Pagaya Reports Second Quarter and First Half 2022 Results

·17 min read

2Q’22 Network Volume and Total Revenue grow 79% and 83%, respectively, in the second quarter, Adjusted EBITDA of $4.9 million

1H’22 Total Revenue of $352.1 million, Adjusted EBITDA of $9.3 million

Provides full-year 2022 outlook

NEW YORK & TEL AVIV, Israel, August 16, 2022--(BUSINESS WIRE)--Pagaya Technologies Ltd. (NASDAQ: PGY) ("Pagaya" or the "Company"), 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 2022 and provided its full-year 2022 outlook.

"In our first quarter reporting as a public company, we are proud to report continued strong network volume and total revenue growth. These results reflect the strength of a proprietary A.I. network that drives better outcomes and a B2B2C business model that delivers consistent growth through macro cycles," said Gal Krubiner, Chief Executive Officer of Pagaya. "Looking ahead, we will remain focused on our ambition to be the trusted A.I. partner for the banking system."

Second Quarter 2022 Financial Highlights

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

  • Network Volume increased 79% to $1.9 billion, reflecting strong growth from existing partnerships across all products

  • Total revenue and other income increased 83% to $181.5 million, primarily due to increased fee revenue from Network Volume growth

  • Net loss attributable to Pagaya shareholders of $146.3 million, impacted by share-based compensation of $146.0 million. Adjusted net income of $3.5 million, which excludes share-based compensation expense, change in fair value of warrant liability, and non-recurring expenses

  • Adjusted EBITDA of $4.9 million, reflecting ongoing investments in the long-term growth and scalability of the business

Recent Business Highlights

  • Business combination with EJF Acquisition Corp. closed on June 22, 2022, with an upsized PIPE investment of $350 million; Class A ordinary shares and public warrants began trading on Nasdaq on June 23, 2022 under the symbols "PGY" and "PGYWW," respectively

  • Onboarded large U.S. bank with over $100 billion in assets as a major partner in auto

  • On July 1, 2022, former Barclays Bank UK CEO, Ashok Vaswani, joined Pagaya as President, bringing 30+ years of financial services experience to help take the Company into its next chapter of growth

  • Continued strong application flow, with 63 million applications cumulatively evaluated from the beginning of 2019 through 2Q’22

  • Raised approximately $1.8 billion in investor capital into financing vehicles, across new ABS issuances and privately managed funds

The following table summarizes the Company’s outlook for full-year 2022:

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, August 16, 2022 at 8:30 a.m. Eastern Time. A live webcast of the call will be available via the Investor Relations section of the Company’s website at investor.pagaya.com. To listen to the live webcast, please go to the site at least five minutes prior to the scheduled start time in order to register, download and install any necessary audio software. Shortly before the call, a copy of the accompanying presentation will be made available on the Company’s website. Shortly after the call, a replay of the webcast will be available for 90 days on the Company’s website.

The conference call can also be accessed by dialing 1-877-407-9208 or 1-201-493-6784. The telephone replay can be accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing the conference ID# 13731631. The telephone replay will be available starting shortly after the call until August 30, 2022. A replay will also be available on the Investor Relations website following the call.

About Pagaya Technologies

Pagaya is a financial technology company working to reshape the lending marketplace by using machine learning, big data analytics, and sophisticated AI-driven credit and analysis technology. Pagaya was built to provide a comprehensive solution to enable the credit industry to deliver their customers a positive experience while simultaneously enhancing the broader credit ecosystem. Its proprietary API and capital solutions seamlessly integrate into its next-gen infrastructure network of partners to deliver a premium customer user experience and greater access to credit.

For more information on Pagaya's technology, services, and careers, please 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", "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 focus on its ambition to be the trusted A.I. partner for the banking system, 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 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 and Adjusted EBITDA to net income (loss) attributable to Pagaya Technologies Ltd.’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 and Adjusted EBITDA in conjunction with its respective related GAAP financial measures.

Non-GAAP financial measures include the following item:

Adjusted Net Income 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 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 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 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 their most directly comparable GAAP amounts, Net Loss Attributable to Pagaya Technologies Ltd.

