Pagaya Technologies Ltd.
For the period ended Mar 31, 2025. Filed May 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
PGY$17.50+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001883085-24-000190
Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0001883085-25-000082
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 172 previous paragraphs and 159 current paragraphs.
88 unchanged; 46 reworded; 25 added; 30 removed; 8 previous and 0 current paragraphs rearranged.
Tables are not compared: 25 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
We expect economic cycles to affect our financial performance and related metrics. Macroeconomic conditions, including persistent inflation, elevated interest rates, supply chain constraints, geopolitical tensions, climate-related disruptions, and evolving global conflicts, may affect consumer demand for financial products, our Partners’ ability to generate and convert customer application volume, and the availability and cost of funding from investors through our Financing Vehicles. The war in Israel and Gaza, which escalated following the October 7, 2023, attacks by a terrorist organization primarily based in the Gaza Strip remains a source of uncertainty. While the conflict has not materially disrupted our operations to date, its potential to intensify or expand, coupled with related instability in the Middle East, could adversely impact regional and global economic conditions, energy prices, and investor confidence. Such developments may increase volatility in financial markets, elevate operating costs, or constrain funding availability, potentially affecting our business, financial condition, results of operations, and prospects. We continue to monitor the situation closely, though no significant direct impact has been observed as of the date of this Report. The Russia-Ukraine conflict, ongoing since February 2022, persists with no clear resolution as of early 2025. While we have not experienced material impacts on our business from this conflict, prolonged hostilities or further escalation, such as expanded sanctions, disruptions to energy markets, or broader economic fallout, could exacerbate global inflationary pressures and supply chain challenges. These factors may indirectly influence consumer credit demand, investor appetite for risk assets, and our Network Volume. We assess this risk as manageable but remain vigilant given its potential to contribute to wider economic disruptions.
Current report
Macroeconomic pressures, including sustained high interest rates and inflation, continue to shape our operating environment. Central banks, including the Federal Reserve, have maintained elevated rates into 2025 to combat inflationary trends, increasing borrowing costs and potentially straining borrowers’ ability to service debt. This could lead to higher delinquencies, defaults, and charge-offs, reducing investor returns and dampening demand for assets generated on our platform. Inflation, though moderating from its 2022-2023 peak, remains above historical norms, driving up operating costs such as employee compensation, financing expenses, and technology investments. These pressures have been partially offset by operational efficiencies and growth in application volume from our Partners, supporting net growth in Network Volume despite a higher cost of capital. Global supply chain disruptions, exacerbated by geopolitical tensions and extreme weather events linked to climate change, continue to challenge economic stability. These disruptions may indirectly affect our Partners’ ability to serve customers and could increase costs across our network. Meanwhile, the elevated risk-free rate environment has shifted investor preferences, with some favoring safer assets over consumer credit. While our ability to raise funding remains intact, the cost of capital has risen, necessitating adjustments in conversion ratios to meet investor return expectations. Strong Partner application volume has mitigated this impact, sustaining Network Volume growth through 2024 and into early 2025. Adverse developments in the financial sector, such as regional bank stresses, liquidity concerns, or prolonged U.S. federal debt ceiling debates, could further complicate our operating landscape. In 2024, isolated bank failures and downgrades sparked temporary market volatility, though our direct exposure remains limited. Should these events escalate into systemic liquidity issues, they could impair our Partners’ and counterparties’ ability to meet obligations, disrupt funding flows, or destabilize financial markets, adversely affecting our performance. Similarly, ongoing trade tensions, particularly between the U.S. and China, and potential tariff escalations could introduce additional uncertainty, though we have not yet seen significant effects on our operations. Economic downturns or prolonged uncertainty may pressure the performance of assets acquired by Financing Vehicles from our network. However, these conditions also provide valuable data to refine our AI technology, enhancing our ability to adapt to shifting market dynamics and deliver value to Partners and investors. Historical events like the COVID-19 pandemic and the current inflationary period have underscored the resilience of our platform, validating its outcomes even amid volatility. For a detailed discussion of uncertainties and other factors that could impact our operating results, see “Risk Factors” section in…
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Current report
Contract fees. Contract fees primarily include administration and management fees, and performance fees. Administration and management fees are contracted upon the establishment of Financing Vehicles and these fees are earned as the Financing Vehicle purchase loans and as the Company provides services over their remaining lives, except for the portion management fees that are recognized at the point in time based on contract terms.
Current report
Costs and Operating Expenses
Current report
Production Costs
Current report
Sales and Marketing
Current report
General and Administrative
Current report
Other Expenses, Net
Current report
Income Tax Expense
Current report
Costs and Operating Expenses
Current report
Production Costs
Current report
Technology, data and product development costs remained relatively flat year over year. Excluding $1.3 million contributions from Theorem in the current period, technology, data and product development costs decreased by $1.2 million. This decrease was primarily driven by a $2.9 million decrease in compensation expense, partially offset by a $0.7 million increase in depreciation expenses and a $1.1 million increase in other miscellaneous costs.
Current report
Sales and Marketing
Current report
General and Administrative
Current report
General and administrative costs for the three months ended March 31, 2025 decreased by $16.9 million, compared to the same period in 2024. Excluding $2.6 million contribution from Theorem in the current period, general and administrative costs for the three months ended March 31, 2025 decreased $19.5 million, or 31%, primarily driven by a $12.5 million decrease in transaction costs, and a $3.0 million decrease in compensation expenses.
Current report
Income Tax Expense
Current report
FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA
Current report
FRLPC is defined as revenue from fees less production costs. We use FRLPC as part of overall assessment of performance, including the preparation of our annual budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance. The Company is including a reconciliation between FRLPC and operating income, which we consider the most directly comparable GAAP financial measure. FRLPC is designed to assess operational efficiency by measuring fee revenue against production costs, excluding operating expenses not directly tied to revenue production, such as technology development, sales and marketing, and general and administrative costs. FRLPC is intended to highlight the scalability of our platform as Network Volume (the gross dollar amount of assets originated or services rendered using our technology) increases, demonstrating our ability to efficiently generate fee revenue while managing production costs. FRLPC %, defined as FRLPC divided by Network Volume, further illustrates this efficiency, showing how effectively we convert Network Volume into fee revenue relative to production costs as our platform scales.
Current report
Securitizations
Current report
In connection with asset-backed securitizations, we sponsor and establish securitization vehicles to purchase loans originated by our Partners. Securities issued from our asset-backed securitizations are senior or subordinated, based on the waterfall criteria of loan payments to each security class. The subordinated residual interests issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria. To comply with risk retention regulatory requirements, we retain at least 5% of the securities issued by securitization vehicles and may choose to hold more than 5% depending on many factors. This 5% risk retention is determined based on the fair value of the securities under US GAAP at the time of closing. In ordinary course of business, we enter into certain financing arrangements to finance our risk retention balance in certain notes and securities retained from securitization transactions. From time to time, the Company makes cash deposits that serve to collateralize guarantees for related transactions, included in restricted cash on the consolidated balance sheets. For further information, see Note 4 and Note 5, respectively, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Current report
For the three months ended March 31, 2025, net cash used in financing activities of $3.8 million was primarily attributable to $46.9 million of payment made to secured borrowing, $4.4 million of distributions made to noncontrolling interests, and $4.4 million of repayments made to long-term debt. These net cash outflows were offset by $49.2 million of proceeds from secured borrowing.
