Rithm Capital Corp. Announces Second Quarter 2024 Results

Rithm Capital Corp. (NYSE: RITM; “Rithm Capital,” “Rithm” or the “Company”) today reported the following information for the second quarter ended June 30, 2024:

Second Quarter 2024 Financial Highlights:

GAAP net income of $213.2 million, or $0.43 per diluted common share(1)
Earnings available for distribution of $231.1 million, or $0.47 per diluted common share(1)(2)
Common dividend of $122.4 million, or $0.25 per common share
Book value per common share of $12.39(1)

Q2 2024

Q1 2024

Summary Operating Results:

GAAP Net (Loss) Income per Diluted Common Share(1)

0.43

0.54

GAAP Net (Loss) Income

213.2

million

261.6

million

Non-GAAP Results:

Earnings Available for Distribution per Diluted Common Share(1)(2)

0.47

0.48

Earnings Available for Distribution(2)

231.1

million

233.2

million

Common Dividend:

Common Dividend per Share

0.25

Common Dividend

122.4

million

120.9

million

“We are pleased to have delivered another strong performance this quarter,” said Michael Nierenberg, Chairman, Chief Executive Officer and President of Rithm Capital. “Our core businesses are capitalizing on attractive opportunities in an increasingly competitive market, while we continue to grow our asset management capabilities and realize the benefits of our expanding partnerships. Looking forward, I believe our diversified platform will enable Rithm to continue its trajectory as a leading alternative asset manager and deliver strong results for shareholders and LPs.”

Second Quarter 2024 Company Highlights:

Total Rithm MSR Portfolio Summary
- Mortgage servicing rights (“MSRs”) portfolio totaled $645 billion in unpaid principal balance (“UPB”) at June 30, 2024, compared to $587 billion in UPB at March 31, 2024(3)
  - Portfolio average constant prepayment rate of approximately 6.2%

Newrez
- Origination & Servicing segment pre-tax income of $247.7 million(4)
- Generated a 23% pre-tax return on equity (“ROE”) on $4.0 billion of equity(5)(6)
- Origination funded production volume of $14.6 billion, an increase of 35% QoQ and 47% YoY
- Acquisition of Computershare Mortgage Services Inc. and certain affiliated companies, including Specialized Loan Servicing LLC (“SLS”), closed on May 1, 2024 for a cash purchase price of approximately $708.0 million.
  - The acquisition included approximately $56 billion in UPB of MSRs and $98 billion of third-party servicing UPB, along with SLS’s origination servicing business

Genesis
- Mortgage Loans Receivable segment pre-tax income of $31.7 million
- Generated a 18% pre-tax ROE on $710 million of equity(7)
- Origination volume of $836 million, an increase of 50% YoY
- Issued largest ever rated Residential Transitional Loan securitization of $500 million, focused on ground-up construction

Sculptor
- Approximately $32 billion of assets under management (“AUM”) at June 30, 2024(8)
- Closed two new CLOs for a total of ~$780 million of AUM
- Additional $100 million closing in Real Estate Credit Fund II

Great Ajax
- Completed transaction to serve as the external manager to Great Ajax Corp. (NYSE: AJX), a publicly traded mortgage REIT

(1)

Per common share calculations for both GAAP Net Income and Earnings Available for Distribution are based on 490,981,282 and 485,931,501 weighted average diluted shares for the quarters ended June 30, 2024 and March 31, 2024, respectively. Per share calculations of Book Value are based on 489,732,422 common shares outstanding as of June 30, 2024.

(2)

Earnings Available for Distribution is a non-GAAP financial measure. For a reconciliation of Earnings Available for Distribution to GAAP Net Income, as well as an explanation of this measure, please refer to the section entitled Non-GAAP Financial Measures and Reconciliation to GAAP Net Income below.

(3)

Includes excess and full MSRs.

(4)

Includes noncontrolling interests.

(5)

Excludes full MSR mark-to-market of $20.1 million.

(6)

ROE is calculated based on annualized pre-tax income, excluding MSR mark to market, divided by the average Origination and Servicing segment ending equity for the respective period.

(7)

ROE is calculated based on annualized pre-tax income, divided by the average Mortgage Loans Receivable segment ending equity for the respective period.

