Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q2 2024 Earnings Presentation
45 slides from Rithm Capital's earnings presentation, Jul 31, 2024
Slide 1: Quarterly Supplement Q2 2024
Rithm Capital Quarterly Supplement Q2 2024 Q2 2024 Quarterly Supplement
Slide 2: Disclaimers
Disclaimers IN GENERAL. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the “Presentation.” FORWARD-LOOKING STATEMENTS. Certain statements regardi
Slide 3: Driving Core Business Performance & Expanding Our Transition
Driving Core Business Performance & Expanding Our Transition Rithm is a leading global asset manager focused on delivering significant, long-term value Powered by CAPITALIZING ON THE POWER OF PARTNERSHIP Partnership A DECADE OF PERFORMANCE DRIVEN BY BROAD EXPERTISE A FOCUSED STRATEGY DELIVERING NEW
Slide 4: Q2'24 Financial Highlights
Q2’24 Financial Highlights BOOK VALUE $12.39 Per Common Share as of June 30, 2024(1) GAAP NET INCOME $213 Million $o.43 per Diluted Share(2) EARNINGS AVAILABLE FOR DISTRIBUTION(3) $231 Million $o.47 per Diluted Share(2) COMMON STOCK DIVIDEND $0.25 per Common Share 9.2% Dividend Yield as of June 30,
Slide 5: Rithm Trades Well-Below the Intrinsic Value of its Parts
Rithm Trades Well-Below the Intrinsic Value of its Parts*(1) Current valuation of 91% of book value understates the intrinsic value of Rithm’s core segments Current Valuation Illustrative SOTP Valuation(1) ($mm, except per share data) $5.4 Billion CURRENT MARKET CAP(2) 0.91x Newrez Book Value(6) $2,
Slide 6: Compelling Potential Value Proposition with Strong Execution
Compelling Potential Value Proposition with Strong Execution(1)* Rithm’s value-creating strategies have the potential opportunity to present even more upside(1) Newrez Investment Portfolio Genesis Sculptor Potential Value Enhancements(1) • Leverage omnichannel • Diversify investments in • Differenti
Slide 7: Rithm 2.0 Establishes a Solid Foundation for Growth
Rithm 2.0 Establishes a Solid Foundation for Growth Strengthening and diversifying the platform for continued strong performance(1) Rithm 2.0 Today Rithm’s Next Stage of Growth(1) Differentiated Platform Vertically integrated operating companies with capabilities in Leverage in-house platforms to dr
Slide 8: Navigating a Dynamic Market
Navigating a Dynamic Market Q2’24 demonstrated continued strong momentum across the platform Key Themes Rithm Action Taken • Finalized the acquisition of Specialized Loan Servicing LLC ("SLS"), adding $56 billion in UPB of MSRs and $98 billion in UPB of third-party and other servicing, further expan
Slide 9: Key Macroeconomic Themes
Key Macroeconomic Themes(1) 1 Yield Curve Normalizing 5 Housing & Mortgage Markets Thawing Steeper curve will lead to favorable financial asset Rising for-sale housing inventory providing some relief valuations and MBS spreads tightening at the margin for housing and mortgage market, though will lik
Slide 10: Newrez: National Mortgage Lender & Servicer Gaining Market Share
Newrez: National Mortgage Lender & Servicer Gaining Market Share Sustained growth driven by disciplined management and expansion of client base(1) Differentiated Originations Servicing Powerhouse Consistent Performance Broad Servicing Platform Omnichannel Platform Top-Rated Platform(3) Strong Capita
Slide 11: Newrez: Delivering Industry-Leading 23% ROE in Q2'24
Newrez: Delivering Industry-Leading 23% ROE*(1)(2) in Q2’24 Opportunistic growth across platform driven by strategic acquisitions, nimble originations platform, and servicing execution(1) Q2’24 Highlights Origination & Servicing Segment Financial Results $248mm 28% ($mm) Q1’24 Q2’24 QoQ Servicing Po
Slide 12: Genesis Capital: Leading Residential Transitional Loans Platform
Genesis Capital: Leading Residential Transitional Loans Platform Genesis is focused on originating high-quality loans to strong sponsors and maintaining robust credit standards Business Highlights(1) Portfolio Detail • Innovative financing Portfolio %(2) Description Risk Mitigants Construction – Gen
Slide 13: Genesis Capital: Robust Performance in Q2'24
Genesis Capital: Robust Performance in Q2’24 Strong client franchise and differentiated platform driving continued momentum(1) Q2’24 Highlights & Key Metrics • Q2’24 originations of $836 million, a near record level and the highest level for any Q2 at Genesis(2) 18% ~64% • Client franchise continues
Slide 14: Sculptor: Global Alternative Asset Manager
