Yahoo Finance Rithm Capital Corp (RITM) Q1 2024 Earnings Call Transcript Highlights: Strong Performance and ...
GAAP Net Income: $262 million
Earnings Per Share (Diluted): $0.54
Earnings Available for Distribution: $233 million
Dividend Per Share: $0.25
Cash and Liquidity: $2 billion at end of Q1
Total Economic Return for Q1: 4.5%
Total Assets Under Management (AUM): $32 billion
Origination Volume: $840 million in commitments
Return on Equity (ROE): 23% for Newrez
Servicing Portfolio: $857 billion total servicing
Owned Servicing: $572 billion
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Could I get an update on book value quarter-to-date? You noted that the hedges had taken the balance sheet up. So yes, just an update would be great? A: Michael Nierenberg, Rithm Capital Corp. - Chairman, President & CEO: We're in and around [$12.30 to $12.40] right now, Bose -- during the -- we still have a little bit of a short bias. But overall, I would say as the market continues to sell off, if it does, what you're going to start to see is obviously, MSR values will be capped. I've said this for a long time. I think last quarter, we had a very conservative mark on our MSRs as well as, I think, where we are today.
Q: Just looking at the results from the Sculptor, I mean when do you expect that might improve and turn positive? And do you have a target rate of return for the investment in the CLO equity that you made in Sculptor? A: Michael Nierenberg, Rithm Capital Corp. - Chairman, President & CEO: Eric, there's a couple of ways to think about this. One is the enterprise value that we're creating by making investments in the Sculptor franchise should lead to a higher overall equity valuation for Rithm at the parent level. So in other words, as we grow our CLO business and we create management fees for Sculptor or we make investments in other things, whether it would be alongside Sculptor or actually in Sculptor. What that's going to do is increase the value of Sculptor. So that's part one.
Q: Michael, as you think about the transition to kind of more of an asset management model. How should we think about the timing and/or which of the business lines will see third-party capital raised first? A: Michael Nierenberg, Rithm Capital Corp. - Chairman, President & CEO: The -- I mean the Sculptor franchise is obviously, there's $32 billion of AUM at the franchise. When you look at the leadership team there between Jimmy and Brett Klein on the credit side and Steve Orbuck and Nick Hecker at the real estate side, it's a great team. I mean it hasn't been easy, obviously, to raise money going back the past couple of years because of the noise around the platform.
Q: I guess to start, can you talk about with mortgage rates moving back towards highs, what you're seeing in the pipeline there, sensitivity of borrowers to rates moving where they are? And kind of outlook for volumes near term and how you see that progressing through the year? A: Baron Silverstein, NewRez LLC - President: I mean the market remains predominantly a purchase market, right? So for us, it's about delivering excellent service to our customers and then making sure they understand who we are as a company and what we can otherwise deliver either through products or quality service.
Q: Just when you're thinking about acquisitions in the alternative asset management space, what do you believe makes the most sense for you kind of over the intermediate term? What types of firms and investments would you be looking at and most interested in? And do you expect there to be opportunities in this area in 2024? A: Michael Nierenberg, Rithm Capital Corp. - Chairman, President & CEO: There's plenty of firms that are always out there for sale. What I would say is we have a business today in Sculptor. We really don't need anything than performance. And again, performance will bring more AUM back to the platform. So we don't need to buy anything. We are going to try to grow our credit business and our real estate business. The 3 pillars of Sculptor are real estate, credit and the multi-strat fund. We are going to grow those 3 different verticals. We're going to grow them by performance. Performance has been great. That will bring in more AUM. The firm is extremely stable, great partner in Rithm, and we're off to the races.
Q: You guys talked a lot about growth opportunities across the entire platform, some of which are non-reach investment portfolio opportunities. I guess when you think about the overall capital deployment that you guys have and the return opportunity out there, can you sort of give us an update on how you think about the dividend level for the overall company in light of all that? A: Michael Nierenberg, Rithm Capital Corp. - Chairman, President & CEO: So the dividend, obviously, we outperform our dividend, and hopefully, we'll continue to do that quarter-after-quarter. The calculation for us, is if we can deploy capital at a 12%, 13%, 14%, 20% return, use 15% on average. If we could deploy capital at 15% rate of return versus a dividend yield of 9% or something around that, everything we do from an investment standpoint is going to be highly accretive versus giving money back. So that's how we think about it.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
