Rithm Capital (RITM) 4 May 232023 Q1 Earnings call transcript

Good morning, and welcome to the Rithm Capital First Quarter 2023 Earnings Conference Call. All participants will be in the listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Emma Bola.

Counsel. General Associate ahead. Please go

and thank good Capital's would you, everyone. quarter morning, for joining to you Rithm earnings like us XXXX Thank call. I today first for

are Rithm Chief Financial this that of President today Joining are CEO call, Throughout was Capital morning Officer Nierenberg, the going and Santoro, Capital; posted to Rithm and reference me website Nick www.rithmcap.com. of Michael the Rithm the we Capital. to Chairman, supplement earnings

to download done already you've you I'd If presentation so, the encourage not now.

would to point out their to contained reports and and I will supplement disclaimers may results. certain be uncertain risk the the SEC. in our by our with review annual review actual differ in are earnings that regarding statements I press today forward-looking like to and filed quarterly factors statements the encourage materially from statements forward-looking made statements. nature you and These release

will of found during earnings some we can be non-GAAP in addition, to discussing comparable measures measures directly measures most these supplement. financial be GAAP In Reconciliations our call. today's the

the that, over will turn call with And to Michael. I

Thanks, Emma. us. for Thanks Good morning, everyone. joining

The power of for the show earnings first company. Rithm quarter our continued to

volatility of the our seen levels as a markets result With high portfolios performed the the of crisis, banking well. regional in investment extremely

clear warrant a during value by a strategy from book as good X.X been we would is that be to unchanged quarter, not of beginning away the have from We that impacted million and book the proven fight $X.XX. the which has Fed exercise essentially shares value

book the dilution in value despite out dividends. years the from by two $X raising warrant paying Fed we past the grew billion rates, Over XX.X%, while away

business working on side, really what's period as and create and deals board. perform time so in were are lines we're well of the well and the come. see remember had a huge many some excited also lending all pipeline across greater both of I will when M&A. operating opportunities can't different have challenges a of we banks The our as for businesses we on about asset Our the potential regional opportunities having to

and Cash putting in to of expect market out the we're $X.X around market seeing. sits assets and the a liquidity do We for dislocations great of the advantage to marketplace plenty some in of us into take sale of a as come dislocations. position result billion,

S-X for fund that manager. business Our continues our asset to focus a we alternative we as third business be in major With to as an This in transition create company to pools coming the our allow a liquidity model. an business file mortgage likely evaluating entity alternatives mind, party are growing the will our will further us we of months. and and to public diversify create extent other

pools of believe capital us grow here course of the next significant will raising months over earnings the three side, in raise the more we On near will future. to allow to the even nine that we capital which

approximately not investment not XX% point billion have to done Regarding lines To that see time business or others trade operating easy. dividends. below our There performance. XX year price that me. earnings financial after to book companies at what $X.X we service The create with our record that out our we're share notion reflect track undervalued. does book sense a managers with in make is of to price, feel extremely are many not can core I XX% paying stock It's to

Obviously, this -- back place, Finally, with we'll will over the stock our pipeline. we pipelines time. other buyback shares other we investments versus begin balance have likely in buying in

Page Fed here going end market economic of the -- points, start again, basis will actually, expectations rates XX towards with landscape. with the Fed that yesterday rates Fed been with online with posted are year. to lower the to to I'm the I'll the the the fight the Obviously, Page raising refer has Now start supplement I'll which we going and here not four

stress We is system come as in is rate company. fight we're good The more to are to assets Fed, to have bets again, to close the will not earnings and the significant to likely for out stay think And grow sales to our continue. interest in our do to going us for not going stable create home, maintain the course, going and continue see this banking marketplace. we try for opportunities which to continue book keep

diluted distribution Page is million per diluted $XX.X or known X, $X.XX for share, income or core million $X.XX GAAP as available per $XXX.X share. the also quarter earnings. earnings for net earnings

from trading First is exercise. $X.X Last billion. the the the reference, Book we're at and XX.X% end the quarter, the at a quarter, at billion, quarter at $XX. of $X.XX, total the Cash warrant yield. common the of $X.XX again, equity quarter was a dilution end March dividend that $X.X just impact of end reflects of for $XX.XX, liquidity dividend, value,

it for So markets essentially, saw all about is the volatility the think if company. you we pretty the way, a despite $XX.XX $XX versus in this good result

