Exceeded second quarter guidance on all metrics:
- Record Network Volume of $1.96 billion
- Total Revenue and Other Income grew 8% year-over-year to $195.6
million
- Adjusted EBITDA grew by 255% to $17.5 million
Raises outlook ranges for full-year 2023 Network Volume and
Adjusted EBITDA
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 second quarter and the first
half of 2023 and provided its third quarter 2023 and full-year 2023
outlook.
For additional information, Pagaya's inaugural letter to
shareholders can be accessed here.
“We delivered another strong quarter while advancing our core
mission to connect more people to financial opportunity,” said Gal
Krubiner, co-founder and CEO of Pagaya Technologies. “Network
volume reached a record-high as we continued to achieve consistent
results for our lending partners and investors. We drove
sustainable gains in profitability through increased monetization
of our network and cost discipline. With continued momentum in our
business, we are raising our network volume and adjusted EBITDA
outlook for the year.”
Second Quarter 2023 Financial Highlights
All comparisons are made versus the same period in 2022 and on a
year-over-year basis unless otherwise stated.
- Network volume grew to $1.96 billion (exceeding outlook of
$1.8 billion to $1.9 billion), driven primarily by growth of
the Company’s personal loan vertical and supported by new partners
in auto and point-of-sale, partially offset by a continued low
conversion rate of application volume across the portfolio.
- The Company raised $3.1 billion across seven asset-backed
securitizations in the first half of the year and was once
again the number one personal loan ABS issuer in the US by issuance
size in the second quarter.
- Total revenue and other income increased 8% to $195.6
million (exceeding outlook of $180 million to $190 million),
primarily due to higher revenue from fees, which grew by 14% and
comprised approximately 95% of total revenue and other income.
- Revenue from fees less production costs (“FRLPC”) increased
12% to $65.1 million. FRLPC as a percentage of network volume
(“FRLPC margin”) was 3.3%, in line with the Company’s target
range of 3-4% of network volume.
- Adjusted EBITDA increased by 255% to $17.5 million
(exceeding outlook of $5 million to $10 million), driven
primarily by higher FRLPC and cost efficiencies.
- Adjusted net income of $0.9 million, which excludes
share-based compensation expense, a change in fair value of warrant
liability and non-recurring expenses.
- Net loss attributable to Pagaya shareholders of $31.3
million, from $175.3 million in the prior year, due to the
continued improvement in operating results and a reduction in
non-cash expenses such as share-based compensation expense.
Third Quarter 2023 Outlook
3Q23
Network Volume
Expected to be between $1.9 billion and
$2.0 billion
Total Revenue and Other Income
Expected to be between $190 million and
$200 million
Adjusted EBITDA
Expected to be between $10 million and $20
million
Full-Year 2023 Outlook
The Company is raising its outlook for Network Volume and
Adjusted EBITDA and maintaining its outlook for Total Revenue and
Other Income:
FY23
Network Volume
Expected to be between $7.6 billion and
$8.1 billion
Total Revenue and Other Income
Expected to be between $775 million and
$825 million
Adjusted EBITDA
Expected to be between $40 million and $50
million
Webcast
The Company will hold a webcast and conference call today,
August 10, 2023 at 5:00 p.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, the accompanying
materials 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# 13739484. The telephone replay will be available
starting shortly after the call until August 24, 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 continue to deliver
consistent results for its lending partners and investors; the
Company’s ability to continue to drive sustainable gains in
profitability; the Company’s ability to achieve continued momentum
in its business; and the Company’s financial outlook for Network
Volume, Total Revenue and Other Income and Adjusted EBITDA for the
third quarter 2023 and full year 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 Fee Revenue Less
Production Costs (“FRLPC”), FRLPC Margin, Adjusted EBITDA and
Adjusted Net Income (Loss), 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 FRLPC, FRLPC
Margin, 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 these non-GAAP measures provide an additional tool for
investors to use in comparing our core financial performance over
multiple periods. 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 and a calculation of FRLPC
and FRLPC Margin. 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:
Fee Revenue Less Production Costs (“FRLPC”) is defined as
revenue from fees less production costs. FRLPC margin is defined as
FRLPC divided by Network Volume.
