Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q3 2024 Earnings Presentation
43 slides from Rithm Capital's earnings presentation, Oct 29, 2024
Slide 1: Quarterly Supplement Q3 2024
Rithm Capital Quarterly Supplement Q3 2024 Q3 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: Stable Core Business Foundation Positioned For Growth
Stable Core Business Foundation Positioned For Growth Rithm is a leading global asset manager focused on delivering significant, long-term value for fund investors and shareholders(1) Powered by DIFFERENTIATED INVESTMENT PLATFORM Partnership BENEFITS FROM SCALE DRIVEN BY BROAD EXPERTISE A FOCUSED ST
Slide 4: Q3'24 Financial Highlights
Q3’24 Financial Highlights • Stable earnings performance: 20 consecutive quarters for which EAD was greater than common dividends paid • Stable book value performance: Book value per share is up 8% since 2021 despite elevated interest rate volatility • Significant cash distribution to shareholders:
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 86% of book value understates the intrinsic value of Rithm’s core segments Current Valuation Illustrative SOTP Valuation(1) ($mm, except per share data) $5.5 Billion CURRENT MARKET CAP(2) 0.86x Newrez Book Value(6) $2,
Slide 6: Rithm's Capital Deployment Bolsters Earnings Growth
Rithm’s Capital Deployment Bolsters Earnings Growth(1) Deployed ~$5.8 billion in capital since 2021 to compound growth and further diversify earnings Since Q1 2021: • Supported by EAD in excess of dividends paid • No new shares sold between Q3 2021 and Q2 2024 ~$5.8 bn ~59% ~14% • Major transformati
Slide 7: Solid Foundation for Next Phase of Growth
Solid Foundation for Next Phase of Growth Strengthening and diversifying the platform for continued strong performance(1) Rithm Today Rithm’s Next Stage of Growth(1) Differentiated Platform Vertically integrated: direct sourcing, asset optimization, and Leverage in-house operating platforms capital
Slide 8: Newrez: Scale and Diversification Driving Superior Performance
Newrez: Scale and Diversification Driving Superior Performance Continued growth enabled by client franchise, customer experience, technology, and cost leadership Industry-Leading Servicing Robust Customer Capabilities Origination Model #2 #5 Nonbank Servicer(1) Originator(1) • Leading special servic
Slide 9: Genesis Capital: Leading Residential Transitional Loans Platform
Genesis Capital: Leading Residential Transitional Loans Platform Capitalizing on a differentiated model and a secular shift in markets to drive attractive growth(1) Genesis’s Core Capabilities(1) Q3’24 Key Metrics Differentiated Business Model 18% +59% ✓ Focused on long-term relationships with high-
Slide 10: Sculptor: A Leading Global Alternative Asset Manager
Sculptor: A Leading Global Alternative Asset Manager and a Specialist in Opportunistic Investing Our platform is well positioned to capitalize on growing opportunity set $34 Billion(1) ASSETS UNDER MANAGEMENT Private Asset & Credit Solutions Market Solutions Credit Real Estate Multi-Strategy ✓ Oppor
Slide 11: Rithm Commercial Real Estate Platform
Rithm Commercial Real Estate Platform The Rithm CRE enterprise is focused on a growing direct lending platform and a leading CRE asset management business(1) Permanent Capital Vehicle • Deep expertise in acquisitions, development, asset & property management, leasing, and construction (2) In-House •
Slide 12: Key Macroeconomic Themes
Key Macroeconomic Themes(1) 1 Election Uncertainty 4 Banks Favor Specialists When Divesting US election uncertainty is driving market sentiment Traditional financial institutions require specialist investors and operations to offload higher risk-weighted Handicapping of the outcome is driving elevat
Slide 13: Q3'24 Segment Performance
Q3’24 Segment Performance Q3 2024 Quarterly Supplement
Slide 14: Servicing Portfolio
Servicing Portfolio $878 billion total servicing portfolio generates stable earnings in a slow prepayment environment Servicing Portfolio Activity & Outlook Rithm Strategic Advantage(1) • $878bn total servicing portfolio ✓ Steady fee income stream, Attractive Return elongated by low turnover – $755b
Slide 15: MSR Portfolio Values
MSR Portfolio Values 89% of our Full MSR portfolio is out-of-the-money to refinance with a portfolio WAC of ~4.2%, significantly below current new production(1) Full MSR Price & Multiples Full MSR Portfolio Speeds & Amortization ($bn UPB) Multiples were down QoQ due to faster realized During Q3’24,
Slide 16: Newrez: Delivering Industry-Leading 23% ROE YTD
Newrez: Delivering Industry-Leading 23% ROE*(1)(2) YTD Strategic acquisitions, nimble originations platform, and servicing execution driving growth across the platform(3) Origination & Servicing Segment Financial Results(4) Q3’24 Key Metrics ($mm) Q2’24 Q3’24 Servicing income excluding MTM $221.1 $2
Slide 17: 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) 8x+ Market Share Expansion 3.4% 2.9% 2.6% 2.5% Originations Market Share(2) 1.5% 0.9% 0.4% 2018 2019 2020 2021 2022 2023 Q3'24 ~40% CAGR(3) $755 $568 $2
Slide 18: Newrez: Portfolio Recapture Opportunity
Newrez: Portfolio Recapture Opportunity MSR portfolio provides significant upside in customer retention(1) MSR Portfolio Consumer Direct Refinance Recapture(3) 32% 55% % of Full Recapture Opportunity(1) 46% 26% 41% MSR Rithm Portfolio(2) $144bn 25% of portfolio 18% 10% 41% 41% 38% 8% 7% 2022 2023 YT
Slide 19: Newrez: Originations Business Highlights
Newrez: Originations Business Highlights Dynamic platform continues to perform well across market environments • Origination volume increased 9% QoQ • Disciplined execution improved GOS margins 17% QoQ to 1.23% while maintaining market share $81mm Originations PTI Q3’24(1) • Expanded client franchis