the when very, bank (ph) and of evolution managed we time. [Soros] the our slide still been that the created. we by for We've which was XXXX, really business. the for little at press Prosper XXXX was property very bought Prosper. well buying some operating company Jefferies, proud we of XXXX, loans transaction, billion own born then we was Caliber, In HLSS XX% capital private $X our under company. we We as a XXXX, a then business in private -- XXXX, our deal. created XXXX from we company. MSRs and [ThirdPoint] loans. and internalized fully the XX% is launched expanded a exchange NewRez, we of out in XXXX, as in of XXXX selling that -- company we is Europe. transformational end for (ph) XXXX externally still which also show XXXX GreenBarn, Fortress that our we business acquisition bought bought bought SpringCastle, an Genesis, bought We're bought manager in bankruptcy XXXX $X.XX own and which a credit bought lender. bit Ditech or that more launched the The this of Shellpoint, we business to of detail. just team licensed The purpose of result X, we little Gordian, at Page bit in our as is And what's

strategic as think So where we're our headed business. real about real growth, with we

today. business Page the what our portfolio left, X, then I'll on see second to X.X you we alternative hard a work big that, next grow And capital do space. can private our we when us just as in Rithm an we investment have aspirations spend in add take to business obviously, continue level Operating asset companies, this. the currently you to to and some have

managers another at The you alternative REITs, other pivoting thing, asset why out, trade just versus an that's look where to manager. when we're growing into reason to point alternative asset

I X, have Baron here. Page company, our mortgage

March you other at we get I'm a good some report encourage a different will February versus of Everybody the we questions. our really and just expense, and our of out I'd that's quarter for earnings the was segment We this friends answer pretax and Q&A, company when peers income January $XX.X The corporate for Baron very Essentially, million. sure there. in out February I'm breakeven. way space. million, sorry, have seasonality. So into the that company. seasonality for March origination look to from laid down reports some quarter the their perspective. a $XXX

and which for ROE out a M&A potential the pretax also look QX, of look we opportunities we When or XX%. mark space the plenty excluding We today around is assets, the MSR on. there's at going little under laid a activity potential at

the of forward company the down company look I won't road. today of So the as go look think be the the we

continue of Third party XXXX. us grown we've to There's for couple a beginning the grow XX% that. of opportunities UPB, to since

Delinquencies will to and a and we continue consumer low when you'd think retention, obviously, you be want well-run remain do to that. on customer profitability, branding company. reducing focus very else that We expenses, about anything extremely

we metrics other service. For

customers We have X our million in portfolio.

company $XXX a is as MSRs billion. of portfolio total Our

funded slide year-over-year of take the point will G&A our numbers expect is on XX% quarter, to we look rest a to year. slide quarter-over-quarter. of the the talk the and origination. billion – down XX% During for the at other And other the $X we Baron what then

XX, any relatively Retail, here. into When we Right we remain look coupon most JV homes, your unless pricing MSR time and to for our as Page the the of MSRs the don't create same portfolio we in low we we I origination MSRs. again they're Once and in all have we will attractive ton going side. extremely really that When a channels, another attractive. corresponding Again, and and the grow do based something season going you billion is what going the XX% the pursue funding IRRs on around DTC our opportunities WAC gross as of not to think spend believe is they're X.X%. $XXX to then you is MSRs, at channel to we for look in to quiet are wholesale at that get extremely control that likely now marketplace. XX% buy will of I'm business. we are need think and think that purchasing

portfolio. that to company whole, at of represents When a XX. and full look MSR Page XX% mortgage company we Rithm's compare the mortgage Rithm the as

for or money. out Newly again, the originated to that portfolio quarter, have of we speeds well the X.XX%, are MSRs take Prepayment X% MSRs our the of CPR. X% most are in give

times, returns, what all X% in seeing take of Again, and multiples, When right X% unlevered X.X now XX% MSR XX. quarter. a for give full the CPR is roughly look now at essentially in includes marketplace. you to our that or the between portfolio, the something X% multiple Page is roughly seasons. right we're an unchanged is

XX. Page

investment other direct were bottom you equity for need or will around focused person the working opportunities different to the GreenBarn at to about on and equity. coming We lending Our will going be distressed as we create starting there. We're on strategies to assets. that think think on about a folks. will the loans -- doing next opportunities and slide space. $X.X so get you then extended. not. as dedicated developers for business real opportunities liquidity, of to loans when strategy, huge doing our in We'll type asset business, now there's three the think when board assets. up both I'd debt When XX focus look with from we to opportunity you we some acquiring in estate are, look we roughly We're C potential are be There'll commercial distressed that and the or great we an B And space the most have where like team over across a where investments, maturity that's and wall go be properties there's do platform and redevelopment years. a where think we trillion mature will forward. And we for and see

when lot business. were XX, We're the We've sponsors, Page from Genesis more we business. more of diversified more the we going first flip there and be new acquired our to some and these where a adding around are fix company.

