Earnings call transcript Q3 2023

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Operator

Hello, and welcome to The RMR Group Fiscal Third Quarter 2023 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Kevin Barry, Director of Investor Relations. Please go ahead.

Kevin Barry

Good morning, and thank you for joining RMR's Third Quarter and Fiscal 2023 Conference Call. call Officer, and Matt today's and Adam on Financial Chief Jordan. me are CEO, President Portnoy; With In just question-and-answer a our business moment, they will quarterly followed provide results, by a session. and details about that I would conference is the without prohibited recording of retransmission prior consent of call written the the company. like today's and note to

undertakes XXXX, revision from and release expectations Litigation actual These those call statements XXXX that and and of contains results any the obligation today's of forward-looking Today's may the RMR's Act are to as statements differ we conference on meaning materially of project. to XX, securities laws. in The August Reform no within forward-looking the statements based Private Securities of call. today, made other publicly or revise forward-looking the results conference company beliefs

are Additional the be information filings on at our those concerning which cause forward-looking undue can statements. Commission, Investors could not factors contained website found differences in is reliance upon that cautioned Securities our to any Exchange place and with www.rmrgroup.com.

margin In may EBITDA discuss adjusted adjusted income results. call, be earnings found EBITDA income, our in net net adjusted reconciliation calculation U.S. we per with share, accepted accounting adjusted A of adjusted during can generally to net numbers accordance income, share, margin. financial adjusted and earnings including EBITDA determined this of principles per adjusted non-GAAP EBITDA addition, adjusted and in the

to the Adam. over turn now call will I

Adam Portnoy

on $XX in an with in consideration potential RMR under $X of Thank of up for CARROLL, assets based acquired capital. agreement to a integrated interest acquire additional CARROLL with multifamily $XX for in vertically million On XXX% the you, future us cash an billion management. the Kevin, announced thank of RMR July earn-out to and you all approximately XX, morning. joining million a this deployment platform equity

The business real core long-term opportunities diversify CARROLL access of pipeline market also the expertise. attractive employees platform capabilities relationships global has high-quality to XXX plus to beyond approximately knowledge estate. gives us and a and With with further institutional partners, RMR's

this the team which into platform time expect transaction in with will management current place. will close down, to We the the step fall, CARROLL the be remaining integrated our and at organization founder

the As have aspect our involves important in balance discussed pursue acquisitions. growth past, sheet of an we utilizing RMR's to strong strategic strategy

achieves complements assessing when is considerable believe focus scale has a new for We Our platform, opportunities and further great providing to access reasons. transaction relationships. our to our and diversifying by transaction objectives been following private capital any institutional ensure these these strategic increasing AUM fit our us CARROLL the already the

of XX% approximately is industrial tailwinds attractive real the sector, represent First, do not the will the of enter only After multifamily real estate total AUM. AUM continued transaction the U.S. multifamily Outside have provides presence. commercial closing the stronger us has space, the estate multifamily of sector acquisition, the new which that given RMR's the in to of the housing significant some an we opportunity a shortage major of

in Sunbelt investments some overall CARROLL U.S. in on markets, markets multifamily the deploying has capital the focused In of addition, to been strongest

our AUM capital a private RMR's further asset platform. private expanding AUM our management to billion, for our $XX Second, $XX acquisition CARROLL key alternative to strategic as doubles been billion. us, and XX% has approximately advancing total priority increase the capital leading approximately AUM nearly a will position

us platform the currently scale continue in to CARROLL's in additional the will managed from term. its position institutional increase fund multifamily in excess also of and potential a billion The existing near investments, series in to has CARROLL substantially capital a to $X make to Our invest of relationships properties. partners the funds putting

achievable is next we XX%, returns track in of this historical believe record to investors of capital years. excess couple the the deployment within of generating Given of

to and markets address acquisitions in asset that Living consumer management believe investments all Third, aspects been their track has from management of through growth and experiences. leveraging they we record operate of ARIUM through multifamily capabilities presence a plan strategies. market by CARROLL's the property successful achieved has integrated vertically which and brand, CARROLL's resident drive awareness we innovative exceptional marketing strong

The closes. the should this has CARROLL's platform success portfolio of to once of management which its demonstrated transaction accelerate vertically been integrated only growth third-party

insights in to the successful CARROLL addition the platform. business which RMR We third-party into will aspects driving In also critical markets operates. benefit operating of management anticipate also revenue broader that the CARROLL platform growth, provides the the

from immediately tremendous asset-light value long-term and business a multifamily promote Lastly, after development expected lending revenue to new potential revenue recurring be create to new the there and including and broader acquisition a investments fees any presents we transaction a we create opportunities. the Over Like capabilities our potential is integrate shareholders. time, made the RMR, scalable across with on the is platform, profitable, for closes. stream believe as accretive and upside longer-term is synergies opportunity to CARROLL

we our directly complementary further summary, current platform TravelCenters the from our of transaction is a aligned we to $XXX this believe the diversify America strategic growth. RMR recent compelling highly to In redeployment It and objectives of million transaction. in with generated is drive and future proceeds represents

capital organization and an to diligence their the sides, commitment have the team and their welcome process both think CARROLL entire been opportunity We throughout RMR. we incredible with their are excited the employees the for to this and partners. to We impressed platform, management is

