Pagaya Technologies Ltd.

NOTE 1 -BUSINESS DESCRIPTION

Pagaya Technologies Ltd. and its consolidated subsidiaries (together “we” “our” “Pagaya” or the “Company”) is a technology company that deploys sophisticated data science and proprietary AI technology to drive better results for financial services and other service providers, their customers, and asset investors. Services providers integrated with Pagaya’s network, which are referred to as “Partners,” range from high-growth financial technology companies to incumbent banks and financial institutions, auto finance providers and residential real estate service providers. Partners have access to Pagaya’s network in order to assist with extending financial products to their customers, in turn helping those customers fulfill their financial needs and dreams. These assets originated by Partners with the assistance of Pagaya’s AI technology are eligible to be acquired by (i) funds managed or advised by Pagaya or one of its affiliates, (ii) securitization vehicles sponsored or administered by Pagaya or one of its affiliates and (iii) other similar vehicles (“Financing Vehicles”).

Pagaya Technologies Ltd. was founded in 2016 and is organized under the laws of the State of Israel. Pagaya has its primary offices in the United States and Israel.

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company, its wholly-owned subsidiaries, and consolidated variable interest entities (“VIEs”) if any.

The accompanying unaudited condensed consolidated financial statements were derived from the audited consolidated financial statements, but does not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K.

All intercompany accounts and transactions have been eliminated. The Company’s functional and reporting currency is the U.S. Dollar. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements, except as noted below, and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2025 and the Company’s consolidated results of operations and shareholders’ equity for the three and nine months ended September 30, 2025 and 2024, and cash flows for the nine months ended September 30, 2025 and 2024. The results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full year ending December 31, 2025 or any other future interim or annual period.

Significant Accounting Policies

Unclassified Balance Sheet

Effective for the quarterly period ended September 30, 2025, the Company has voluntarily changed its balance sheet presentation to an unclassified format. Management believes this change in accounting principle is preferable because it conforms the Company's financial reporting with the predominant practice of its peers within the financial technology industry and provides a presentation consistent with the financial metrics used to evaluate the business, thereby enhancing comparability and relevance for investors. In accordance with applicable accounting guidance, this change has been applied retrospectively to all prior periods presented. The change had no impact on previously reported total assets, total liabilities, stockholders' equity or results of operations.

Except for the balance sheet presentation change, there were no material changes to our significant accounting policies as disclosed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 12, 2025.

Emerging Growth Company Status

On the last business day of the second quarter in 2025, the aggregate market value of the Company’s ordinary Class A shares held by non-affiliate shareholders exceeded $700 million. As a result, we will be considered a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act for filings beginning with our annual report on Form 10-K for the fiscal year ended December 31, 2025, and we will cease to be an emerging growth company as of December 31, 2025. Due to the loss of emerging growth company status, the Company will no longer be exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, and our independent registered public accounting firm will evaluate and report on the effectiveness of our internal controls over financial reporting in our annual report for the fiscal year ended December 31, 2025. The transition to large accelerated filer status will also subject the Company to accelerated filing deadlines and additional disclosure requirements, which will further align our reporting with other large US companies for even greater transparency.

Reclassification

Certain prior year amounts have been reclassified to conform to the current period presentation. The reclassification adjustments primarily relate to changes to the presentation of certain expenses in the unaudited condensed consolidated statements of operations. Specifically, effective with the third quarter of 2025, the Company has added new financial statement line items labeled “Gains and (losses) on investments in loans and securities” and “Loss from extinguishment of debt” and reclassified the corresponding amounts in the prior period financial statements to conform to the current period presentation.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require entities to disclose specific categories in the effective tax rate reconciliation and provide additional information for reconciling items where the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income/loss by the applicable statutory income tax rate. In addition, entities are required to disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by jurisdictions. This ASU is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of these amendments on its consolidated financial statements disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40), Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about certain expense captions presented in the unaudited condensed consolidated statements of operations as well as disclosure about selling expense. The effective date for this update was amended by ASU 2025-01 Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, and is now effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. It could be applied either prospectively or retrospectively. The Company is currently evaluating the impact of these amendments on its consolidated financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to modernize the accounting guidance for the costs to develop software for internal use. The standard applies to costs incurred to develop or obtain software for internal use. ASU 2025-06 amends the existing standard that refers to various stages of a software development project to align better with current software development methods, such as agile programming. Under the new standard, entities will commence capitalizing eligible costs when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The new standard also supersedes the guidance related to costs incurred to develop a website. ASU 2025-06 guidance is effective for annual periods beginning after December 15, 2027. The guidance can be applied on a prospective basis, a modified basis for in-process projects or on a retrospective basis. The Company is currently evaluating the impact of these amendments on its consolidated financial statement disclosures.

NOTE 3 -REVENUE

Revenue from fees is comprised of Network AI fees and Contract fees. Network AI fees can be further broken down intotwo fee streams: AI integration fees and capital markets execution fees. AI integration fees are earned for the creation and delivery of assets that comprise Network Volume. The Company utilizes multiple funding channels to enable the purchase of network assets from Partners, such as asset backed securitizations (“ABS”), pass-through and forward flow transactions. Capital markets execution fees are earned from the market pricing of ABS transactions while contract fees are management, performance and similar fees. These fees are the result of agreements with customers and are recognized in accordance with FASB Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC 606”).

