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Subjects: EARNINGS, Conference Call, Webcast

Pagaya Reports First Quarter 2024 Results


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 quarter ending March 31, 2024.

For additional information, view Pagaya's first quarter 2024 letter to shareholders here.

"Disciplined execution drove another record quarter across our key metrics. We began onboarding a bank partner in our POS vertical, enhanced our unit economics and strengthened our funding capabilities," said Gal Krubiner, co-founder and CEO of Pagaya Technologies. "These results reflect the strength of our business and our unwavering commitment to deliver more financial opportunity for U.S. consumers."

First Quarter 2024 Highlights

All comparisons are made versus the same period in 2023 and on a year-over-year basis unless otherwise stated.

Second Quarter 2024 Outlook

 

2Q24

Network Volume

Expected to be between $2.2 billion and $2.4 billion

Total Revenue and Other Income

Expected to be between $235 million and $245 million

Adjusted EBITDA

Expected to be between $40 million and $45 million

Full Year 2024 Outlook

 

FY24

Network Volume

Expected to be between $9.0 billion and $10.5 billion

Total Revenue and Other Income

Expected to be between $925 million and $1,050 million

Adjusted EBITDA

Expected to be between $150 million and $190 million

Webcast

The Company will hold a webcast and conference call today, May 9, 2024 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, 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 1-844-826-3035 or 1-412-317-5195. The telephone replay can be accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing the conference ID# 10187845. The telephone replay will be available starting shortly after the call until Thursday, May 23, 2024. 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 an 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; the Company's ability to achieve positive net cash flow by 2025; and the Company's financial outlook for Network Volume, Total Revenue and Other Income and Adjusted EBITDA for the full year 2024. 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 public health crises such as the COVID-19 pandemic (including any government responses thereto); geopolitical conflicts such as the war in Israel; 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 10-K filed on April 25, 2024 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 8-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 income tax expense (benefit).

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 FRLPC, FRLPC Margin, 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 FRLPC, FRLPC Margin, 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 fiscal year 2024 on a non-GAAP basis. The Company cannot reconcile its expected Adjusted EBITDA to expected Net Loss Attributable to Pagaya under "Full-Year 2024 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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

 

Three Months Ended
March 31,

?

 

2024

 

 

 

2023

 

Revenue

?

 

?

Revenue from fees

$

237,004

 

 

$

175,254

 

Other Income

 

 

 

Interest income

 

7,744

 

 

 

10,397

 

Investment income (loss)

 

528

 

 

 

987

 

Total Revenue and Other Income

 

245,276

 

 

 

186,638

 

Production costs

 

144,881

 

 

 

125,057

 

Technology, data and product development (1)

 

19,380

 

 

 

21,131

 

Sales and marketing (1)

 

10,257

 

 

 

14,300

 

General and administrative (1)

 

63,068

 

 

 

51,126

 

Total Costs and Operating Expenses

 

237,586

 

 

 

211,614

 

Operating Income (Loss)

 

7,690

 

 

 

(24,976

)

Other income (expense), net

 

(34,349

)

 

 

(66,980

)

Income (Loss) Before Income Taxes

 

(26,659

)

 

 

(91,956

)

Income tax expense (benefit)

 

5,003

 

 

 

6,667

 

Net Income (Loss) Including Noncontrolling Interests

 

(31,662

)

 

 

(98,623

)

Less: Net income (loss) attributable to noncontrolling interests

 

(10,439

)

 

 

(37,652

)

Net Income (Loss) Attributable to Pagaya Technologies Ltd.

$

(21,223

)

 

$

(60,971

)

 

 

 

 

Per share data:

 

 

 

Net loss per share:

 

 

 

Basic and Diluted (3)

$

(0.33

)

 

$

(1.03

)

 

 

 

 

Non-GAAP adjusted net income (loss) (2)

$

13,331

 

 

$

(11,015

)

Non-GAAP adjusted net income (loss) per share:

 

 

 

Basic (3)

$

0.21

 

 

$

(0.19

)

Diluted (3)

$

0.20

 

 

$

(0.19

)

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic (3)

 

64,504,458

 

 

 

59,255,864

 

Diluted (3)

 

65,890,518

 

 

 

59,972,806

 

(1)

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

 

Three Months Ended
March 31,

 

 

2024

 

 

2023

Technology, data and product development

$

2,905

 

$

2,458

Selling and marketing

 

2,852

 

 

2,754

General and administrative

 

9,718

 

 

11,155

Total

$

15,475

 

$

16,367

(2)

See "Reconciliation of Non-GAAP Financial Measures."