(8)

“Assets Under Management” (AUM) refers to the assets for which Sculptor provides investment management, advisory or certain other investment-related services. This is generally equal to the sum of (i) net asset value of the funds, (ii) uncalled capital commitments, (iii) total capital commitments for certain real estate funds and (iv) par value of collateralized loan obligations. AUM includes amounts that are not subject to management fees, incentive income or other amounts earned on AUM. Our calculation of AUM may differ from the calculations of other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. Our calculations of AUM are not based on any definition set forth in the governing documents of the investment funds and are not calculated pursuant to any regulatory definitions.

ADDITIONAL INFORMATION

For additional information that management believes to be useful for investors, please refer to the latest presentation posted on the Investors - News section of the Company’s website, www.rithmcap.com. Information on, or accessible through, our website is not a part of, and is not incorporated into, this press release.

EARNINGS CONFERENCE CALL

Rithm Capital’s management will host a conference call on Wednesday, July 31, 2024 at 8:00 A.M. Eastern Time. A copy of the earnings release will be posted to the Investors - News section of Rithm Capital’s website, www.rithmcap.com.

The conference call may be accessed by dialing 1-833-974-2382 (from within the U.S.) or 1-412-317-5787 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Rithm Capital Second Quarter 2024 Earnings Call.” In addition, participants are encouraged to pre-register for the conference call at https://dpregister.com/sreg/10191227/fd2708fc40.

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.rithmcap.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available two hours following the call’s completion through 11:59 P.M. Eastern Time on Wednesday, August 7, 2024 by dialing 1-877-344-7529 (from within the U.S.) or 1-412-317-0088 (from outside of the U.S.); please reference access code “6413013.”

Consolidated Statements of Operations (Unaudited)

($ in thousands, except share and per share data)

Three Months Ended

June 30,

2024

March 31,

2024

(As Restated)(A)

Revenues

Servicing fee revenue, net and interest income from MSRs and MSR financing receivables

498,978

469,891

Change in fair value of MSRs and MSR financing receivables (includes realization of cash flows of $(165,138) and $(116,839), respectively)

(67,898

)

84,175

Servicing revenue, net

431,080

554,066

Interest income

478,653

429,886

Gain on originated residential mortgage loans, held-for-sale, net

153,741

142,458

Other revenues

56,500

58,348

Asset management revenues

109,433

75,860

1,229,407

1,260,618

Expenses

Interest expense and warehouse line fees

465,944

409,827

General and administrative

207,123

197,194

Compensation and benefits

270,448

235,778

943,515

842,799

Other income (loss)

Realized and unrealized gains (losses), net

(14,769

)

(44,846

)

Other income (loss), net

19,042

7,926

4,273

(36,920

)

Income (loss) before income taxes

290,165

380,899

Income tax expense

51,648

93,412

Net income (loss)

238,517

287,487

Noncontrolling interests in income of consolidated subsidiaries

2,961

3,452

Dividends on preferred stock

22,395

Net income (loss) attributable to common stockholders

213,161

261,640

Net income (loss) per share of common stock

Basic

0.44

0.54

Diluted

0.43

0.54

Weighted average number of shares of common stock outstanding

Basic

486,721,836

483,336,777

Diluted

490,981,282

485,931,501

Dividends declared per share of common stock

0.25

(A)

As reported in the Company’s 8-K on July 22, 2024, the Company is restating its prior period financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 and as of and for each of the quarters within 2023 and 2022 as well as the quarter ended March 31, 2024 (the “Restatement”) due to the need to consolidate certain mortgage securitization trusts (the “Trusts”). The Restatement relates to a change in the accounting treatment of the Trusts from investments in nonconsolidated VIEs to consolidated VIEs as well as other immaterial adjustments. This resulted in a gross up of the VIEs’ assets and liabilities on the Company’s consolidated balance sheets as well as reclassifying certain items on the Company’s consolidated statements of operations and cash flows for the relevant periods. Accordingly, the information presented herein designated “As Restated” reflects adjustments to previously presented financial information in connection with the Restatement.

See the Company’s 8-K filed with the Securities and Exchange Commission (“SEC”) on July 22, 2024 for a discussion of the Restatement. The Company plans to file an amendment to its Annual Report on Form 10-K for the year ended December 31, 2023 and to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 which will contain a detailed reconciliation to the previously reported amounts and a detailed description of the adjustments thereon.