Current report
The initial exchange rate of the Notes is 71.4669 Class A Ordinary Shares per $1,000 principal amount of Notes (which is equivalent to an initial exchange price of approximately $13.99 per share). The exchange rate will be subject to adjustment upon the occurrence of certain events. In addition, upon the occurrence of a “make-whole fundamental change” (as defined in the indenture governing the Notes) or if Pagaya US redeems the Notes, Pagaya US will, in certain circumstances, increase the exchange rate by a number of additional Class A Ordinary Shares for a holder who elects to convert its Notes in connection with such make-whole fundamental change or to convert its Notes called for redemption during the related redemption exchange period.
Current report
Pagaya US may redeem the Notes in whole or in part on or after October 5, 2027, only if the last reported sale price per Class A Ordinary Share exceeds 130% of the exchange price for a specified period of time and certain other conditions are satisfied. The redemption price will be equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Current report
If a “fundamental change” (as defined in the indenture governing the Notes) of the Company occurs, then, subject to a limited exception, noteholders may require Pagaya US to repurchase their Notes for cash. The repurchase price will be equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Current report
Our significant accounting policies and their effect on our financial condition and results of operations are more fully described in our audited consolidated financial statements included in our Annual Report on Form 10-K. Management has reassessed the critical accounting policies and estimates as disclosed in Note 2 to the audited Consolidated Financial Statements included in our Annual Report on Form 10-K and determined that there were no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2025.
Removed paragraphs (30)
Previous report
We expect economic cycles to affect our financial performance and related metrics. Macroeconomic conditions, including, but not limited to the evolving conflict in Israel, rising interest rates, inflation, supply chain disruptions, labor shortages, bank failures, U.S. deficit concerns, and the Russian invasion of Ukraine, may impact consumer demand for financial products, our Partners’ ability to generate and convert customer application volume, as well as the availability of funding from our investors through the Financing Vehicles. On October 7, 2023, a terrorist organization primarily based in the Gaza Strip launched a series of attacks on Israel, igniting a war with Israel. The conflict is rapidly evolving and developing, and the intensity and duration of the current war and any escalation is difficult to predict, as are its economic impacts on the Company’s business and operations and on regional and global political and economic conditions in general. Although the Company’s business operations have not been materially impacted due to this evolving conflict as of the date of this Report, our business, financial condition, results of operations and prospects may be adversely affected due to the ongoing nature of this conflict. The recent rise in inflation and corresponding rapid rise in interest rates may increase financing costs and adversely impact the ability of borrowers to service their debt, which could lead to deterioration of the credit performance of loans and impact investor returns, and therefore may result in lower demand from investors for assets generated on our platform and lead to constraints on our ability to fund new Network Volume. In addition, rising inflation may create an escalation in our operating costs, including employee compensation, financing costs, and general corporate expenses, which could reduce our cash flow and operating income. As of the date of this report, we have not experienced material impacts to our business performance from inflationary pressure. Higher interest rates often lead to higher payment obligations, which may reduce the ability of borrowers to remain current on their obligations and therefore, lead to increased delinquencies, defaults, customer bankruptcies, charge-offs, and decreasing recoveries. Any impact to investor returns may lead to an adverse impact on our earnings. The increased risk-free rate of return may impact investor demand for risk assets such as consumer credit, which may constrain our ability to raise new funding for Network Volume. While our ability to raise new funding has not been materially impacted, the cost of capital has increased due to the higher interest rate environment which has led to a reduction in conversion ratio to meet investor return hurdles, more than offset by an increase in application volume to our network from our Partners, resulting in net growth in Network Volume this year. We continue to closely monitor the ongoing Russia-Ukraine conflict and its …
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Previous report
Other Income (expense), net
Previous report
(2) Share amounts have been retroactively adjusted to reflect the 1-for-12 reverse share split effected on March 8, 2024.
Previous report
(3) See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of this and Adjusted EBITDA.
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Technology, data and product development costs for the three months ended September 30, 2024 decreased $1.4 million, or 8%, compared to the same period in 2023. The decrease was primarily driven by a $4.2 million decrease in compensation expenses, partially offset by a $2.2 million increase in depreciation of capitalized software, inclusive of impairment charges and a $0.8 million increase in professional expenses.
Previous report
Sales and marketing costs for the three months ended September 30, 2024 remained relatively flat compared to the same period in 2023.
Previous report
General and administrative costs for the three months ended September 30, 2024 increased $4.4 million, or 8%, compared to the same period in 2023. Excluding a $12.8 million loss from loan purchases during the three months ended September 30, 2024, general and administrative costs decreased $8.4 million, primarily driven by a $5.1 million decrease in compensation expenses, a $1.6 million decrease in professional expenses, and a $1.9 million decrease in overhead allocation and other miscellaneous costs.
Previous report
Other expense, net for the three months ended September 30, 2024 increased $60.9 million compared to the same period in 2023. The increase was primarily due to a higher credit-related impairment loss of $40.6 million on certain investments, driven by changes in the fair value of investments in loans and securities as a result of fluctuations in key inputs to the discounted cash flow models used to determine fair value. We are not exposed economically to a portion of these fair value changes as certain investments are held within consolidated VIEs. For further information, see “—Net Income (Loss) Attributable to Noncontrolling Interests.” Also contributing to the increase was higher interest expenses of $17.5 million due to higher interest rates and increased borrowings to support business growth.
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Comparison of Nine Months Ended September 30, 2024 and 2023
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Total Revenue and Other Income
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Total revenue and other income, increased by $158.8 million, or 27%, to $752.9 million for the nine months ended September 30, 2024 from $594.0 million for the nine months ended September 30, 2023. The increase was primarily driven by an increase in revenue from fees, partially offset by decreases in interest income and investment income (loss).
Previous report
Revenue from fees for the nine months ended September 30, 2024 increased by $166.5 million, or 30%, to $728.9 million, compared to the same period in 2023. The increase was primarily due to a $160.7 million increase in Network AI fees, comprised of AI integration fees and capital markets execution fees, from $505.5 million for the nine months ended September 30, 2023 to $666.2 million for the nine months ended September 30, 2024. The increase in Network AI fees was primarily driven by improved economics in AI integration fees earned from certain Partners, as well as the growth in Network Volume, which increased by 20% from $5.9 billion for the nine months ended September 30, 2023 to $7.1 billion for the nine months ended September 30, 2024. Capital execution fees earned from our ABS transactions for the nine months ended September 30, 2023 remained relatively flat compared to the same period in 2023.
