The RMR Group Inc. Announces Fourth Quarter and Fiscal Year End 2016 Results

17.0% Increase in Total Revenues for the Fourth Quarter Compared to Last Year

$0.46 Net Income per Share for the Fourth Quarter, a 15.0% Increase Compared to Last Year

NEWTON, Mass.--(BUSINESS WIRE)-- The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the quarter and fiscal year ended September 30, 2016.

Adam Portnoy , President and Chief Executive Officer, made the following statement regarding the fourth quarter fiscal 2016 results:

“Total revenues grew 17.0% on a quarterly basis and 38.4% on an annual basis compared to last year, which contributed to continued increases in net income and Adjusted EBITDA. Net income was $18.8 million, or $0.46 per share, for the fourth quarter, a 15.0% increase compared to last year, and Adjusted EBITDA was $27.4 million for the fourth quarter. During the quarter, we also closed the acquisition of Tremont Realty Capital, and we expect this business may provide RMR a platform for growth in the commercial real estate finance industry. We continue to maintain a strong balance sheet, with cash and cash equivalents having grown over the past year to $65.8 million and no indebtedness at September 30, 2016. We believe this makes us well positioned to take advantage of possible future growth opportunities."

Fourth Quarter Fiscal 2016 Highlights:

• As of September 30, 2016, The RMR Group Inc. had approximately $26.9 billion of total assets under management for all client companies. An explanation of this calculation appears later in this press release.
• The RMR Group Inc. earned real estate business and property management services revenues for the three months ended September 30, 2016 and 2015 from the following sources (dollars in thousands):

												As of the three months ended
												September 30, 2016																											September 30, 2015
Managed REITs												$	36,719													84.0	%												$	32,889													82.6	%
Managed Operators												6,636														15.2	%												6,276														15.7	%
Other												365														0.8	%												672														1.7	%
Total Management Services Revenues												$	43,720													100.0	%												$	39,837													100.0	%

• For the three months ended September 30, 2016, net income was $18.8 million and net income attributable to The RMR Group Inc. was $7.4 million, or $0.46 per share, compared to net income of $16.3 million and net income attributable to The RMR Group Inc. of $6.3 million, or $0.40 per share, for the three months ended September 30, 2015.

• For the three months ended September 30, 2016, Adjusted EBITDA was $27.4 million and Adjusted EBITDA Margin was 58.3% compared to Adjusted EBITDA of $24.3 million and Adjusted EBITDA Margin of 56.9% for the three months ended September 30, 2015. Adjusted EBITDA Margin equals Adjusted EBITDA divided by the contractual management and advisory fees earned from The RMR Group LLC’s client companies. These contractual management and advisory fees are calculated pursuant to The RMR Group LLC’s contracts with its client companies and do not deduct non-cash asset amortization recognized in accordance with U.S. generally accepted accounting principles, or GAAP, as a reduction to management services revenues and do not include any incentive business management fees which may be earned based upon certain calendar year end calculations.
• As of September 30, 2016, The RMR Group Inc. had cash and cash equivalents of $65.8 million and no indebtedness.

Summary Results for the Quarter and Fiscal Year Ended September 30, 2016:

Total revenues for the quarter ended September 30, 2016 increased 17.0% to $56.3 million from $48.1 million for the same period in 2015. Net income attributable to The RMR Group Inc. for the quarter ended September 30, 2016 was $7.4 million, or $0.46 per share, compared to $6.3 million, or $0.40 per share, for the quarter ended September 30, 2015. Net income for the quarters ended September 30, 2016 and 2015 include net expenses of $0.3 million and $1.0 million comprised of transaction and acquisition related costs and certain one time adjustments, respectively. Net income attributable to The RMR Group Inc. include net expenses of $0.2 million and $0.5 million, respectively, comprised of transaction and acquisition related costs and certain one time adjustments, or $0.01 and $0.02 per share, respectively. Adjusted EBITDA for the quarter ended September 30, 2016 was $27.4 million compared to Adjusted EBITDA of $24.3 million for the quarter ended September 30, 2015.

Total revenues for the fiscal year ended September 30, 2016 were $266.9 million compared to $192.9 million for the fiscal year ended September 30, 2015. Net income attributable to The RMR Group Inc. for the fiscal year ended September 30, 2016 was $37.2 million, or $2.33 per share, compared to $7.3 million, or $0.46 per share, for the year ended September 30, 2015. Net income for the fiscal years ended September 30, 2016 and 2015 include net expenses of $3.3 million and $4.6 million comprised of separation costs, acquisition and transaction related costs and certain one time adjustments, respectively. Net income attributable to The RMR Group Inc. includes net expenses of $1.7 million and $2.4 million comprised of separation costs, acquisition and transaction related costs and certain one time adjustments, respectively, or $0.06 and $0.09 per share, respectively. Adjusted EBITDA for the fiscal year ended September 30, 2016 was $100.1 million compared to $92.3 million for the fiscal year ended September 30, 2015.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. Reconciliations of net income determined in accordance with GAAP to EBITDA and Adjusted EBITDA as well as a calculation of Adjusted EBITDA Margin appear later in this press release.