Consolidated Balance Sheets

($ in thousands, except share data)

June 30,

2024

(Unaudited)

March 31,

2024

(Unaudited)

(As Restated)(A)

Assets

Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value

9,693,331

8,706,723

Government and government-backed securities ($9,300,237 and $14,038,866 at fair value, respectively)

9,325,097

14,063,751

Residential mortgage loans, held-for-investment, at fair value

368,866

365,398

Residential mortgage loans, held-for-sale ($3,837,929 and $3,691,700 at fair value, respectively)

3,910,823

3,766,115

Consumer loans, held-for-investment, at fair value

946,367

1,103,799

Single-family rental properties

1,025,324

1,007,172

Mortgage loans receivable, at fair value

2,049,266

2,042,913

Residential mortgage loans subject to repurchase

1,905,625

1,845,889

Cash and cash equivalents

1,238,736

1,136,437

Restricted cash

296,955

382,939

Servicer advances receivable

2,774,510

2,586,409

Reverse repurchase agreement

—

3,040,756

Other assets ($2,024,740 and $1,918,496 at fair value, respectively)

4,251,186

3,905,221

Assets of consolidated CFEs(B):

Investments and other assets of consolidated entities

4,232,803

3,982,059

Total Assets

42,018,889

47,935,581

Liabilities and Equity

Liabilities

Secured financing agreements

15,179,900

18,271,046

Secured notes and bonds payable ($205,286 and $221,922 at fair value, respectively)

9,955,891

9,721,313

Residential mortgage loan repurchase liability

1,905,625

1,845,889

Unsecured notes, net of issuance costs

1,197,294

1,205,411

Payable for investments purchased

—

1,271,542

Treasury securities payable

—

2,992,477

Dividends payable

139,004

135,695

Accrued expenses and other liabilities ($487,785 and $33,586 at fair value, respectively)

2,644,728

1,884,527

Liabilities of consolidated CFEs(B):

Notes payable, at fair value and other liabilities

3,575,833

3,364,309

Total Liabilities

34,598,275

40,692,209

Commitments and Contingencies

Equity

Preferred stock, $0.01 par value, 100,000,000 shares authorized, 51,964,122 and 51,964,122 issued and outstanding, $1,299,104 and $1,299,104 aggregate liquidation preference, respectively

1,257,254

Common stock, $0.01 par value, 2,000,000,000 shares authorized, 489,732,422 and 483,477,713 issued and outstanding, respectively

4,897

4,836

Additional paid-in capital

6,162,872

6,075,080

Retained earnings (accumulated deficit)

(143,185

)

(232,119

)

Accumulated other comprehensive income

44,755

44,501

Total Rithm Capital stockholders’ equity

7,326,593

7,149,552

Noncontrolling interests in equity of consolidated subsidiaries

94,021

93,820

Total Equity

7,420,614

7,243,372

Total Liabilities and Equity

42,018,889

47,935,581

(A)

(B)

Includes assets and liabilities of certain consolidated VIEs that meet the definition of collateralized financing entities (“CFEs”). These assets can only be used to settle obligations and liabilities of such VIEs for which creditors do not have recourse to Rithm Capital.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP NET INCOME

The Company has four primary variables that impact its performance: (i) Net interest margin on assets held within the investment portfolio; (ii) realized and unrealized gains or losses on assets held within the investment portfolio and operating companies, including any impairment or reserve for expected credit losses; (iii) income from the Company’s operating company investments; and (iv) the Company’s operating expenses and taxes.

“Earnings available for distribution” is a non-GAAP financial measure of the Company’s operating performance, which is used by management to evaluate the Company’s performance excluding: (i) net realized and unrealized gains and losses on certain assets and liabilities; (ii) other net income and losses; (iii) non-capitalized transaction-related expenses; and (iv) deferred taxes.

The Company’s definition of earnings available for distribution excludes certain realized and unrealized losses, which although they represent a part of the Company’s recurring operations, are subject to significant variability and are generally limited to a potential indicator of future economic performance. Within other net income and losses, management primarily excludes (i) equity-based compensation expenses, (ii) non-cash deferred interest expense and (iii) amortization expense related to intangible assets as management does not consider this non-cash activity to be a component of earnings available for distribution. With regard to non-capitalized transaction-related expenses, management does not view these costs as part of the Company’s core operations, as they are considered by management to be similar to realized losses incurred at acquisition. Management also excludes amortization of acquisition premium on Mortgage loans receivable. Non-capitalized transaction-related expenses generally relate to legal and valuation service costs, as well as other professional service fees, incurred when the Company acquires certain investments, as well as costs associated with the acquisition and integration of acquired businesses. Management also excludes deferred taxes because the Company believes deferred taxes are not representative of current operations.