Previous report
Interest income decreased by $6.3 million, or 20%, to $24.7 million for the nine months ended September 30, 2024 from $31.0 million for the nine months ended September 30, 2023. The decrease in interest income was directly related to our risk retention holdings and related securities held in our consolidated VIEs as well as certain risk retention holdings held directly by our consolidated subsidiaries. For further information, see “—Net Income (Loss) Attributable to Noncontrolling Interests.” The decrease in interest income was primarily the result of changes in structure and composition of the investments in loans and securities portfolio, partially offset by higher interest income on our cash balances.
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Technology, Data and Product Development
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Technology, data and product development costs for the nine months ended September 30, 2024 increased $1.1 million, or 2%, compared to the same period in 2023. The increase was primarily driven by a $8.2 million increase in depreciation of capitalized software, inclusive of impairment charges, and a $1.6 million increase in overhead allocation and other miscellaneous costs. These increases were partially offset by a $8.1 million decrease in compensation expenses and a $1.5 million decrease in server costs.
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General and administrative costs for the nine months ended September 30, 2024 increased $27.7 million, or 18%, compared to the same period in 2023. Excluding a $31.2 million loss from loan purchases during the nine months ended September 30, 2024, general and administrative costs decreased $3.5 million, primarily driven by a $6.3 million decrease in compensation expenses and a $2.0 million decrease in miscellaneous costs, including overhead allocations, partially offset by a $5.0 million increase in professional and transaction-related expenses supporting business initiatives.
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Other Expense, Net
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FRLPC, Adjusted Net Income (Loss) and Adjusted EBITDA
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For the nine months ended September 30, 2024, net cash provided by financing activities of $387.9 million was primarily attributable to $227.2 million of net proceeds from issuance of long-term debt, net of repayments, $90.0 million of net proceeds from the ordinary share offering, $137.0 million from secured borrowings executed to finance certain risk retention assets, net of repayments, and $11.9 million of proceeds from the issuance of our Class A Ordinary Shares under the Equity Financing Purchase Agreement. These net cash inflows were partially offset by $75.0 million of repayments of the SVB revolving credit facility.
Previous report
Pagaya US may redeem the Notes in whole or in part on or after October 5, 2027, subject to specific trading price thresholds. Redemption of the Notes could trigger certain provisions that adjust the exchange rate in favor of the holders.
Previous report
The Facilities replace the SVB Revolving Credit Facility. In addition to replacing the SVB Revolving Credit Facility, proceeds of borrowings under the Facilities may be used for general corporate purposes of the Company and its subsidiaries.
Previous report
The preparation of our condensed consolidated financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
Previous report
During the nine months ended September 30, 2024, we have reassessed the critical accounting policies and estimates as described in Part II, Item 7, “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023 and determined that in addition to the updates below relating to fair value (previously identified as “Loans and investments in securities”), we no longer consider revenue recognition, consolidation and variable interest entities or recoverability of deferred tax assets to be critical accounting estimates as the application of the relevant US GAAP accounting policies does not involve significant levels of uncertainty.
Previous report
We believe that the accounting policies discussed below are critical to our financial results and the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because the information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate and (2) changes in the estimate could have a material impact on our financial condition or results of operations. For further information, see Note 2 to our audited consolidated financial statements in our Annual Report on Form 10-K, which was filed with the SEC on April 25, 2024. It should be noted that future events rarely develop exactly as forecasted, and estimates require regular review and adjustment.
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Fair Value
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Investments in loans and securities, which include whole loans and notes and residual interests in securitizations, are measured at fair value on a recurring basis. The estimate of fair value of these financial assets requires significant judgment. We use a discounted cash flow model to estimate the fair value of these financial assets based on the present value of estimated future cash flows. The cash flow model uses both observable and unobservable inputs and reflects our best estimates of the assumptions a market participant would use to calculate fair value of the particular financial asset. Primary inputs that require significant judgment include discount rates, net credit loss expectations, and expected prepayment rates.
Previous report
As it relates to net credit loss expectations, the most significant unobservable input, management considers a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, recovery rates and current economic conditions. We also take into consideration certain qualitative factors, in which we adjust our quantitative baseline using our best judgment to consider the inherent uncertainty regarding future economic conditions and consumer loan performance.
Previous report
Additionally, we determine whether an impairment has resulted from a credit loss or other factors. We determine whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, and reasonable and supportable forecasts of economic conditions. We recognize the credit loss portion through earnings in the income statement and the noncredit loss portion in accumulated other comprehensive loss.
Previous report
The underlying assumptions, estimates, and assessments we use to provide for fair value are assessed and updated quarterly, as necessary, to reflect our view of current conditions, which can result in changes to the fair value of investments in loans and securities. It is possible that we will experience material differences in the fair value of investments in loans and securities.
Previous report
Prior to 2023, we wrote down the amortized cost basis of the investment if it was more likely than not we would be required, or we intended to sell the investment before recovery of its amortized cost basis, or we did not expect to collect cash flows sufficient to recover the amortized cost basis of the investment.
Reworded paragraphs (46)
Previous wording
We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of June 22, 2022, (b) in which we have an annual total gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary equity that is held by non-affiliates exceeds $700 million as of the last business day of the second fiscal quarter of such fiscal year; and (ii) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Current wording
We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of June 22, 2022, or (b) in which we have an annual total gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary equity that is held by non-affiliates exceeds $700 million as of the last business day of the second fiscal quarter of such fiscal year; or (ii) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Previous wording
We are technically a “foreign private issuer” under U.S. Securities and Exchange Commission rules. Consequently, we are subject to the reporting requirements under the Exchange Act applicable to foreign private issuers. That said, as previously disclosed on January 16, 2024, we have decided to voluntarily file on U.S. domestic issuer forms with the SEC beginning in 2024. Accordingly, the Company will be filing its quarterly reports on Form 10-Q, current reports on Form 8-K, and its annual reports on Form 10-K, and will no longer report on forms 20-F and 6-K. In addition, the Company intends to comply with Regulation FD and the SEC’s proxy rules, and the Company's officers, directors, and 10% shareholders will now also begin reporting on Forms 3, 4 and 5, as applicable.
Current wording
We are technically a “foreign private issuer” under U.S. Securities and Exchange Commission rules. Consequently, we are subject to the reporting requirements under the Exchange Act applicable to foreign private issuers. That said, as previously disclosed on January 16, 2024, we have decided to voluntarily file on U.S. domestic issuer forms with the SEC beginning in 2024. Since then, the Company has been filing its quarterly reports on Form 10-Q, current reports on Form 8-K, and its annual reports on Form 10-K, and will no longer report on forms 20-F and 6-K. In addition, the Company intends to comply with Regulation FD and the SEC’s proxy rules, and the Company's officers, directors, and 10% shareholders will now also begin reporting on Forms 3, 4 and 5, as applicable.
