Exceeded third quarter guidance on all metrics:
- Record Network Volume of $2.1 billion
- Record Total Revenue and Other Income of $211.8 million
- Record Adjusted EBITDA of $28.3 million
- Announced new partner integrations, including a top 5 bank in
the U.S. by total assets and a top 4 OEM auto captive by U.S.
vehicle sales
Raises outlook for full-year 2023 Network Volume, Total Revenue
and Other Income 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 third quarter and nine months
ended September 30, 2023 and raised its outlook for Network Volume,
Total Revenue and Other Income and Adjusted EBITDA.
For additional information, view Pagaya's third quarter 2023
letter to shareholders here.
“Our third quarter performance once again underscored the
strength of our two-sided network. We exceeded our outlook across
all metrics and achieved record network volume, revenue and
adjusted EBITDA,” said Gal Krubiner, co-founder and CEO of Pagaya
Technologies. “The strong momentum in our business and the
integration of our product by new transformational partnerships are
driving a step-change in our journey to transform the consumer
finance ecosystem.”
Third Quarter 2023 Financial Highlights
All comparisons are made versus the same period in 2022 and on a
year-over-year basis unless otherwise stated.
- Record network volume of $2.1 billion (exceeding outlook of
$1.9 billion to $2.0 billion), grew by 10%, driven primarily by
continued growth of the Company’s largest strategic partners in its
personal loan product and the ramp-up of newer partnerships.
- The Company raised $4.9 billion across eleven asset-backed
securitizations (“ABS”) in the nine months ended
September 30, 2023 and was once again the number one personal loan
ABS issuer in the US by issuance size in the third quarter.
- Record total revenue and other income of $211.8 million
(exceeding outlook of $190 million to $200 million), increased
4%, driven primarily by 9% growth in revenue from fees.
- Revenue from fees less production costs (“FRLPC”) increased
29% to $72.7 million. FRLPC as a percentage of network volume
(“FRLPC margin”) improved 50 basis points to 3.4%.
- Record adjusted EBITDA of $28.3 million (exceeding outlook
of $10 million to $20 million). This is an increase of $33
million compared to the prior year period, benefiting from the
growth in FRLPC and operating leverage as the business scales. The
Company also generated positive quarterly GAAP operating income for
the first time as a public company.
- Adjusted net income of $14.3 million, which excludes the
impact of non-cash items such as share-based compensation expense,
representing the second consecutive quarter of positive adjusted
net income.
- Net loss attributable to Pagaya shareholders of $21.8
million, compared to $74.8 million in the prior year period,
due primarily to the continued improvement in operating results and
lower non-cash expenses such as share-based compensation
expense.
Full-Year 2023 Outlook
The Company is raising its outlook for Network Volume, Total
Revenue and Other Income and Adjusted EBITDA:
FY23
Network Volume
Expected to be between $8.0
billion and $8.2 billion
Total Revenue and Other
Income
Expected to be between $800
million and $825 million
Adjusted EBITDA
Expected to be between $65
million and $75 million
Webcast
The Company will hold a webcast and conference call today,
November 2, 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, 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
1-855-327-6837 or 1-631-891-4304. The telephone replay can be
accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing
the conference ID# 10022646. The telephone replay will be available
starting shortly after the call until Thursday, November 16, 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
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 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 20-F filed on April 20, 2023
and subsequent filings with the U.S. Securities and Exchange
Commission, including the Company’s Report of Foreign Private
Issuer on Form 6-K filed or to be filed on November 2, 2023. 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 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 2023 on
a non-GAAP basis. The Company cannot reconcile its expected
Adjusted EBITDA to expected Net Loss Attributable to Pagaya under
“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
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Revenue
Revenue from fees
$
201,447
$
185,614
$
562,386
$
507,241
Other Income
Interest income
10,375
13,666
30,965
43,127
Investment income (loss)
(65
)
4,675
656
5,670
Total Revenue and Other Income
211,757
203,955
594,007
556,038
Production costs
128,792
129,115
374,462
326,375
Research and development (1)
18,039
38,643
56,833
127,379
Sales and marketing (1)
11,339
26,579
40,197
90,229
General and administrative (1)
53,425
73,790
157,567
236,863
Total Costs and Operating
Expenses
211,595
268,127
629,059
780,846
Operating Income (Loss)
162
(64,172
)
(35,052
)
(224,808
)
Other income (loss), net
(47,260
)
3,233
(131,135
)
9,846
Loss Before Income Taxes
(47,098
)
(60,939
)
(166,187
)
(214,962
)
Income tax expense (benefit)
(1,158
)
6,065
10,515
25,604
Net Loss Including Noncontrolling
Interests
(45,940
)
(67,004
)
(176,702
)
(240,566
)
Less: Net income (loss) attributable to
noncontrolling interests
(24,188
)
7,785
(62,682
)
27,757
Net Loss Attributable to Pagaya
Technologies Ltd.
