Pagaya Reports Third Quarter 2022 Results

3Q’22 Network Volume grows 26% year-over-year to $1.9 billion

Total Revenue grows 49% year-over-year to reach record $204 million

Adjusted EBITDA of ($5.2) million

NEW YORK & TEL AVIV, Israel--()--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 third quarter ending September 30, 2022 and updates to its full-year 2022 outlook.

“We delivered another quarter of strong network volume and total revenue growth year-over-year, resulting in the highest quarterly revenue in our 6-year history. These results reflect the power of the network infrastructure we have created, the “rails” that connect our partners, investors, and consumers across the country,” said Gal Krubiner, Chief Executive Officer of Pagaya. “We believe we have built a unique business, led by an experienced management team, that will enable us to navigate the current macroeconomic cycle and continue executing on our mission.”

Third Quarter 2022 Financial Highlights

All comparisons are made versus the same period in 2021 unless otherwise stated

  • Network Volume increased 26% to $1.9 billion, reflecting strong growth from existing partnerships and newer products
  • Total revenue and other income increased 49% to $204.0 million, mainly due to increased fee revenue from Network Volume growth
  • Net loss attributable to Pagaya shareholders of $74.8 million, impacted by share-based compensation of $60.3 million. Adjusted net loss of $14.4 million, which excludes share-based compensation expense, a change in fair value of warrant liability and non-recurring expenses
  • Adjusted EBITDA of negative $5.2 million, reflecting lower margins in newer programs, financial markets volatility and ongoing investment in the business

Recent Business Highlights

  • Network expansion: Monthly application flow from existing partners grew by approximately 20% from January to September 2022. Top 3 Auto partner onboarded in May enabling further expansion in Auto product, with dealership representation in over 70% of all U.S. franchise dealerships. Top-tier PoS partner onboarded onto the Company’s platform
  • Consistently raising capital: Raised over $2 billion of investor capital into financing vehicles in the third quarter, in both public and private capital markets. Triple-A rating achieved from Moody’s and DBRS on Company’s most recent single-family-rental ABS transaction
  • Strengthening Pagaya’s network infrastructure: Continued strong application flow from existing and new partners, with 77 million applications evaluated from the beginning of 2019 through the third quarter of 2022. 41 million applications evaluated in the first nine months of 2022, representing 120% growth compared to the same period last year

Full-Year 2022 Outlook

The Company is maintaining its prior outlook for full-year 2022, with Network Volume and Adjusted EBITDA expected to be at the low end of their respective ranges.

 

 

FY22

Network Volume

 

Expected to range between $7.2 billion and $7.8 billion

Total Revenue

 

Expected to range between $700 million and $725 million

Adjusted EBITDA

 

Expected to range between negative $20 million and positive $10 million

Webcast

The Company will hold a webcast and conference call today, November 10, 2022 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, 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 1-888-396-8064 or 1-416-764-8649. The telephone replay can be accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing the conference ID# 00585771. The telephone replay will be available starting shortly after the call until November 24, 2022. 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, as it reshapes the financial services ecosystem. 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, Tel Aviv and Boston. 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 partnerships with certain key providers; the development, innovation, introduction and performance of, and demand for, the Company's products and services; the Company’s ability to continue to invest in the long-term growth and scalability of its business; the Company's future growth, investments, brand awareness, financial position, gross market value, revenue, transaction costs, operating income, provision for credit losses, and cash flows; and general economic trends and trends in the Company's industry and markets; and the Company’s financial outlook for the full year of 2022. 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); 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 6-K filed on August 16, 2022 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 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 (“GAAP”). To supplement the consolidated financial statements prepared and presented in accordance with 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 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 consolidated financial statements prepared and presented in accordance with 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 item:

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, and non-recurring expenses associated with the business combination with EJF Acquisition Corp. (the “Merger”).

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, non-recurring expenses associated with the Merger, interest expense, depreciation expense, and provision for 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 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 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 “Full-Year 2022 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 GAAP financial results.