Revenue is recognized in accordance with ASC 606 with revenue recorded on a gross basis when the Company is a principal in the transaction with customers, and recorded on a net basis when the Company is acting as an agent on behalf of another. The Company generally recognizes revenue on a gross basis because the Company is primarily responsible for integrating the various services fulfilled by Partners and is ultimately responsible to the Financing Vehicles for the fulfillment of the related services. To the extent the Company does not meet the criteria for recognizing revenue on a gross basis, the Company records revenue on a net basis.

Network AI Fees

Network AI fees, comprised of AI integration fees and capital markets execution fees, totaled $304.6 million and $229.1 million for the three months ended September 30, 2025 and 2024, respectively, and $843.9 million and $666.2 million for the nine months ended September 30, 2025 and 2024, respectively. The Company recognizes Network AI fees primarily at a point in time when the related performance obligation is satisfied and the payment term is generally 30 days. From time to time the Company may provide certain incentives to a customer. When the Company determines that an incentive is consideration payable, which is not in exchange for distinct goods or services, to a customer, the incentive is recorded as a reduction of revenue. Expenses to third parties for services that are integrated with the Company’s technology are recorded in the unaudited condensed consolidated statements of operations as Production Costs.

Contract Fees

Contract fees include administration and management fees, performances fees, and servicing fees. Contract fees totaled $35.3 million and $20.1 million for the three months ended September 30, 2025 and 2024, respectively, and $96.4 million and $62.7 million for the nine months ended September 30, 2025 and 2024, respectively. All of these fees are recognized over the service period for the Financing Vehicles managed or administered by the Company and the payment term is monthly as a fixed percentage of the entity’s assets, except for the portion of management fees that are recognized at the point in time based on contract terms.

Performance fees are earned when certain Fund Financing Vehicles exceed contractual return thresholds. They are recognized only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. An estimate is made by the Company based on a variety of factors including market conditions and expected loan performance. In the following period, the true performance is measured and then adjusted to ensure that the fees accurately represent actual performance of Financing Vehicles. As such, there are revenues that result from performance obligations satisfied in the previous year. During the three and nine months ended September 30, 2025, $0.1 million and $0.9 million, respectively, worth of fees were recognized, which represent performance obligations satisfied in the previous year that were greater than the original estimate. During the three months ended September 30, 2024, $0.3 million worth of fees were recognized, which represent performance obligations satisfied in the previous year that were greater than the original estimate. During the nine months ended September 30, 2024, $2.9 million worth of fees were reversed, which represent performance obligations satisfied in the previous year that were less than the original estimate.

Servicing fees for the Financing Vehicles, which primarily involve collecting payments and providing reporting on the loans within the securitization vehicles, are recognized over the service period and payment is received monthly from the Financing Vehicles. These duties have been considered to be agent responsibilities and does not include acting as a loan servicer. Accordingly, servicing fees are recorded on a net basis.

Total Revenue From Fees

The Company determines its contracts generally to not include a significant financing component since the Company's selling prices are not subjected to billing terms nor is its purpose to receive financing from its customers or to provide customers with financing. In addition, as a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between payment and the transfer of services is expected to be one year or less.

Once revenue is recognized, it is recorded on the unaudited condensed consolidated balance sheet in fees receivables until the payment is received from the customer. The timing of the recognition depends on the type of service as described above.

The Company had no material contract assets, contract liabilities, or deferred contract costs recorded as of September 30, 2025 or December 31, 2024.

Concentrations of Credit Risk and Significant Customers

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents, restricted cash and cash equivalents and fees receivable. Cash and cash equivalents are principally maintained with major financial institutions, which management assesses to be of high credit quality. The Company has not experienced any losses on these deposits.

The Company’s fees receivable balances are predominantly with agreements with customers, and these are subject to normal credit risks which management believes to be not significant.

Significant customers are those which represent 10% or more of the Company’s total fee revenue for each respective period presented. Two related party customers individually represented greater than 10% of total fee revenue and collectively totaled approximately 25% for three months ended September 30, 2025. No customer represented more than 10% of the Company’s total fee revenue for nine months ended September 30, 2025. Four customers, including three related parties, individually represented greater than 10% of total fee revenue and collectively totaled approximately 65% for the three months ended September 30, 2024. Two customers, including one related party, individually represented great than 10% of total fee revenue and collectively totaled approximately 25% for nine months ended September 30, 2024.

NOTE 4 -BORROWINGS

The following table sets forth the Company’s outstanding borrowings as of the date indicated (in thousands):

The Company was in compliance with all covenants as of September 30, 2025 and December 31, 2024.

Secured Borrowing

During the three months ended September 30, 2025, the Company has repaid $153.9 million of secured borrowing, following the issuance of Senior Notes. As a result of these transactions, the Company has incurred a loss of $1.1 million during the three months ended September 30, 2025, related to the write-off of deferred issuance costs reported within “Loss from extinguishment of debt” in the unaudited condensed consolidated statements of operations.

