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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Rithm Capital Corp | NYSE:RITM | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.03 | 0.27% | 11.25 | 3,840 | 13:39:54 |
Rithm Capital Corp. (NYSE: RITM; “Rithm Capital” or the “Company”) today reported the following information for the second quarter ended June 30, 2023:
Second Quarter 2023 Financial Highlights:
Q2 2023
Q1 2023
Summary Operating Results:
GAAP Net Income per Diluted Common Share(1)
$
0.74
$
0.14
GAAP Net Income
$
357.4
million
$
68.9
million
Non-GAAP Results:
Earnings Available for Distribution per Diluted Common Share(1)(2)
$
0.62
$
0.35
Earnings Available for Distribution(2)
$
297.9
million
$
171.1
million
Common Dividend:
Common Dividend per Share
$
0.25
$
0.25
Common Dividend
$
120.8
million
$
120.8
million
“Rithm had one of its best quarters ever,” said Michael Nierenberg, Chairman, Chief Executive Officer and President of Rithm Capital. “We had near record earnings, grew book value, acquired $1.4 billion of consumer loans and grew our SFR business with the acquisition of 371 units. Subsequent to quarter end, we announced the acquisition of Sculptor Capital Management. This acquisition helps accelerate our growth in the alternative asset management space, as Sculptor’s $34 billion of AUM complements Rithm’s $7bn of permanent equity capital and $30+ billion balance sheet. With the introduction of new capital rules being instituted on banks and the highest level of rates seen in 20+ years, the investing environment has not been this good in years.”
Second Quarter 2023 Company Highlights:
(1)
Per common share calculations for both GAAP Net Income and Earnings Available for Distribution are based on 483,376,961 and 482,846,911 weighted average diluted shares for the quarters ended June 30, 2023 and March 31, 2023, respectively. Per share calculations of Book Value are based on 483,320,606 common shares outstanding as of June 30, 2023.
(2)
Earnings Available for Distribution is a non-GAAP financial measure. For a reconciliation of Earnings Available for Distribution to GAAP Net Income, as well as an explanation of this measure, please refer to Non-GAAP Financial Measures and Reconciliation to GAAP Net Income below.
(3)
Includes noncontrolling interests.
(4)
Includes excess and full MSRs.
(5)
Based on management’s current views and estimates, and actual results may vary materially.
(6)
Total transaction value includes upfront equity purchase price, assumption of certain unvested securities and repayment of Sculptor term loan and warrants.
ADDITIONAL INFORMATION
For additional information that management believes to be useful for investors, please refer to the latest presentation posted on the Investors section of the Company’s website, www.rithmcap.com. For consolidated investment portfolio information, please refer to the Company’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, which are available on the Company’s website, www.rithmcap.com. Information on, or accessible through, our website is not a part of, and is not incorporated into, this press release.
EARNINGS CONFERENCE CALL
Rithm Capital’s management will host a conference call on Wednesday, August 2, 2023 at 8:00 A.M. Eastern Time. A copy of the earnings release will be posted to the Investors section of Rithm Capital’s website, www.rithmcap.com.
All interested parties are welcome to participate on the live call. The conference call may be accessed by dialing 1-833-974-2382 (from within the U.S.) or 1-412-317-5787 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Rithm Capital Second Quarter 2023 Earnings Call.” In addition, participants are encouraged to pre-register for the conference call at https://dpregister.com/sreg/10181285/fa0718414a.
A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.rithmcap.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.
A telephonic replay of the conference call will also be available two hours following the call’s completion through 11:59 P.M. Eastern Time on Wednesday, August 9, 2023 by dialing 1-877-344-7529 (from within the U.S.) or 1-412-317-0088 (from outside of the U.S.); please reference access code “6092343.”