Previous wording
Our AI technology typically enables Partners to convert a larger proportion of their application volume into originated loans, enabling them to expand their ecosystem and generate incremental revenues. Our Partners have historically seen rapid scaling of origination volume on our network shortly after onboarding and the contribution of Pagaya’s network to Partners’ total origination volume tends to increase over time. By integrating our product, connected lenders can increase originations by up to 25% in some cases.
Current wording
Our AI technology typically enables Partners to convert a larger proportion of their application volume into originated loans, enabling them to expand their ecosystem and generate incremental revenues. Our Partners have historically seen rapid scaling of origination volume on our network shortly after onboarding and the contribution of Pagaya’s network to Partners’ total origination volume tends to increase over time.
Previous wording
We devote significant time to, and have a team that focuses on, onboarding and managing Partners to our network. We believe that our success in adding new Partners to our network is driven by our distinctive value proposition: driving significant revenue uplift to our Partners at limited incremental cost or credit risk to the Partner. Our success adding new Partners has contributed to our overall Network Volume growth and driven our ability to rapidly scale new asset classes. In 2022, we onboarded six new Partners, including Klarna and Ally Financial. In 2023, we expanded our network with four new Partners, including U.S. Bank, a top 5 auto captive, Exeter Finance and Westlake Financial.
Current wording
We devote significant time to, and have a team that focuses on, onboarding and managing Partners to our network. We believe that our success in adding new Partners to our network is driven by our distinctive value proposition: driving significant revenue uplift to our Partners at limited incremental cost or credit risk to the Partner. Our success adding new Partners has contributed to our overall Network Volume growth and driven our ability to rapidly scale new asset classes. In 2024, we expanded our network with several new Partners, including OneMain Financial and Avvance, the point-of-sale leading solution offered by US Bank and Elavon.
Previous wording
We believe our historical growth has been significantly influenced by improvements to our AI technology, which are in turn driven both by the deepening of our proprietary data network and the strengthening of our AI technology. As our existing Partners grow their usage of our network, new Partners join our network, and as we expand our network into new asset classes, the value of our data asset increases. Our technology improvements thus benefit from a flywheel effect that is characteristic of AI technology, in that improvements are derived from a continually increasing base of training data for our technology. We have found, and we expect to continue to experience, that more data leads to more efficient pricing and greater Network Volume. Since inception, we have evaluated more than $2.4 trillion in application volume.
Current wording
We believe our historical growth has been significantly influenced by improvements to our AI technology, which are in turn driven both by the deepening of our proprietary data network and the strengthening of our AI technology. As our existing Partners grow their usage of our network, new Partners join our network, and as we expand our network into new asset classes, the value of our data asset increases. Our technology improvements thus benefit from a flywheel effect that is characteristic of AI technology, in that improvements are derived from a continually increasing base of training data for our technology. We have found, and we expect to continue to experience, that more data leads to more efficient pricing and greater Network Volume. Since inception, we have evaluated more than $2.7 trillion in application volume.
Previous wording
Regardless of market conditions, the availability and pricing of funding from investors is critical to our growth. We have diversified our investor network and will continue to seek to further diversify our investor base. In the nine months ended September 30, 2024, our top 5 ABS investors contributed approximately 53% of our total ABS funding compared to 50% in the year ended December 31, 2023.
Current wording
Regardless of market conditions, the availability and pricing of funding from investors is critical to our growth. We have diversified our investor network and will continue to seek to further diversify our investor base. In the three months ended March 31, 2025, our top 5 ABS investors contributed approximately 53% of our total ABS funding compared to 54% in the year ended December 31, 2024.
Previous wording
We collect and analyze operating and financial data of our business to assess our performance, formulate financial projections and make strategic decisions. In addition to total revenues, net operating income (loss), other measures under U.S. GAAP, and certain non-GAAP financial measures (see discussion and reconciliation herein titled “Reconciliation of Non-GAAP Financial Measures”), we consider Network Volume to be a key operating metric we use to evaluate our business. The following table sets forth our Network Volume for the three and nine months ended September 30, 2024 and 2023.
Current wording
We collect and analyze operating and financial data of our business to assess our performance, formulate financial projections and make strategic decisions. In addition to total revenues, net operating income (loss), other measures under U.S. GAAP, and certain non-GAAP financial measures (see discussion and reconciliation herein titled “Reconciliation of Non-GAAP Financial Measures”), we consider Network Volume to be a key operating metric we use to evaluate our business. The following table sets forth our Network Volume for the three months ended March 31, 2025 and 2024.
Previous wording
We believe the Network Volume metric to be a suitable proxy for our overall scale and reach, as we generate revenue primarily on the basis of Network Volume. In addition, Network Volume directly influences Fee Revenue Less Production Cost (FRLPC), a key non-GAAP measure we use to assess operational efficiency. The growth in Network Volume highlights the scalability of our business, which, in turn, affects our operational leverage and profitability. Network Volume is primarily driven by our relationships with our Partners and SFR Partners. We believe that Network Volume has benefited from continuous improvements to our proprietary technology, enabling our network to more effectively identify assets for acquisition by the Financing Vehicles, thereby providing additional investment opportunities to investors. As a result, the expansion of Network Volume provides insights into the effectiveness of our business strategies and the ability to leverage operational efficiencies across different asset classes. Network Volume is comprised of assets across several asset classes, including personal loans, auto loans, residential real estate, and point-of-sale receivables.
Current wording
We believe the Network Volume metric to be a suitable proxy for our overall scale and reach, as we generate revenue primarily on the basis of Network Volume. In addition, Network Volume directly influences Fee Revenue Less Production Cost (FRLPC), a key non-GAAP measure we use to assess operational efficiency. We believe the growth in Network Volume highlights the scalability of our business, which, in turn, affects our operational leverage and profitability. Network Volume is primarily driven by our relationships with our Partners and SFR Partners. We believe Network Volume has benefited from continuous improvements to our proprietary technology, enabling our network to more effectively identify assets for acquisition by the Financing Vehicles, thereby providing additional investment opportunities to investors. As a result, the expansion of Network Volume provides insights into the effectiveness of our business strategies and the ability to leverage operational efficiencies across different asset classes. Network Volume is comprised of assets across several asset classes, including personal loans, auto loans, residential real estate, and point-of-sale receivables.
Previous wording
Network AI fees. Network AI fees can be further broken down into two fee streams: AI integration fees and capital markets execution fees. We earn AI integration fees for the creation and delivery of the assets that comprise our Network Volume. Multiple funding channels are used to enable the purchase of network assets from our Partners, such as ABS. Capital markets execution fees are earned when a pre-funded, Pagaya-sponsored ABS vehicle is sold by underwriters.
Current wording
Network AI fees. Network AI fees can be further broken down into two fee streams: AI integration fees and capital markets execution fees. We earn AI integration fees for the creation and delivery of the assets that comprise our Network Volume. Multiple funding channels are used to enable the purchase of network assets from our Partners, such as ABS, pass-through and forward flow transactions. Capital markets execution fees are earned when a pre-funded, Pagaya-sponsored ABS vehicle is sold by underwriters.
