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EQUITY AND EARNINGS PER SHARE
 3 Months Ended
Mar. 31, 2023
Earnings Per Share [Abstract]  
EQUITY AND EARNINGS PER SHARE EQUITY AND EARNINGS PER SHARE
 
Equity and Dividends

Rithm Capital’s certificate of incorporation authorizes 2.0 billion shares of common stock, par value $0.01 per share, and 100.0 million shares of preferred stock, par value $0.01 per share.

On August 5, 2022, Rithm Capital entered into a Distribution Agreement to sell shares of its common stock, par value $0.01 per share (the “ATM Shares”), having an aggregate offering price of up to $500.0 million, from time to time, through an “at-the-market” equity offering program (the “ATM Program”). No share issuances were made during the three months ended March 31, 2023 under the ATM Program.

In December 2022, Rithm Capital’s board of directors authorized the repurchase of up to $200.0 million of its common stock and $100.0 million of its preferred stock through December 31, 2023. Repurchases may be made from time to time through open market purchases or privately negotiated transactions, pursuant to one or more plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 or by means of one or more tender offers, in each case, as permitted by securities laws and other legal requirements. The share repurchase programs may be suspended or discontinued at any time. During the three months ended March 31, 2023, the Company did not repurchase any shares of its common stock or preferred stock.

The table below summarizes preferred shares:
Dividends Declared per Share
Number of SharesThree Months Ended
March 31,
SeriesMarch 31, 2023December 31, 2022
Liquidation Preference(A)
Issuance Discount
Carrying Value(B)
20232022
Series A, 7.50% issued July 2019(C)
6,200 6,200 $155,002 3.15 %$149,822 $0.47 $0.47 
Series B, 7.125% issued August 2019(C)
11,261 11,261 281,518 3.15 %272,654 0.45 0.45 
Series C, 6.375% issued February 2020(C)
15,903 15,903 397,584 3.15 %385,289 0.40 0.40 
Series D, 7.00% issued September 2021(D)
18,600 18,600 465,000 3.15 %449,489 0.44 0.44 
Total51,964 51,964 $1,299,104 $1,257,254 $1.76 $1.76 
(A)Each series has a liquidation preference or par value of $25.00 per share.
(B)Carrying value reflects par value less discount and issuance costs.
(C)Fixed-to-floating rate cumulative redeemable preferred.
(D)Fixed-rate reset cumulative redeemable preferred.

On March 17, 2023, Rithm Capital’s board of directors declared first quarter 2023 preferred dividends of $0.47 per share of Preferred Series A, $0.45 per share of Preferred Series B, $0.40 per share of Preferred Series C and $0.44 per share of Preferred Series D, or $2.9 million, $5.0 million, $6.3 million and $8.1 million, respectively.

Common dividends have been declared as follows:
Declaration DatePayment DatePer ShareTotal Amounts Distributed (millions)
Quarterly Dividend
March 21, 2022April 2022$0.25 $116.7 
June 17, 2022August 20220.25 116.7 
September 22, 2022October 20220.25 118.4 
December 15, 2022January 20230.25 118.6 
March 17, 2023April 20230.25 120.9 

Common Stock Purchase Warrants

During the second quarter of 2020, the Company issued warrants (the “2020 Warrants”) in conjunction with the issuance of a term loan, which was fully repaid in the third quarter of 2020, that provided the holders the right to acquire, subject to anti-dilution adjustments, up to 43.4 million shares of the Company’s common stock in the aggregate. The 2020 Warrants were
exercisable in cash or on a cashless basis and were set to expire on May 19, 2023 and were exercisable, in whole or in part, at any time or from time to time after September 19, 2020 at the following prices (subject to certain anti-dilution adjustments): approximately 24.6 million shares of common stock at $6.11 per share and approximately 18.9 million shares of common stock at $7.94 per share.

On February 21, 2023, warrant holders exercised all remaining and outstanding warrants to purchase up to approximately 25.6 million shares of the Company’s common stock. The warrants were exercised on a cashless basis, using the market price of the Company’s common stock on February 17, 2023, which was the last trading day preceding the date of exercise of the warrants, resulting in the issuance of approximately 9.3 million shares of the Company’s common stock on February 23, 2023.

The table below summarizes the 2020 Warrants at March 31, 2023:
Number of Warrants (in millions)Adjusted Weighted Average Exercise Price
(per share)
Initial
Adjusted(A)
December 31, 2022
22.4 25.6 $6.1 
Granted— — — 
Exercised(22.4)(25.6)6.1 
Expired— — — 
March 31, 2023
— — 
(A)Reflects the incremental number of additional common stock issuable upon exercise of warrants in accordance with the warrant agreement.

Option Plan

As of March 31, 2023, outstanding options were as follows:
Held by Former Manager21,471,990
Issued to the independent directors5,000
Total21,476,990 

The following table summarizes outstanding options as of March 31, 2023. The last sales price on the New York Stock Exchange for Rithm Capital’s common stock in the quarter ended March 31, 2023 was $8.00 per share.
Recipient
Date of
Grant/
Exercise(A)
Number of Unexercised
Options
Options
Exercisable
as of
March 31, 2023
Weighted
Average
Exercise
Price(B)
Intrinsic Value of Exercisable Options as of
March 31, 2023
(millions)
DirectorsVarious5,000 5,000 $12.83 $— 
Former Manager20171,130,916 1,130,916 12.84 — 
Former Manager20185,320,000 5,320,000 15.57 — 
Former Manager20196,351,000 6,351,000 14.95 — 
Former Manager20201,619,739 1,619,739 16.30 — 
Former Manager20217,050,335 5,091,095 9.34 —
Outstanding21,476,990 19,517,750 
(A)Options expire on the tenth anniversary from date of grant.
(B)The exercise prices are subject to adjustment in connection with return of capital dividends.
 
