Exceeded first quarter guidance on all metrics
Network Volume grew 12% year-over-year to $1.85 billion; Total
Revenue and Other Income grew 9% year-over-year to $186.6 million;
Adjusted EBITDA of $2.0 million
Company raises adjusted EBITDA guidance for full-year 2023
Pagaya Technologies Ltd. (NASDAQ: PGY) (“Pagaya”, the “Company”
or “we”), a global technology company delivering artificial
intelligence infrastructure for the financial ecosystem, today
announced financial results for the first quarter ending March 31,
2023 and raised its adjusted EBITDA guidance for 2023.
“Our results in 1Q23 were another proof point of our ability to
execute through market volatility,” said Gal Krubiner, Chief
Executive Officer of Pagaya. “The strength of our AI technology and
resilient business model enables us to deliver consistent value for
our partners and asset outperformance for investors. Our new
partners are growing rapidly, and we are seeing improving economics
as our network expands. We continue to consistently raise funding
and grow our investor base as the number one issuer of personal
loan ABS transactions in the U.S. We remain focused on driving
sustainable profitability through continued network expansion,
increased monetization of our network and operating efficiency,
which resulted in a return to positive adjusted EBITDA this
quarter. We are raising our adjusted EBITDA guidance for the
full-year 2023, as we remain confident in our ability to continue
to drive profitable growth.”
First Quarter 2023 Financial Highlights
All comparisons are made versus the same period in 2022 unless
otherwise stated
- Network volume increased 12% to $1.85 billion, reflecting
continued growth of existing partners and products and ramp-up of
newer partners who joined the Pagaya network in the past 12
months
- Total revenue and other income increased 9% to $186.6 million,
driven by higher AI integration and contract fees, offsetting the
impact of ongoing capital markets volatility
- Adjusted EBITDA of $2.0 million, reflecting continued volume
growth, increased fee revenue and cost-savings initiatives.
Excluding the impact of the Company’s recent acquisition of Darwin,
adjusted EBITDA is $4.7 million
- Net loss attributable to Pagaya shareholders of $61.0 million,
impacted by non-cash items such as share-based compensation expense
and the cumulative impact of a change in election to
available-for-sale accounting for the Company’s risk retention
investments. Adjusted net loss of $11.0 million, which excludes
share-based compensation expense, a change in fair value of warrant
liability and non-recurring expenses
Recent Business Highlights
- Network expansion and monetization: Rapid growth of both
new and mature partners further strengthened the Company’s AI
technology and enabled improved economics via incremental AI
integration fees. Partners and channels added in 2022 contributed
approximately 20% of total network volume in the first quarter of
2023.
- Exercising prudence to optimize asset performance:
Conversion rate of applications evaluated in the first quarter of
2023 declined by 46% compared to a peak in the third quarter of
2021, while application volume grew by 56% over that same period,
as the Company shifted to a more resilient borrower portfolio to
deliver target asset returns for investors. Early-stage
delinquencies on Q4’22 personal loan vintages are 55% lower than
Q4’21 vintages and continued to outperform the market
benchmark.
- Consistently raising capital: The Company was the number
one issuer of personal loan ABS transactions in the U.S. in the
first quarter of 2023, reflecting its ability to consistently raise
capital to fund partner originations. New strategic investors
joined the Company’s funding network and long-term investor, GIC,
extended its funding agreement with the Company through 2028.
- Path to sustainable profitability: The Company remains
committed to delivering sustainable profitability on an adjusted
EBITDA basis with increased network monetization and operating
efficiency. The Company’s core operating expense ratio excluding
the impact of its recent Darwin acquisition (defined as operating
expenses excluding share-based compensation expense, depreciation
and one-time items as a percentage of total revenue and other
income) fell to 29% in the first quarter of 2023, a decline of 3
percentage points sequentially compared to the fourth quarter of
2022.
