Earnings Available for Distribution (EAD): $0.52 per diluted share, marking the 22nd consecutive quarter where EAD exceeded common dividends paid. GAAP Net Income: $36.5 million or $0.07 per diluted share, with a 2% return on equity. Book Value: $6.6 billion at the end of the quarter, with a book value per share of $12.39. Common Stock Dividend: $0.25 per common share, yielding an 8.7% dividend yield. Cash and Liquidity: $1.9 billion at the end of Q1. Genesis Capital Production: Nearly $1 billion, with a 7% year-over-year increase. Sculptor Asset Management AUM: $35 billion, with $1.4 billion of gross inflows in the quarter. Newrez Servicing Portfolio: Approximately $850 billion, including third-party servicing. Newrez Funded Volume: $11.8 billion, with a 9% increase in funded volume year-over-year. Newrez Pretax Income: $270 million, excluding mark-to-market, up 14% year-over-year. Third-Party Servicing Clients: Added four new clients in the first quarter. Owned MSR Performance: 60-day delinquencies down 30 basis points to 3.1%.

Warning! GuruFocus has detected 1 Warning Sign with RITM.

Release Date: April 25, 2025

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 earnings available for distribution at $0.52 per diluted share, representing a 17% return on equity. The company continues to see growth in its asset management business, with Sculptor's real estate fund reaching commitments of $3.2 billion, the largest in its history. Rithm Capital Corp (NYSE:RITM) is the third largest mortgage servicer and fifth largest mortgage originator in the United States, showcasing its strong market position. The company has a diversified portfolio with funds in real estate, credit, energy, and infrastructure, providing a broad base for growth. Rithm Capital Corp (NYSE:RITM) maintains a strong liquidity position with $1.9 billion in cash and liquidity at the end of Q1 2025.

Negative Points

Rithm Capital Corp (NYSE:RITM) believes its equity is severely undervalued, trading at 83% of book value, which is a concern for management. The company faces margin compression in its origination business due to increased competition and lower expected origination volumes. Market volatility, particularly in the MSR business, has led to mark-to-market volatility affecting GAAP net income. Despite strong performance, the company is challenged by the need to unlock shareholder value and improve its market valuation. The company is experiencing increased competition in the mortgage origination market, impacting its ability to grow market share without compromising on pricing discipline.

Story Continues

Q & A Highlights

Q: How does the Cooper Rocket transaction affect Newrez's growth opportunities and potential listing plans? A: Michael Nierenberg, CEO, stated that Newrez will continue business as usual, but the Cooper Rocket deal may present opportunities to pick up subservicing due to the size of the combined platforms. Regarding listing, they are exploring ways to unlock value, potentially through taking the company public or other capital actions by the end of 2025.

Q: Can you provide an update on the book value quarter-to-date amid market volatility? A: Michael Nierenberg, CEO, mentioned that the book value is approximately $12.60, up from the end of Q1. He noted that the company is well-positioned regardless of economic conditions due to strong risk discipline.

Q: What are your thoughts on potential acquisition opportunities given recent market dislocations? A: Michael Nierenberg, CEO, indicated that their M&A pipeline is very active, particularly in the mortgage and asset management spaces. They are focused on scaling in credit and are excited about their energy infrastructure business, expecting to be active in M&A to compete with top asset management firms.

Q: How is fundraising activity progressing given recent market volatility? A: Michael Nierenberg, CEO, stated that fundraising is active across the platform, with a strong brand presence. They aim to build partnerships with LPs for long-term relationships, and are optimistic about achieving a double-digit EBITDA multiple.

Q: Can you discuss the performance and future expectations for Sculptor Asset Management? A: Michael Nierenberg, CEO, reported good performance across Sculptor's credit and multi-strategy businesses. The real estate business has $3.2 billion in commitments, and they expect significant capital inflows into the asset-based finance space. They are focused on partnerships and maintaining strong returns.

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

This article first appeared on GuruFocus.

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