PAGAYA TECHNOLOGIES LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(In thousands, except share and per share data)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue

 

 

 

 

 

Revenue from fees

$

185,614

 

 

$

128,149

 

 

$

507,241

 

 

$

301,604

 

Other Income

 

 

 

 

 

 

 

Interest income

 

13,666

 

 

 

8,455

 

 

 

43,127

 

 

 

18,256

 

Investment income (loss)

 

4,675

 

 

 

(14

)

 

 

5,670

 

 

 

(2

)

Total Revenue and Other Income

 

203,955

 

 

 

136,590

 

 

 

556,038

 

 

 

319,858

 

Costs and Operating Expenses

 

 

 

 

 

 

 

Production costs

 

129,115

 

 

 

81,731

 

 

 

326,375

 

 

 

181,505

 

Research and development(1)

 

38,643

 

 

 

11,932

 

 

 

127,379

 

 

 

51,344

 

Sales and marketing(1)

 

26,579

 

 

 

9,161

 

 

 

90,229

 

 

 

37,564

 

General and administrative(1)

 

73,790

 

 

 

18,961

 

 

 

236,863

 

 

 

53,068

 

Total Costs and Operating Expenses

 

268,127

 

 

 

121,785

 

 

 

780,846

 

 

 

323,481

 

Operating Income (Loss)

 

(64,172

)

 

 

14,805

 

 

 

(224,808

)

 

 

(3,623

)

Other income (loss), net(2)

 

3,233

 

 

 

(32,768

)

 

 

9,846

 

 

 

(51,539

)

Income (Loss) Before Income Taxes

 

(60,939

)

 

 

(17,963

)

 

 

(214,962

)

 

 

(55,162

)

Income tax expense(2)

 

6,065

 

 

 

3,624

 

 

 

25,604

 

 

 

11,417

 

Net Loss

 

(67,004

)

 

 

(21,587

)

 

 

(240,566

)

 

 

(66,579

)

Less: Net income attributable to noncontrolling interests

 

7,785

 

 

 

6,570

 

 

 

27,757

 

 

 

14,116

 

Net Loss Attributable to Pagaya Technologies Ltd.

$

(74,789

)

 

$

(28,157

)

 

$

(268,323

)

 

$

(80,695

)

Per share data:

 

 

 

 

 

 

 

Net loss attributable to Pagaya Technologies Ltd.

$

(74,789

)

 

$

(28,157

)

 

$

(268,323

)

 

$

(80,695

)

Less: Undistributed earnings allocated to participated securities

 

 

 

 

(3,153

)

 

 

(12,205

)

 

 

(13,494

)

Less: Deemed dividend distribution

 

 

 

 

 

 

 

 

 

 

(23,612

)

Net loss attributed to Pagaya Technologies Ltd.

$

(74,789

)

 

$

(31,310

)

 

$

(280,528

)

 

$

(117,801

)

Net loss per share attributable to Pagaya Technologies Ltd.:

 

 

 

 

 

 

 

Basic and Diluted(3)

$

(0.11

)

 

$

(0.16

)

 

$

(0.73

)

 

$

(0.61

)

Non-GAAP adjusted net income (loss)(4)

$

(14,440

)

 

$

11,283

 

 

$

(28,981

)

 

$

36,879

 

Non-GAAP adjusted net income per share:

 

 

 

 

 

 

 

Basic(3)

$

(0.02

)

 

$

0.06

 

 

$

(0.08

)

 

$

0.19

 

Diluted(3)

$

(0.02

)

 

$

0.03

 

 

$

(0.08

)

 

$

0.11

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic(3)

 

679,431,901

 

 

 

196,023,981

 

 

 

381,831,895

 

 

 

194,490,947

 

Diluted(3)

 

964,179,889

 

 

 

439,122,774

 

 

 

666,968,467

 

 

 

345,551,431

 

(1) The following table sets forth share-based compensation for the periods indicated below:

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Research and development

$

16,208

 

$

1,168

 

$

76,451

 

$

26,242

Sales and marketing

 

15,645

 

 

631

 

 

54,534

 

 

17,410

General and administrative

 

28,449

 

 

2,058

 

 

92,022

 

 

19,322

Total share-based compensation in operating expenses

$

60,302

 

$

3,857

 

$

223,007

 

$

62,974

(2) Amounts for the nine months ended September 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” for a reconciliation of this and adjusted EBITDA, another non-GAAP measure.