Previous wording
Contract fees. Contract fees primarily include administration and management fees, and performance fees. Administration and management fees are contracted upon the establishment of Financing Vehicles and are earned and collected over their remaining lives. Performance fees are earned when certain Financing Vehicles exceed contractual return hurdles and a significant reversal in the amount of cumulative revenue recognized is not expected to occur.
Current wording
Performance fees are earned when certain Financing Vehicles exceed contractual return hurdles and a significant reversal in the amount of cumulative revenue recognized is not expected to occur.
Previous wording
Technology, data and product development expenses primarily comprise costs associated with the maintenance and ongoing development of our network and AI technology, including pers onnel, allocated costs, and other development-related expenses. Technology, data and product development costs, net of amounts capitalized in accordance with U.S. GAAP, are expensed as incurred. The capitalized internal-use software is amortized on a straight-line method over the estimated useful life in technology, data and product development costs. We have invested and believe continued investments in technology, data and product development are important to achieving our strategic objectives.
Current wording
Technology, data and product development expenses primarily comprise costs associated with the maintenance and ongoing development of our network and AI technology, including personnel, allocated costs, and other development-related expenses. Technology, data and product development costs, net of amounts capitalized in accordance with U.S. GAAP, are expensed as incurred. The capitalized internal-use software is amortized on a straight-line method over the estimated useful life in technology, data and product development costs. We have invested and believe continued investments in technology, data and product development are important to achieving our strategic objectives.
Previous wording
Other Income (expense), net primarily consists of changes in the fair value of warrant liabilities and other items, including credit-related impairment losses on investments in loans and securities.
Current wording
Other expenses, net primarily consists of changes in the fair value of warrant liabilities and other items, including credit-related impairment losses on investments in loans and securities.
Previous wording
Net income attributable to noncontrolling interests in our consolidated statements of operations is a result of our investments in certain of our consolidated variable interest entities (‘‘VIEs’’) and consists of the portion of the net income of these consolidated entities that is not attributable to us.
Current wording
Net income attributable to noncontrolling interests in our consolidated statements of income is a result of our investments in certain of our consolidated variable interest entities (‘‘VIEs’’) and consists of the portion of the net income of these consolidated entities that is not attributable to us.
Previous wording
Total revenue and other income, increased by $45.5 million, or 21%, to $257.2 million for the three months ended September 30, 2024 from $211.8 million for the three months ended September 30, 2023. The increase was primarily driven by an increase in revenue from fees, partially offset by decreases in interest income and investment income.
Current wording
Total revenue and other income, increased by $44.7 million, or 18%, to $290.0 million for the three months ended March 31, 2025 from $245.3 million for the three months ended March 31, 2024. The increase was primarily driven by an increase in revenue from fees, partially offset by a decrease in investment (loss) income.
Previous wording
Revenue from fees for the three months ended September 30, 2024 increased by $47.8 million, or 24%, to $249.3 million, compared to the same period in 2023. The increase was primarily due to a $45.1 million increase in Network AI fees, comprised of AI integration fees and capital markets execution fees, from $184.0 million for the three months ended September 30, 2023 to $229.1 million for the three months ended September 30, 2024. The increase in Network AI fees was primarily driven by improved economics in AI integration fees earned from certain Partners, as well as the growth in Network Volume, which increased by 11.3% from $2.1 billion for the three months ended September 30, 2023 to $2.4 billion for the three months ended September 30, 2024. These increases were partially offset by a decrease in capital markets execution fees earned from our ABS transactions affected by tighter economic environment during the three months ended September 30, 2024.
Current wording
Revenue from fees for the three months ended March 31, 2025 increased by $45.7 million, or 19%, to $282.7 million, compared to the same period in 2024. The increase was primarily due to a $38.1 million increase in Network AI fees, comprised of AI integration fees and capital markets execution fees, from $215.3 million for the three months ended March 31, 2024 to $253.4 million for the three months ended March 31, 2025. The increase in Network AI fees was primarily driven by improved economics of AI integration fees earned from certain Partners which increased by 25% from $205.6 million for the three months ended March 31, 2024 to $257.5 million for the three months ended March 31, 2025. These increases were partially offset by a decrease in capital markets execution fees earned from our ABS transactions during the three months ended March 31, 2025.
Previous wording
Contract fees, comprised of administration and management fees, performances fees, and servicing fees, increased by $2.7 million from $17.4 million for the three months ended September 30, 2023 to $20.1 million for the three months ended September 30, 2024, reflecting an increase in net asset values of the assets held by certain Financing Vehicles driven by continued business growth.
Current wording
Contract fees, comprised of administration and management fees and performance fees, increased by $7.6 million from $21.7 million for the three months ended March 31, 2024 to $29.3 million for the three months ended March 31, 2025. This increase was due to higher net asset values of assets held by certain Financing Vehicles driven by continued business growth, and an increase in performance fees, as the prior year period included a reversal of performance fees.
Previous wording
Interest income decreased by $1.6 million, or 16%, to $8.7 million for the three months ended September 30, 2024 from $10.4 million for the three months ended September 30, 2023. The decrease in interest income was directly related to our risk retention holdings and related securities held in our consolidated VIEs as well as certain risk retention holdings held directly by our consolidated subsidiaries. For further information, see “—Net Income (Loss) Attributable to Noncontrolling Interests.” The decrease in interest income was primarily the result of changes in structure and composition of asset portfolio, partially offset by higher interest income on our cash balances.
Current wording
Interest income remained relatively flat year over year. Interest income is directly related to our risk retention holdings and related securities held in our consolidated VIEs as well as certain risk retention holdings held directly by our consolidated subsidiaries. For further information, see “—Net Income (Loss) Attributable to Noncontrolling Interests.”
Previous wording
Investment income (loss) decreased by $1.4 million to a loss of $0.7 million for the nine months ended September 30, 2024 from an income of $0.7 million for nine months ended September 30, 2023, reflecting an unfavorable impact from the change in valuation of certain proprietary investments.
Current wording
Investment (loss) income decreased by $0.9 million to a loss of $0.4 million for the three months ended March 31, 2025 from an income of $0.5 million for three months ended March 31, 2024, reflecting an unfavorable impact from the change in valuation of certain proprietary investments.
Previous wording
Production costs increased by $20.2 million, or 16%, to $149.0 million for the three months ended September 30, 2024 from $128.8 million for the three months ended September 30, 2023. This increase was predominantly due to increases in Network Volume and to a lesser extent the composition of the asset classes that make up our Network Volume, as well as new Partners onboarded to our network.
Current wording
Production costs increased by $22.2 million, or 15%, to $167.1 million for the three months ended March 31, 2025 from $144.9 million for the three months ended March 31, 2024. This increase was due to the composition of the asset classes that make up our Network Volume, as well as new Partners onboarded to our network.