Second Quarter 2023 Outlook
2Q23
Network Volume
Expected to be between $1.8 billion and
$1.9 billion
Total Revenue and Other Income
Expected to be between $180 million and
$190 million
Adjusted EBITDA
Expected to be between $5 million and $10
million
Full-Year 2023 Outlook
The Company is maintaining its prior outlook for Network Volume
and Total Revenue and Other Income, and raising its outlook for
Adjusted EBITDA:
FY23
Network Volume
Expected to be between $7.5 billion and
$8.0 billion
Total Revenue and Other Income
Expected to be between $775 million and
$825 million
Adjusted EBITDA
Expected to be between $15 million and $30
million
Webcast
The Company will hold a webcast and conference call today, May
16, 2023 at 8:30 a.m. Eastern Time. A live webcast of the call will
be available via the Investor Relations section of the Company’s
website at investor.pagaya.com. To listen to the live webcast,
please go to the site at least five minutes prior to the scheduled
start time in order to register, download and install any necessary
audio software. Shortly before the call, a copy of the accompanying
presentation will be made available on the Company’s website.
Shortly after the call, a replay of the webcast will be available
for 90 days on the Company’s website.
The conference call can also be accessed by dialing
1-877-407-9208 or 1-201-493-6784. The telephone replay can be
accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing
the conference ID# 13737470. The telephone replay will be available
starting shortly after the call until May 30, 2023. A replay will
also be available on the Investor Relations website following the
call.
About Pagaya Technologies
Pagaya (NASDAQ: PGY) is a global technology company making
life-changing financial products and services available to more
people nationwide. By using machine learning, a vast data network
and a sophisticated AI-driven approach, Pagaya provides
comprehensive consumer credit and residential real estate solutions
for its partners, their customers, and investors. Its proprietary
API and capital solutions integrate into its network of partners to
deliver seamless user experiences and greater access to the
mainstream economy. Pagaya has offices in New York and Tel Aviv.
For more information, visit pagaya.com.
Cautionary Note About Forward-Looking Statements
This document contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
that involve risks and uncertainties. These forward-looking
statements generally are identified by the words “anticipate,”
“believe,” “continue,” “can,” “could,” “estimate,” “expect,”
“intend,” “may,” “opportunity,” “future,” “strategy,” “might,”
“outlook,” “plan,” “possible,” “potential,” “predict,” “project,”
“should,” “strive,” “will,” “would,” “will be,” “will continue,”
“will likely result,” and similar expressions. All statements other
than statements of historical fact are forward-looking statements,
including statements regarding: the Company’s strategy and future
operations, including the Company’s ability to deliver consistent
growth for our partners and asset outperformance for investors, and
to remain nimble as market conditions evolve, the Company’s focus
on driving sustainable profitability through disciplined growth and
operating efficiency, the Company’s ability to consistently raise
capital to fund partner originations, and the Company’s commitment
to delivering sustainable profitability on an adjusted EBITDA basis
and executing on its cost-savings initiatives to drive operating
leverage; general economic trends and trends in the Company’s
industry and markets; and the Company’s financial outlook for the
second quarter and full year of 2023. These forward-looking
statements involve known and unknown risks, uncertainties and other
important factors that may cause the Company's actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Risks, uncertainties and
assumptions include factors relating to: the Company's ability to
attract new partners and to retain and grow its relationships with
existing partners to support the underlying investment needs for
its securitizations and funds products; the need to maintain a
consistently high level of trust in its brand; the concentration of
a large percentage of its investment revenue with a small number of
partners and platforms; its ability to sustain its revenue growth
rate or the growth rate of its related key operating metrics; its
ability to improve, operate and implement its technology, its
existing funding arrangements for the Company and its affiliates
that may not be renewed or replaced or its existing funding sources
that may be unwilling or unable to provide funding to it on terms
acceptable to it, or at all; the performance of loans facilitated
through its model; changes in market interest rates; its
securitizations, warehouse credit facility agreements; the impact
on its business of general economic conditions, including, but not
limited to rising interest rates, inflation, supply chain
disruptions, exchange rate fluctuations and labor shortages; the
effect of and uncertainties related to the COVID-19 pandemic
(including any government responses thereto); its ability to
realize the potential benefits of past or future acquisitions;
anticipated benefits and savings from our recently announced
reduction in workforce; changes in the political, legal and
regulatory framework for AI technology, machine learning, financial
institutions and consumer protection; the ability to maintain the
listing of our securities on Nasdaq; the financial performance of
its partners, and fluctuations in the U.S. consumer credit and
housing market; its ability to grow effectively through strategic
alliances; seasonal fluctuations in our revenue as a result of
consumer spending and saving patterns; pending and future
litigation, regulatory actions and/or compliance issues including
with respect to the merger with EJF Acquisition Corp.; and other
risks that are described in and the Company’s Form 20-F filed on
April 20, 2023 and subsequent filings with the U.S. Securities and
Exchange Commission. These forward-looking statements reflect the
Company's views with respect to future events as of the date hereof
and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, investors should not
place undue reliance on these forward-looking statements. The
forward-looking statements are made as of the date hereof, reflect
the Company’s current beliefs and are based on information
currently available as of the date they are made, and the Company
assumes no obligation and does not intend to update these
forward-looking statements.