PAGAYA TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

(In thousands)

 

 

September 30,

 

December 31,

 

2022

 

2021

Assets

(Unaudited)

 

(Audited)

Current assets:

 

 

 

Cash and cash equivalents

$

327,896

 

 

$

190,778

 

Restricted cash

 

34,161

 

 

 

7,000

 

Short-term deposits

 

 

 

 

5,020

 

Fees and other receivables

 

52,122

 

 

 

32,332

 

Investments in loans and securities

 

2,446

 

 

 

5,142

 

Prepaid expenses and other current assets

 

22,512

 

 

 

6,263

 

Total current assets

 

439,137

 

 

 

246,535

 

Restricted cash

 

4,762

 

 

 

6,797

 

Fees and other receivables

 

31,250

 

 

 

19,208

 

Investments in loans and securities

 

442,840

 

 

 

277,582

 

Equity method and other investments

 

25,807

 

 

 

14,841

 

Right-of-use asset

 

66,366

 

 

 

 

Property and equipment, net

 

28,202

 

 

 

7,648

 

Deferred tax assets, net

 

8,501

 

 

 

5,681

 

Deferred offering costs

 

 

 

 

11,966

 

Prepaid expenses and other assets

 

2,706

 

 

 

 

Total non-current assets

 

610,434

 

 

 

343,723

 

Total Assets

$

1,049,571

 

 

$

590,258

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

2,483

 

 

$

11,580

 

Accrued expenses and other liabilities

 

40,343

 

 

 

17,093

 

Operating lease liability - current

 

8,983

 

 

 

 

Secured borrowing - current

 

26,251

 

 

 

 

Income taxes payable - current

 

10,924

 

 

 

 

Total current liabilities

 

88,984

 

 

 

28,673

 

Non-current liabilities:

 

 

 

Warrant liability

 

3,080

 

 

 

27,469

 

Secured borrowing - non-current

 

87,503

 

 

 

37,905

 

Operating lease liability - non-current

 

53,501

 

 

 

 

Income taxes payable - non-current

 

22,773

 

 

 

11,812

 

Total non-current liabilities

 

166,857

 

 

 

77,186

 

Total liabilities

 

255,841

 

 

 

105,859

 

Redeemable convertible preferred shares

 

 

 

 

307,047

 

Shareholders’ equity:

 

 

 

Additional paid-in capital

 

947,381

 

 

 

113,170

 

Accumulated deficit

 

(380,201

)

 

 

(111,878

)

Total Pagaya Technologies Ltd. Shareholders’ Equity

 

567,180

 

 

 

1,292

 

Noncontrolling interests

 

226,550

 

 

 

176,060

 

Total shareholders’ Equity

 

793,730

 

 

 

177,352

 

Total Liabilities and Shareholders’ Equity

$

1,049,571

 

 

$

590,258

 

PAGAYA TECHNOLOGIES LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (In thousands)​

 

 

Nine Months Ended September 30,

2022

 

2021

Cash flows from operating activities

 

 

Net loss

$

(240,566

)

 

$

(66,579

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

Equity method income (loss)

 

(5,670

)

 

 

2

 

Depreciation and amortization

 

4,077

 

 

 

489

 

Share-based compensation

 

223,007

 

 

 

62,974

 

Fair value adjustment to warrant liability

 

(9,408

)

 

 

51,477

 

Issuance of ordinary shares related to commitment shares

 

1,000

 

 

 

 

Loss from investment in loans and securities

 

10,706

 

 

 

 

Change in operating assets and liabilities:

 

 

 

Fees and other receivables

 

(31,832

)

 

 

(16,929

)

Deferred tax assets, net

 

(2,820

)

 

 

(2,979

)

Prepaid expenses and other assets

 

(18,530

)

 

 

(17,221

)

Right-of-use asset

 

2,322

 

 

 

 

Accounts payable

 

(9,097

)

 

 

4,242

 

Accrued expenses and other liabilities

 

23,250

 

 

 

8,265

 

Operating lease liability

 

(6,204

)

 

 

 