Risk Retention Master Repurchase

In the normal course of business, the Company, through consolidated VIEs, enters into repurchase agreements to finance the Company’s risk retention balance in notes and certificates retained from securitization transactions. Under these agreements, the Company pledges financial instruments as collateral. These agreements with counterparties generally contain contractual provisions allowing the counterparty the right to sell or repledge the collateral. Pledged securities owned that can be sold or repledged by the counterparty are included in Investments in loans and securities in the Company’s unaudited condensed consolidated balance sheet. As of September 30, 2025 and December 31, 2024, the outstanding principal balance under the repurchase agreements was $68.4 million and $144.0 million, respectively, which is recorded within secured borrowing on the unaudited condensed consolidated balance sheet, with a weighted average interest rate of approximately twelve percent andfifteen percent, respectively. The average remaining contractual maturities of the repurchase agreements were greater than 90 days as of both September 30, 2025 and December 31, 2024.

Receivables Facility

In April 2025, Pagaya Structured Products LLC, a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement (the “LSA Agreement”) with certain lenders. This agreement established a 24-month Capitalized Interest Amounts Facility (the “CIA Facility”) with a maximum principal amount of $24 million to finance eligible capitalized interest amounts related to sponsored securitization transactions. Additionally, in June 2025, Pagaya Structured Products LLC entered into a 30-month Accrued Loan Purchasing Fee Receivables Facility (the “ALPF Facility”) with a maximum principal amount of $65 million, to finance certain eligible receivables from sponsored securitization transactions. Borrowings under the CIA Facility bear interest at a rate per annum equal to the adjusted term SOFR (subject to a 1.00% floor) plus a margin of 4.00%, while borrowings under the ALPF Facility bear interest at a rate per annum equal to the adjusted term SOFR (subject to a 1.00% floor) plus a margin of 1.9%. As of September 30, 2025, the combined outstanding principal balance under the CIA Facility and ALPF Facility was $63.2 million, which is recorded within secured borrowing on the unaudited condensed consolidated balance sheet.

In June 2025, Pagaya Receivables LLC, a wholly-owned subsidiary of the Company, repaid the outstanding balance of a 3-year loan facility (the “SVB Receivables Facility”) and terminated the related Loan and Security Agreement, which was originally executed in October 2022. Borrowings under the SVB Receivables Facility bear interest at a rate per annum equal to the adjusted term SOFR (subject to a 0.00% floor) plus a margin of 3.50%. As of December 31, 2024, the outstanding principal balance under the SVB Receivable Facility was $31.9 million, which is recorded within secured borrowing on the unaudited condensed consolidated balance sheet.

Exchangeable Notes

On October 1, 2024, the Company, through a wholly owned subsidiary of the Company, issued $160 million aggregate principal amount of its 6.125% Exchangeable Notes (“Notes”) due 2029. The issuance was in connection with a purchase agreement dated September 26, 2024, with certain initial purchasers. The Notes bear interest at a rate of 6.125% per annum, payable semiannually in arrears on April 1 and October 1 of each year, beginning April 1, 2025. The Notes will mature on October 1, 2029, unless earlier repurchased, redeemed or exchanged.

The Company accounted for the issuance of the Notes as a single liability at par as the conversion feature does not require bifurcation as a derivative under ASC 815 and the Notes were not issued at a substantial premium. Debt issuance costs related to the Notes totaled $6.2 million and consisted of underwriting fees and third-party offering costs, which are amortized to interest expense using the effective interest method over the contractual term. The Company recorded $3.1 million and $9.2 million of interest expense, including $0.6 million and $1.8 million of amortization of debt issuance costs, for the three and nine months ended September 30, 2025. The effective interest rate of the Notes is 8.7%.

Long-Term Debt

Senior Notes

On July 28, 2025, the Company, through Pagaya US Holding Company LLC (“Pagaya US”), a wholly-owned subsidiary of the Company, completed the issuance of $500 million aggregate principal amount of Senior Unsecured Notes (“Senior Notes”) due 2030. The Senior Notes will accrue interest at a rate of 8.875% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2026. The Senior Notes will mature on August 1, 2030, unless earlier repurchased or redeemed.

The Senior Notes will be redeemable at the option of Pagaya US. At any time prior to August 1, 2027, Pagaya US may redeem the Senior Notes, in whole or in part, at its option at a redemption price equal to 100% of the principal amount of the Senior Notes plus a make-whole premium described in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. On and after August 1, 2027, Pagaya US may redeem the Notes, in whole or in part, at the redemption prices set forth in the Indenture.

The following table details the Company’s Senior Notes as of September 30, 2025 (in thousands):

The Company recorded $8.3 million of interest expense, including $0.4 million of amortization of debt issuance costs, for the three months ended September 30, 2025.