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 Technologies Ltd. under "2022 Outlook" without unreasonable effort because certain items that impact net income and other reconciling metrics 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 SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(In thousands, except share and per share data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Revenue

Revenue from fees

$

163,302

$

92,179

$

321,627

$

173,455

Other Income

Interest income

17,252

6,969

29,461

9,801

Investment income (loss)

995

(58)

995

12

Total Revenue and Other Income

181,549

99,090

352,083

183,268

Costs and Operating Expenses

Production costs

104,980

62,592

197,260

99,774

Research and development(1)

65,110

8,562

88,736

39,412

Sales and marketing(1)

50,604

6,228

63,650

28,403

General and administrative(1)

111,479

11,338

163,073

34,107

Total Costs and Operating Expenses

332,173

88,720

512,719

201,696

Operating Income (Loss)

(150,624)

10,370

(160,636)

(18,428)

Other income (loss), net

13,159

(9,198)

13,472

(18,771)

Income (Loss) Before Income Taxes

(137,465)

1,172

(147,164)

(37,199)

Income tax expense (benefit)

(2,404)

1,627

(2,590)

7,793

Net Loss

(135,061)

(455)

(144,574)

(44,992)

Less: Net income attributable to noncontrolling interests

11,213

5,419

19,972

7,546

Net Loss Attributable to Pagaya Technologies Ltd.

$

(146,274)

$

(5,874)

$

(164,546)

$

(52,538)

Per share data:

Net loss attributable to Pagaya Technologies Ltd.

$

(146,274)

$

(5,874)

$

(164,546)

$

(52,538)

Less: Deemed dividend distribution

(23,612)

Net loss attributed to Pagaya Technologies Ltd.

$

(146,274)

$

(5,874)

$

(164,546)

$

(76,150)

Net loss per share attributable to Pagaya Technologies Ltd.:

Basic(2)

$

(0.24)

$

(0.01)

$

(0.27)

$

(0.14)

Diluted(2)

$

(0.24)

$

(0.01)

$

(0.27)

$

(0.14)

Non-GAAP adjusted net income(3)

$

3,481

$

5,281

$

7,587

$

25,596

Non-GAAP adjusted net income per share:

Basic(2)

$

0.01

$

0.01

$

0.01

$

0.05

Diluted(2)

$

0.00

$

0.01

$

0.01

$

0.04

Weighted average shares outstanding:

Basic(2)

621,680,496

594,168,810

616,371,816

563,664,856

Diluted(2)

846,420,843

743,246,506

851,569,948

629,922,341

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

Three Months Ended June 30,

Six Months Ended

June 30,

2022

2021

2022

2021

Research and development

$ 54,383

$ 567

$ 60,243

$ 25,074

Sales and marketing

35,998

406

38,889

16,779

General and administrative

55,689

889

63,573

17,264

Total share-based compensation in operating expenses

$ 146,070

$ 1,862

$ 162,705

$ 59,117

(2) Prior period amounts have been retroactively adjusted to reflect the 1:186.9 stock split and the conversion of preferred shares into ordinary shares, effected on June 22, 2022.

(3) See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of this and adjusted EBITDA, another non-GAAP measure.

PAGAYA TECHNOLOGIES LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

FOR THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(In thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Net Loss Attributable to Pagaya Technologies Ltd.

$

(146,274)

$

(5,874)

$

(164,546)

$

(52,538)

Adjusted to exclude the following:

Share-based compensation

146,070

1,862

162,705

59,117

Fair value adjustment to warrant liability

(13,737)

9,293

(13,268)

19,017

Non-recurring expenses

17,422

22,696

Adjusted Net Income

$

3,481

$

5,281

$

7,587

$

25,596

Adjusted to exclude the following:

Interest expenses

3,177

3,177

Income tax expense (benefit)

(2,404)

1,627

(2,590)

7,793

Depreciation and amortization

671

156

1,148

282

Adjusted EBITDA

$

4,925

$

7,064

$

9,322

$

33,671

PAGAYA TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2022 AND DECEMBER 31, 2021

(In thousands)