Sculptor: Global Alternative Asset Manager Investing Opportunistically Across Private & Public Markets Provides fund investors with differentiated investment capabilities across a broad range of asset classes with a culture focused on delivering investment performance(1) Private Asset & Credit Solut
Slide 15: Sculptor: Q2'24 Business Highlights
Sculptor: Q2’24 Business Highlights Sculptor continues to capitalize on an attractive investment opportunity set and deliver strong risk- adjusted investment performance to fund investors(1) Sculptor Q2’24 Highlights Closing of two new CLOs for a total of ~$780 million of AUM ✓ Successful closings o
Slide 16: Rithm Commercial Real Estate Platform
Rithm Commercial Real Estate Platform Growing direct lending platform focused on investing for Rithm and third-parties(1) 1 Permanent Capital Vehicle with Great Ajax • Deep expertise in acquisitions, development, asset & In-House property management, leasing, and construction Capabilities • Extensiv
Slide 17: Q2'24 Segment Performance
Q2’24 Segment Performance Q2 2024 Quarterly Supplement
Slide 18: Servicing Portfolio
Servicing Portfolio $868 billion total servicing portfolio generates stable earnings in an elevated rate environment Servicing Portfolio Activity & Outlook Rithm Strategic Advantage • $587bn Full MSR portfolio Attractive Return ✓ Source of steady fee income, Profile elongated in a higher rate – 96%
Slide 19: MSR Portfolio Values
MSR Portfolio Values 96% of our Full MSR portfolio is out-of-the-money to refinance with a portfolio WAC of ~4.0%, significantly below current new production(1) Full MSR Price & Multiples Full MSR Portfolio Speeds & Amortization Multiples were flat QoQ due to acquisitions with higher During Q2’24, s
Slide 20: Newrez: Consistent Growth of Balanced Business
Newrez: Consistent Growth of Balanced Business Substantial growth in both Originations and Servicing businesses reinforce well-balanced platform(1) Strong Track Record of Servicing and Originations Growth Over Time 8x+ Market Share Expansion 3.40% 2.90% 2.60% 2.50% Originations Market Share(2) 1.50%
Slide 21: Newrez: Servicing Business Highlights
Newrez: Servicing Business Highlights Operational excellence and client growth powering performance • SLS acquisition added $56bn in UPB of owned MSRs and $98bn in UPB of third-party and other servicing Top-Rated – Substantially all 800k+ SLS loans have transitioned onto Newrez proprietary systems F
Slide 22: Newrez: Originations Business Highlights
Newrez: Originations Business Highlights Dynamic platform continues to perform well across market environments • Origination volume increased 35% QoQ, driven by 39% growth in correspondent originations, and 47% YoY • Gained market share in Wholesale channel(1) – originations up 55% QoQ • Maintained
Slide 23: Newrez Technology: Reducing Cost and Improving Efficiency
Newrez Technology: Reducing Cost and Improving Efficiency(1) Digital mortgage experience driven by investments in technology and Rezi AI(1) Technological Progress Foundation: Shared Today: Proprietary Future: Tech-Driven Operating System (1) • StreamTechnology Enables • Remain Industry disciplinedLe
Slide 24: Adoor: Rental Housing Strategy
Adoor: Rental Housing Strategy Adoor has established itself as a vertically-integrated SFR owner/operator with the formation of Adoor Property Management (“APM”) through a joint venture with Darwin Homes Q2’24 Activity & Key Metrics • Established APM’s full staff and portfolio operating capabilities
Slide 25: Consumer Loans
Consumer Loans Rithm continues to opportunistically invest in consumer loan portfolios, providing differentiated and attractive risk-adjusted returns Marcus Prosper SpringCastle • In June 2023, Rithm invested $145 • In February 2017, Rithm became part • In April 2013, Rithm invested $241 million to
Slide 26: Appendix
Appendix Q2 2024 Quarterly Supplement
Slide 27: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 6/30/24 As of 3/31/24 (dollars in thousands, except per share data) (Unaudited) (Unaudited) (As Restated)* ASSETS Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value $ 9,693,331 $ 8,706,723 Government and government
Slide 28: Book Value per Share Summary
Book Value per Share Summary Per Share Ending Q1’24 Book Value Per Share $12.19 Net Income (Net of Tax and Change in Fair Value) 0.57 MSR Realization of Cash Flows (0.34) Change in Valuation Inputs and Assumptions 0.20 GAAP Net Income 0.44 Other Comprehensive Income 0.00 NCI redemption 0.01 Common D