During with little quarter, unlevered a a $XXX under XX% XX% tad did to asset the leverage. of there anywhere from million yields first we are

returns. see You're XX% to going to XX%

that to there going business. perspective. us banks, We're again, create, likely deploy This from will capital are to with at looking opportunities credit We contracting greater a in regional for opportunities grow space. the that

family rental unchanged Single essentially space, quarter-over-quarter.

at opportunities with are space. in a of the looking builders different We number

need It's to I builders where well have we as good lend more we're that out we investment very the balance grow say, when or at, are looking cap how business deploy rates to what think for rates, business. model. around a acquisitions, to company five an relationships Genesis through higher four We don't asset capital we as still our deploy would larger I invest capital likely capital. cap or we through three, as, we

our is pick that to for advances. keep essentially space down we'll a very over advances, delinquencies unchanged the But talk good There's overall, that in out a Q&A. need up portfolio there. more the to turn and the delinquency company. investment it to page Finally, really Servicer is low and quarter last not eyes about capital quarter-over-quarter. extent the deploy the for road to well, lot performing We'll for then we extremely

turn we'll the for operator back now, Q&A. So it to

Thank you.

from is will Bose Instructions] begin We question-and-answer go the question the [Operator now first session. George ahead. KBW. Please of line Our with

on morning. get update everyone. Hey, Good to can Actually, date? quarter I an book just value

It's ended think essentially where unchanged I we QX. from

be still me, are can Okay. that exercised? warrants Great. other you there remind And any actually, can

that's it. No,

So deal XXXX. did warrants in some May some. Fortress We had some and back Canyon debt had we of had issued our when

So now been exercised. all of. Everything's taken they're care

the can And of there? you are in terms at then difference of or great. looking Okay, agencies you the And Fannie returns opportunity, sort the MSR in Mae? at more characterize

It's Fannie what that less say. we probably is we're generate to right well more kind the now. would conventional on XX% on the Mae, POS as as In on It's of could -- anywhere XX% think focused I returns we side side.

And return, a levered that's right?

some Yes, some with that of have. we financing term MSR or our currently facilities

Okay, great. Thanks.

Thanks, Bose.

you. Thank

Our of is next line Eric BTIG. ahead. question Please from the with Hagen go

you feel We with in the competitive but a are how about rates can volatile? positioning and you being when slow, is competitive there you that you channel even in like rates do more Hey, how market those know so you mortgage forth? thanks. is like And fall you're are curious and origination that if morning. rates like how feel be think competitive volatile more And channels you Good materially? feel

I take to wants you that.

in the to to market the lot of more some mean, cyclical where a particular of what ability going each of see between some we that channels. I pricing have the I on overall. party just be market to different coming and a like of maneuver the ability think just margin take with channels some of one gain we the And inventory kind can channels aspect share we distributed and Yes. one And competition it's any Fargo tell have less back. obviously, in third is out the market Wells just we retail you -- with

strategies the and think business? about helpful. and When really like leverage feel to think Well, you you Yes, those that's and value leverage about comfortably unlock capital, such. support third as incorporating much how you you businesses to party opportunities, can guys across the from the you new how can that pivoting and do support maintain

company mortgage Eric, overall? -- what in in just the or in

overall. Just

As you new opportunities. in layer the

we'll pools side think the on balance that capital. not more mean raising to here I do, over lever so Everything sheet. -- to the we'll we're I capital of deploy that We're equity

where at look a you or X% end do to I more you some yields, funds things end X.XX%. you front look think term likely structure where right, are front financing from got to unlevered kind yields through at at it's things really leverage. and When perspective, of with

go see think I forward reduce more there's, could So us as term with financing. we you longer actually leverage

Appreciate great. Thanks That's for the detail. it.

Thank you.