Financial Information; Non-GAAP Financial Measures
Some of the unaudited financial information and data contained
in this press release and Form 6-K, such as Adjusted EBITDA, have
not been prepared in accordance with United States generally
accepted accounting principles (“U.S. GAAP”). To supplement the
unaudited consolidated financial statements prepared and presented
in accordance with U.S. GAAP, management uses the non-GAAP
financial measures Adjusted Net Income (Loss) and Adjusted EBITDA
to provide investors with additional information about our
financial performance and to enhance the overall understanding of
the results of operations by highlighting the results from ongoing
operations and the underlying profitability of our business.
Management believes it provides an additional tool for investors to
use in comparing our core financial performance over multiple
periods with the performance of other companies. However, non-GAAP
financial measures have limitations in their usefulness to
investors because they have no standardized meaning prescribed by
U.S. GAAP and are not prepared under any comprehensive set of
accounting rules or principles. In addition, non-GAAP financial
measures may be calculated differently from, and therefore may not
be directly comparable to, similarly titled measures used by other
companies. As a result, non-GAAP financial measures should be
viewed as supplementing, and not as an alternative or substitute
for, our unaudited consolidated financial statements prepared and
presented in accordance with U.S. GAAP. To address these
limitations, management provides a reconciliation of Adjusted Net
Income (Loss) and Adjusted EBITDA to net income (loss) attributable
to Pagaya’s shareholders. Management encourages investors and
others to review our financial information in its entirety, not to
rely on any single financial measure and to view Adjusted Net
Income (Loss) and Adjusted EBITDA in conjunction with its
respective related GAAP financial measures.
Non-GAAP financial measures include the following items:
Adjusted Net Income (Loss) is defined as net income (loss)
attributable to Pagaya Technologies Ltd.’s shareholders excluding
share-based compensation expense, change in fair value of warrant
liability, impairment, including credit-related charges,
restructuring expenses, and non-recurring expenses associated with
mergers and acquisitions.
Adjusted EBITDA is defined as net income (loss) attributable to
Pagaya Technologies Ltd.’s shareholders excluding share-based
compensation expense, change in fair value of warrant liability,
impairment, including credit-related charges, restructuring
expenses, non-recurring expenses associated with mergers and
acquisitions, interest expense, depreciation expense, and provision
for (benefit from) income taxes.
These items are excluded from our Adjusted Net Income (Loss) and
Adjusted EBITDA measures because they are noncash in nature, or
because the amount and timing of these items is unpredictable, is
not driven by core results of operations and renders comparisons
with prior periods and competitors less meaningful.
We believe Adjusted Net Income (Loss) and Adjusted EBITDA
provide useful information to investors and others in understanding
and evaluating our results of operations, as well as providing a
useful measure for period-to-period comparisons of our business
performance. Moreover, we have included Adjusted Net Income (Loss)
and Adjusted EBITDA because these are key measurements used by our
management internally to make operating decisions, including those
related to operating expenses, evaluate performance, and perform
strategic planning and annual budgeting. However, this non-GAAP
financial information is presented for supplemental informational
purposes only, should not be considered a substitute for or
superior to financial information presented in accordance with U.S.
GAAP and may be different from similarly titled non-GAAP financial
measures used by other companies. The tables below provide
reconciliations of Adjusted EBITDA to Net Loss Attributable to
Pagaya Technologies Ltd., its most directly comparable U.S. GAAP
amount.