Previous wording
During the three months ended September 30, 2024 and 2023, we capitalized $5.7 million and $7.0 million of software development costs, respectively. Depreciation expense, including impairment charges, for capitalized software development costs was $6.6 million and $4.4 million during the three months ended September 30, 2024 and 2023, respectively.
Current wording
During the three months ended March 31, 2025 and 2024, we capitalized $4.5 million and $6.3 million of software development costs, respectively. Depreciation expense, including impairment charges, for capitalized software development costs was $6.2 million and $5.6 million during the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Sales and marketing costs for the nine months ended September 30, 2024 decreased $5.2 million, or 13%, compared to the same period in 2023, primarily driven by a $4.6 million decrease in compensation expenses and a $0.5 million decrease in marketing and other miscellaneous costs.
Current wording
Sales and marketing costs for the three months ended March 31, 2025 decreased by $0.7 million, compared to the same period in 2024. Excluding $1.3 million contribution from Theorem in the current period, sales and marketing costs for the three months ended March 31, 2025 decreased $2.0 million compared to the same period in 2024, primarily driven by a $3.6 million decrease in compensation expenses, partially offset by a $1.7 million increase in overhead allocation and other miscellaneous costs.
Previous wording
Other expense, net for the nine months ended September 30, 2024 increased $84.5 million, compared to the same period in 2023. The increase was primarily due to a higher interest expenses of $44.2 million due to higher interest rates and increased borrowing to support business growth, and a higher credit-related impairment loss of $42.8 million on certain investments, driven by changes in the fair value of investments in loans and securities as a result of fluctuations in key inputs to the discounted cash flow models used to determine fair value. We are not exposed economically to a portion of these fair value changes as certain investments are held within consolidated VIEs. For further information, please see “—Net Income (Loss) Attributable to Noncontrolling Interests.” These increases were partially offset by a $4.1 million favorable impact from the changes in fair value remeasurement of warrants.
Current wording
Other expense, net for the three months ended March 31, 2025 increased $13.4 million, compared to the same period in 2024. The increase was primarily due to a higher interest expenses of $8.7 million from the long-term debt and exchangeable note and a higher credit-related impairment loss of $7.9 million on certain investments, driven by changes in the fair value of investments in loans and securities as a result of fluctuations in key inputs to the discounted cash flow models used to determine fair value. Of the credit-related impairment loss of $7.9 million, $6.8 million is attributable to the noncontrolling interest in certain VIEs and accordingly, is not attributable to Pagaya. For further information, please see “—Net Income (Loss) Attributable to Noncontrolling Interests.” These increases were partially offset by a $3.2 million favorable impact from the changes in a contingent consideration liability. See Note 8 for additional information.
Previous wording
Income tax expense for the nine months ended September 30, 2024 decreased $2.5 million, compared to the same period in 2023. The decrease was primarily driven by discrete tax expenses related to a change in the reserve estimate for an uncertain tax position related to credit loss on investments in loans and securities during the nine months ended September 30, 2024.
Current wording
Income tax expense for the three months ended March 31, 2025 decreased $7.5 million, compared to the same period in 2024. The decrease was primarily driven by discrete tax expenses related to a change in the reserve for an uncertain tax position related to credit loss on investments in loans and securities during the three months ended March 31, 2025.
Previous wording
Net loss attributable to noncontrolling interests for the three months ended September 30, 2024 decreased $17.4 million compared to the same period in 2023. The decrease was driven by the net loss generated by our consolidated VIEs associated with our risk retention holdings. This amount represented the net income (loss) of the consolidated VIEs to which we had no economic right and was the result of interest income of $1.2 million generated from risk retention holdings offset by the credit-related impairment loss of $7.9 million on the same risk retention holdings. For further information, see “—Total Revenue and Other Income” and “—Other Expense, Net.”
Current wording
Net loss attributable to noncontrolling interests for the three months ended March 31, 2025 decreased by $5.0 million, or 48%, compared to the same period in 2024. The decrease was driven by the net loss generated by our consolidated VIEs associated with our risk retention holdings. This amount represented the net loss of the consolidated VIEs which was not attributable to Pagaya, but rather to the noncontrolling interest holders. For the three months ended March 31, 2025, the net loss attributable to noncontrolling interests reported interest income of $1.8 million generated from risk retention holdings offset by the credit-related impairment loss of $6.8 million on the same risk retention holdings. For further information, see “—Total Revenue and Other Income” and “—Other Expense, Net.”
Previous wording
To supplement our consolidated financial statements prepared and presented in accordance with U.S. GAAP, we use the non-GAAP financial measures FRLPC, 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. We are presenting these non-GAAP financial measures because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple periods with the performance of other companies.
Current wording
To supplement our consolidated financial statements prepared and presented in accordance with U.S. GAAP, we use the non-GAAP financial measures FRLPC, Fee Revenue Less Production Costs as percentage of Network Volume (FRLPC %), 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. We are presenting these non-GAAP financial measures because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple periods with the performance of other companies.
Previous wording
To address these limitations, we provide a reconciliation of FRLPC, Adjusted Net Income (Loss) and Adjusted EBITDA to the most directly comparable U.S. GAAP measure. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view FRLPC, Adjusted Net Income (Loss) and Adjusted EBITDA in conjunction with their respective related U.S. GAAP financial measures.
Current wording
To address these limitations, we provide a reconciliation of FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA to the most directly comparable U.S. GAAP measure. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA in conjunction with their respective related U.S. GAAP financial measures.
Previous wording
FRLPC, Adjusted Net Income (Loss) and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 are summarized below (in thousands):
Current wording
FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA for the three and three months ended March 31, 2025 and 2024 are summarized below ($ in thousands):
Previous wording
FRLPC is defined as revenue from fees less production costs. We use FRLPC as part of overall assessment of performance, including the preparation of our annual budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance. Adjusted Net Income (Loss) is defined as net income (loss) attributable to our 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 our shareholders excluding share-based compensation expense, change in fair value of warrant liability, impairment, including credit-related charges, restructuring expenses, transaction-related expenses, non-recurring expenses associated with mergers and acquisitions, interest expense, depreciation expense, and provision (and benefit from) for income taxes.
Current wording
Adjusted Net Income is defined as net income (loss) attributable to our shareholders excluding share-based compensation expense, change in fair value of warrant liability, change in fair value of contingent 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 our shareholders excluding share-based compensation expense, change in fair value of warrant liability, change in fair value of contingent liability, impairment, including credit-related charges, restructuring expenses, transaction-related expenses, non-recurring expenses associated with mergers and acquisitions, interest expense, depreciation expense, and provision (and benefit from) 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.
Previous wording
We believe FRLPC, 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, Adjusted Net Income (Loss) and Adjusted EBITDA in this report 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.
Current wording
We believe FRLPC, FRLPC %, 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 FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA in this report 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.