$
(21,752
)
$
(74,789
)
$
(114,020
)
$
(268,323
)
Per share data:
Net loss attributable to Pagaya
Technologies Ltd. shareholders
$
(21,752
)
$
(74,789
)
$
(114,020
)
$
(268,323
)
Less: Undistributed earnings allocated to
participated securities
—
—
—
(12,205
)
Net loss attributable to Pagaya
Technologies Ltd. ordinary shareholders
$
(21,752
)
$
(74,789
)
$
(114,020
)
$
(280,528
)
Net loss per share:
Basic and Diluted (2)
$
(0.03
)
$
(0.11
)
$
(0.16
)
$
(0.73
)
Non-GAAP adjusted net income (loss)
(3)
$
14,296
$
(14,440
)
$
4,167
$
(28,981
)
Non-GAAP adjusted net income (loss) per
share:
Basic (2)
$
0.02
$
(0.02
)
$
0.01
$
(0.08
)
Diluted (2)
$
0.02
$
(0.02
)
$
0.01
$
(0.08
)
Weighted average shares outstanding
(Class A and Class B):
Basic (2)
728,563,796
679,431,901
715,411,921
381,831,895
Diluted (2)
796,392,671
964,179,889
738,147,927
666,968,467
(1) The following table sets
forth share-based compensation for the periods indicated below:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Research and development
$
3,467
$
16,208
$
8,915
$
71,687
Selling and marketing
3,469
15,645
10,979
54,534
General and administrative
13,801
28,449
37,418
92,022
Total
$
20,737
$
60,302
$
57,312
$
218,243
(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.”
PAGAYA TECHNOLOGIES
LTD.
CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(In thousands)
September 30,
2023
December 31,
2022
Assets
(Unaudited)
(Audited)
Current assets:
Cash and cash equivalents
$
252,578
$
309,793
Restricted cash
26,280
22,539
Fees and other receivables
67,460
59,219
Investments in loans and securities
249
1,007
Prepaid expenses and other current
assets
27,353
27,258
Income tax receivable
4,073
—
Total current assets
377,993
419,816
Restricted cash
5,320
4,744
Fees and other receivables
35,393
38,774
Investments in loans and securities
665,405
462,969
Equity method and other investments
26,550
25,894
Right-of-use assets
54,587
61,077
Property and equipment, net
40,680
31,663
Goodwill
10,945
—
Intangible assets
3,189
—
Prepaid expenses and other assets
145
142
Total non-current assets
842,214
625,263
Total Assets
$
1,220,207
$
1,045,079
Liabilities and Shareholders’
Equity
Current liabilities:
Accounts payable
$
1,299
$
1,739
Accrued expenses and other liabilities
29,332
49,496
Operating lease liability - current
6,213
8,530
Secured borrowing - current
44,193
61,829
Income taxes payable - current
591
6,424
Total current liabilities
81,628
128,018
Non-current liabilities:
Warrant liability
5,163
1,400
Revolving credit facility
100,000
15,000
Secured borrowing - non-current
227,356
77,802
Operating lease liability -
non-current
41,116
49,097
Income taxes payable - non-current
18,261
7,771
Deferred tax liabilities, net -
non-current
581
568
Total non-current liabilities
392,477
151,638
Total Liabilities
474,105
279,656
Redeemable convertible preferred
shares
74,250
—
Shareholders’ equity:
Additional paid-in capital
1,060,166
968,432
Accumulated other comprehensive income
(loss)
3,985
(713
)
Accumulated deficit
(528,219
)
(414,199
)
Total Pagaya Technologies Ltd.