Management believes that the adjustments to compute “earnings available for distribution” specified above allow investors and analysts to readily identify and track the operating performance of the assets that form the core of the Company’s activity, assist in comparing the core operating results between periods, and enable investors to evaluate the Company’s current core performance using the same financial measure that management uses to operate the business. Management also utilizes earnings available for distribution as a financial measure in its decision-making process relating to improvements to the underlying fundamental operations of the Company’s investments, as well as the allocation of resources between those investments, and management also relies on earnings available for distribution as an indicator of the results of such decisions. Earnings available for distribution excludes certain recurring items, such as gains and losses (including impairment and reserves as well as derivative activities) and non-capitalized transaction-related expenses, because they are not considered by management to be part of the Company’s core operations for the reasons described herein. As such earnings available for distribution is not intended to reflect all of the Company’s activity and should be considered as only one of the factors used by management in assessing the Company’s performance, along with GAAP net income which is inclusive of all of the Company’s activities.

The Company views earnings available for distribution as a consistent financial measure of its portfolio’s ability to generate income for distribution to common stockholders. Earnings available for distribution does not represent and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with GAAP, and the Company’s calculation of this financial measure may not be comparable to similarly entitled financial measures reported by other companies. Furthermore, to maintain qualification as a REIT, U.S. federal income tax law generally requires that the Company distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. Because the Company views earnings available for distribution as a consistent financial measure of its ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that the Company’s board of directors uses to determine the amount, if any, and the payment date of dividends on common stock. However, earnings available for distribution should not be considered as an indication of the Company’s taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay, as earnings available for distribution excludes certain items that impact its cash needs.

The table below provides a reconciliation of earnings available for distribution to the most directly comparable GAAP financial measure (dollars in thousands, except share and per share data):

Three Months Ended

June 30,

2024

March 31,

2024

Net income (loss) attributable to common stockholders

213,161

261,640

Adjustments:

Realized and unrealized (gains), net, including MSR change in valuation inputs and assumptions

(71,480

)

(131,638

)

Other (income) loss, net

48,434

9,134

Computershare Mortgage Acquisition:

Bargain purchase gain

(28,161

)

—

Non-recurring acquisition and restructuring expenses

14,936

—

Non-capitalized transaction-related expenses

7,775

3,472

Deferred taxes

46,451

90,628

Earnings available for distribution

231,116

233,236

Net income (loss) per diluted share

0.43

0.54

Earnings available for distribution per diluted share

0.47

0.48

Weighted average number of shares of common stock outstanding, diluted

490,981,282

485,931,501

SEGMENT INFORMATION

($ in thousands)

Second Quarter 2024

Origination

and Servicing

Investment

Portfolio

Mortgage

Loans

Receivable

Asset

Management

Corporate

Total

Servicing fee revenue, net and interest income from MSRs and MSR financing receivables

442,016

56,962

—

498,978

Change in fair value of MSRs and MSR financing receivables (includes realization of cash flows of $(165,138))

(127,401

)

59,503

—

(67,898

)

Servicing revenue, net

314,615

116,465

—

431,080

Interest income

178,445

235,662

59,573

4,971

478,653

Gain on originated residential mortgage loans, held-for-sale, net

155,771

(2,030

)

—

153,741

Other investment portfolio revenues

—

56,500

—

56,500

Asset management revenues

—

109,433

—

109,433

Total revenues

648,831

406,597

59,573

114,404

1,229,407

Interest expense and warehouse line fees

152,477

254,331

29,106

8,333

21,697

465,944

General and administrative

91,057

60,704

6,306

31,440

17,616

207,123

Compensation and benefits

184,853

3,478

9,113

51,982

21,022

270,448

Total operating expenses

428,387

318,513

44,525

91,755

60,335

943,515

Realized and unrealized gains (losses), net

—

(41,975

)

18,739

8,467

—

(14,769

)

Other income (loss), net

27,293

(8,810

)

(2,116

)

2,675

—

19,042

Total other income (loss)

27,293

(50,785

)

16,623

11,142

—

4,273

Income (loss) before income taxes

247,737

37,299

31,671

33,791

(60,333

)