The following table summarizes activity in outstanding options:
Number of OptionsWeighted Average Exercise Price
December 31, 2022
21,476,990 $— 
Granted— — 
Exercised— — 
Expired— — 
March 31, 2023
21,476,990 See table above

Stock-Based Compensation

Rithm Capital’s Nonqualified Stock Option and Incentive Award Plan became effective on May 15, 2013, and was amended and restated as of November 4, 2014 and as of February 16, 2023 (the “Plan”). The Company may grant stock-based compensation to its officers and other employees and non-employee directors for the purpose of providing incentives and rewards for service or performance. Stock-based awards issued under the Plan include time-based and performance-based restricted stock unit awards (“RSU” and “PSU” awards, respectively), and restricted stock awards (“RSA”), and may include other forms of equity-based compensation. RSU and PSU awards are an agreement to issue an equivalent number of shares of the Company’s common stock, plus any equivalent shares for dividends declared on the Company’s common stock, at the time the award vests. RSU awards vest over a specified service period. PSU awards vest over a specified service period subject to achieving long-term performance criteria.

The Company measures and recognizes compensation expense for all stock-based payment awards made to employees and non-employee directors based on their fair value. The Company values RSU awards based on the fair value of its common stock on the date of grant. Compensation expense is recognized on a straight-line basis over each award’s respective service period. For PSU awards, the Company estimates the probability that the performance criteria will be achieved and recognizes expense only for those awards expected to vest. The Company reevaluates its estimate each reporting period and recognizes a cumulative effect adjustment to expense if estimates change from the prior period. The Company does not estimate forfeiture rates but rather adjusts for forfeitures in the periods in which they occur.

Shares underlying RSU and PSU awards are issued when the awards vest. Statutory tax withholding obligations may be covered via (i) election of a cash payment, (ii) net settlement of the applicable shares of stock underlying the RSUs or PSUs, (iii) a broker assisted sale process or (iv) any such other method approved by Rithm Capital. If applicable, the fair value of shares withheld for tax withholdings is recorded as a reduction to additional paid-in capital.

During the three months ended March 31, 2023, the Company granted RSU awards to employees with a grant date fair value of $11.6 million, which vest ratably over a three-year period. The Company also granted PSU awards to employees which vest at the end of a three-year period provided that specified performance criteria are met. The fair value of the PSU awards granted during the three months ended March 31, 2023 as of the grant date was $11.6 million, assuming the target levels of performance are achieved.

The table below summarizes the Company’s awards granted, forfeited or vested under the Plan during the three months ended March 31, 2023:
Number of SharesGrant Date Price
RSAs (B)
RSUsPSUsTotalRSAsRSUsPSUs
Unvested Shares at December 31, 2022
578,034 — — 578,034 $8.65 $— $— 
Granted— 1,215,329 1,215,329 2,430,658 — 9.52 9.52 
Unvested Shares at March 31, 2023(A)
578,034 1,215,329 1,215,329 3,008,692 
(A)Number of PSUs assumes target levels of performance are achieved for outstanding unvested PSU awards.
(B)Does not include cash dividends received in relation to unvested RSAs.
The fair value of granted awards is determined based on the closing price of the Company’s common stock on the date of grant of the awards. Stock-based compensation is recorded within Compensation and benefits in the Consolidated Statements of Operations. For the three months ending March 31, 2023, total stock-based compensation expenses recorded was $1.4 million. For the three months ending March 31, 2023, there were no performance adjustments for actual performance achieved relative to target, no vested shares and no forfeited shares.

At March 31, 2023, aggregate unrecognized compensation cost for all unvested equity awards was $26.7 million (assuming target levels of performance are achieved), which is expected to be recognized over a weighted-average period of 1.4 years.

Earnings Per Share

Rithm Capital is required to present both basic and diluted earnings per share (“EPS”). Basic EPS is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period.

The following table summarizes the basic and diluted earnings per share calculations:
Three Months Ended
March 31,
20232022
Net income$89,949 $689,931 
Noncontrolling interests in income of consolidated subsidiaries
(1,300)5,609 
Dividends on preferred stock22,395 22,461 
Net income attributable to common stockholders$68,854 $661,861 
Basic weighted average shares of common stock outstanding478,167,178 466,785,584 
Dilutive effect of stock options, restricted stock, common stock purchase warrants, RSUs and PSUs(A)(B)
4,679,733 17,639,482 
Diluted weighted average shares of common stock outstanding482,846,911 484,425,066 
Basic earnings per share attributable to common stockholders$0.14 $1.42 
Diluted earnings per share attributable to common stockholders$0.14 $1.37 
(A)Stock options and common stock purchase warrants that could potentially dilute basic earnings per share in the future were not included in the computation of diluted earnings per share for the periods where a loss has been recorded because they would have been anti-dilutive for the period presented. There were no anti-dilutive stock options or common stock purchase warrants for all periods presented.
(B)RSU and PSU awards were included to the extent dilutive and issuable under the relevant performance measures.