Credit Agreement

On February 2, 2024, the Company entered into a certain Credit Agreement (the “Credit Agreement”) which provides for a 5-year senior secured revolving credit facility (the “Revolving Credit Facility”) in an initial principal amount of $25 million, which subsequently increased to $35 million, and a 5 year senior secured term loan facility (the “Term Loan Facility,” and together with the Revolving Credit Facility, the “Facilities”) in an initial principal amount of $255 million. Borrowings under the Facilities bear interest at a rate per annum equal to, at the Company’s option, (i) a base rate (determined based on the prime rate and subject to a 2.00% floor) plus a margin of 6.50% or (ii) an adjusted term Secured Overnight Financing Rate (subject to a 1.00% floor) plus a margin of 7.50%.

In November 2024, the Company entered into Amendment No. 2 (the “Amendment”) to the Credit Agreement. Pursuant to the Amendment, the Company incurred incremental term loans in an aggregate principal amount $100 million, bringing the total principal amount of the Term Loan Facility to $355 million. The Company also increased an aggregate principal amount of the Revolving Credit Facility of $15 million, bringing the total principal amount of the Revolving Credit Facility to $50 million. In February 2025, the Company further increased the aggregate principal amount of the Revolving Credit Facility by $8 million, resulting in a total principal amount of $58 million. As of September 30, 2025 and December 31, 2024, the Company had letters of credit issued in the amount of $16.6 million and $24.3 million, respectively, and $41.4 million and $25.7 million of remaining capacity available under the Revolving Credit Facility, respectively.

In July 2025, the Company fully paid off the outstanding principal balance under the Credit Agreement using the proceeds from the issuance of Senior Notes, as discussed above. As a result of this transaction and the repayment of outstanding balance under the Credit Agreement, the Company has incurred a loss of $23.9 million during the three months ended September 30, 2025, related to the write-off of deferred issuance costs and an early payment penalty, reported within “Loss from extinguishment of debt” in the unaudited condensed consolidated statements of operations.

On October 1, 2025, the Company refinanced the Revolving Credit Facility by way of terminating Credit Agreement and entering into a newthree-year revolving credit facility (the “2025 Revolving Credit Facility”) with a syndicate of financial institutions. The 2025 Revolving Credit Facility provides a committed borrowing capacity of $132 million. Borrowings under the 2025 Revolving Credit Facility bear interest at a rate per annum equal to, at the Company’s option, (i) a base rate (determined based on the prime rate and subject to 1.00% floor) plus a margin of 2.50% and (ii) an adjusted term SOFR (subject to 1.00% floor) plus a margin of 3.50%, a reduction from the prior revolving credit facility’s rate of SOFR plus 7.50%. A commitment fee accrues on any unused portion of the commitments under the 2025 Revolving Credit Facility at a rate per annum of 0.25% and is payable quarterly in arrears. The terms and conditions of the 2025 Revolving Credit Facility include customary covenants and restrictions. See Note 15.

NOTE 5 -INVESTMENTS

As of September 30, 2025, our investments in loans and securities portfolio consisted of (i) investments held at fair value with changes in fair value recorded in unrealized gain (loss) on available for sale securities, excluding the portion relating to any credit loss; (ii) loans held for investment at amortized cost, less an allowance for potential uncollectible amounts; and (iii) investments held at fair value, with changes in fair value recorded in earnings, for which we elected the fair value option. Below is a disaggregated presentation of our investments in loans and securities, including fair value adjustments, accrued interest income and net of the allowance for credit losses, as applicable (in thousands):

Investments in Loans and Securities

The amortized cost, gross unrealized gains and losses, allowance for credit losses, and fair value of investments in securities as of September 30, 2025 and December 31, 2024 were as follows (in thousands). As provided in Note 6, a portion of these investments in securities are consolidated as a result of the Company’s determination that it is the primary beneficiary of certain VIEs.

(1) Includes accrued interest receivable of $21.7 million.

(2) Includes accrued interest receivable of $14.3 million, previously reported within “Fee receivables” as of December 31, 2024, has been reclassified to conform to the current period’s presentation.

The following tables set forth the fair value and gross unrealized losses on investments in securities without an allowance for credit losses aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, as of the dates indicated (in thousands):

The following table sets forth the amortized cost and fair value of investments in securities by contractual maturities, as of the date indicated (in thousands):

(1) Based on expected maturity date cash flows.

(2) Includes accrued interest receivable of $14.3 million, previously reported within “Fee and other receivables” as of December 31, 2024, has been reclassified to conform to the current period’s presentation.

The following table sets forth gross proceeds and related investment gains and losses, as well as losses on write-downs and the allowance for credit losses of securities, for the periods indicated (in thousands):

The following tables set forth the activity in the allowance for credit losses for investments in loans and securities, as of the dates indicated (in thousands):

Investments in securities, under the fair value option

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We elected the fair value option to measure certain securities, as we believe that fair value best reflects the economic transaction of investing in certain new securities. We determined the fair value of certain securities using a discounted cash flow methodology, while also considering market data as it became available. We record the initial fair value measurement and subsequent measurement changes in fair value in the period in which the changes occur within the gains and (losses) on investments in loans and securities in the unaudited condensed consolidated statements of operations. We report the changes in fair value within (gains) and losses on investments in loans and securities in the unaudited condensed consolidated statements of cash flow.