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, transaction-related 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, transaction-related 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, Pagaya provides outlook for the third quarter and
fiscal year 2023 on a non-GAAP basis. The Company cannot reconcile
its expected Adjusted EBITDA to expected Net Loss Attributable to
Pagaya under “Third 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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue
Revenue from fees
$
185,685
$
163,302
$
360,939
$
321,627
Other Income
Interest income
10,193
17,252
20,590
29,461
Investment income (loss)
(266
)
995
721
995
Total Revenue and Other Income
195,612
181,549
382,250
352,083
Production costs
120,613
104,980
245,670
197,260
Research and development (1)
17,663
65,110
38,794
88,736
Sales and marketing (1)
14,558
50,604
28,858
63,650
General and administrative (1)
53,016
111,479
104,142
163,073
Total Costs and Operating
Expenses
205,850
332,173
417,464
512,719
Operating Loss
(10,238
)
(150,624
)
(35,214
)
(160,636
)
Other income (loss), net (2)
(16,895
)
6,300
(83,875
)
6,613
Loss Before Income Taxes
(27,133
)
(144,324
)
(119,089
)
(154,023
)
Income tax expense (2)
5,006
19,725
11,673
19,539
Net Loss Including Noncontrolling
Interests
(32,139
)
(164,049
)
(130,762
)
(173,562
)
Less: Net income (loss) attributable to
noncontrolling interests
(842
)
11,213
(38,494
)
19,972
Net Loss Attributable to Pagaya
Technologies Ltd.
$
(31,297
)
$
(175,262
)
$
(92,268
)
$
(193,534
)
Per share data:
Net loss attributable to Pagaya
Technologies Ltd. shareholders
$
(31,297
)
$
(175,262
)
$
(92,268
)
$
(193,534
)
Less: Undistributed earnings allocated to
participated securities
—
(5,531
)
—
(12,205
)
Net loss attributable to Pagaya
Technologies Ltd. ordinary shareholders
$
(31,297
)
$
(180,793
)
$
(92,268
)
$
(205,739
)
Net loss per share:
Basic and Diluted (3)
$
(0.04
)
$
(0.71
)
$
(0.13
)
$
(0.89
)
Non-GAAP adjusted net income (loss)
(4)
$
886
$
(18,648
)
$
(10,129
)
$
(14,542
)
Non-GAAP adjusted net income (loss) per
share:
Basic (3)
$
0.00
$
(0.07
)
$
(0.01
)
$
(0.06
)
Diluted (3)
$
0.00
$
(0.07
)
$
(0.01
)
$
(0.06
)
Weighted average shares outstanding
(Class A and Class B):
Basic (3)
715,317,456
255,474,778
712,643,696
230,180,474
Diluted (3)
723,971,957
480,217,835
721,268,385
465,379,968
(1) The following table sets forth share-based compensation for
the periods indicated below:
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Research and development
$
2,990
$
54,383
$
5,448
$
60,243
Selling and marketing
4,756
35,998
7,510
38,889
General and administrative
12,462
55,689
23,617
63,573
Total
$
20,208
$
146,070
$
36,575
$
162,705
(2) Amounts for the three and six months ended June 30, 2022
include certain adjustments for the second quarter of 2022 relating
to deferred tax assets and warrant liability, which were not
originally recorded as of and for the three and six months ended
June 30, 2022.
(3) Prior period amounts have been retroactively adjusted to
reflect the 1:186.9 stock split effected on June 22, 2022.
(4) See “Reconciliation of Non-GAAP Financial Measures.”
PAGAYA TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(In thousands)
June 30, 2023
December 31, 2022
Assets
(Unaudited)
(Audited)
Current assets:
Cash and cash equivalents
$
304,047
$
309,793
Restricted cash
22,540
22,539
Fees and other receivables
68,034
59,219
Investments in loans and securities
2,141
1,007
Prepaid expenses and other current
assets
24,619
27,258
Total current assets
421,381
419,816
Restricted cash
4,781
4,744
Fees and other receivables
37,505
38,774
Investments in loans and securities
588,314
462,969
Equity method and other investments
26,615
25,894
Right-of-use assets
56,748
61,077
Property and equipment, net
38,028
31,663
Goodwill
9,782
—
Intangible assets
3,826
—
Prepaid expenses and other assets
104
142
Total non-current assets
765,703
625,263
Total Assets
$
1,187,084
$
1,045,079
Liabilities and Shareholders’
Equity
Current liabilities:
Accounts payable
$
3,789
$
1,739
Accrued expenses and other liabilities
28,402
49,496
Operating lease liability - current
7,169
8,530
Secured borrowing - current
66,113
61,829
Income taxes payable - current
6,239
6,424
Total current liabilities
111,712
128,018
Non-current liabilities:
Warrant liability
3,835
1,400
Revolving credit facility
90,000
15,000
Secured borrowing - non-current
150,467
77,802
Operating lease liability -
non-current
43,921
49,097
Income taxes payable - non-current
9,206
7,771
Deferred tax liabilities, net -
non-current
570
568
Total non-current liabilities
297,999
151,638
Total liabilities
409,711
279,656
Redeemable convertible preferred
shares
74,250
—
Shareholders’ equity:
Additional paid-in capital
1,027,687
968,432
Accumulated other comprehensive income
(loss)
1,963
(713
)
Accumulated deficit
(506,467
)
(414,199
)
Total Pagaya Technologies Ltd.
