• Equity Raised: $300 million raised during the quarter.
• Capital Deployed Since 2021: $5.81 billion deployed.
• Mortgage Servicing Rights Portfolio: Approximately $875 billion.
• Assets Under Management (AUM): $80 billion managed.
• Permanent Capital: $7.8 billion in public markets.
• Dividend Yield: 8.8% as of September 30, 2024.
• Cash and Liquidity: Approximately $2 billion at quarter-end.
• GAAP Net Income: $97 million or $0.2 per diluted share.
• Earnings Available for Distribution: $170 million or $0.54 per diluted share.
• Return on Equity: 18% for the quarter.
• Book Value: $6.4 billion or $12.31 per common share.
• Dividends Paid: $0.25 per share.
• Pre-Tax Income (Excluding MSR Mark-to-Market): $246 million, up 8% quarter over quarter.
• Return on Equity (Pre-Tax Income): 24%.
• Origination Volume: $15.9 billion, up 9% from last quarter.
• Origination Margins: 1.23%, up 17% quarter over quarter.
• Cost Per Loan: $113, industry-leading efficiency.
• Delinquency Rates: Owned MSR delinquencies increased but remain historically low.
• Genesis Capital EBITDA: Expected $90 million for the year.
• Genesis Capital Production: Expected to close the year at $3.5 million to $4 billion.
• New CLO Closed: $400 million during the quarter.

• Warning! GuruFocus has detected 2 Warning Signs with RITM.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Rithm Capital Corp (NYSE:RITM) reported a strong quarter with significant growth across all business lines, including a 60% increase in earnings since 2021.
• The company successfully raised $300 million in equity, which will be used to fund growth and manage risks in a volatile market environment.
• Genesis Capital had a record quarter, showcasing strong performance and low delinquency rates, contributing positively to the company's overall results.
• The asset management business, particularly Sculptor, is performing well with strong inflows and fundraising efforts, indicating potential for future growth.
• Rithm Capital Corp (NYSE:RITM) maintains a robust balance sheet with $2 billion in cash and liquidity, providing financial stability and flexibility for future investments.

Negative Points

• Despite strong performance, Rithm Capital Corp (NYSE:RITM) believes its equity is undervalued, trading below its book value, which may indicate market skepticism.
• The company faces uncertainties due to geopolitical tensions and potential economic volatility, which could impact future performance.
• There is concern about the mixed signals in consumer credit, with some indications of consumer over-leverage, which could affect the company's servicing portfolio.
• Rithm Capital Corp (NYSE:RITM) is cautious about deploying capital in the single-family rental business due to current cap rate conditions, which may limit growth in this segment.
• The company is operating in a highly competitive mortgage market, which could pressure margins and affect profitability in the origination business.

Q & A Highlights

Q: What are your latest thoughts on potentially listing part of your business as a way to realize some of the value difference? A: Michael Nierenberg, CEO: We have to figure out a way to get our equity price to trade where it should. It's likely a 2025 event if we consider taking any part of the company public. We're also considering other M&A opportunities.

Q: Can you provide an update on the book value in October? A: Michael Nierenberg, CEO: The book value is roughly $12.5.

Q: How do you see residential refinance activity trending, and was it rate-driven? A: Michael Nierenberg, CEO: Refinance volume increased as markets rallied in Q3, reaching about 30% of overall production. We expect a more normalized market going forward, with continued momentum in our direct lending channels.

Q: Can you discuss the potential for annual performance fees in Q4 from Sculptor? A: Michael Nierenberg, CEO: While I can't provide forward-looking performance fees, you should expect some in Q4. We believe Sculptor will be one of our better investments, with more AUM growth expected.

Q: In a scenario where rates continue rising, do you have the flexibility to repurpose capital from NewRez to other segments? A: Michael Nierenberg, CEO: Yes, everything sits in one pot, allowing us to grow earnings. If MSRs were rich, we could potentially sell them. We focus on the best ways to deploy capital across the platform.

Q: What are your perspectives on the mixed messaging around consumer credit? A: Michael Nierenberg, CEO: Our servicing portfolio looks in good shape, with low delinquencies. While some areas like subprime auto have rolled over, overall consumer credit remains resilient.

Q: Can you provide insights into the recent net flow picture for Sculptor and attractive growth areas? A: Michael Nierenberg, CEO: AUM is up a few billion, with strong performance across all platforms. We aim to scale our private credit business and see growth in real estate and multi-strategy funds.

Q: What are your expectations for sustainable operating ROEs over the long term? A: Michael Nierenberg, CEO: We aim for mid-10s type returns across all environments. Our mortgage business performs well, and as we grow asset management, we expect to maintain these returns.

Q: How do you view the election's implications for Rithm? A: Michael Nierenberg, CEO: A divided government might be the best outcome, limiting extreme policy changes. We focus on maintaining cash and liquidity, staying close to home from a rate perspective.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.