When considering the financial data for the fiscal year ended September 30, 2016 in comparison to the financial data for the fiscal year ended September 30, 2015, investors should note that the businesses that now comprise the Company were privately owned by ABP Trust or its owners until June 5, 2015. Prior to the reorganization that created the Company on June 5, 2015, the Company’s assets, structure and operations differed in several respects and such differences impact period to period comparisons. For further information regarding the reorganization and related changes, see The RMR Group Inc.’s filings with the Securities and Exchange Commission, or SEC, including the Annual Report on Form 10-K filed on December 18, 2015, the Proxy Statement filed on January 22, 2016, and the Registration Statement (including the Prospectus) for the public distribution of the Company’s shares dated November 16, 2015, which are available at the SEC’s website, www.sec.gov.

Total Assets Under Management for all Client Companies:

Starting with the fiscal fourth quarter ended September 30, 2016, The RMR Group Inc. has determined to present its total assets under management for all client companies in a manner that it believes more clearly reflects the size of The RMR Group Inc.'s business. The calculation of total assets under management for all client companies includes: (i) the gross book value of real estate and related assets, excluding depreciation, amortization, impairment charges or other non-cash reserves, of the Managed REITs, plus (ii) the gross book value of real estate assets, property and equipment of the Managed Operators, plus (iii) the fair value of investments of Affiliates Insurance Company and RMR Real Estate Income Fund, plus (iv) the contributed capital and outstanding principal of loans serviced for certain other private clients. This calculation of total assets under management may include amounts in respect of the Managed REITs that are higher than the calculations of assets under management used for purposes of calculating fees under the terms of the business management agreements. For information on the calculations of assets under management of the Managed REITs for purposes of the fee provisions of the business management agreements, see the Company’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K filed with the SEC.

Conference Call:

At 10:00 a.m. Eastern Time this morning, President and Chief Executive Officer, Adam Portnoy , and Chief Financial Officer and Treasurer, Matt Jordan , will host a conference call to discuss The RMR Group Inc.’s fiscal fourth quarter and fiscal year ended September 30, 2016 financial results.

The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on Thursday, December 22, 2016. To access the replay, dial (412) 317-0088. The replay pass code is 10093035. The transcription, recording and retransmission in any way of The RMR Group Inc.'s fiscal fourth quarter and fiscal year end 2016 financial results conference call are strictly prohibited without the prior written consent of The RMR Group Inc.

The RMR Group Inc. is a holding company and substantially all of its business is conducted by its majority-owned subsidiary, The RMR Group LLC. The RMR Group LLC is an alternative asset management company that primarily provides management services to publicly traded REITs and real estate operating companies. As of September 30, 2016, The RMR Group LLC had approximately $26.9 billion of total assets under management, including more than 1,400 properties, and employed over 450 real estate professionals in more than 30 offices throughout the United States; the companies managed by The RMR Group LLC collectively had over 52,000 employees. The RMR Group Inc. is headquartered in Newton, Massachusetts.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. FORWARD LOOKING STATEMENTS CAN BE IDENTIFIED BY USE OF WORDS SUCH AS “OUTLOOK”, “BELIEVE”, “EXPECT”, “POTENTIAL”, “WILL”, “MAY”, “ESTIMATE”, “ANTICIPATE”, AND DERIVATIVES OR NEGATIVES OF SUCH WORDS OR SIMILAR WORDS. FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE ARE BASED UPON PRESENT BELIEFS OR EXPECTATIONS. HOWEVER, FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS, INCLUDING SOME REASONS BEYOND RMR’S CONTROL. FOR EXAMPLE:

• MR. PORTNOY’S STATEMENT THAT THE RMR GROUP INC. EXPERIENCED INCREASES IN TOTAL REVENUES, NET INCOME AND ADJUSTED EBITDA MAY IMPLY THAT THE RMR GROUP INC.’S TOTAL REVENUES, NET INCOME AND ADJUSTED EBITDA MAY CONTINUE TO INCREASE. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE RMR GROUP INC. WILL REALIZE GROWTH IN TOTAL REVENUES, NET INCOME OR ADJUSTED EBITDA. IN FACT, THE RMR GROUP INC.’S TOTAL REVENUES, NET INCOME AND ADJUSTED EBITDA MAY DECLINE.
• MR. PORTNOY FURTHER STATES THAT THE ACQUISITION OF TREMONT REALTY CAPITAL MAY PROVIDE A PLATFORM FOR GROWTH IN THE COMMERCIAL REAL ESTATE FINANCE INDUSTRY. INTEGRATION AND EXPANSION INTO NEW BUSINESSES CAN BE DIFFICULT, TIME CONSUMING AND/OR MORE EXPENSIVE THAN ANTICIPATED, AND MAY NOT PRODUCE THE BENEFITS THAT ARE EXPECTED AND MAY LEAD TO INCREASED LIABILITIES.
• MR. PORTNOY ALSO STATES THAT THE RMR GROUP INC. IS WELL POSITIONED TO TAKE ADVANTAGE OF POSSIBLE FUTURE GROWTH OPPORTUNITIES. THIS STATEMENT MAY IMPLY THAT THE RMR GROUP INC. WILL REALIZE FUTURE GROWTH. IN FACT, THERE CAN BE NO ASSURANCE THE RMR GROUP INC. WILL REALIZE FUTURE GROWTH AND ITS BUSINESS COULD DECLINE.

THE INFORMATION CONTAINED IN THE RMR GROUP INC.’S FILINGS WITH THE SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN THE RMR GROUP INC.’S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM THE FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE. THE RMR GROUP INC.’S FILINGS WITH THE SEC ARE AVAILABLE ON ITS WEBSITE AT WWW.SEC.GOV.

EXCEPT AS REQUIRED BY LAW, THE RMR GROUP INC. UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE DEVELOPMENTS OR OTHERWISE.