In addition, outlook for the fiscal year, where adjusted, is
provided on a non-GAAP basis, which Pagaya will continue to
identify as it reports its future financial results. The Company
cannot reconcile its expected Adjusted EBITDA to expected Net Loss
Attributable to Pagaya under “Second Quarter 2023 Outlook” and
“Full-Year 2023 Outlook” without unreasonable effort because
certain items that impact net income (loss) and other reconciling
items are out of the Company's control and/or cannot be reasonably
predicted at this time, which unavailable information could have a
significant impact on the Company’s U.S. GAAP financial
results.
PAGAYA TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share and per
share data)
Three Months Ended March
31,
2023
2022
Revenue
Revenue from fees
$
175,254
$
158,325
Other Income
Interest income
10,397
12,209
Investment income
987
—
Total Revenue and Other Income
186,638
170,534
Costs and Operating Expenses
Production costs
125,057
92,280
Research and development (1)
21,131
23,626
Sales and marketing (1)
14,300
13,046
General and administrative (1)
51,126
51,594
Total Costs and Operating
Expenses
211,614
180,546
Operating Loss
(24,976
)
(10,012
)
Other income (loss), net
(66,980
)
313
Loss Before Income Taxes
(91,956
)
(9,699
)
Income tax expense (benefit)
6,667
(186
)
Net Loss Including Noncontrolling
Interests
(98,623
)
(9,513
)
Less: Net income (loss) attributable to
noncontrolling interests
(37,652
)
8,759
Net Loss Attributable to Pagaya
Technologies Ltd.
$
(60,971
)
$
(18,272
)
Per share data:
Net loss attributable to Pagaya
Technologies Ltd.
$
(60,971
)
$
(18,272
)
Less: Undistributed earnings allocated to
participated securities
—
(5,984
)
Net loss attributed to Pagaya Technologies
Ltd.
$
(60,971
)
$
(24,256
)
Net loss per share attributable to
Pagaya Technologies Ltd.:
Basic and Diluted (2)
$
(0.09
)
$
(0.12
)
Non-GAAP adjusted net income (loss)
(3)
$
(11,015
)
$
4,106
Non-GAAP adjusted net income (loss) per
share:
Basic (2)
$
(0.02
)
$
0.02
Diluted (2)
$
(0.02
)
$
0.01
Weighted average shares outstanding
(Class A and Class B):
Basic (2)
711,070,368
204,605,121
Diluted (2)
719,673,675
455,455,389
(1) The following table sets forth share-based compensation for
the periods indicated below:
Three Months Ended March
31,
2023
2022
Research and development
$
2,458
$
5,860
Selling and marketing
2,754
2,891
General and administrative
11,155
7,884
Total
$
16,367
$
16,635
(2) Prior period amounts have been retroactively adjusted to
reflect the 1:186.9 stock split effected on June 22, 2022.
(3) See “Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of this and adjusted EBITDA, another non-GAAP
measure.
PAGAYA TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(In thousands)
March 31, 2023
December 31, 2022
Assets
(Unaudited)
(Audited)
Current assets:
Cash and cash equivalents
$
289,387
$
309,793
Restricted cash
22,542
22,539
Fees and other receivables
58,469
59,219
Investments in loans and securities
3,274
1,007
Prepaid expenses and other current
assets
25,550
27,258
Total current assets
399,222
419,816
Restricted cash
4,833
4,744
Fees and other receivables
39,869
38,774
Investments in loans and securities
503,892
462,969
Equity method and other investments
26,881
25,894
Right-of-use asset
59,170
61,077
Property and equipment, net
34,126
31,663
Goodwill
9,782
—
Intangible assets
4,471
—
Prepaid expenses and other assets
114
142
Total non-current assets
683,138
625,263
Total Assets
$
1,082,360
$
1,045,079
Liabilities and Shareholders’
Equity
Current liabilities:
Accounts payable
$
2,738
$
1,739
Accrued expenses and other liabilities
27,513
49,496
Operating lease liability - current
7,988
8,530
Secured borrowing - current
45,807
61,829
Income taxes payable - current
11,675
6,424
Total current liabilities
95,721
128,018
Non-current liabilities:
Warrant liability
1,210
1,400
Revolving credit facility
95,000
15,000
Secured borrowing - non-current
118,430
77,802
Operating lease liability -
non-current
46,399
49,097
Income taxes payable - non-current
8,637
7,771
Deferred tax liabilities, net -
non-current
523
568
Total non-current liabilities
270,199
151,638
Total liabilities
365,920
279,656
Shareholders’ equity (deficit):
Additional paid-in capital
1,004,346
968,432
Accumulated other comprehensive income
(loss)
(1,259
)
(713
)
Accumulated deficit
(475,170
)
(414,199
)
Total Pagaya Technologies Ltd.