290,165

Income tax expense (benefit)

38,960

2,909

1,952

7,827

—

51,648

Net income (loss)

208,777

34,390

29,719

25,964

(60,333

)

238,517

Noncontrolling interests in income (loss) of consolidated subsidiaries

1,016

1,110

—

835

—

2,961

Dividends on preferred stock

—

22,395

Net income (loss) attributable to common stockholders

207,761

33,280

29,719

25,129

(82,728

)

213,161

Total Assets

16,264,142

21,273,775

2,817,309

1,637,511

26,152

42,018,889

Total Rithm Capital Stockholders' Equity

3,998,447

3,117,670

732,061

695,882

(1,217,467

)

7,326,593

First Quarter 2024 (As Restated) (A)

Origination

and Servicing

Investment

Portfolio

Mortgage

Loans

Receivable

Asset

Management

Corporate

Total

Servicing fee revenue, net and interest income from MSRs and MSR financing receivables

397,478

72,413

—

469,891

Change in fair value of MSRs and MSR financing receivables (includes realization of cash flows of $(116,839))

93,361

(9,186

)

—

84,175

Servicing revenue, net

490,839

63,227

—

554,066

Interest income

140,021

225,143

64,720

—

429,886

Gain on originated residential mortgage loans, held-for-sale, net

145,869

(3,411

)

—

142,458

Other investment portfolio revenues

—

58,348

—

58,348

Asset management revenues(B)

—

75,860

—

75,860

Total revenues

776,729

343,307

64,720

75,860

1,260,618

Interest expense and warehouse line fees

131,174

228,074

32,414

7,621

10,544

409,827

General and administrative

83,564

66,997

4,754

31,935

9,944

197,194

Compensation and benefits

153,806

4,743

11,303

63,112

2,814

235,778

Total operating expenses

368,544

299,814

48,471

102,668

23,302

842,799

Realized and unrealized gains (losses), net

—

(62,570

)

24,566

(6,842

)

—

(44,846

)

Other income (loss), net

(36

)

3,682

274

3,969

7,926

Total other income (loss)

(36

)

(58,888

)

24,840

(2,873

)

(36,920

)

Income (loss) before income taxes

408,149

(15,395

)

41,089

(29,681

)

(23,263

)

380,899

Income tax expense (benefit)

96,201

1,248

(333

)

(3,704

)

—

93,412

Net income (loss)

311,948

(16,643

)

41,422

(25,977

)

(23,263

)

287,487

Noncontrolling interests in income (loss) of consolidated subsidiaries

2,037

—

1,360

—

3,452

Dividends on preferred stock

—

22,395

Net income (loss) attributable to common stockholders

311,893

(18,680

)

41,422

(27,337

)

(45,658

)

261,640

Total Assets

15,001,011

28,672,548

2,689,844

1,529,360

42,818

47,935,581

Total Rithm Capital Stockholders' Equity

4,076,767

2,949,982

688,211

607,437

(1,172,845

)

7,149,552

(A)

(B)

Includes $4.9 million of asset management related interest income.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this press release constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts. They represent management’s current expectations regarding future events and are subject to a number of trends and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those described in the forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Cautionary Statement Regarding Forward Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent annual and quarterly reports and other filings filed with the U.S. Securities and Exchange Commission, which are available on the Company’s website (www.rithmcap.com). New risks and uncertainties emerge from time to time, and it is not possible for Rithm Capital to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Forward-looking statements contained herein speak only as of the date of this press release, and Rithm Capital expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Rithm Capital's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

ABOUT RITHM CAPITAL

Rithm Capital is a global asset manager focused on real estate, credit and financial services. Rithm makes direct investments and operates several wholly-owned operating businesses. Rithm’s businesses include Sculptor Capital Management, Inc., an alternative asset manager, as well as Newrez LLC and Genesis Capital LLC, leading mortgage origination and servicing platforms. Rithm Capital seeks to generate attractive risk-adjusted returns across market cycles and interest rate environments. Since inception in 2013, Rithm has delivered approximately $5.4 billion in dividends to shareholders. Rithm is organized and conducts its operations to qualify as a real estate investment trust (REIT) for federal income tax purposes and is headquartered in New York City.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240731004718/en/

Investor Relations 212-850-7770 IR@RithmCap.com

Rithm Capital (NYSE:RITM)
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