The following table presents activities of investments in securities for which we elected the fair value option. See Note 10 for the assumptions used in our fair value model (in thousands):

Equity Method and Other Investments

The following investments, including those accounted for under the equity method, are included within Equity method and other investments in the unaudited condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024 (in thousands):

(1) The Company owns approximately 5.4% and is the general partner of Pagaya Smartresi F1 Fund LP.

(2) Represents the Company’s proprietary investments. Income (loss) from these investments is included in Investment income (loss), net in the unaudited condensed consolidated statements of operations.

NOTE 6 -CONSOLIDATION AND VARIABLE INTEREST ENTITIES

The Company has variable interests in securitization vehicles that it sponsors. The Company consolidates VIEs when it is deemed to be the primary beneficiary. In order to be primary beneficiary, the Company must have a controlling financial interest in the VIE. This is determined by evaluating if the Company has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant.

Consolidated VIEs

As of September 30, 2025 and December 31, 2024, the Company has determined that it is the primary beneficiary of Pagaya Structured Holdings LLC, Pagaya Structured Holdings II LLC, and Pagaya Structured Holding III LLC (“Risk Retention Entities”). As sponsor of securitization transactions, the Company is subject to risk retention requirements and established the Risk Retention Entities to meet these requirements.

Below is a summary of assets and liabilities from the Company’s involvement with consolidated VIEs (i.e., Risk Retention Entities) (in thousands):

(1) Assets comprised of the note and certificates to comply with risk retention requirements.

Unconsolidated VIEs

The Company determined that it is not the primary beneficiary of the trusts which hold the loans and issue securities associated with the securitization transactions the Company sponsors. The Company does not have the power to direct or control the activities which most significantly affect the performance of the trusts, which was determined to be servicing loans.

The Company’s maximum exposure to loss from its involvement with unconsolidated VIEs represents the estimated loss that would be incurred under severe, hypothetical circumstances, for which the Company believes the possibility is remote, such as where the value of securitization notes and senior and residual certificates the Company holds as part of the risk retention requirement declines to zero.

Below is a summary of the Company’s direct interest in (i.e., not held through Risk Retention Entities) variable interests in nonconsolidated VIEs (in thousands):

From time to time, the Company may, but is not obligated to, purchase assets from the Financing Vehicles. Such repurchases occur at the Company’s discretion, subject to contractual requirements and limitations. See Note 9 for additional information.

NOTE 7 -LEASES

The Company leases facilities under operating leases with various expiration dates through 2032. The Company leases office space in New York, Israel and several other locations.

The security deposits for the leases are $1.9 million and $3.3 million as of September 30, 2025 and December 31, 2024, respectively, which have been recognized as restricted cash and cash equivalents in the unaudited condensed consolidated balance sheets.

The Company’s operating lease expense consists of rent and variable lease payments. Variable lease payments such as common area maintenance were included in operating expenses. Rent expense for the Company’s short-term leases was immaterial for the periods presented. Operating lease expense was as follows (in thousands):

(1) The Company entered into sublease agreements for certain leased office space, and the amounts were included in other expense, net in the unaudited condensed consolidated statements of operations.

Supplemental information related to the Company’s operating leases was as follows ($ in thousands):

Maturities of the Company’s operating lease liabilities as of September 30, 2025 were as follows (in thousands):

NOTE 8 -COMMITMENTS AND CONTINGENCIES

Legal Proceedings— From time to time the Company is subject to legal proceedings and claims in the ordinary course of business. The results of such matters often cannot be predicted with certainty. In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal proceeding and claims when those matters present loss contingencies which are both probable and reasonably estimable. All such liabilities arising from current legal matters, to the extent such matters existed, have been recorded in accrued expenses and other liabilities on the unaudited condensed consolidated balance sheets and these matters are immaterial.

Contractual Obligations and Commitments— From time to time, the Company enters into a purchase commitment with our third-party cloud computing web services providers. As of September 30, 2025, the total remaining contractual obligations from this purchase commitment are approximately $12.3 million, of which $6.3 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.

In October 2024, the Company completed the acquisition of Theorem Technology, Inc. (“Theorem”), a Silicon Valley-based institutional asset manager focused exclusively on the consumer credit space, managing assets for global institutional investors since its founding in 2014. The Company acquired 100% of Theorem’s equity for approximately $17.5 million, consisting of $10.0 million cash and 504,440 of the Company’s Class A Ordinary Shares ($7.5 million worth as of the closing date), with an additional contingent consideration based on achievement of certain performance objectives defined in the purchase agreement. The Company established contingent consideration liability is reported at fair value, which is determined based on the present value of an expected payment under the arrangement, using an option pricing model based on a number of assumptions, including certain unobservable assumptions discounted at an estimated market interest rate. The fair value of the liability is updated each reporting period, with changes in fair value reported within “Other expenses, net.” The fair value of the contingent consideration liability was $0.3 million and $6.1 million as of September 30, 2025 and December 31, 2024, respectively.

Guarantees and Indemnifications— 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.