shareholders’ equity
523,183
553,520
Noncontrolling interests
179,940
211,903
Total shareholders’ equity
703,123
765,423
Total Liabilities, Redeemable
Convertible Preferred Shares, and Shareholders’ Equity
$
1,187,084
$
1,045,079
PAGAYA TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months Ended June
30,
2023
2022
Cash flows from operating
activities
Net loss including noncontrolling
interests
$
(130,762
)
$
(173,562
)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity method income (loss)
(721
)
(995
)
Depreciation and amortization
7,984
1,148
Share-based compensation
36,575
162,705
Fair value adjustment to warrant
liability
2,435
(6,409
)
Impairment loss on available-for-sale debt
securities
78,327
—
Write-off of capitalized software
1,630
—
Gain on foreign exchange
(94
)
—
Change in operating assets and
liabilities:
Fees and other receivables
(7,602
)
(14,697
)
Deferred tax assets, net
—
732
Deferred tax liabilities, net
2
—
Prepaid expenses and other assets
4,587
(1,813
)
Right-of-use assets
4,619
727
Accounts payable
2,083
(8,658
)
Accrued expenses and other liabilities
(21,395
)
5,963
Operating lease liability
(4,455
)
(4,190
)
Income tax payable
1,274
13,409
Net cash used in operating
activities
(25,513
)
(25,640
)
Cash flows from investing
activities
Proceeds from the sale/maturity/prepayment
of:
Investments in loans and securities
91,360
50,090
Short-term deposits
—
5,020
Equity method and other investments
—
453
Cash and restricted cash acquired from
Darwin Homes, Inc.
1,608
—
Payments for the purchase of:
Investments in loans and securities
(273,339
)
(154,247
)
Property and equipment
(10,496
)
(1,657
)
Equity method and other investments
—
(3,700
)
Net cash used in investing
activities
(190,867
)
(104,041
)
Cash flows from financing
activities
Proceeds from sale of ordinary shares in
connection with the Business Combination and PIPE Investment, net
of issuance costs
—
291,872
Proceeds from secured borrowing
192,420
94,094
Proceeds received from noncontrolling
interests
15,293
29,522
Proceeds from revolving credit
facility
100,000
26,000
Proceeds from exercise of stock
options
1,430
446
Distributions made to noncontrolling
interests
(28,913
)
(53,361
)
Payments made to revolving credit
facility
(25,000
)
(26,000
)
Payments made to secured borrowing
(115,471
)
(7,719
)
Settlement of share-based compensation in
satisfaction of tax withholding requirements
(650
)
—
Proceeds from issuance of redeemable
convertible preferred shares, net of issuance costs
74,250
—
Net cash provided by financing
activities
213,359
354,854
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(2,687
)
—
Net increase (decrease) in cash, cash
equivalents and restricted cash
(5,708
)
225,173
Cash, cash equivalents and restricted
cash, beginning of period
337,076
204,575
Cash, cash equivalents and restricted
cash, end of period
$
331,368
$
429,748
PAGAYA TECHNOLOGIES LTD.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED)
($ in thousands, unless otherwise
noted)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net Loss Attributable to Pagaya
Technologies Ltd.
$
(31,297
)
$
(175,262
)
$
(92,268
)
$
(193,534
)
Adjusted to exclude the following:
Share-based compensation
20,208
146,070
36,575
162,705
Fair value adjustment to warrant
liability
2,625
(6,878
)
2,435
(6,409
)
Impairment loss on certain investments
4,236
—
30,648
—
Write-off of capitalized software
106
—
1,630
—
Restructuring expenses
1,146
—
4,966
—
Transaction-related expenses
2,025
—
2,025
—
Non-recurring expenses
1,837
17,422
3,860
22,696
Adjusted Net Income (Loss)
$
886
$
(18,648
)
$
(10,129
)
$
(14,542
)
Adjusted to exclude the following:
Interest expenses
7,134
3,177
10,014
3,177
Provision for income tax
5,006
19,725
11,673
19,539
Depreciation and amortization
4,468
671
7,984
1,148
Adjusted EBITDA
$
17,494
$
4,925
$
19,542
$
9,322
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Fee Revenue Less Production Costs
(FRLPC):
Revenue from fees
$
185,685
$
163,302
$
360,939
$
321,627
Production costs
120,613
104,980
245,670
197,260
Fee Revenue Less Production Costs
(FRLPC)
$
65,072
$
58,322
$
115,269
$
124,367
Fee Revenue Less Production Costs
Margin (FRLPC Margin):
Fee Revenue Less Production Costs
(FRLPC)
$
65,072
$
58,322
$
115,269
$
124,367
Network Volume (in millions)
1,957
1,947
3,807
3,597
Fee Revenue Less Production Costs
Margin (FRLPC Margin)
3.3
%
3.0
%
3.0
%
3.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230810102344/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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