Consolidated Statements of Operations (Unaudited)
($ in thousands, except share and per share data)
Three Months Ended
June 30,
2023
March 31,
2023
Revenues
Servicing fee revenue, net and interest income from MSR financing receivables
$
465,562
$
469,839
Change in fair value of MSRs and MSR financing receivables (includes realization of cash flows of $(139,410), and $(105,691), respectively)
22,032
(142,304
)
Servicing revenue, net
487,594
327,535
Interest income
398,786
346,614
Gain on originated residential mortgage loans, held-for-sale, net
151,822
109,268
1,038,202
783,417
Expenses
Interest expense and warehouse line fees
329,158
309,068
General and administrative
181,508
167,155
Compensation and benefits
189,606
188,880
700,272
665,103
Other income (loss)
Realized and unrealized gains (losses) on investments, net
89,425
(75,649
)
Other income (loss), net
15,860
30,478
105,285
(45,171
)
Income before income taxes
443,215
73,143
Income tax expense (benefit)
56,530
(16,806
)
Net income
$
386,685
$
89,949
Noncontrolling interests in income (loss) of consolidated subsidiaries
6,889
(1,300
)
Dividends on preferred stock
22,395
22,395
Net income attributable to common stockholders
$
357,401
$
68,854
Net income per share of common stock
Basic
$
0.74
$
0.14
Diluted
$
0.74
$
0.14
Weighted average number of shares of common stock outstanding
Basic
483,091,792
478,167,178
Diluted
483,376,961
482,846,911
Dividends declared per share of common stock
$
0.25
$
0.25
Consolidated Balance Sheets
($ in thousands, except share data)
June 30,
2023
(Unaudited)
March 31,
2023
(Unaudited)
Assets
Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value
$
8,688,556
$
8,886,209
Real estate and other securities ($8,722,018 and $8,987,572 at fair value, respectively)
9,701,000
8,987,572
Residential loans held-for-investment, at fair value
400,206
426,259
Residential mortgage loans, held-for-sale ($3,008,722 and $2,743,809 at fair value, respectively)
3,092,667
2,841,320
Consumer loans held-for-investment, at fair value
1,602,571
340,525
Single-family rental properties
965,194
968,987
Mortgage loans receivable, at fair value
1,939,499
1,946,422
Residential mortgage loans subject to repurchase
1,296,097
1,189,907
Cash and cash equivalents
1,369,025
1,434,697
Restricted cash
319,765
365,649
Servicer advances receivable
2,447,918
2,594,271
Other assets
2,035,581
1,836,833
$
33,858,079
$
31,818,651
Liabilities and Equity
Liabilities
Secured financing agreements
$
12,757,428
$
11,760,930
Secured notes and bonds payable ($574,120 and $598,070 at fair value, respectively)
10,315,006
9,728,605
Residential mortgage loan repurchase liability
1,296,097
1,189,907
Unsecured senior notes, net of issuance costs
545,930
545,490
Dividends payable
134,188
131,941
Accrued expenses and other liabilities
1,614,746
1,507,235
26,663,395
24,864,108
Commitments and Contingencies
Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 51,964,122 and 51,964,122 issued and outstanding, $1,299,104 and $1,299,104 aggregate liquidation preference, respectively
1,257,254
1,257,254
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 483,320,606 and 483,017,747 issued and outstanding, respectively
4,834
4,832
Additional paid-in capital
6,068,613
6,062,051
Retained earnings (accumulated deficit)
(236,222
)
(470,562
)
Accumulated other comprehensive income
39,954
40,631
Total Rithm Capital stockholders’ equity
7,134,433
6,894,206
Noncontrolling interests in equity of consolidated subsidiaries
60,251
60,337
Total equity
7,194,684
6,954,543
$
33,858,079
$
31,818,651
NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP NET INCOME
The Company has five primary variables that impact its operating performance: (i) the current yield earned on the Company’s investments, (ii) the interest expense under the debt incurred to finance the Company’s investments, (iii) the Company’s operating expenses and taxes, (iv) the Company’s realized and unrealized gains or losses on investments, including any impairment or reserve for expected credit losses and (v) income from the Company’s origination and servicing businesses. “Earnings available for distribution” is a non-GAAP financial measure of the Company’s operating performance, excluding the fourth variable above and adjusts the earnings from the consumer loan investment to a level yield basis. Earnings available for distribution is used by management to evaluate the Company’s performance without taking into account: (i) realized and unrealized gains and losses, which although they represent a part of the Company’s recurring operations, are subject to significant variability and are generally limited to a potential indicator of future economic performance; (ii) termination fee to affiliate; (iii) non-cash deferred compensation expense; (iv) non-capitalized transaction-related expenses; and (v) deferred taxes, which are not representative of current operations.