Now results. our quarter to third turning

real conditions Our results RMR's model, commercial current business again especially market once highlight volatility. resilient amid the estate unsettled and

adjusted adjusted impacted uncertainty remaining and From ratio the by of earnings. dividend quarter. in continue covered reported of rate approximately XX% of perspective, quarterly macro to conditions real we and distributable well our of commercial with a market be $X.XX $XX.X share million, during payout quarter, interest a estate EBITDA earnings volatility This per

the to more participants with in Federal than market visibility remains recovering real benefit estate While transacting focus the RMR. of Organization's delivering transaction the gain current cycle. slower confidence volume on improved be is with year, Reserve's executing end clients and hike possible it ultimately as last will modestly returns both of our rate plans to continues our strategic that of clients interest shareholder the goal

highly are impact values has the on of we to We as the potential reach incentivized equity it RMR's growth. revenue a public manage direct equity improve

resulted put remains as flow-through we leasing in annually With of context, of nationwide. XX conditions to a the impacting our revenues on commercial To $XX million enterprise the respect value challenging million real macro hard of and over this and if roll-up real our the leases clients, team than of generate weighted we REIT's rents commercial to Despite the arranged adjusted nearly of result of close work years. estate, assets, experienced operating of cost approximately in a and XX% professionals close X strong, commitment our average EBITDA. our platform activity incremental more gap feet with XXX% in to across which historical lease behalf underlying fundamentals, estate between equity could square term

we the our well the acquisition sheet and strategies, results our managed to quarter focus growth closing, we progress organization's private strategies RMR's volatility despite leasing on remain to positioned in forward In commercial assets continuous strategic tenant value deliver healthy CARROLL long-term step through financial our ability growth demonstrate our the the exciting confident to an on strong and profile, and further objectives took These business. some retention. with continue strategy to are balance opportunistic capital in leasing trajectory the of platform. we pursue of during estate we a on and market, made ongoing real With creative a

who will With that, I'll for Matt turn now Chief the our Financial review financial results call quarter. over to the Jordan, Officer, our

Matthew Jordan

good Thanks, Adam, morning, everyone. and

For with and both higher EBITDA the million or end measures $X $XX.X our guidance. million, reported we of third income finishing adjusted at quarter, per of of quarterly $X.XX share adjusted net the

earnings share termination strategic In costs, this and adjustments for costs, separation excludes per of with addition CARROLL transaction an per transformation and to including the and recurring add-back platform. equity associated technology method transactions, investments quarter fees share of incentive $X.XX costs $X.XX for adjusted

expect immediately As Adam to highlighted transaction earlier, we accretive. CARROLL be the

is EBITDA that $X.XX earnings share. In CARROLL $X.XX expectation and our closing, contribute of million year platform's and $XX of the recurring distributable the full between per $XX million business fee adjusted first it will to after

close, solely transaction the I revenues legacy guidance Given $XX million were provide the this RMR's focused approximately CARROLL was advisory of quarter for on that will next which be sequentially. quarter, any the may down uncertainty business. million service when Management and $X

with in the This TA decrease line on to the attributable of transaction expectations and XX. May was was primarily completion

$XX quarter, upon the expect volumes, values next $XX lower million enterprise managed current revenues equity based the million transaction relates impact it quarter. of full a we average between construction and projected quarter and to REITs, next of be TA to As our

taxes being million, $XX approximately to to Recurring $XXX,XXX and expenses. a quarter due caps head of was favorable cash for sequentially benefits statutory mix. count primarily this compensation and decrease Turning a met

recurring quarter, help in benefit as to all expect an roles million $XX tax reach to next which we've statutory continuing well based and XX%. be to employees to drive some corporate we office undertaken, cash rate as closer restructuring our ahead caps Looking compensation of strategic of on will to projected increase reimbursement

of should approximately technology investments, includes million per adjusted earnings to range earlier, share normalized next $X.XX approximately $X.XX $X.X technology we to On assumptions be prospective adjusted basis, G&A share G&A expect quarter, EBITDA should this aggregating million outlined costs per million transformation or excluding $X.XX million. $XX $XXX,XXX costs. range from to continued of $XX quarter the all $X and I next quarter, a per from share

have take and CARROLL returns in strategies additional over with cash our quarter hand for to acquisition, the in on closing risk-adjusted tremendous shareholders. advantage the of us $XXX million $XXX gives closed continue to growth debt opportunistic to further after no of almost to million to attractive opportunities we for flexibility which expect We deliver cash continue the