(Unaudited)

(Audited)

June 30,

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

$

414,968

$

190,778

Restricted cash

10,010

7,000

Short-term deposits

5,020

Fees receivable

35,066

32,332

Investments in loans and securities

4,173

5,142

Prepaid expenses and other current assets

7,918

6,263

Total current assets

472,135

246,535

Restricted cash

4,770

6,797

Fees receivable

31,171

19,208

Investments in loans and securities

382,708

277,582

Equity method and other investments

19,083

14,841

Right-of-use asset

41,797

Property and equipment, net

24,971

7,648

Deferred tax assets, net

27,078

5,681

Deferred offering costs

11,966

Prepaid expenses and other assets

158

Total non-current assets

531,736

343,723

Total Assets

$

1,003,871

$

590,258

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

2,922

$

11,580

Accrued expenses and other liabilities

39,870

17,093

Secured borrowing - current

28,007

Operating lease liability - current

6,423

Income taxes payable - current

11,760

Total current liabilities

88,982

28,673

Non-current liabilities:

Warrant liability

19,795

27,469

Secured borrowing - non-current

96,273

37,905

Operating lease liability - non-current

31,911

Income taxes payable

13,461

11,812

Total non-current liabilities

161,440

77,186

Total liabilities

250,422

105,859

Shareholders’ equity:

Additional paid-in capital(1)

857,680

420,217

Accumulated deficit

(276,424)

(111,878)

Total Pagaya Technologies Ltd. Shareholders’ Equity

581,256

308,339

Noncontrolling interests

172,193

176,060

Total shareholders’ Equity

753,449

484,399

Total Liabilities and Shareholders’ Equity

$

1,003,871

$

590,258

(1) Prior period amounts have been retroactively adjusted to reflect the 1:186.9 stock split and the conversion of preferred shares into ordinary shares, effected on June 22, 2022.

PAGAYA TECHNOLOGIES LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(In thousands)

Six Months Ended
June 30,

2022

2021

Cash flows from operating activities

Net income (loss)

$

(144,574)

$

(44,992)

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

Equity method income (loss)

(995)

(12)

Depreciation and amortization

1,148

282

Share-based compensation

162,705

59,117

Fair value adjustment to warrant liability

(13,268)

19,017

Change in operating assets and liabilities:

Fees receivable

(14,697)

(10,676)

Deferred tax assets, net

(21,397)

(1,921)

Prepaid expenses and other assets

(1,813)

(25,763)

Right-of-use asset

(41,797)

Accounts payable

(8,658)

2,914

Accrued expenses and other liabilities

5,963

1,895

Operating lease liability

38,334

Income tax accrual

13,409

9,402

Net cash (used in) provided by operating activities

(25,640)

9,263

Cash flows from investing activities

Proceeds from the sale/maturity/prepayment of:

Investments in loans and securities

50,090

42,106

Short-term deposits

5,020

Equity method and other investments

453

954

Payments for the purchase of:

Investments in loans and securities

(154,247)

(118,825)

Property and equipment

(1,657)

(885)

Equity method and other investments

(3,700)

(23,000)

Short-term deposits

(91,082)

Net cash used in investing activities

(104,041)

(190,732)

Cash flows from financing activities

Proceeds from sale of common stock in PIPE, net of issuance costs

291,872

Proceeds from issuance of redeemable convertible preferred shares, net

193,496

Proceeds from secured borrowing

94,094

Proceeds from revolving credit facility

26,000

Proceeds received from noncontrolling interests

29,522

83,788

Proceeds from exercise of stock options

446

17

Distribution made to noncontrolling interests

(53,361)

(33,368)

Distribution made to revolving credit facility

(26,000)

Distribution made to secured borrowing

(7,719)

Net cash provided by financing activities

354,854

243,933

Net increase in cash, cash equivalents and restricted cash

225,173

62,464

Cash, cash equivalents and restricted cash, beginning of period

204,575

5,880

Cash, cash equivalents and restricted cash, end of period

$

429,748

$

68,344

View source version on businesswire.com: https://www.businesswire.com/news/home/20220816005381/en/

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