The Company’s definition of earnings available for distribution includes accretion on held-for-sale loans as if they continued to be held-for-investment. Although the Company intends to sell such loans, there is no guarantee that such loans will be sold or that they will be sold within any expected timeframe. During the period prior to sale, the Company continues to receive cash flows from such loans and believes that it is appropriate to record a yield thereon. In addition, the Company’s definition of earnings available for distribution excludes all deferred taxes, rather than just deferred taxes related to unrealized gains or losses, because the Company believes deferred taxes are not representative of current operations. The Company’s definition of earnings available for distribution also limits accreted interest income on RMBS where the Company receives par upon the exercise of associated call rights based on the estimated value of the underlying collateral, net of related costs including advances. The Company created this limit in order to be able to accrete to the lower of par or the net value of the underlying collateral, in instances where the net value of the underlying collateral is lower than par. The Company believes this amount represents the amount of accretion the Company would have expected to earn on such bonds had the call rights not been exercised.
The Company’s investments in consumer loans are accounted for under the fair value option. Earnings available for distribution adjusts earnings on consumer loans to a level yield to present income recognition across the consumer loan portfolio in the manner in which it is economically earned, to avoid potential delays in loss recognition, and align it with the Company’s overall portfolio of mortgage-related assets which generally record income on a level yield basis.
With regard to non-capitalized transaction-related expenses, management does not view these costs as part of the Company’s core operations, as they are considered by management to be similar to realized losses incurred at acquisition. Non-capitalized transaction-related expenses are generally legal and valuation service costs, as well as other professional service fees, incurred when the Company acquires certain investments, as well as costs associated with the acquisition and integration of acquired businesses.
Through its wholly owned subsidiaries, the Company originates conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. In connection with the transfer of loans to the GSEs or mortgage investors, the Company reports realized gains or losses on the sale of originated residential mortgage loans and retention of mortgage servicing rights, which the Company believes is an indicator of performance for the Origination and Servicing segments and therefore included in earnings available for distribution.
Earnings available for distribution includes results from operating companies with the exception of the unrealized gains or losses due to changes in valuation inputs and assumptions on MSRs, net of unrealized gains and losses on hedged MSRs, and non-capitalized transaction-related expenses.
Management believes that the adjustments to compute “earnings available for distribution” specified above allow investors and analysts to readily identify and track the operating performance of the assets that form the core of the Company’s activity, assist in comparing the core operating results between periods, and enable investors to evaluate the Company’s current core performance using the same financial measure that management uses to operate the business. Management also utilizes earnings available for distribution as a financial measure in its decision-making process relating to improvements to the underlying fundamental operations of the Company’s investments, as well as the allocation of resources between those investments, and management also relies on earnings available for distribution as an indicator of the results of such decisions. Earnings available for distribution excludes certain recurring items, such as gains and losses (including impairment and reserves as well as derivative activities) and non-capitalized transaction-related expenses, because they are not considered by management to be part of the Company’s core operations for the reasons described herein. As such, earnings available for distribution is not intended to reflect all of the Company’s activity and should be considered as only one of the factors used by management in assessing the Company’s performance, along with GAAP net income which is inclusive of all of the Company’s activities.
The Company views earnings available for distribution as a consistent financial measure of its investment portfolio’s ability to generate income for distribution to common stockholders. Earnings available for distribution does not represent and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with GAAP, and the Company’s calculation of this financial measure may not be comparable to similarly entitled financial measures reported by other companies. Furthermore, to maintain qualification as a REIT, U.S. federal income tax law generally requires that the Company distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. Because the Company views earnings available for distribution as a consistent financial measure of its ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that the Company’s board of directors uses to determine the amount, if any, and the payment date of dividends on common stock. However, earnings available for distribution should not be considered as an indication of the Company’s taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay, as earnings available for distribution excludes certain items that impact its cash needs.