Previous wording
The following tables present a reconciliation of the most directly comparable U.S. GAAP measure to FRLPC, Adjusted Net Income (Loss) and Adjusted EBITDA (in thousands):
Current wording
The following tables present reconciliations of FRLPC to Operating Income, and Adjusted EBITDA to Net Income Attributable to Pagaya Technologies Ltd., in each case the most directly comparable U.S. GAAP measure ($ in thousands, unless otherwise noted):
Previous wording
As of September 30, 2024 and December 31, 2023, the principal sources of liquidity were cash, cash equivalents and restricted cash of $181.0 million and $222.5 million, respectively. We believe these sources will be sufficient to meet our current liquidity needs for the next twelve months, from the date of issuance of the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, and be sufficient to support our future cash needs, however, we can provide no assurance that our liquidity and capital resources will meet future funding requirements.
Current wording
As of March 31, 2025 and December 31, 2024, the principal sources of liquidity were cash, cash equivalents and restricted cash of $229.6 million and $226.5 million, respectively. We believe these sources will be sufficient to meet our current liquidity needs for the next twelve months, from the date of issuance of the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, and be sufficient to support our future cash needs, however, we can provide no assurance that our liquidity and capital resources will meet future funding requirements.
Previous wording
We expect to fund our operations with existing cash and cash equivalents, cash generated from operations, including cash flows from investments in loans and securities, and additional secured borrowings, including repurchase agreements. We may also raise additional capital, including through borrowings under the new credit facility that we entered into in February 2024 (see further description of the new credit facility below in the section titled “Credit Agreement”) or through the sale or issuance of equity or debt securities, as described below in the sections titled “The Committed Equity Financing,” “Shelf Registration Statement” and “Ordinary Share Offering,” as well as the issuance of up to an additional 1,666,666 Series A Preferred Shares. The ownership interest of our shareholders will be, or could be, diluted as a result of sales or issuances of equity or debt securities, and the terms of any such securities may include liquidation or other preferences that adversely affect the rights of our shareholders of Class A Ordinary Shares. We intend to support our liquidity and capital position by pursuing diversified sources of financing, including debt financing, secured borrowings, or equity financing. The rates, terms, covenants and availability of such additional financing is not guaranteed and will be dependent on not only macro-economic factors, but also on Pagaya-specific factors such as the results of our operations and the returns generated by loans originated with the assistance of our AI Technology.
Current wording
We expect to fund our operations with existing cash and cash equivalents, cash generated from operations, including cash flows from investments in loans and securities, and additional secured borrowings, including repurchase agreements. We may also raise additional capital, including through borrowings under the credit facility (see further description of the credit facility below in the section titled “Credit Agreement”) or through the sale or issuance of equity or debt securities, as described below in the sections titled “Shelf Registration Statement” and “Ordinary Share Offering,” as well as the issuance of up to an additional 1,666,666 Series A Preferred Shares. The ownership interest of our shareholders will be, or could be, diluted as a result of sales or issuances of equity or debt securities, and the terms of any such securities may include liquidation or other preferences that adversely affect the rights of our shareholders of Class A Ordinary Shares. We intend to support our liquidity and capital position by pursuing diversified sources of financing, including debt financing, secured borrowings, or equity financing. The rates, terms, covenants and availability of such additional financing is not guaranteed and will be dependent on not only macro-economic factors, but also on Pagaya-specific factors such as the results of our operations and the returns generated by loans originated with the assistance of our AI Technology.
Previous wording
In addition, we will receive the proceeds from any exercise of any public warrants and private placement warrants in cash. Each public warrant and each private placement warrant that was issued and exchanged for each EJFA Private Placement Warrant in the EJFA Merger entitles the holder thereof to purchase one Class A Ordinary Share at a price of $138 per share. The aggregate amount of proceeds could be up to $169.6 million if all such warrants are exercised for cash. We expect to use any such proceeds for general corporate and working capital purposes, which would increase our liquidity.
Current wording
In addition, we will receive the proceeds from any exercise of any public warrants and private placement warrants in cash. Each public warrant and each private placement warrant that was issued and exchanged for each EJFA Private Placement Warrant in the EJFA Merger entitles the holder thereof to purchase one Class A Ordinary Share at a price of $138 per share (as adjusted for the 1-for-12 reverse share split). Following the 1-for-12 reverse share split effective March 2024, each warrant entitles holder to purchase 1/12 of a Class A Ordinary Share (or equivalently, 12 warrants are required to obtain 1 Class A Ordinary Share). The aggregate amount of proceeds could be up to $169.6 million if all such warrants are exercised for cash. We expect to use any such proceeds for general corporate and working capital purposes, which would increase our liquidity.
Previous wording
As of November 11, 2024, the price of our Class A Ordinary Shares was $16.89 per share. We believe the likelihood that warrant holders will exercise their public warrants and private placement warrants that were issued and exchanged for EJFA Private Placement Warrants in the EJFA Merger, and therefore the amount of cash proceeds that we would receive, is dependent upon the market price of Class A Ordinary Shares. If the market price for our Class A Ordinary Shares is less than $138 per share, we believe warrant holders will be unlikely to exercise on a cash basis their public warrants and private placement warrants that were issued and exchanged for EJFA Private Placement Warrants in the EJFA Merger. To the extent the public warrants and private placement warrants are exercised by warrant holders, ownership interest of our shareholders will be diluted as a result of such issuances. Moreover, the resale of Class A Ordinary Shares issuable upon the exercise of such warrants, or the perception of such sales, may cause the market price of our Class A Ordinary Shares to decline and impact our ability to raise additional financing on favorable terms. See“Risk Factors—We have and may need to continue to raise additional funds in the future, including but not limited to, through equity, debt, secured borrowings, or convertible debt financings, to support business growth, and those funds may be unavailable on acceptable terms, or at all. As a result, we may be unable to meet our future capital requirements, which could limit our ability to grow and jeopardize our ability to continue our business” and “Risk Factors—Risks Related to Ownership of our Class A Ordinary Shares and Warrants” in our Annual Report on Form 10-K, which was filed with the SEC on April 25, 2024.
Current wording
As of May 6, 2025, the price of our Class A Ordinary Shares was $11.49 per share. We believe the likelihood that warrant holders will exercise their public warrants and private placement warrants that were issued and exchanged for EJFA Private Placement Warrants in the EJFA Merger, and therefore the amount of cash proceeds that we would receive, is dependent upon the market price of Class A Ordinary Shares. If the market price for our Class A Ordinary Shares is less than $138 per share, we believe warrant holders will be unlikely to exercise on a cash basis their public warrants and private placement warrants that were issued and exchanged for EJFA Private Placement Warrants in the EJFA Merger. To the extent the public warrants and private placement warrants are exercised by warrant holders, ownership interest of our shareholders will be diluted as a result of such issuances. Moreover, the resale of Class A Ordinary Shares issuable upon the exercise of such warrants, or the perception of such sales, may cause the market price of our Class A Ordinary Shares to decline and impact our ability to raise additional financing on favorable terms. See“Risk Factors” in our Annual Report on Form 10-K, which was filed with the SEC on March 12, 2025.