Harter is Suisse. question ahead. next Credit Our with from the line of Doug Please go

slide take have banks of there's your kind I to Thanks. and that? in turmoil market. the you regional Michael, one very are what when do stress you guys from as of opportunities that the portrayed opportunistic in position of been guess, kind seeing advantage think kind of that how you been

Hey, Doug.

in regional somebody's say misfortune. banks, business thing being on don't when like look this would to So XX we the at the for years, we I prey one

the really it lot regional business, be some First the funds folks it. around they seeing number that others, JPMorgan, lines, the a driven which at i.e. most you're Bank the likely of in lot and what of and at of these owned whether Genesis Republic, business. some is look of is have now unfortunately, look against by a hedge crossover lines are a some by you of Signature think business that you up there's the our I So, regional business banks, When banks

to could on business those unlevered company so. on side, the XX% I do Genesis lending themselves. XX% make the are that commercial some side, businesses look We folks prove direct think loans more to of the between business going to think start even there's real make I even mortgage And on be when you be all up to local whether because kinds loans we really are just roughly returns scaling lending. at developers, see side ability people estate the and the the and our the Genesis people to you'll it loans -- like

also to going see assets number I of out. that you're a think come

We're a to to now. of assets in consumer see pools going couple out. start come working some You're right

MSRs the pools second of a just we've shareholders. we're years amounts around private seen stuff to think of So of investment to separate extremely what today some I years. looking opportunities at for work is largest valuable of I call and would capital, Raising in for pipeline that the good and with parties third going those be it's that, prove

the in announced commercial what When of people call making the is probably away as us you cheaper the you we I not who less of around money a some correspondence bank unless acquire are look they that some -- large at would result assets then out seeing able space trade be may call would to interesting opportunities they're from the -- selling mortgage MSRs. and the I than bigger of M&A business. levels. pursue what That's to the origination, attractive getting This

going I based. So of to A the lot the stuff going to is around be broad business. lending be it's think

in Great. about mortgage something out your Just of did kind you And the again? then, sure that understood comment? considering mention I prepared splitting wanted to business remarks, make

Yes.

trades way doing what how stock or now say. trades, poorly So our look stock I I at when should the we're our is, how

time really take going possibility our I way we're at of of But will us, the at mortgage a an model. we're which that's think diversify likely S-X. and the the out company we it, when been business I to guarantee entity there's likely business could going no look us over explore thing. further created file for creating We'll -- this public look allow there, to which

Michael. Great. Thank you,

Doug. Thanks,

you. Thank

go Giuliano of line Bologna with ahead. the from Point. is question Please next Our Compass

on Actually company. mortgage about that the discussion following up

but kind the a did potential or potential make separate of then light have curious, move out to our kind infrastructure. of in a of it of of [indiscernible] asset for a sense Could quarters the to would the [indiscernible] capital MSR independent spend make I about company, a company And Would mentioned -- that would trade with the think in topic, you out for running rather all past assets kind the be performance for you the mention in following more to fees more you couple same there. I'd out separately? having an over of you you you wanting discussed when that think there? and and on try mortgage vehicle management you managing last quarter want structure. over up

the think I take and like of We'd of yes. question like to a be larger -- -- I'll Yes, alternative answer asset second one the part in the players we'd your space. to is create

I think asset that likely manager it's an you'd that. below have

operating and have the players similar your You'd to companies successful, marketplace. more larger in have some the business obviously funds the you'd

has a Regarding put little the I frankly, quite table. frustrating think up value I on or where mortgage bit is two simply it's yet earnings grown as very too the I years, just the quarter over pointed the -- relative out the we cheap. past after course quarter. is when book company, to consistent everything mean, Book so we by trade XX% of

So we'll our grow opportunities actually to any price. all and look at share

being I opportunity manager X. thing portfolio of there's we to The deploy If a another an better I just out a pointed servicing capital, would MSR earlier, buy and need to buy we'll another do MSR I say that. don't one to this to maintain think is, investment

the buying discount. mean, lines, any think those for or a I great. share kind more merit, if bit current repurchases of valuation. preferred be And curious That's a back I'd [indiscernible] about along I there's

have know teens. same you You have down I going didn't that in also thread. yields the

a the holding pretty notes at Your company at are trading discount. high level yield wide

chip income curious public it create could about markets about the if your out and some there? in be you I'd away reduce accretion. those how interest to and you securities think -- think be So accretive

as peers we in our is, one in The I some Yes, acquire alone probably point stock stock book in go the company, that where likes out where I forward think, relative will opening the is value assuming continues buyback The and kind valuation folks success. to stable where I pursue has hire does. we shares think we're would said it remarks, not not the is thing to same haven't equity trade marketplace. but had of or I misery to the some difference been other other our likely

they closer then So may trade to book.