The table below provides a reconciliation of earnings available for distribution to the most directly comparable GAAP financial measure (dollars in thousands, except share and per share data):
Three Months Ended
June 30,
2023
March 31,
2023
Net income attributable to common stockholders
$
357,401
$
68,854
Adjustments:
Impairment
5,813
(2,803
)
Realized and unrealized (gains) losses on investments, net
(156,055
)
114,874
Other (income) loss, net
23,539
5,350
Non-capitalized transaction-related expenses
9,163
427
Deferred taxes
56,431
(16,845
)
Earnings available for distribution of equity method investees:
Excess mortgage servicing rights
1,636
1,217
Earnings available for distribution
$
297,928
$
171,074
Net income per diluted share
$
0.74
$
0.14
Earnings available for distribution per diluted share
$
0.62
$
0.35
Weighted average number of shares of common stock outstanding, diluted
483,376,961
482,846,911
SEGMENT INFORMATION
($ in thousands)
Origination and Servicing
Residential Securities, Properties and Loans
Second Quarter 2023
Origination
Servicing
MSR Related Investments
Real Estate Securities
Properties & Residential Mortgage Loans
Consumer Loans
Mortgage Loans Receivable
Corporate
Total
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables
$
—
$
359,854
$
105,708
$
—
$
—
$
—
$
—
$
—
$
465,562
Change in fair value of MSRs and MSR financing receivables (includes realization of cash flows of $(139,410))
—
45,767
(23,735
)
—
—
—
—
—
22,032
Servicing revenue, net
—
405,621
81,973
—
—
—
—
—
487,594
Interest income
26,552
102,687
35,622
122,476
26,291
24,401
58,809
1,948
398,786
Gain on originated mortgage loans, held-for-sale, net
134,130
10,188
—
1,247
6,257
—
—
—
151,822
Total revenues
160,682
518,496
117,595
123,723
32,548
24,401
58,809
1,948
1,038,202
Interest expense
28,613
81,606
30,368
115,572
30,830
4,315
29,282
8,572
329,158
G&A and other
143,064
94,074
75,295
1,560
19,242
2,734
14,795
20,350
371,114
Total operating expenses
171,677
175,680
105,663
117,132
50,072
7,049
44,077
28,922
700,272
Realized and unrealized gains (losses) on investments, net
(112
)
386
10,311
77,442
(7,936
)
(3,994
)
13,328
—
89,425
Other income (loss), net
255
(5,434
)
34,428
(2,035
)
17,998
5,396
(822
)
(33,926
)
15,860
Total other income (loss)
143
(5,048
)
44,739
75,407
10,062
1,402
12,506
(33,926
)
105,285
Income (loss) before income taxes
(10,852
)
337,768
56,671
81,998
(7,462
)
18,754
27,238
(60,900
)
443,215
Income tax expense (benefit)
(2,718
)
51,925
3,308
—
4,948
48
(981
)
—
56,530
Net income (loss)
(8,134
)
285,843
53,363
81,998
(12,410
)
18,706
28,219
(60,900
)
386,685
Noncontrolling interests in income (loss) of consolidated subsidiaries
386
—
845
—
—
5,658
—
—
6,889
Dividends on preferred stock
—
—
—
—
—
—
—
22,395
22,395
Net income (loss) attributable to common stockholders
$
(8,520
)
$
285,843
$
52,518
$
81,998
$
(12,410
)
$
13,048
$
28,219
$
(83,295
)
$
357,401
As of June 30, 2023
Total Assets
$
2,261,296
$
10,037,550
$
4,863,294
$
10,203,238
$
2,458,275
$
1,704,131
$
2,208,159
$
122,136
$
33,858,079
Total Rithm Capital stockholder’s equity
$
305,518
$
3,579,194
$
1,914,719
$
926,843
$
214,825
$
219,934
$
571,332
$
(597,932
)
$
7,134,433
Origination and Servicing
Residential Securities, Properties and Loans
First Quarter 2023
Origination
Servicing
MSR Related Investments
Real Estate Securities
Properties & Residential Mortgage Loans
Consumer Loans
Mortgage Loans Receivable
Corporate
Total
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables
$
—
$
349,424
$
120,415
$
—
$
—
$
—
$
—
$
—
$
469,839
Change in fair value of MSRs and MSR financing receivables (includes realization of cash flows of $(105,691))
—
(37,526
)
(104,778
)
—
—
—
—
—
(142,304
)
Servicing revenue, net
—
311,898
15,637
