The RMR Group Inc. (NASDAQ:RMR) Q4 2018 Earnings Conference Call Transcript

Dec 03, 2018 • 01:00 pm ET


The RMR Group Inc. (NASDAQ:RMR) Q4 2018 Earnings Conference Call Transcript


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Good day, and welcome to The RMR Group Fourth Quarter and Year-End 2018 Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

I would now like to turn the conference over to Tim Bonang, Senior Vice President. Please go ahead.

Timothy Bonang

(technical difficulty) our President and CEO, Adam Portnoy; and Chief Financial Officer, Matt Jordan. In just a moment, they will provide details about our business and our performance for the fourth quarter and fiscal year-end 2018. They will then take questions from analysts.

I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company.

(Forward-Looking Cautionary Statements)

In addition, we may be discussing non-GAAP numbers during this call, including adjusted net income, adjusted EBITDA, and adjusted EBITDA margin. A reconciliation of net income determined in accordance with US Generally Accepted Accounting Principles, or GAAP, to adjusted earnings net income, adjusted EBITDA and a calculation of adjusted EBITDA margin can be found in the news release we issued this morning.

And, now, I would like to turn the call over to Adam Portnoy to begin our quarterly review. Adam?

Adam Portnoy

Thanks, Tim, and thank you to everyone for joining us this afternoon. For the fourth quarter of fiscal 2018, which ended on September 30th, we've reported adjusted net income of $9.9 million or $0.61 per share, which represents an increase of $0.17 per share or 39% compared to the same period last year. This year-over-year growth in adjusted net income is largely attributable to increases in revenues and lower operating costs.

In addition, adjusted EBITDA of $31.2 million and adjusted EBITDA margin of 59.7% are both at their highest level since we became a public company in 2015.

From an operations perspective this quarter, we arranged over 1 million square feet of leasing activity on behalf of our client companies with a weighted average lease term of 8.5 years and a weighted average roll up in rent of 6.3%. We also supervised approximately $22 million in capital improvements at our client companies during the quarter.

Some of the more noteworthy highlights across our client companies during the quarter include the following. In September, SIR and GOV announced plans for a stock for stock merger, which would create a leading national office REIT that will be renamed Office Properties Income Trust or OPI. In connection with this transaction, the cross ownership between GOV, SIR and ILPT will be eliminated. GOV has already disposed of its 27.8% ownership in SIR, and SIR plans to distribute its 69.2% ownership in ILPT prior to closing.

As part of the merger announcement, management has stated that OPI will be both selling up to an additional $750 million in assets by mid-year 2019 and reducing its dividend to ensure leverage and operating metrics are more in line with its peer group. The asset sales and