For our forward flow agreements, loans purchased have a contractual performance requirement which is measured periodically over the life of the underlying loans. If the loan’s performance is below the contractual requirement, the counterparty may have first loss up until a contractual agreed limit. If the loans’ performance is below the counterparty’s first loss limit or if there is no first loss limit, then Pagaya would be required to make a payment to the counterparty such that the loans purchased would have achieved the contractual performance requirement. There is a contractual maximum loss for Pagaya’s loss protection with the counterparty taking full risk of loss beyond Pagaya’s loss protection. Our guarantee of contractual loss protection for the buyer meets the accounting definition of a derivative, and therefore we recognize, at inception and each reporting period, a liability for the fair value of the estimated loss protection payments, if any.

As of September 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. As of September 30, 2025, the unfunded maximum potential amount of undiscounted future payments the Company could be required to make under these guarantees totaled $104.9 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 September 30, 2025, $39.9 million has been segregated and recognized within restricted cash and cash equivalents, of which $8.4 million has been accrued within accrued expenses and other liabilities in the unaudited condensed consolidated balance sheet in accordance with these contractual requirements.

NOTE 9 -TRANSACTIONS WITH RELATED PARTIES

In the ordinary course of business, the Company may enter into transactions with directors, principal officers, their immediate families, and affiliated companies in which they are principal shareholders (commonly referred to as related parties). In addition, the Company has transactions with the securitization vehicles and other Financing Vehicles, which are also related parties.

As of September 30, 2025, the fee receivables from related parties are $100.2 million, which consist of $78.3 million from securitization vehicles and $21.9 million from other Financing Vehicles. As of December 31, 2024, the fee receivables from related parties are $99.4 million, which consists of $79.0 million from securitization vehicles and $20.4 million from other Financing Vehicles.

As of September 30, 2025 and December 31, 2024, other assets include revolving facilities and other amounts due from related parties of $30.5 million and $15.2 million, respectively, all of which were attributable to Financing Vehicles.

For the three months ended September 30, 2025, the total revenue from related parties is $159.3 million, which consists of $150.8 million from securitization vehicles and $8.5 million from other Financing Vehicles. For the nine months ended September 30, 2025, the total revenue from related party is $473.7 million, which consists of $447.7 million from securitization vehicles and $26.0 million from other Financing Vehicles. For the three months ended September 30, 2024, the total revenue from related parties is $174.2 million, which consists of $154.3 million from securitization vehicles and $19.9 million from other Financing Vehicles. For the nine months ended September 30, 2024, the total revenue from related parties is $528.0 million which consists of $474.1 million from securitization vehicles and $53.9 million from other Financing Vehicles.

During the three and nine months ended September 30, 2024, the Company purchased approximately $14.5 million and $34.0 million, respectively, of loan principal from the Financing Vehicles and included a loss of approximately $12.8 million and $31.2 million, respectively, in general and administrative expenses with respect to these loans.

NOTE 10 -FAIR VALUE MEASUREMENT

FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, when available. If such quoted market prices are not available, fair value is based upon discounted cash flow model that use, as inputs, observable market-based parameters to the greatest extent possible.

The Company determines the fair value of its financial instruments and conducts an ongoing assessment of the techniques used to ensure their appropriateness, consistent application and the reasonableness of the assumptions. In determining the fair value of each investment security, the Company reviews performance characteristics of the underlying loan pool including origination vintage, borrower credit quality, macroeconomic environment, etc. The Company determines the fair value for each investment security by then estimating significant assumptions including discount rate, cumulative net loss rate and prepayment rate which are reviewed and approved by management.

The Company also engages a third-party valuation service provider to estimate a range of fair values for all significant investment securities. The Company reviews and validates that each of its significant assumptions are within the range of the independent third-party service provider, including: discount rate, cumulative net loss rate, prepayment rate, etc. Finally, the Company reviews and validates that the fair value used for financial reporting is within the range of fair value estimates by the third-party service provider for the same significant investment securities.

Financial Assets and Liabilities Recorded at Fair Value

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):

(1) Included in “Accrued expenses and other liabilities” in the unaudited condensed consolidated balance sheets. See Note 8 for additional information.

(2) Accrued interest receivable of $14.3 million, previously reported within “Fee receivables” as of December 31, 2024, has been reclassified to conform to the current period’s presentation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 1 and 2)

Warrant liability (Level 1)

The following tables summarize the Warrant liability activity for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 3)

Investments in Loans and Securities (Level 3)

As of September 30, 2025, the Company held investments in securities classified as available for sale. These assets are measured at fair value using a discounted cash flow model, and presented within investments in loans and securities on the unaudited condensed consolidated balance sheets. Changes in the fair value, other than declines in fair value due to credit, are reflected in other comprehensive income (loss) on the unaudited condensed consolidated statements of comprehensive loss. Declines in fair value due to credit are reflected in gains and (losses) on investments in loans and securities on the unaudited condensed consolidated statements of operations.

The Company held investments in securities under the fair value option. These assets are measured using a discounted cash flow methodology, while also considering market data as it become available, and presented within investments in loans and securities on the unaudited condensed consolidated balance sheets. The initial fair value measurement and subsequent measurement changes in fair value in the period are reflected in gains and (losses) on investments in loans and securities on the unaudited condensed consolidated statements of operations.