—
—
—
—
—
327,535
Interest income
25,533
84,233
24,559
114,247
22,766
14,287
58,337
2,652
346,614
Gain on originated mortgage loans, held-for-sale, net
112,822
(4,601
)
—
—
1,047
—
—
—
109,268
Total revenues
138,355
391,530
40,196
114,247
23,813
14,287
58,337
2,652
783,417
Interest expense
29,995
81,074
31,702
98,292
26,192
1,680
30,692
9,441
309,068
G&A and other
140,512
100,834
69,241
630
9,383
1,766
16,231
17,438
356,035
Total operating expenses
170,507
181,908
100,943
98,922
35,575
3,446
46,923
26,879
665,103
Realized and unrealized gains (losses) on investments, net
168
(191
)
(12,398
)
(45,999
)
(6,427
)
(5,990
)
(4,812
)
—
(75,649
)
Other income (loss), net
(590
)
(12,837
)
35,921
165
24,181
(8,722
)
1,713
(9,353
)
30,478
Total other income (loss)
(422
)
(13,028
)
23,523
(45,834
)
17,754
(14,712
)
(3,099
)
(9,353
)
(45,171
)
Income (loss) before income taxes
(32,574
)
196,594
(37,224
)
(30,509
)
5,992
(3,871
)
8,315
(33,580
)
73,143
Income tax expense (benefit)
(8,160
)
4,488
(7,371
)
—
(3,728
)
59
(2,094
)
—
(16,806
)
Net income (loss)
(24,414
)
192,106
(29,853
)
(30,509
)
9,720
(3,930
)
10,409
(33,580
)
89,949
Noncontrolling interests in income (loss) of consolidated subsidiaries
(42
)
—
(146
)
—
—
(1,112
)
—
—
(1,300
)
Dividends on preferred stock
—
—
—
—
—
—
—
22,395
22,395
Net income (loss) attributable to common stockholders
$
(24,372
)
$
192,106
$
(29,707
)
$
(30,509
)
$
9,720
$
(2,818
)
$
10,409
$
(55,975
)
$
68,854
As of March 31, 2023
Total Assets
$
1,955,613
$
10,161,889
$
5,030,161
$
9,437,577
$
2,530,135
$
384,293
$
2,180,520
$
138,463
$
31,818,651
Total Rithm Capital stockholder’s equity
$
330,404
$
3,263,251
$
2,024,148
$
1,039,411
$
242,513
$
59,338
$
507,510
$
(572,369
)
$
6,894,206
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this press release constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts. They represent management’s current expectations regarding future events and are subject to a number of trends and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those described in the forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Cautionary Statement Regarding Forward Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent annual and quarterly reports and other filings filed with the U.S. Securities and Exchange Commission, which are available on the Company’s website (www.rithmcap.com). New risks and uncertainties emerge from time to time, and it is not possible for Rithm Capital to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Forward-looking statements contained herein speak only as of the date of this press release, and Rithm Capital expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Rithm Capital's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
ABOUT RITHM CAPITAL
Rithm Capital is an asset manager focused on the real estate and financial services industries. Rithm Capital’s investments in operating entities include leading origination and servicing platforms held through its wholly-owned subsidiaries, Newrez LLC, Caliber Home Loans Inc. and Genesis Capital LLC, as well as investments in affiliated businesses that provide residential and commercial real estate related services. The Company seeks to provide attractive risk-adjusted returns across interest rate environments. Since inception in 2013, Rithm Capital has delivered approximately $4.7 billion in dividends to shareholders. Rithm Capital is organized and conducts its operations to qualify as a Real Estate Investment Trust (“REIT”) for federal income tax purposes and is headquartered in New York City.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230802108209/en/
Investor Relations 212-850-7770 IR@RithmCap.com
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