shareholders’ equity
527,917
553,520
Noncontrolling interests
188,523
211,903
Total shareholders’ equity
716,440
765,423
Total Liabilities and Shareholders’
Equity
$
1,082,360
$
1,045,079
PAGAYA TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended March
31,
2023
2022
Cash flows from operating
activities
Net loss including noncontrolling
interests
$
(98,623
)
$
(9,513
)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity method income (loss)
(987
)
—
Depreciation and amortization
3,516
477
Share-based compensation
16,367
16,635
Fair value adjustment to warrant
liability
(190
)
469
Impairment loss on available-for-sale debt
securities
68,347
—
Write-off of capitalized software
1,549
—
Change in operating assets and
liabilities:
Fees and other receivables
(345
)
(1,220
)
Deferred tax assets, net
—
(3,513
)
Deferred tax liabilities, net
(45
)
—
Prepaid expenses and other assets
3,528
43
Right-of-use asset
2,197
1,852
Accounts payable
999
(6,709
)
Accrued expenses and other liabilities
(22,573
)
(1,350
)
Operating lease liability
(3,530
)
(2,473
)
Income tax payable
6,117
2,479
Net cash used in operating
activities
(23,673
)
(2,823
)
Cash flows from investing
activities
Proceeds from the sale/maturity/prepayment
of:
Investments in loans and securities
25,985
27,313
Short-term deposits
—
5,020
Equity method and other investments
—
—
Cash and restricted cash acquired from
Darwin Homes, Inc.
1,608
—
Payments for the purchase of:
Investments in loans and securities
(121,732
)
(73,991
)
Property and equipment
(5,526
)
(1,513
)
Equity method and other investments
—
(747
)
Net cash used in investing
activities
(99,665
)
(43,918
)
Cash flows from financing
activities
Proceeds from secured borrowing
82,031
53,337
Proceeds received from noncontrolling
interests
10,128
8,547
Proceeds from revolving credit
facility
100,000
—
Proceeds from exercise of stock
options
484
208
Distributions made to noncontrolling
interests
(12,194
)
(29,658
)
Distributions made to revolving credit
facility
(20,000
)
—
Distributions made to secured
borrowing
(57,425
)
(1,860
)
Payments for deferred offering costs
—
(1,532
)
Net cash provided by financing
activities
103,024
29,042
Net increase in cash, cash equivalents and
restricted cash
(20,314
)
(17,699
)
Cash, cash equivalents and restricted
cash, beginning of period
337,076
204,575
Cash, cash equivalents and restricted
cash, end of period
$
316,762
$
186,876
PAGAYA TECHNOLOGIES LTD.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED)
(In thousands)
Three Months Ended March
31,
2023
2022
Net Loss Attributable to Pagaya
Technologies Ltd.
$
(60,971
)
$
(18,272
)
Adjusted to exclude the following:
Share-based compensation
16,367
16,635
Fair value adjustment to warrant
liability
(190
)
469
Impairment loss on certain investments
26,412
—
Write-off of capitalized software
1,524
—
Restructuring expenses
3,820
—
Non-recurring expenses
2,023
5,274
Adjusted Net Income (Loss)
(11,015
)
4,106
Adjusted to exclude the following:
Interest expenses
2,880
—
Provision for (benefit from) income
tax
6,667
(186
)
Depreciation and amortization
3,516
477
Adjusted EBITDA
$
2,048
$
4,397
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230516005505/en/
Investors & Analysts Jency John Head of Investor
Relations IR@pagaya.com
Media & Press Emily Passer Head of PR & External
Communications Press@pagaya.com
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