Operator, concludes our questions. remarks. you line open That formal to would the please

Operator

Bryan first B. from the And Instructions]. question comes Riley [Operator FBR. with Maher

Bryan Maher

can And which savings think maybe opportunities Adam, out, effectively the that EBITDA reduce you the apart you how multifamily upon can that quickly set touch CARROLL opportunity guys the you put discussed particular that transaction? looking implement do what EBITDA would in you the transaction? other costs And multiple on at? you PowerPoint were from your you

Adam Portnoy

that at talked about several Bryan, in of calls we've in investors. over last years, with meetings for thanks looked question. Sure. as Look, the a opportunities we've and prior lot

boxes of liked remarks, prepared about. they're lot And checked integrated for really CARROLL I it in platform. us we what think a my multifamily said talked I vertically we've that is about

vertically advantage we that So competitive don't it checks outsource running the integrated real estate. the think We the that's of actually We that like they're a in marketplace our the us. box real estate. run

of talking sort obviously, have They size, -- about spot $XX It that. sweet the always been would where one sort they're our real organizations commercial billion the fills We've -- of AUM that are, $X billion of is the was the in sweet is our the relationships. platform. also for hole are sort perfect for They cycle, something right piece the of right given between life puzzle fit we be of and sizes of capital the private multifamily they're spot. estate in They're us. $X billion

Our and we more can relationships. we strategic always that very to very the deep objective investors become in XX relationships hope maybe our institutional do over them They clients have was will with well-established future. grow with our

the is majority And but their they were they all we that for not it, that's buy, investments, plus, real core how long-term return the of weren't you and shop. of focus that get you but a core that call sell, They investing, core of then their add, the of maybe would that estate additive necessarily fact for what hold really expect much do that real I investing. we sort of of fix, estate some looking maybe value more you We're you investors. a majority

I to think that do. to expertise the we is that real a sort they table what complement bring of

and box us, so I what very it made compelling. just that's checked it every think And just possible for

of I'll to turn terms EBITDA, that. In over the discuss to Matt it

Matthew Jordan

with there of good we million aligned $XX how the through critical say of this will across because identifying critical in we're team aligned would transaction looking roles a year has pretty are be getting and in to for on performance, I of we're combined we're going open the X, the and us platform. behind that And hold in get the management combination to and million $XX going put feel with economies to closing a hit them business it's the scale and been synergies, lot business ways. they

feel that we really numbers we've think in getting the publicly operation. So first I good and the year full about of disclosed

Bryan Maher

multifamily? more you you little bit in Or there? specific growth be would discussed any pursue And in comments, Adam, particular Would continuing it your prepared it to other more opportunities, other be a can sector? be

Adam Portnoy

Sure.

an So in. we're generally, it's interesting environment

meaning estate, now at evaluating. going I any looking generally we presented in more more us in to are opportunities years, one real the distress multiple commercial at say would time the been are have that that last there on we Given than several things are

we'll it's the we So a sure other think executing actively we end opportunities, things. looking other interesting pretty but of not up and on at I'm any are time,

be your particular of do of would be forward, a too. multifamily multifamily growth platform focus CARROLL in CARROLL in our our your void answer multifamily? fills question that investments bit, we don't is To us. little question, think would the it of a follow-on specific for sort will what acquisition, really for the basis first I going

from of it it -- diligence, the part they're what into don't I also that be as felt with team the we excited think the the we staying on. about more CARROLL, very became were were they're things their I also -- like highly do that looking was in place. management to meeting we our we about clear very plan going sort was to keep in but regarded. specifically, And us It it's that's to at highly others of team CARROLL to One And they that's entire too that good And distinguished multifamily. clear management why expand we're that investors team. think they of why very really

platform team multifamily with we CARROLL to think investments. have I the our grow right the

Bryan Maher

quarter. want road. your about DHC there stood not of anything talked you're kind just comments, the the for is probably of might managed particularly good X or going managed the OPI down you the among sake that last to going call Usually, you that highlight? to that streets me. X the highlights your during want in to go And this bad I'm for of assume REITs But to out Okay.

