Pagaya Technologies Ltd.

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. 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.

Current wording

The Company was previously classified as a “foreign private issuer” (“FPI”) under SEC rules; however, as of June 30, 2025, the Company determined that it no longer satisfied the criteria to be an FPI. Consequently, we will be required to comply with all of the provisions applicable to a U.S. domestic issuer under the Exchange Act. There will be no material adjustments required as a result of this adjustment since 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. In addition, the Company has been complying with Regulation FD and the SEC’s proxy rules, with the exception of the “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Beginning on January 1, 2026, our officers, directors, and principal shareholders will be subject to the “short-swing” profit recovery provisions of Section 16 of the Exchange Act with respect to their purchases and sales of the Ordinary Shares.

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.

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. Additionally, we continue to introduce and develop new lines of business, asset types, and products and services, enabling Partners to expand their relationship with Pagaya and further increase origination volumes.

Previous wording

Adoption of Our Network by Partners

Current wording

Adoption of Our Network by New Partners

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 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.

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.

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 $2.7 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 $2.9 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 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.

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 six months ended June 30, 2025, our top 5 ABS investors contributed approximately 52% of our total ABS funding compared to 54% in the year ended December 31, 2024.

Previous wording

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 wording

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 mid-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.

Previous wording

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…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 mid-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 mid-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 …

Excerpt shortened here; the source contains the full paragraph.

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 months ended March 31, 2025 and 2024.

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 and six months ended June 30, 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. 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.

Current wording

We believe the Network Volume metric to be a helpful indicator 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. While maintaining a focus on profitable growth, which may result in a different targeted volume mix, 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, when viewed in combination with financial profitability metrics, 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

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.

Current 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.

Previous 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.

Current wording

Revenue from fees for the three months ended June 30, 2025 increased by $75.1 million, or 31%, to $317.7 million, compared to the same period in 2024. The increase was primarily due to a $64.1 million increase in Network AI fees, comprised of AI integration fees and capital markets execution fees, from $221.8 million for the three months ended June 30, 2024 to $285.9 million for the three months ended June 30, 2025. 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 13.6% from $2.3 billion for the three months ended June 30, 2024 to $2.6 billion for the three months ended June 30, 2025. These increases were partially offset by a decrease in capital markets execution fees earned from our ABS and forward flow transactions during the three months ended June 30, 2025.

Previous 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.”

Current wording

Interest income increased by $2.5 million, or 31%, to $10.7 million for the three months ended June 30, 2025 from $8.2 million for the three months ended June 30, 2024. The increase 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 increase in interest income was primarily the result of changes in structure and composition of asset portfolio.

Previous 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.

Current wording

Production costs increased by $45.9 million, or 31%, to $191.5 million for the three months ended June 30, 2025 from $145.6 million for the three months ended June 30, 2024. This increase was due to an increase in the Network Volume attributable to business growth in addition to the composition of the asset classes that make up our Network Volume.

Previous 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.

Current wording

During the three months ended June 30, 2025 and 2024, we capitalized $4.0 million and $5.9 million of software development costs, respectively. Depreciation expense, including impairment charges for capitalized software development costs was $5.9 million and $7.9 million during the three months ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

Income tax expense for the three months ended June 30, 2025 decreased $9.5 million, compared to the same period in 2024. The decrease was primarily driven by a decrease in discrete tax expenses during the three months ended June 30, 2025.

Previous 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.”

Current wording

Net loss attributable to noncontrolling interests for the three months ended June 30, 2025 decreased $7.8 million 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 to which we had no economic right and was the result of a lower credit-related impairment loss of $7.3 million on the risk retention holdings. For further information, see “—Total Revenue and Other Income” and “—Other Expense, Net.”

Previous 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.

Current wording

Total revenue and other income, increased by $120.8 million, or 24%, to $616.4 million for the six months ended June 30, 2025 from $495.6 million for the six months ended June 30, 2024. The increase was primarily driven by an increase in revenue from fees, partially offset by a decrease in investment (loss) income.

Previous 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.

Current wording

Contract fees, comprised of administration and management fees and performance fees, increased by $18.6 million from $42.5 million for the six months ended June 30, 2024 to $61.1 million for the six months ended June 30, 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 period included a reversal of performance fees.