Slide 29: Consolidated Statements of Operations
Consolidated Statements of Operations Three Months Ended June 30, March 31, 2024 Unaudited (dollars in thousands) 2024 (As Restated)* 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 rec
Slide 30: Segment Information (Q2'24)
Segment Information (Q2’24) ($ in thousands) Mortgage Origination Investment Loans Asset Quarter Ended June 30, 2024 and Servicing Portfolio Receivable Management Corporate Total Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 442,016 $ 56,962 $ — $ — $ — $ 4
Slide 31: Segment Information (Q1'24)
Segment Information (Q1’24) ($ in thousands) Mortgage Origination Investment Loans Asset Quarter Ended March 31, 2024 (As Restated)* and Servicing Portfolio Receivable Management Corporate Total Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 397,478 $ 72,413
Slide 32: Mortgage Servicing Rights
Mortgage Servicing Rights ($ in thousands) MSRs Balance as of March 31, 2024 $ 8,706,723 Purchases, net - SLS Acquisition 697,494 Originations 364,305 Proceeds from sales 1,733 Change in fair value due to: Realization of cash flows (167,350) Change in valuation inputs and assumptions 90,426 Balance
Slide 33: Origination and Servicing
Origination and Servicing Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Servicing Servicing Portfolio (UPB $bn) In-House Servicing $401.6 $455.2 $457.0 $456.6 $518.5 On Behalf of Third-Parties $95.6 $99.4 $102.5 $111.3 $213.7 Whole Loan & Other $8.8 $8.5 $8.5 $9.6 $9.4 Total UPB $506.0 $563.1 $568.0 $577.5 $741.6 O
Slide 34: Unaudited GAAP Reconciliation of Earnings Available for Distribution
Unaudited GAAP Reconciliation of Earnings Available for Distribution Management uses Earnings Available for Distribution, which is a non-GAAP measure, as one measure of operating performance. Please see next slide for the definition of Earnings Available for Distribution. ($000s, except per share da
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures • 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 compan
Slide 36: Illustrative Sum of the Parts Valuation Detail
Illustrative Sum of the Parts Valuation Detail*(1)(2) Origination & Investment Mortgage Loan Asset Total Rithm Book $mm, except per share data Corporate Preferred Stock Servicing Portfolio Receivable Management Value GAAP Segment Equity $3,998 $3,118 $732 $696 ($1,217) ($1,257) $6,069 % of Total Equ
Slide 37: Illustrative Long-Term Sum of the Parts Valuation Detail
Illustrative Long-Term Sum of the Parts Valuation Detail*(1)(2) Mortgage Companies: Newrez Residential Transitional Loans: Genesis Market Cap Market Cap Company Ticker ROE P/BV ’24E P/E Company Ticker ROE P/BV P/E ($mm) ($mm) Mr. Cooper COOP $5,461 15% 1.3x 9.1x Velocity Financial VEL $634 14% 1.4x
Slide 38: Endnotes
Endnotes Q2 2024 Quarterly Supplement
Slide 39: Endnotes
Endnotes Endnotes to Slide 3: Source: Company past SEC filings and current financial information. Financial and market data as of June 30, 2024 unless otherwise noted. 1) Total Dividends includes the common dividend for the second quarter ended June 30, 2024, which was paid on July 26, 2024. 2) Tota
Slide 40: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 6: Source: Company past SEC filings and current financial information. Financial and market data as of June 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the begin
Slide 41: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 12: Source: Company past SEC filings and current financial information. Financial and market data as of June 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the begi
Slide 42: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 20: Source: Company past SEC filings and current financial information. Financial and market data as of June 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the begi
Slide 43: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 36: Source: Company past SEC filings and current financial information. Financial and market data as of June 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the begi
Slide 44: Abbreviations
Abbreviations This Presentation may include abbreviations, which have the following meanings: • 60+ DQ – Percentage of loans that are delinquent by 60 days or more • AI – Artificial Intelligence • AUM – Assets Under Management • BTR – Build to Rent • BV – Book Value • BVPS – Book Value Per Share • C
Slide 45: Q2 2024 Quarterly Supplement
Q2 2024 Quarterly Supplement