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Rithm Capital Corp. (RITM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong non-GAAP performance: Earnings Available for Distribution (EAD) per diluted share of $0.54, a modest beat vs Wall Street consensus of $0.52*, while GAAP diluted EPS was $0.35 *.
  • Revenue versus estimates was mixed: S&P Global “Revenue” actual registered $0.94B* vs $1.07B* consensus (miss), while company-reported Total Revenues were $1.11B, reflecting MSR mark-to-market headwinds offset by solid Origination & Servicing and asset management contributions *.
  • Segment momentum persisted: Newrez pre-tax income (ex-MS R MTM) rose to $295.1M (20% ROE); Genesis origination volume remained at a record $1.2B; Sculptor AUM ~$37B; book value per share rose to $12.83 .
  • Strategic catalysts: definitive agreements to acquire Crestline ($18B AUM) and Paramount ($1.6B cash consideration) target Q4 closing; management reiterated they will not raise equity to fund these deals and expect to use balance sheet and LP capital .

Note: Values marked with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Newrez delivered pre-tax income of $295.1M excluding MSR mark-to-market, up from $275.1M in Q2; ROE was 20% on $6.2B equity, with servicing UPB up 7% YoY to $878B and third-party UPB up 21% YoY to $282B .
  • Asset management growth: Sculptor AUM ~$37B with $1.4B gross fundraising inflows in the quarter; continued CLO activity including ~$585M AUM contribution from a European issuance/reset .
  • Residential transitional lending (Genesis) posted $1.2B originations (+60% YoY), consistent with record Q2 levels, with sponsor growth up 82% YoY, underpinning ABF manufacturing capability .

Selected quote: “This quarter marks a pivotal step forward… The pending acquisition of Crestline… and Paramount… unlock differentiated value for investors and shareholders.” – CEO Michael Nierenberg .

What Went Wrong

  • MSR mark-to-market headwind: change in fair value of MSRs and MSR financing receivables net of economic hedges was $(264.4)M, compressing GAAP results despite stable EAD .
  • Interest income fell within the Investment Portfolio, driven by lower agency balances and a retrospective interest adjustment (offset in unrealized gains/losses) .
  • Weighted-average origination margins fell to 114 bps due to channel mix and increased government streamline refinances; while cheaper to produce, competitive dynamics pressured gain-on-sale margins .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
GAAP Diluted EPS ($)$0.07 $0.53 $0.35
EAD per Diluted Share ($)$0.52 $0.54 $0.54
Net Income Attributable to Common ($MM)$36.5 $283.9 $193.7
Total Revenues ($MM, Company)$976.9 $1,217.0 $1,105.5
S&P Global Revenue Actual ($MM)*$693.3*$997.6*$943.0*
S&P Global Revenue Estimate ($MM)*$1,217.6*$1,122.0*$1,068.6*
Book Value per Share ($)$12.39 $12.71 $12.83
ROE (GAAP, as discussed)——11% (management commentary)

Note: Values marked with * are from S&P Global.

Segment performance (selected P&L lines):

Segment ($MM)Q2 2025 RevenuesQ3 2025 RevenuesQ2 2025 Net Income (Common)Q3 2025 Net Income (Common)
Origination & Servicing$925.6 $836.2 $315.7 $225.4
Investment Portfolio$110.0 $93.0 $34.1 $36.1
Residential Transitional Lending$75.4 $77.6 $24.7 $21.9
Asset Management$102.8 $95.5 $(4.0) $3.8
Corporate Category$3.1 $3.2 $(86.6) $(93.6)
Total$1,217.0 $1,105.5 $283.9 $193.7

Key operating KPIs:

KPIQ1 2025Q2 2025Q3 2025
Newrez pre-tax income excl. MSR MTM ($MM)$270.1 $275.1 $295.1
Newrez ROE (pre-tax, excl. MTM)19% 19% 20%
Servicing UPB ($B)845 864 878
Third-party Servicing UPB ($B)254 271 282
Origination funded volume ($B)11.8 16.3 16.4
Genesis origination volume ($B)0.895 1.2 1.2
Sculptor AUM ($B)~35 ~36 ~37
Dividend per common share ($)$0.25 $0.25 $0.25
Common dividend ($MM)$132.5 $132.6 $138.5
Cash & cash equivalents ($MM)$1,493.8 $1,600.9 $1,611.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Crestline acquisition closingQ4 2025Announced 9/3; closing targeted Q4 Targeted Q4 close; funding via balance sheet + LPs; no equity raise Maintained timeline
Paramount acquisition closingQ4 2025Announced 9/17; shareholder approval req’d Targeted Q4 close; ~$1.6B cash; intend ~$300M RITM equity and ~$950–$1,000M third-party capital Maintained timeline; updated funding detail
ABF fund first close (wealth platform)Q4 2025Discussed pipeline Expect first close in Q4; indicated size “upwards of $500M,” duration ~3 years (products like non-QM, RTL) New specifics
Dividend policyOngoing$0.25/share No intention to raise dividend; preference would be to reduce if feasible (board decision) Maintained near term; constrained upside
Equity financing for dealsQ4 2025—“We will not be raising equity… fund via balance sheet and LPs” Clarified funding stance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Asset management scaleSculptor AUM ~35–36B, fundraising incl. Tactical Credit and RE V Sculptor AUM 37B; European CLO issuance/reset; Crestline definitive agreement ($18B AUM) Expanding AUM, multi-manager integration
Mortgage origination & servicingNewrez pre-tax excl. MTM ~$270–275M; UPB growth; large MSR debt issuance Pre-tax excl. MTM $295.1M; ROE 20%; margin pressure from government streamline refis; Resi AI enhancing capacity Operational strength; margin mix pressure
ABF manufacturing & fundraisingNon-QM securitizations; RTL partnerships Non-QM securitization $483M UPB; forward flow for $1B HIL; ABF fund first close targeted Q4 Building scalable ABF pipelines
M&A (Paramount, Crestline)Strategy focus; pipeline building Paramount rationale (lease-up, rent growth); Crestline adds direct lending/insurance; no equity raise Strategic expansion; funding clarity
Capital allocation & valuationBook value per share rising; dividend covered by EAD Focus on growing fee-related earnings; not raising dividend; consider future spins/IPO for Newrez; limited buybacks near term Drive re-rating via FRE; disciplined payout

Management Commentary

  • “We will not be raising equity in the capital markets to fund these acquisitions. We will fund… with a combination of balance sheet and third party LPs and partners.” – CEO Michael Nierenberg .
  • “Earnings available for distribution… $0.54 per diluted share… Book value… $12.83… cash and liquidity… $2.2 billion.” – CEO Michael Nierenberg .
  • “San Francisco is in the middle of the so-called AI boom… demand for tenants… roughly 7.8 million square feet, the highest ever that we know of.” – CEO Michael Nierenberg (Paramount thesis) .
  • “Our third quarter 2025 pre-tax income excluding mark to market was approximately $295 million… delivered a 20% ROE for the quarter… expansion of our RESI AI stack.” – President of Newrez, Baron Silverstein .
  • “Definitively… we’re not going to raise our dividend… if we could go the other way, we would.” – CEO Michael Nierenberg .

Q&A Highlights

  • Valuation gap and strategic options: management emphasized driving fee-related earnings (FRE) growth and potential future actions (spin/partial listing of Newrez, D-REIT structures), but near-term focus is growth and M&A integration .
  • Paramount funding: plan to deploy ~$300M RITM equity plus ~$950–$1,000M third-party capital; draw on facilities as needed; high LP interest to backstop refinancing post-close .
  • Origination margins: weighted-average margins fell to 114 bps due to channel mix and government streamline refis; these loans are cheaper to produce but highly competitive .
  • Interest income decline: lower agency balances and retrospective interest adjustment (offset elsewhere) drove quarter-over-quarter change in investment portfolio interest income .
  • Capital returns: share buybacks unlikely near term given acquisition funding priorities; dividend increases off the table; priority is reinvesting at 15–20% ROE to drive re-rating .

Estimates Context

  • EPS: EAD per diluted share of $0.54 beat Wall Street consensus of $0.52*; prior quarters were in-line to slightly above (Q2 actual $0.54 vs $0.523*; Q1 actual $0.52 vs $0.467*). Expectation for Q4 is ~$0.567* *.
  • Revenue: S&P Global “Revenue” actual of $0.94B* missed $1.07B* consensus, while company-reported Total Revenues were $1.11B (reflecting MSR valuation dynamics and segment contributions) *.
  • Target price and coverage: Consensus target price ~$14.07*; EPS and revenue estimates based on 7 and 5 estimates, respectively, for Q3*.

Note: Values marked with * are from S&P Global.

Key Takeaways for Investors

  • Non-GAAP EPS beat alongside GAAP volatility highlights the importance of MSR mark-to-market impacts; EAD remains a robust measure for dividend coverage and core earnings power .
  • Mortgage platform resilience continues, but margin mix (government streamline refis) is pressuring gain-on-sale; watch Newrez’s AI-driven capacity improvements and margin stabilization trajectory .
  • Asset management expansion via Crestline and continued Sculptor fundraising should accelerate FRE growth—key to re-rating; track Q4 closes and ABF fund first-close .
  • Paramount offers asymmetric upside through lease-up and potential rent increases; funding clarity (no equity raise) reduces overhang; monitor shareholder vote and LP capital commitments .
  • Dividend is secure but capped; management would favor reinvestment over payout increases; near-term buybacks unlikely given M&A funding priorities .
  • Interest income variability in the investment portfolio reflects balance shifts and accounting adjustments; the offset in unrealized gains/losses mitigates P&L impact .
  • For trading: near-term catalysts include deal closings and ABF fund launch; watch for EAD durability vs MSR valuation swings and narrative shift toward growing FRE to close valuation gap .