Previous 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.

Current wording

Investment (loss) income decreased by $2.5 million to a loss of $2.4 million for the six months ended June 30, 2025 from an income of $0.1 million for six months ended June 30, 2024, reflecting an unfavorable impact from the change in valuation of certain proprietary investments.

Previous 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.

Current wording

Other expense, net for the six months ended June 30, 2025 decreased $24.9 million, compared to the same period in 2024. The decrease was primarily due to a $24.2 million decrease in credit-related impairment loss on certain investments from $76.4 million in the prior period to $52.2 million in the current period, 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 $52.2 million in the current period, $8.7 million is attributable to the noncontrolling interest in certain VIEs, and accordingly, is not attributable to Pagaya Shareholders. For further information, see “—Net Income (Loss) Attributable to Noncontrolling Interests.” Also contributing to the decrease was $8.7 million of gain from sales of certain investments in the current period, and a favorable impact of $5.4 million from a release of contingent liability associated with the acquisition of Theorem. Theses decreases were partially offset by higher interest expenses of $7.6 million and an unfavorable impact from the change in fair value of warrant liability of $3.1 million.

Previous 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):

Current wording

FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024 are summarized below ($ in thousands):

Previous 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.

Current wording

As of June 30, 2025 and December 31, 2024, the principal sources of liquidity were cash, cash equivalents, current and non-current restricted cash of $242.0 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 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.

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 “Senior Note Issuance,” 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

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.

Current wording

As of August 6, 2025, the price of our Class A Ordinary Shares was $31.36 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

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.

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 June 30, 2025, we had 524 employees compared to 591 on June 30, 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 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.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was $91.8 million, an increase of $64.8 million from net cash provided by operating activities of $27.0 million for the same period in 2024. This reflects our net income including noncontrolling interests of $19.1 million, adjusted for non-cash charges of $103.8 million, and net cash outflows of $31.1 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 $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.

Current wording

Non-cash charges during six months ended June 30, 2025 primarily consisted of (1) impairment losses on investments in loans and securities, which decreased by $25.4 million compared to the same period in 2024, 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 $8.7 million is not attributable to Pagaya, but rather attributable to the VIEs noncontrolling interests, (2) share-based compensation, which decreased by $2.1 million compared to the same period in 2024,, (3) depreciation and amortization, which increased by $2.0 million compared to the same period in 2024, primarily from capitalized software, and (4)

Previous 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.

Current wording

Our net cash flows resulting from changes in operating assets and liabilities decreased by $43.2 million to net cash outflows of $31.1 million for the six months ended June 30, 2025 compared to net cash inflows of $12.1 million for the same period in 2024.

Previous 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.

Current wording

For the six months ended June 30, 2025, net cash used in investing activities totaled $152.2 million, primarily driven by purchases of risk retention assets. These purchases of risk retention assets amounted to $274.1 million, a decrease of $134.3 million compared to the prior period, driven by diversified funding channels, including asset-backed securitization, pass-through and forward flow transactions, in the current period. This cash outflow was partially offset by proceeds received from existing risk retention assets, which totaled $129.4 million, an increase of $53.6 million compared to the prior period.

Previous wording

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 wording

For the six months ended June 30, 2025, net cash provided by financing activities of $74.7 million was primarily attributable to $244.9 million of proceeds from secured borrowing, partially offset by $156.9 million of repayments made to secured borrowing and $8.9 million of repayments made to long-term debt.

Previous wording

On October 1, 2024, Pagaya US Holding Company LLC (“Pagaya US”), a wholly-owned subsidiary of the Company, issued $160 million in aggregate principal amount of 6.125% exchangeable senior notes due 2029 (the “Notes”). The issuance was in connection with a purchase agreement dated September 26, 2024, with certain initial purchasers. The Company intends to use the net proceeds from the Notes to repay higher-cost debt and reduce interest expense, with the remainder allocated for general corporate purposes.

Current wording

On October 1, 2024, Pagaya US issued $160 million in aggregate principal amount of 6.125% exchangeable notes due 2029 (the “Notes”). The issuance was in connection with a purchase agreement dated September 26, 2024, with certain initial purchasers. The Company intends to use the net proceeds from the Notes to repay higher-cost debt and reduce interest expense, with the remainder allocated for general corporate purposes.