Slide 20: Newrez: Servicing Business Highlights
Newrez: Servicing Business Highlights Operational excellence and client growth powering performance • SLS integration complete, continued momentum gaining wallet share with existing clients 116% • High-quality owned MSR portfolio continues to perform well, 60 day+ delinquencies at 2.5% Third-party s
Slide 21: Genesis Capital: Robust Performance in Q3'24
Genesis Capital: Robust Performance in Q3’24 Strong client franchise and differentiated platform driving continued momentum(1) Q3’24 Highlights Portfolio Detail • Q3’24 originations of $761 million, a near record quarter and the Portfolio %(2) Description highest level for any Q3 at Genesis(3) Const
Slide 22: Sculptor: Q3'24 Business Highlights
Sculptor: Q3’24 Business Highlights Sculptor continues to see strong momentum across the platform and capitalize on an attractive investment opportunity set, delivering strong risk-adjusted investment performance to fund investors(1) Q3’24 Highlights Key Metrics $1.3 billion first closing of Real Es
Slide 23: Adoor: Rental Housing Strategy
Adoor: Rental Housing Strategy Adoor is a vertically-integrated SFR owner/operator through the formation of Adoor Property Management (“APM”), a joint venture with Darwin Homes Q3’24 Highlights Q3’24 Key Metrics • Full Adoor portfolio now managed by APM, following the onboarding of ~2,600 additional
Slide 24: Appendix
Appendix Q3 2024 Quarterly Supplement
Slide 25: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 9/30/24 As of 6/30/24 (dollars in thousands, except per share data) (Unaudited) (Unaudited) ASSETS Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value $ 9,300,989 $ 9,693,331 Government and government-backed securit
Slide 26: Book Value per Share Summary
Book Value per Share Summary Per Share Ending Q2’24 Book Value Per Share $12.39 Net Income (Net of Tax and Change in Fair Value) 1.63 MSR Realization of Cash Flows (0.27) Change in Valuation Inputs and Assumptions (1.17) GAAP Net Income 0.20 Impact of Equity Raise (0.06) Other Comprehensive Income (
Slide 27: Consolidated Statements of Operations
Consolidated Statements of Operations Three Months Ended September 30, June 30, Unaudited (dollars in thousands) 2024 2024 Revenues Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 493,171 $ 498,978 Change in fair value of MSRs and MSR financing receivables (7
Slide 28: Segment Information (Q3'24)
Segment Information (Q3’24) Mortgage ($ in thousands) Origination Investment Loans Asset Quarter Ended September 30, 2024 and Servicing Portfolio Receivable Management Corporate Total Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 441,562 $ 51,609 $ — $ — $
Slide 29: Segment Information (Q2'24)
Segment Information (Q2’24) Mortgage ($ in thousands) 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 30: Mortgage Servicing Rights
Mortgage Servicing Rights ($ in thousands) MSRs Balance as of June 30, 2024 $ 9,693,331 Purchases, net - Originations 363,267 Proceeds from sales 344 Change in fair value due to: Realization of cash flows (141,070) Change in valuation inputs and assumptions (614,883) Balance as of September 30, 2024
Slide 31: Origination and Servicing
Origination and Servicing Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Servicing Servicing Portfolio (UPB $bn) In-House Servicing $455.2 $457.0 $456.6 $518.5 $521.9 On Behalf of Third-Parties $99.4 $102.5 $111.3 $213.7 $223.4 Whole Loan & Other $8.5 $8.5 $9.6 $9.4 $9.4 Total UPB $563.1 $568.0 $577.5 $741.6 $754.7
Slide 32: 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 33: 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 34: Illustrative Sum of the Parts Valuation Detail
Illustrative Sum of the Parts Valuation Detail*(1)(2) Origination & Investment Mortgage Loan Asset Preferred Total Rithm $mm, except per share data Corporate Servicing Portfolio Receivable Management Stock Book Value GAAP Segment Equity $4,314 $3,144 $743 $717 ($1,262) ($1,257) $6,399 % of Total Equ
Slide 35: Illustrative Sum of the Parts Valuation Detail: Peer Analysis
Illustrative Sum of the Parts Valuation Detail: Peer Analysis*(1)(2) Mortgage Companies: Newrez Residential Transitional Loans: Genesis Market Cap Market Cap Company Ticker ROE P/BV ’24E P/E Company Ticker ROE P/BV ’24E P/E ($mm) ($mm) Mr. Cooper COOP $5,590 11% 1.2x 8.6x Velocity Financial VEL $634
Slide 36: Endnotes
Endnotes Q3 2024 Quarterly Supplement
Slide 37: Endnotes
Endnotes Endnotes to Slide 3: Source: Company past SEC filings and current financial information. Financial and market data as of September 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginnin
Slide 38: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 6: Source: Company past SEC filings and current financial information. Financial and market data as of September 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the
Slide 39: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 14: Source: Company current financial information. Financial and market data as of September 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginning of this Pr
Slide 40: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 19: Source: Company past SEC filings and current financial information. Financial and market data as of September 30, 2024 unless otherwise noted. 1) Prior periods exclude the recapture MSR which is reported in the servicing segment. Gain on Sale margins beginning
Slide 41: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 34: Source: Company past SEC filings and current financial information. Financial and market data as of September 30, 2024 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the
Slide 42: 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 43: Q3 2024 Quarterly Supplement
Q3 2024 Quarterly Supplement