Previous wording
During the three months ended September 30, 2024, 516,512 shares were issued under the Equity Financing Purchase Agreement for net proceeds of $6.7 million, and related fee of $0.2 million was expensed. During the nine months ended September 30, 2024, 814,569 shares were issued under the Equity Financing Purchase Agreement for net proceeds of $11.9 million, and related fee of $0.4 million was expensed. On September 25, 2024, the Company terminated the Equity Financing Purchase Agreement.
Current wording
During the three months ended March 31, 2024, 298,057 shares were issued under the Equity Financing Purchase Agreement for net proceeds of $5.2 million. In September 2024, the Company terminated the Equity Financing Purchase Agreement.
Previous wording
Our primary uses of cash in operating activities are for ordinary course of business, with the primary use related to employee and personnel-related expenses. As of September 30, 2024, we had 534 employees, including 146 full-time Darwin employees, compared to 712 on December 31, 2023. During the second quarter of 2024, we reduced our headcount by over 20% across our Israel and U.S. offices. This reduction in workforce enabled us to streamline our operations resulting in cost savings.
Current wording
Our primary uses of cash in operating activities are for ordinary course of business, with the primary use related to employee and personnel-related expenses. As of March 31, 2025, we had 527 employees compared to 892 on March 31, 2024. During the the first and second quarters of 2024, we reduced our headcount by over 20% across our Israel and U.S. offices. This reduction in workforce enabled us to streamline our operations resulting in cost savings.
Previous wording
Net cash provided by operating activities for the nine months ended September 30, 2024 was $34.5 million, an increase of $43.8 million from net cash used in operating activities of $9.4 million for the same period in 2023. This reflects our net loss including noncontrolling interests of $188.6 million, adjusted for non-cash charges of $232.4 million, and net cash inflows of $9.4 million from changes in our operating assets net of operating liabilities.
Current wording
Net cash provided by operating activities for the three months ended March 31, 2025 was $34.4 million, an increase of $16.7 million from net cash provided by operating activities of $17.7 million for the same period in 2024. This reflects our net income including noncontrolling interests of $2.5 million, adjusted for non-cash charges of $56.0 million, and net cash outflows of $24.1 million from changes in our operating assets net of operating liabilities.
Previous wording
Non-cash charges primarily consisted of (1) impairment losses on investments in loans and securities, which increased by $40.3 million driven by changes in the fair value of investments in loans and securities as a result of fluctuations in key inputs to the discounted cash flow models used to determine fair value (we are not exposed economically to a portion of these fair value changes as certain investments are held within consolidated VIEs), (2) share-based compensation, which decreased by $11.5 million, (3) depreciation and amortization, which increased by $7.3 million primarily from capitalized software, and (4) fair value adjustment to warrant liability, which decreased by $4.1 million driven by changes in the market price of our Class A Ordinary Shares.
Current wording
Non-cash charges primarily consisted of (1) impairment losses on investments in loans and securities, which increased by $10.1 million driven by changes in the fair value of investments in loans and securities as a result of fluctuations in key inputs to the discounted cash flow models used to determine fair value, of which $6.8 million is not attributable to Pagaya, but rather attributable to the VIEs noncontrolling interests, (2) share-based compensation, which decreased by $2.3 million, (3) depreciation and amortization, which increased by $1.4 million primarily from capitalized software, and (4) fair value adjustment to warrant liability, which increased by $3.0 million driven by changes in the market price of our Class A Ordinary Shares.
Previous wording
Our net cash flows resulting from changes in operating assets and liabilities increased by $13.0 million to net cash outflows of $9.4 million for the nine months ended September 30, 2024 compared to net cash outflows of $22.4 million for the same period in 2023, reflecting cost saving initiatives.
Current wording
Our net cash flows resulting from changes in operating assets and liabilities decreased by $25.9 million to net cash outflows of $24.1 million for the three months ended March 31, 2025 compared to net cash inflows of $1.9 million for the same period in 2024.
Previous wording
For the nine months ended September 30, 2024, net cash used in investing activities of $462.7 million was primarily attributable to purchases of risk retention assets of $538.7 million, which increased by $102.5 million driven by business growth, partially offset by proceeds received from existing risk retention assets of $89.9 million, which decreased by $44.2 million.
Current wording
For the three months ended March 31, 2025, net cash used in investing activities of $26.9 million was primarily attributable to purchases of risk retention assets of $81.9 million, which decreased by $179.7 million driven by management’s decision to purchase more than the required minimum risk retention holdings in the prior period, partially offset by proceeds received from existing risk retention assets of $58.7 million, which increased by $20.0 million.
Showing the first 40 of 46 pairs. Open the source sections for the rest.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
Investment income (loss) decreased by $0.7 million to a loss of $0.8 million for the three months ended September 30, 2024, reflecting an unfavorable impact from the change in valuation of certain proprietary investments.
Previous report — wording carried elsewhere
Income tax benefit for the three months ended September 30, 2024 increased $10.4 million, compared to the same period in 2023. The increase was primarily driven by discrete tax expenses related to a change in the reserve estimate for an uncertain tax position related to credit loss on investments in loans and securities during the three months ended September 30, 2024.
Previous report — wording carried elsewhere
Contract fees, comprised of administration and management fees and performance fees, increased by $5.8 million from $56.9 million for the nine months ended September 30, 2023 to $62.7 million for the nine months ended September 30, 2024, reflecting an increase in net asset values of the assets held by certain Financing Vehicles driven by continued business growth.
Previous report — wording carried elsewhere
Production costs increased by $65.0 million, or 17%, to $439.4 million for the nine months ended September 30, 2024 from $374.5 million for the nine months ended September 30, 2023. This increase was predominantly due to increases in Network Volume and to a lesser extent the composition of the asset classes that make up our Network Volume, as well as new Partners onboarded to our network.
Previous report — wording carried elsewhere
During the nine months ended September 30, 2024 and 2023, we capitalized $17.8 million and $20.5 million of software development costs, respectively. Depreciation expense, including impairment charges, for capitalized software development costs was $20.1 million and $11.9 million during the nine months ended September 30, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Net Loss Attributable to Noncontrolling Interests
Previous report — wording carried elsewhere
Net loss attributable to noncontrolling interests for the nine months ended September 30, 2024 decreased by $37.6 million, or 60%, compared to the same period in 2023. The decrease was driven by the net loss generated by our consolidated VIEs associated with our risk retention holdings. This amount represented the net income (loss) of the consolidated VIEs to which we had no economic right and was the result of interest income of $4.5 million generated from risk retention holdings offset by the credit-related impairment loss of $29.3 million on the same risk retention holdings. For further information, see “—Total Revenue and Other Income” and “—Other Expense, Net.”
Previous report — wording carried elsewhere
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.