Adam Portnoy

for REITs I At you primer look, OPI, was in all of cover I some quarters -- we Touching it sort all our of really reasons. mean some good different on our SVC, unfortunate think offset listening, had results all it's SHOP those portfolio, at them. had setbacks they by of ILPT, good for and RMR, neutral DHC, We're of the parts to of potential about here we're the the RMR's to really I talking not All been sort occur. very OPI-DHC that. sort will of were other portfolio. We've market or in that merger about say is the transaction we're is whether vocal from indifferent. occur about perspective, to in

that I be themselves have and vocal about indifferent we're collect of neutral, a versus REITs revenues think that, X in the vehicles the virtually vehicle manager sort merged the whether separate would as would been very we identical.

really it's have from don't dog that much So -- perspective. in RMR's we fight really

Operator

Ronald from comes with question Morgan next Stanley. The Kamdem

Ronald Kamdem

CARROLL, the a provided to think more bit back going Just I you color. little

is going so -- like and sounds the everything same. structure it and So to the G&A the stay

sort is multifamily. of So through idea to the platform just value-add grow more the

sort grow more bit CARROLL little to a give the the structure, color strategy can be of you DNA operating and helpful. on maybe the the Just would how both

Adam Portnoy

Sure.

they I it, very do. run been the that years, continue we're So call going for at the running they're the has very they've way that it on certainly, to or to to exactly the short run term, next few been is have similar that what good reason with And doing. business focus doing what think

do with And X what on for to their years so of doing multifamily -- them and again focused and the what be nature investments. we is their they X, the very have partners. That's expect been relationships value-add to next

changing is this we X, that over relationships estate. we that one or or core CARROLL plus time, and to to that plus are could platform, bring as core meaning X holding assets things time. those investing, our more more the that complement through for core could see in we bear on of out, relationships deep interested that over be core I have the that see RMR folks don't our years really could I pretty real that think do some LPs the a with

CARROLL to an core bear some addition will we there's core opportunity time to multifamily bring be plus. could at that think we investments that And or over perhaps in

think And on X investing the focused as you're what very hope continue going term, short core next it be value-add doing similar more been expand They and repertoire into so plus. thing or X, do much will years, to core that much investing, do doing to I see over very some to they've that, we but time. to basically able

we we talking that obviously, today the hope -- a is nationwide operating is could geographically, Look, platform. expand would platform. RMR RMR I'm

is and on in term, time. very going Canada the focused We Could to the to expanding to short reach CARROLL Sunbelt, in parts the over they're to we medium have in the X,XXX the focused Caribbean. we assets is state, every stay their see on something again, country. expand would them hope of that expertise is also that Sunbelt do maybe Yes, of country? parts and other

Ronald Kamdem

my the EBITDA on synergies. to Great. to so of $XX adjusted just $X then -- follow-up million just million was of the million $X million And $XX includes

coming So opportunities If sounds the where it's synergies synergies are from? there? it not other those are maybe like what G&A,

Matthew Jordan

will Well, a it G&A. chunk of be

through through some not to we RMR those that technology think obviously CARROLL's matching should currently I service on and the There of that get think across collectively there'll rethinking be closing, just on to be and/or back. things of I alignments, exist may going providers. mixing costs, at back organizations. CARROLL And open putting It's ways be -- you're synergies. personnel office scale different economies positions whether that's some see that

we and then phase So out in towards the the will ongoing process that's of and a itself as process closing. integration work during lot play

Ronald Kamdem

Okay. Great.

doing if assets Wondering assets. of historically, about one last of of of joint just venture think sort on capital raise any I there's you talked happening private my sort across other JVs and REITs? was conversations sort any of more sort So of on,

Adam Portnoy

our things. dialogue there I potential sort would say is of going real about in that partners We're way. imminent nothing pretty regular advanced in with is any

open expanding. would partners I to think They our expand. to are like

of -- I issues like think -- not running more externally some are about, the existing than we would from ventures as of to acquisitions let's in REITs, likely most more tremendous a through amount take today. Some growth and are say, today, there's the going there's we've there sides activity and that our the of to external joint on is would up just, marketplace in our grow assets talked of both trying transaction

better, getting think that and JVs last not be are partners But a quarters. areas in are grow of there's interested Things transactions external coming some one couple transactions of out a about happens occurring lot large we the that the Industrial of some asset I the larger but there's quarter some headlines of significant I some -- those there's capital there. through that I the limited acquisitions we have do classes And think of could to out. there's in lot in our been expanding. a in equity not private specifically with big of mean, firms, possibly

of are one-offs. Those sort

And we as aggressively up so well. of than a growth and to grow aren't we few joint to and themselves sort about doesn't open what that but modestly could I'm those that say, present the could talking in them end mean growth of I lot don't here could growth, in, next let's opportunities them expect or more quarters, ventures they

Operator

session. question-and-answer comments. Executive Adam and like to Portnoy, closing the would concludes this the for call Chief any turn I And Officer, President to

Adam Portnoy

joining for concludes you Thank today. call. that all our Operator, us

Operator

you. Thank

may and conference concluded. today's the presentation, for lines. mentioned, disconnect has Thank you attending As now you your

The RMR Group Inc. (RMR) 10 Aug 232023 Q3 Earnings call transcript