at market the a little trading to a then book we'll but short time. and open acquire discount over down. go It's value bit versus book growing in book shares senior So, likely answer frustrating, is, the

thank jump queue. for very That's That's great. the helpful you questions. answering back will I in my and

Thank you.

you. Thank

next with question line Please Coffey the Wedbush. of go from ahead. is Our Henry

which think at of but family a possibilities It different and where real general there. you comment value multifamily add, must don't which wondering Yes. a earning some and it's of differentiate their like But not of we the if terms? stress just aren't slightly the that estate Good sounds to the morning. analyst, the not diverse sounds their just our of companies shed And lots between earning get to book seeing their have to value would talk single the the banks that lot issue? are you in almost book could frustrating. would also hearing banks like dividends coming opportunities be was it you're bank cutting Michael, to looking -- sort from it that range with -- companies the impossible richest a are of And where what that, this see out opportunities when I at and seem you're tune, market dividend, related look like we for at you that dividend, are yet that look assets. but yourselves I are like is, stress on are opportunities least willing reality assets,

Henry. a When what of for consumer there space we at. the around us couple next early portfolio I I was as very look live would through chronology opportunities of Keep went born, where So, the we what our our being there, SpringCastle would large good transaction loans. as a bought that mind, call, of looking [indiscernible] morning, I years consumer over opportunities, weeks call, well. we're of, at large in

did at look out I with you that good transaction. very pointed (ph) others, we [Suros] and If the that was Prosper another as deal,

So front here next be the well extremely couple know weeks. over and consumer stuff will and the we center of that

think again, regional the be some the those front banks, of at well. see I will and Genesis for you that loans us center as type

All of these proper financing at things XX% and are to with in yielding around XX% least.

we're about really excited So opportunities. those

the a mortgage what mortgage there's On company things We'll I would time. call, light over there out couple, company continue side, at that we've that. at looked look to

I as On during commercial space, distressed $XX a property, around estate out, around real something well would the of million development quarter as dollars the on, multifamily. something put call, we what one deal, think, around net I

So getting active there. more

I back, are When be to out to assets banks banks loans those look would will regional the the at hold patient. side, come you on of there. really pull to delinquent, need delinquent on the going commercial loans, over we so a there's go side, time. don't say When lot out

sell On side, (ph) it’s there. to has [Newmark] the the signature -- has been I by FDIC think Newmark, hired assets been

And opportunities to residential range going of as could commercial consumer you're see as So well to on side. to side from real deploy plenty to estate capital. the it

returns, think Measuring where higher call, what for there's, outsized we'll So risk head. appropriate realistically, anywhere we where ROEs would opportunities that's I

points. Great. thank the where you. new focus touch is and plays of lots Well, gives This out you

comment. that for thanks So

Henry. Thanks,

Thank you.

ahead. from with Please of is line JMP the Trevor Cranston Securities. question next Our go

Thanks. Hi.

quarters I wondering ambitions You little think if had so you of to private kind capital the could us be on capital of three you've a around able might in funds? raising side. maybe what far color sort was some management and your the that you or raise more Thanks. talked you in general traction terms sort two next over much give maybe business how of of in of terms color about

Sure.

out around I multibillion opportunities So Rithm financial would a or fund. call, right dollar what services we're a, asset now with as called fund

and probably sat We you tell a couple week. conferences. once I focus on asset it's at would ours traveling, some of would have I've a -- a tell panels that been We've alternative huge mine. you what I

good in this So to else life, very, it's some going relationship we're very that success, a like have of hopeful business. anything some stuff

As continue it's our and very world, our are LPs we're to relationships much we that a around are relationship the very we of develop very pools going the as deploy now. to folks. that And very relationships past it's about others strategies to very more future And banks with optimistic very, do be good, whatever performance. numbers good and asset performance hopeful I'm business, other call very, very, as we and in with to capital large currently and same able raise our

or call fund. So here early in first would well. some I and specific would what the of hope -- QX get to either SMA would close first be have specific late QX for close strategies a that I close a could we this I more as we But hope

Got it.

Okay, very you. that's Thank helpful.

you. Thank

session. our to Michael back This like would to conference turn question-and-answer you. Nierenberg, Thank CEO the concludes for closing I remarks. over

of in on you morning. that day. to look we're growth over everyone. the other all updating Look forward hopefully lot not Have Well, questions a quarter for as transition sectors your deploying and capital to of our business of performance this thanks a and next good great into the currently call we Thanks, or forward the another quarter.

Thank attending conference Thank concluded. The today's now you. presentation. you has for

disconnect. may You now