The following tables summarize the activity related to the fair value of the investments in loans and securities available for sale (Level 3 only) for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Significant unobservable inputs used for our Level 3 fair value measurement of the loans and securities and credit losses are the discount rate, loss rate, and prepayment rate and consideration of any optional redemption features in our investment securities. Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the securities as of September 30, 2025 and December 31, 2024:

Financial Assets and Liabilities Not Recorded at Fair Value

The Company believes that the carrying amount of cash, cash equivalents and restricted cash, fees receivables, accounts payables and other current liabilities approximate their fair value due to the short-term maturities of these instruments.

The below tables contain information about assets that are not measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 (in thousands):

(1) Accrued interest receivable of $14.3 million, previously reported within “Fee receivables” as of December 31, 2024, has been reclassified to “Investment in loans and securities” to conform to the current period’s presentation.

NOTE 11 -ORDINARY SHARES AND ORDINARY SHARE WARRANTS

As of September 30, 2025,839,999,998 shares with no par value are authorized, of which,6,666,666 shares are designated as Preferred Shares,666,666,666 shares are designated as Class A Ordinary Shares, and 166,666,666 shares are designated as Class B Ordinary Shares. As of September 30, 2025, the Company had 2,027,147 Preferred Shares outstanding,68,839,327 Class A Ordinary Shares outstanding and 11,288,577 Class B Ordinary Shares outstanding.

The rights of the holders of each class of Ordinary Shares are identical, except with respect to voting. Each Class A Ordinary Share is entitled toone vote per share. Each Class B Ordinary Share is entitled to 10 votes per share. Class B Ordinary Shares may be converted at any time at the option of the stockholder and automatically convert upon sale or transfer to a Class A Ordinary Share.

As of September 30, 2025 and December 31, 2024, the Company had reserved ordinary shares for future issuance as follows:

(1) Reflects the application of the automatic increase of shares reserved under the Company's 2022 Share Incentive Plan (the "2022 Plan") pursuant to the terms of the 2022 Plan. For more information on the automatic increases see our Form 10-K.

Ordinary Share Warrants

The Company has accounted for the ordinary share warrants as equity-classified warrants as they met the requirements for equity classification under ASC 815, including whether the ordinary share warrants are indexed to the Company’s own ordinary shares. For warrants that do not meet all the criteria for equity classification, the warrants are recorded at their initial fair value on the date of issuance and remeasured each balance sheet date thereafter. Changes in the estimated fair value of the liability-classified warrants are recognized as a non-cash other income or expense in the accompanying unaudited condensed consolidated statements of operations.

As of September 30, 2025, there were 433,942 warrants expiring in March 2031 with an exercise price of $0.00006 per share,192,900 warrants expiring in June 2030 with an exercise price of $0.0006 per share,220,000 warrants expiring in March 2032 with an exercise price of $0.12 per share,1,309,632 warrants expiring in September 2034 with an exercise price of $0.01 per share, and 1,229,166 warrants expiring in June 2027 (consisting of the Public Warrants) with an exercise price of $138 per share to purchaseone Class A Ordinary Share.

Redeemable Convertible Preferred Stock

In May 2023, the Company issued 5,000,000 Preferred Shares at $15.00 per share to Oak HC/FT Partners V, L.P., Oak HC/FT Partners V-A, L.P. and Oak HC/FT Partners V-B, L.P for gross total proceeds of $75 million. During the third quarter of 2025, a total of 2,972,853 Preferred Shares were converted into 2,972,853 Class A Ordinary Shares at the option of the holders. This conversion resulted in a reduction of the Preferred Shares outstanding and a corresponding increase in the Company's Class A Ordinary Shares. The conversion was accounted for by reclassifying the carrying value of the converted Preferred Shares from mezzanine equity to permanent equity. Following this conversion,2,027,147 Preferred Shares remain outstanding as of September 30, 2025.

NOTE 12 -SHARE BASED COMPENSATION

Share Options—Granted share options expire at the earlier of termination of employment orten years from the date of grant. Share options generally vest over four years of the employment commencement date or with 25% vesting on thetwelve-month anniversary of the employment commencement date, and the remaining on a pro-rata basis each quarter over the next three years. Any options, which are forfeited or not exercised before expiration, become available for future grants.

The following table summarized the Company’s share option activity during the nine months ended September 30, 2025:

The weighted-average grant-date fair value of options granted was approximately $9.7 for the nine months ended September 30, 2025. The aggregate intrinsic value of options exercised was approximately $16.0 million and $3.2 million for the nine months ended September 30, 2025 and 2024, respectively. The total grant date fair value of share options vested for the nine months ended September 30, 2025 and 2024, was $5.0 million and $28.4 million, respectively.

The assumptions used to estimate the fair value of share options granted for the nine months ended September 30, 2025 were as follows:

As of September 30, 2025, unrecognized compensation expense related to unvested share options was approximately $7.6 million, which is expected to be recognized over a remaining weighted-average period of 1.2 years.