Previous wording

As of March 31, 2025, the Company had an outstanding balance of $317.9 million, which is recorded within long-term debt on the unaudited condensed consolidated balance sheet, and the Company had letters of credit issued in the amount of $24.7 million, and $33.3 million of remaining capacity available under the Revolving Credit Facility. The Company is in compliance with all covenants.

Current wording

As of June 30, 2025, the Company had an outstanding balance of $314.5 million, which is recorded within long-term debt and current portion of long-term debt on the unaudited condensed consolidated balance sheet, and the Company had letters of credit issued in the amount of $20.5 million, and $37.5 million of remaining capacity available under the Revolving Credit Facility. As of June 30, 2025, the Company was in compliance with all covenants.

Previous wording

During the normal course of business, we enter into certain lease contracts with lease terms through 2032. As of March 31, 2025, the total remaining contractual obligations are approximately $44.2 million, of which $9.3 million is for the next 12 months. In 2023, we entered into a purchase commitment with our third-party cloud computing web services provider, which included an annual purchase commitment of $8.5 million for the period from October 2023 through September 2025. As of March 31, 2025, the total remaining contractual obligations are approximately $2.4 million, all of which is for the next 12 months. We may pay more than the minimum purchase commitment based on usage.

Current wording

During the normal course of business, we enter into certain lease contracts with lease terms through 2032. As of June 30, 2025, the total remaining contractual obligations are approximately $45.2 million, of which $9.7 million is for the next 12 months. From time to time, the Company enters into a purchase commitment with our third-party cloud computing web services providers. As of June 30, 2025, the total remaining contractual obligations from this purchase commitment are approximately $2.1 million, of which $1.7 million is for the next 12 months. The Company may pay more than the minimum purchase commitment based on usage. Additionally, the Company has contractual obligations related to its lease for corporate office space. See Note 7 for details regarding when these obligations are due.

Previous wording

In the ordinary course of business, the Company may provide indemnifications or loss guarantees of varying scope and terms to customers and other third parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments may not be subject to a cap. As of March 31, 2025, there have been no known events or circumstances that have resulted in a material indemnification liability and the Company did not incur material costs to defend lawsuits or settle claims related to these indemnifications. For certain contracts meeting the definition of a guarantee or a derivative, the guarantor must recognize, at inception, a liability for the fair value of the obligation undertaken in issuing the guarantee. In addition, the guarantor must disclose the maximum potential amount of future payments that the guarantor could be required to make under the guarantee, if there were a default by the guaranteed parties. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. As of March 31, 2025, the unfunded maximum potential amount of undiscounted future payments the Company could be required to make under these guarantees totaled $60.3 million. Additionally, in accordance with the guarantee contracts, the Company is required to fund segregated cash balances to provide protection in the event the Company is not able to meet its contractual commitments. As of March 31, 2025, $39.8 million has been segregated and recognized within restricted cash in the unaudited condensed consolidated balance sheet in accordance with these contractual requirements.

Current wording

In the ordinary course of business, the Company may provide indemnifications or loss guarantees of varying scope and terms to customers and other third parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments may not be subject to a cap. As of June 30, 2025, there have been no known events or circumstances that have resulted in a material indemnification liability and the Company did not incur material costs to defend lawsuits or settle claims related to these indemnifications. For certain contracts meeting the definition of a guarantee or a derivative, the guarantor must recognize, at inception, a liability for the fair value of the obligation undertaken in issuing the guarantee. In addition, the guarantor must disclose the maximum potential amount of future payments that the guarantor could be required to make under the guarantee, if there were a default by the guaranteed parties. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. As of June 30, 2025, the unfunded maximum potential amount of undiscounted future payments the Company could be required to make under these guarantees totaled $86.9 million. Additionally, in accordance with the guarantee contracts, the Company is required to fund segregated cash balances to provide protection in the event the Company is not able to meet its contractual commitments. As of June 30, 2025, $51.7 million has been segregated and recognized within restricted cash in the unaudited condensed consolidated balance sheet in accordance with these contractual requirements.