(3)

Share amounts have been retroactively adjusted to reflect the 1-for-12 reverse share split effected on March 8, 2024.

 

PAGAYA TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(In thousands)

 

March 31,

 

December 31,

 

 

2024

 

 

 

2023

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

274,495

 

 

$

186,478

 

Restricted cash

 

16,872

 

 

 

16,874

 

Fees and other receivables

 

87,370

 

 

 

79,526

 

Investments in loans and securities

 

1,298

 

 

 

2,490

 

Prepaid expenses and other current assets

 

19,059

 

 

 

18,034

 

Total current assets

 

399,094

 

 

 

303,402

 

Restricted cash

 

18,681

 

 

 

19,189

 

Fees and other receivables

 

35,230

 

 

 

34,181

 

Investments in loans and securities

 

892,853

 

 

 

714,303

 

Equity method and other investments

 

26,911

 

 

 

26,383

 

Right-of-use assets

 

53,631

 

 

 

55,729

 

Property and equipment, net

 

42,757

 

 

 

41,557

 

Goodwill

 

10,945

 

 

 

10,945

 

Intangible assets

 

1,913

 

 

 

2,550

 

Prepaid expenses and other assets

 

1,172

 

 

 

137

 

Total non-current assets

 

1,084,093

 

 

 

904,974

 

Total Assets

$

1,483,187

 

 

$

1,208,376

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

3,136

 

 

$

1,286

 

Accrued expenses and other liabilities

 

36,712

 

 

 

28,562

 

Current maturities of operating lease liabilities

 

6,663

 

 

 

6,931

 

Current portion of long-term debt

 

12,750

 

 

 

?

 

Secured borrowing

 

108,054

 

 

 

37,685

 

Income taxes payable

 

2,069

 

 

 

461

 

Total current liabilities

 

169,384

 

 

 

74,925

 

Non-current liabilities:

 

 

 

Warrant liability

 

1,342

 

 

 

3,242

 

Revolving credit facility

 

?

 

 

 

90,000

 

Long-term debt

 

222,298

 

 

 

?

 

Secured borrowing

 

223,102

 

 

 

234,028

 

Operating lease liabilities

 

41,838

 

 

 

43,940

 

Long-term tax liabilities

 

24,955

 

 

 

22,135

 

Deferred tax liabilities, net

 

107

 

 

 

107

 

Total non-current liabilities

 

513,642

 

 

 

393,452

 

Total Liabilities

 

683,026

 

 

 

468,377

 

Redeemable convertible preferred shares

 

74,250

 

 

 

74,250

 

Shareholders' equity:

 

 

 

Additional paid-in capital

 

1,214,969

 

 

 

1,101,914

 

Accumulated other comprehensive income (loss)

 

(24,279

)

 

 

444

 

Accumulated deficit

 

(563,860

)

 

 

(542,637

)

Total Pagaya Technologies Ltd. shareholders' equity

 

626,830

 

 

 

559,721

 

Noncontrolling interests

 

99,081

 

 

 

106,028

 

Total shareholders' equity

 

725,911

 

 

 

665,749

 

Total Liabilities, Redeemable Convertible Preferred Shares, and Shareholders' Equity

$

1,483,187

 

 

$

1,208,376

 

PAGAYA TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

?

Three Months Ended March 31,

?

 

2024

 

 

 

2023

 

Cash flows from operating activities

?

 

 

Net loss including noncontrolling interests

$

(31,662

)

 

$

(98,623

)

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

 

 

 

Equity method income (loss)

 

(528

)

 

 

(987

)

Depreciation and amortization

 

6,317

 

 

 

3,516

 

Share-based compensation

 

15,475

 

 

 

16,367

 

Fair value adjustment to warrant liability

 

(1,900

)

 

 

(190

)

Impairment loss on investments in loans and securities

 

26,851

 

 

 

68,347

 

Write-off of capitalized software

 

408

 

 

 

1,549

 

Other non-cash items

 

739

 

 

 

?

 

Change in operating assets and liabilities:

 

 

 

Fees and other receivables

 

(8,875

)

 

 

(345

)

Deferred tax liabilities, net

 

?