shareholders’ equity
535,932
553,520
Noncontrolling interests
135,920
211,903
Total shareholders’ equity
671,852
765,423
Total Liabilities, Redeemable
Convertible Preferred Shares, and Shareholders’ Equity
$
1,220,207
$
1,045,079
PAGAYA TECHNOLOGIES
LTD.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
(In thousands)
Nine Months Ended September
30,
2023
2022
Cash flows from operating
activities
Net loss including noncontrolling
interests
$
(176,702
)
$
(240,566
)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity method income (loss)
(655
)
(5,670
)
Depreciation and amortization
13,161
4,077
Share-based compensation
57,312
223,007
Fair value adjustment to warrant
liability
3,763
(9,408
)
Issuance of ordinary shares related to
commitment shares
—
1,000
Impairment loss on available-for-sale debt
securities
115,644
10,706
Write-off of capitalized software
1,935
—
Tax benefit related to release of
valuation allowance
(1,162
)
—
Gain on foreign exchange
(302
)
—
Change in operating assets and
liabilities:
Fees and other receivables
(7,666
)
(31,832
)
Deferred tax assets, net
—
(2,820
)
Deferred tax liabilities, net
13
—
Prepaid expenses and other assets
1,812
(18,530
)
Right-of-use assets
6,435
2,322
Accounts payable
(374
)
(9,097
)
Accrued expenses and other liabilities
(16,682
)
23,250
Operating lease liability
(6,433
)
(6,204
)
Income tax receivable / payable
529
21,885
Net cash used in operating
activities
(9,372
)
(37,880
)
Cash flows from investing
activities
Proceeds from the sale/maturity/prepayment
of:
Investments in loans and securities
134,101
88,538
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
(436,242
)
(261,806
)
Property and equipment
(15,555
)
(18,266
)
Equity method and other investments
—
(5,749
)
Net cash used in investing
activities
(316,088
)
(191,810
)
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
314,276
94,094
Proceeds received from noncontrolling
interests
19,235
92,988
Proceeds from revolving credit
facility
110,000
26,000
Proceeds from exercise of stock
options
2,538
1,480
Distributions made to noncontrolling
interests
(39,321
)
(70,255
)
Payments made to revolving credit
facility
(25,000
)
(26,000
)
Payments made to secured borrowing
(182,358
)
(18,245
)
Settlement of share-based compensation in
satisfaction of tax withholding requirements
(650
)
—
Proceeds from issuance of ordinary shares
from the Equity Financing Purchase Agreement
3,793
—
Proceeds from issuance of redeemable
convertible preferred shares, net of issuance costs
74,250
—
Net cash provided by financing
activities
276,763
391,934
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(4,201
)
—
Net increase (decrease) in cash, cash
equivalents and restricted cash
(52,898
)
162,244
Cash, cash equivalents and restricted
cash, beginning of period
337,076
204,575
Cash, cash equivalents and restricted
cash, end of period
$
284,178
$
366,819
PAGAYA TECHNOLOGIES
LTD.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED)
($ in thousands, unless
otherwise noted)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Net Loss Attributable to Pagaya
Technologies Ltd.
$
(21,752
)
$
(74,789
)
$
(114,020
)
$
(268,323
)
Adjusted to exclude the following:
Share-based compensation
20,737
60,302
57,312
223,007
Fair value adjustment to warrant
liability
1,328
(3,000
)
3,763
(9,408
)
Impairment loss on certain investments
9,130
—
39,778
—
Write-off of capitalized software
305
—
1,935
—
Restructuring expenses
484
—
5,450
—
Transaction-related expenses
2,472
—
4,497
—
Non-recurring expenses
1,592
3,047
5,452
25,743
Adjusted Net Income (Loss)
$
14,296
$
(14,440
)
$
4,167
$
(28,981
)
Adjusted to exclude the following:
Interest expenses
9,918
243
19,932
3,420
Income tax expense (benefit)
(1,158
)
6,065
10,515
25,604
Depreciation and amortization
5,205
2,929
13,189
4,077
Adjusted EBITDA
$
28,261
$
(5,203
)
$
47,803
$
4,120
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Fee Revenue Less Production Costs
(FRLPC):
Revenue from fees
$
201,447
$
185,614
$
562,386
$
507,241
Production costs
128,792
129,115
374,462
326,375
Fee Revenue Less Production Costs
(FRLPC)
$
72,655
$
56,499
$
187,924
$
180,866
Fee Revenue Less Production Costs
Margin (FRLPC Margin):
Fee Revenue Less Production Costs
(FRLPC)
$
72,655
$
56,499
$
187,924
$
180,866
Network Volume (in millions)
2,112
1,924
5,919
5,521
Fee Revenue Less Production Costs
Margin (FRLPC Margin)
3.4
%
2.9
%
3.2
%
3.3
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101579025/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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