Restricted Stock Units (RSUs)—RSUs for new employees generally vest overtwo years of the employment commencement date with 50% vesting on thetwelve-month anniversary of the employment commencement date, and the remaining on a pro-rata basis each quarter over the remaining twelve months. RSUs for existing employees are granted periodically and generally vest quarterly over periods of 1 to 4 years. Unvested RSUs are forfeited at termination of employment. Any RSUs that are forfeited become available for future grants.

The following table summarized the Company’s RSU activity during the nine months ended September 30, 2025:

As of September 30, 2025, unrecognized compensation expense related to RSUs was approximately $25.1 million, which is expected to be recognized over a remaining weighted-average period of 0.8 years.

Options to Restricted Shares—Options to restricted shares were granted to certain employees and directors during 2021. See Note 16 to the consolidated financial statements included in the Annual Report on Form 10-K for additional information.

The following table summarized the Company’s options to restricted shares activity during the nine months ended September 30, 2025:

At September 30, 2025, unrecognized compensation expense related to options to restricted shares was approximately $6.9 million, which is expected to be recognized over a remaining weighted-average period of 1.1 years.

Employee Stock Purchase Plan—The Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase shares of our Class A Ordinary Shares at a discounted price, normally through payroll deductions, subject to the terms of the ESPP and applicable law. During the nine months ended September 30, 2025,99,243 shares were issued under the ESPP. As of September 30, 2025,733,470 shares of Class A Ordinary Shares were reserved for issuance under the ESPP. Compensation expense related to the ESPP was $0.2 million and $0.4 million for the three and nine months ended September 30, 2025, respectively.

Share-Based Compensation Expense

The following table presents the components and classification of share-based compensation for the three and nine months ended September 30, 2025 and 2024 (in thousands):

NOTE 13 -INCOME TAXES

Corporate Income Tax

Ordinary taxable income in Israel is subject to a corporate tax rate of 23%. However, the Company has received an approval from the Israeli Tax authorities for Preferred Technological Enterprise (“PTE”) status and received approval on November 18, 2021. The Company is eligible for PTE status which is implemented commencing 2020. Income from a PTE is subject to 12% tax rate. The Company is currently in the process of obtaining a renewal of its PTE status.

Foreign Exchange Regulations in Israel

Under the Foreign Exchange Regulations, the Company calculates its tax liability in U.S. Dollars according to certain orders. The tax liability, as calculated in U.S. Dollars is translated into NIS according to the exchange rate as of December 31st of each year.

Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.

The Company’s effective tax rates for the three and nine months ended September 30, 2025 and 2024 are as follows (in thousands):

The Company’s tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income the Company earns in those jurisdictions. The difference between the effective tax rate and statutory tax rate in Israel mainly related to a change in valuation allowance, tax expenses in the United States, and a change in uncertain tax positions. The change in the effective tax rate was primarily due to accelerated deduction following the enactment of new tax law, with an additional decrease from reduction in uncertain tax positions.

The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company provides a valuation allowance to offset certain deferred tax assets due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBA”) was signed into law in the U.S. which contains a broad range of tax reform provisions affecting businesses. The impact of OBBA is reflected in these financial statements.

In 2025, the Company is currently subject to federal tax audits in Israel and the U.S. and state tax audits in U.S. The tax audits are ongoing and to date, no material issues have been raised and no adjustments have been proposed.

NOTE 14 -EARNINGS (LOSS) PER SHARE

The following tables set forth the calculation of basic and diluted earnings (loss) per share attributable to ordinary shareholders for the three and nine months ended September 30, 2025 and 2024 (in thousands, except share and per share data):

EPS for Class B ordinary shares and EPS for preferred shares are not presented separately, as under the two-class method, the EPS for Class A, Class B and preferred shares are the same.

The following potentially dilutive outstanding securities as of September 30, 2025 and 2024 were excluded from the computation of diluted earnings (loss) per share because their effect would have been anti-dilutive for the periods:

(1) For the three and nine months ended September 30, 2025, the potential shares from exchangeable notes were excluded from the diluted EPS calculation as the incremental interest expense, net of tax, and the related shares would not be dilutive under the if-converted method.

NOTE 15 -SUBSEQUENT EVENTS

On October 1, 2025, the Company refinanced the Revolving Credit Facility by way of terminating Credit Agreement and entering into a newthree-year revolving credit facility (the “2025 Revolving Credit Facility”) with a syndicate of financial institutions. The 2025 Revolving Credit Facility provides a committed borrowing capacity of $132 million. The 2025 Revolving Credit Facility matures on October 2, 2028.

Borrowings under the 2025 Revolving Credit Facility bear interest at a rate per annum equal to, at the Company’s option, (i) a base rate (determined based on the prime rate and subject to 1.00% floor) plus a margin of 2.50% and (ii) an adjusted term SOFR (subject to 1.00% floor) plus a margin of 3.50%, a reduction from the prior revolving credit facility’s rate of SOFR plus 7.50%. A commitment fee accrues on any unused portion of the commitments under the 2025 Revolving Credit Facility at a rate per annum of 0.25% and is payable quarterly in arrears. The terms and conditions of the 2025 Revolving Credit Facility include customary covenants and restrictions.