 

 

 

(45

)

Prepaid expenses and other assets

 

(1,936

)

 

 

3,528

 

Right-of-use assets

 

1,879

 

 

 

2,197

 

Accounts payable

 

1,885

 

 

 

999

 

Accrued expenses and other liabilities

 

8,298

 

 

 

(22,573

)

Operating lease liability

 

(1,524

)

 

 

(3,530

)

Income tax receivable / payable

 

5,043

 

 

 

6,117

 

Net cash provided by (used in) operating activities

 

20,470

 

 

 

(23,673

)

Cash flows from investing activities

 

 

 

Proceeds from the sale/maturity/prepayment of:

 

 

 

Investments in loans and securities

 

35,897

 

 

 

25,985

 

Cash and restricted cash acquired from Darwin Homes, Inc.

 

?

 

 

 

1,608

 

Payments for the purchase of:

 

 

 

Investments in loans and securities

 

(261,638

)

 

 

(121,732

)

Property and equipment

 

(5,145

)

 

 

(5,526

)

Net cash used in investing activities

 

(230,886

)

 

 

(99,665

)

Cash flows from financing activities

 

 

 

Proceeds from sale of ordinary shares, net of issuance costs

 

89,938

 

 

 

?

 

Proceeds from long-term debt

 

244,725

 

 

 

?

 

Proceeds from secured borrowing

 

97,448

 

 

 

82,031

 

Proceeds received from noncontrolling interests

 

2,815

 

 

 

10,128

 

Proceeds from revolving credit facility

 

44,000

 

 

 

100,000

 

Proceeds from exercise of stock options

 

161

 

 

 

484

 

Proceeds from issuance of ordinary shares from the Equity Financing Purchase Agreement

 

5,338

 

 

 

?

 

Distributions made to noncontrolling interests

 

(2,515

)

 

 

(12,194

)

Payments made to revolving credit facility

 

(134,000

)

 

 

(20,000

)

Payments made to secured borrowing

 

(38,005

)

 

 

(57,425

)

Payments made to long-term debt

 

(3,188

)

 

 

?

 

Long-term debt issuance costs

 

(7,974

)

 

 

?

 

Net cash provided by financing activities

 

298,743

 

 

 

103,024

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(820

)

 

 

?

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

87,507

 

 

 

(20,314

)

Cash, cash equivalents and restricted cash, beginning of period

 

222,541

 

 

 

337,076

 

Cash, cash equivalents and restricted cash, end of period

$

310,048

 

 

$

316,762

 

PAGAYA TECHNOLOGIES LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
($ in thousands, unless otherwise noted)

 

Three Months Ended March 31,

?

 

2024

 

 

 

2023

 

Net Loss Attributable to Pagaya Technologies Ltd.

$

(21,223

)

 

$

(60,971

)

Adjusted to exclude the following:

 

 

 

Share-based compensation

 

15,475

 

 

 

16,367

 

Fair value adjustment to warrant liability

 

(1,900

)

 

 

(190

)

Impairment loss on certain investments

 

19,483

 

 

 

26,412

 

Write-off of capitalized software

 

?

 

 

 

1,524

 

Restructuring expenses

 

820

 

 

 

3,820

 

Transaction-related expenses

 

400

 

 

 

?

 

Non-recurring expenses

 

276

 

 

 

2,023

 

Adjusted Net Income (Loss)

$

13,331

 

 

$

(11,015

)

Adjusted to exclude the following:

 

 

 

Interest expenses

 

15,164

 

 

 

2,880

 

Income tax expense (benefit)

 

5,003

 

 

 

6,667

 

Depreciation and amortization

 

6,317

 

 

 

3,516

 

Adjusted EBITDA

$

39,815

 

 

$

2,048

 

 

Three Months Ended March 31,

?

 

2024

 

 

 

2023

 

Fee Revenue Less Production Costs (FRLPC):

 

 

 

Revenue from fees

$

237,004

 

 

$

175,254

 

Production costs

 

144,881

 

 

 

125,057

 

Fee Revenue Less Production Costs (FRLPC)

$

92,123

 

 

$

50,197

 

 

 

 

 

Fee Revenue Less Production Costs Margin (FRLPC Margin):

 

 

 

Fee Revenue Less Production Costs (FRLPC)

$

92,123

 

 

$

50,197

 

Network Volume (in millions)

 

2,419

 

 

 

1,850

 

Fee Revenue Less Production Costs Margin (FRLPC Margin)

 

3.8

%

 

 

2.7

%

 


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