Rithm Capital Corp. Q1 FY2025 earnings call

• Strong performance across all business lines despite market volatility, with investment teams leveraging experience to protect and grow capital.
• Emphasis on earning trust through performance, with results first being the top message. The company's equity is undervalued, and efforts to unlock shareholder value are ongoing.
• Manufacturing engine for assets differentiates Rithm, with operating businesses including Newrez (top 3 servicer, top 5 originator), Genesis Capital, Sculptor (strong fundraising and performance), Rithm Property Trust, and Adoor.
• ABF space expertise highlighted, with significant demand for ABF products. Growth strategies include growing off-balance sheet capital, expanding investment verticals (energy transition, infrastructure), and focusing on partnerships in asset management.
• Newrez's strong quarter with origination performance, recapture investments, servicing growth, and Rezi AI initiatives driving cost leadership.

Mortgage Servicing (Newrez): Top 3 servicer and top 5 originator in the U.S. First quarter funded volume was little under $12 billion, generated $270 million of pre-tax income. Ex-mark-to-market up 14% YOY. Genesis Capital: Little under $1 billion in production, 7% year-over-year growth from funded volume. Commitments grew 46% YOY, sponsor growth up 37% YOY. Delinquencies remain extremely low. Asset Management (Sculptor): $1.4 billion of gross inflows across the platform, with $870 million from the real estate business bringing Sculptor's Real Estate Fund V to $3.2 billion in commitments. Closed a $900 million AUM on Sculptor Tactical Credit Fund and a $420 million CLO in Europe. Rithm Property Trust: Turned around from loss to breakeven, raised $50 million of a prep in the quarter, sitting on little under $100 million of cash with $300 million of equity. SPAC: $230 million SPAC with a target of between $1 billion and $1.5 billion.

• Expect active M&A activity in mortgage and asset management spaces, with focus on growing in credit and other investment verticals.
• Continued strong fundraising across the platform, with confidence in LP appetite despite market volatility.
• Hopes to unlock shareholder value in 2025 through potential capital actions, including possible listings or externalizations of business units.
• Expect growth in asset management fees and expansion of ABF and other fund offerings.

• Market volatility impacting mark-to-market values, particularly in the MSR business.
• Potential credit deterioration if chasing market share, as seen in other firms.
• Competition leading to margin compression in origination business.
• Changes in SPAC market conditions affecting deployment of SPAC capital.

Q: Bose George asked about the Cooper Rocket transaction and book value quarter-to-date.

A: Michael Nierenberg said Newrez would continue business as usual, with opportunities to pick up subservicing from the Cooper Rocket deal, and book value was in and around $12.60.

Q: Doug Harter asked about M&A opportunities and LP appetite for fundraising.

A: Michael Nierenberg said M&A pipeline is active, focusing on credit and other investment verticals, and LP appetite remains strong with active fundraising across the platform.

Q: Eric Hagen asked about Sculptor performance and MSR funds.

A: Michael Nierenberg said Sculptor had strong fundraising and performance, with MSR funds not yet rolled out but expecting demand, and hedging offsetting mark-to-market volatility.

Q: Jason Weaver asked about credit events in Genesis portfolio and securitization implications.

A: Michael Nierenberg said Genesis portfolio delinquencies were low, and securitization markets were open with opportunities for buying assets.

Q: Kenneth Lee asked about Sculptor fundraising targets and SPAC motivation.

A: Michael Nierenberg said Sculptor had multiple funds in the works, and SPAC provided ability to generate asset management fees and off-balance sheet investments.

Q: Giuliano Bologna asked about capital actions and hedging.

A: Michael Nierenberg said capital actions were ongoing, and hedging was set up with a steepener to benefit from potential rate cuts and inflation.

Q: Randy Binner asked about GSC reform and privatization impacts.

A: Michael Nierenberg said privatization would play to Rithm's strengths, but no immediate impact was expected.

Q: Crispin Love asked about partnerships in asset management.

A: Michael Nierenberg said partnerships were being developed, similar to Mubadala's investment in Fortress, to grow the asset management business.

Q: Crispin Love asked about Newrez residential volumes in April.

A: Baron Silverstein said there was a pickup in residential volumes in April, with expectations of continued growth into the second quarter.