,

Adam Portnoy

around those We that everybody great Washington retained the very not have doing those folks still folks, We a I the the open a positions actually And when good D.C. for and majority, field talk turned we a D.C. of lot be have hired it's great FPO. around been in but in hires about filling at some that into us. positions. area. out to We've and job of

our our We've a staff. any country. through our and million a of dollars over there one acquisition really that re-development We've hundred came year. the The been digging opportunities run RMR I'd pretty portfolio integration something redevelopment FPO, digging they not which lot with interesting enjoyed activities of It's is very the going the well. lot teeth capital of portfolio, into. to some I doing. our we're throughout actually well in That's not But development capable exciting think FPO have and that or is is around they staffs something what of done call, the not think very had - the development for couple market. projects do. I opportunities, really in RMR the in development D.C. projects really the more, But that FPO what we're portfolio a able actually

a it's think been I lot positives. of So

opportunities district. terms inside pretty I really We've think in of are redeveloping some pretty some the that assets came from hired out specific enjoyed GOV interesting in great folks FPO. having the interesting our them we've there company. think some for I And field join

Mitchell Germain

it That's you. Thank me. for Great.

Operator

Oppenheimer. And Please Chris of comes ahead. Kotowski from our go next question

Chris Kotowski

Yeah. Good morning.

model, that since quarter Just GOV and October results. Is as go X is both we management assume that much earnings the the base that in seen fine-tune fee pretty on closed to expense our fourth I the side, transaction that revenue right?

Matthew Jordan

correct. That's

Chris Kotowski

XX IPLT, point fee the assume should with then, IPO, with incremental then, proceeds management we there And from base there on the basis incremental that associated just an secondarily is that? expenses are and any

Matthew Jordan

There no of at expenses the essentially because there won't outset SIR. a at incremental - and will the the be incremental be there we the essentially it's they're And spinout day and there revenue, day before the after. IPO assets were

mentioned, ILPT As lot a out dry and now grow. powder Adam of has to go

But So one, incremental out they I RMR not as benefits to incremental think buy there assets. will go gains is to industrial RMR. and there be day

Chris Kotowski

Okay. there But quarter there or it upon an will first release split see extra press X will presumably, rather the when we be be X? line than

Matthew Jordan

And might Correct. results, it second March be quarter, XX yes. at

Chris Kotowski

Right.

you. great. Thank Okay,

Operator

turn I'd the concludes any back over this remarks. session. for Adam like closing to conference our question-and-answer And

Adam Portnoy

updating forward on you quarter Thank for us that our We conference look Operator, this our joining call. second call. concludes morning. to you our during progress

Operator

much. so you Thank

now all we presentation. And you conference attending thank today's So has today's concluded. for

You your And a day. wonderful have disconnect may now lines.

The RMR Group Inc. (RMR) 8 Feb 182018 Q1 Earnings call transcript