Income tax payable

 

21,885

 

 

 

14,059

 

Net cash (used in) provided by operating activities

 

(37,880

)

 

 

37,800

 

Cash flows from investing activities

 

 

 

Proceeds from the sale/maturity/prepayment of:

 

 

 

Investments in loans and securities

 

88,538

 

 

 

27,935

 

Short-term deposits

 

5,020

 

 

 

 

Equity method and other investments

 

453

 

 

 

925

 

Payments for the purchase of:

 

 

 

Investments in loans and securities

 

(261,806

)

 

 

(142,146

)

Property and equipment

 

(18,266

)

 

 

(1,517

)

Equity method and other investments

 

(5,749

)

 

 

(22,991

)

Short-term deposits

 

 

 

 

(51,446

)

Net cash used in investing activities

 

(191,810

)

 

 

(189,240

)

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 issuance of redeemable convertible preferred shares, net

 

 

 

 

172,645

 

Proceeds from issuance of ordinary share warrants, net

 

 

 

 

20,807

 

Proceeds from secured borrowing

 

94,094

 

 

 

 

Proceeds received from noncontrolling interests

 

92,988

 

 

 

129,970

 

Proceeds from revolving credit facility

 

26,000

 

 

 

 

Proceeds from exercise of stock options

 

1,480

 

 

 

171

 

Distribution made to noncontrolling interests

 

(70,255

)

 

 

(54,457

)

Distribution made to revolving credit facility

 

(26,000

)

 

 

 

Distribution made to secured borrowing

 

(18,245

)

 

 

 

Payment for deferred offering costs

 

 

 

 

(4,278

)

Net cash provided by financing activities

 

391,934

 

 

 

264,858

 

Net increase in cash, cash equivalents and restricted cash

 

162,244

 

 

 

113,418

 

Cash, cash equivalents and restricted cash, beginning of period

 

204,575

 

 

 

5,880

 

Cash, cash equivalents and restricted cash, end of period

$

366,819

 

 

$

119,298

 

Reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated statements of financial position to the amounts shown in the statements of cash flow above:

 

 

 

Cash and cash equivalents

$

327,896

 

 

$

101,236

 

Restricted cash - current

 

34,161

 

 

 

12,000

 

Restricted cash - non-current

 

4,762

 

 

 

6,062

 

Total cash, cash equivalents, and restricted cash

$

366,819

 

 

$

119,298

 

PAGAYA TECHNOLOGIES LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(In thousands)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2022

 

2021

 

2022

 

2021

Net Loss Attributable to Pagaya Technologies Ltd.

$

(74,789

)

 

$

(28,157

)

 

$

(268,323

)

 

$

(80,695

)

Adjusted to exclude the following:

 

 

 

 

 

 

 

Share-based compensation

 

60,302

 

 

 

3,857

 

 

 

223,007

 

 

 

62,974

 

Fair value adjustment to warrant liability

 

(3,000

)

 

 

32,460

 

 

 

(9,408

)

 

 

51,477

 

Non-recurring expenses

 

3,047

 

 

 

3,123

 

 

 

25,743

 

 

 

3,123

 

Adjusted Net Income (Loss)

 

(14,440

)

 

 

11,283

 

 

 

(28,981

)

 

 

36,879

 

Adjusted to exclude the following:

 

 

 

 

 

 

 

Interest expenses

 

243

 

 

 

 

 

 

3,420

 

 

 

 

Income tax expense

 

6,065

 

 

 

3,624

 

 

 

25,604

 

 

 

11,417

 

Depreciation and amortization

 

2,929

 

 

 

207

 

 

 

4,077

 

 

 

489

 

Adjusted EBITDA

$

(5,203

)

 

$

15,114

 

 

$

4,120

 

 

$

48,785

 

 

Contacts

Investors & Analysts
Jency John
Head of Investor Relations
IR@pagaya.com

Media & Press
Emily Passer
VP, Head of PR & External Communications
Press@pagaya.com

Contacts

Investors & Analysts
Jency John
Head of Investor Relations
IR@pagaya.com

Media & Press
Emily Passer
VP, Head of PR & External Communications
Press@pagaya.com