Pagaya Technologies Ltd.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated interim financial statements included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) and our audited annual consolidated financial statements as of and for the years ended December 31, 2025 and 2024, and the related notes included in our Annual Report on Form 10-K filed with the SEC on March 2, 2026 (“our Annual Report on Form 10-K”). Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. In this section “we,” “us,” “our” and “Pagaya” refer to Pagaya Technologies Ltd.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q (this “Form 10-Q”) and our audited annual consolidated financial statements as of and for the year ended December 31, 2025, and the related notes included in our Annual Report on Form 10-K filed on March 2, 2026, and as amended on April 30, 2026 and June 1, 2026 (collectively, the “2025 Annual Report on Form 10-K”). Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of the 2025 Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. In this section “we,” “us,” “our” and “Pagaya” refer to Pagaya Technologies Ltd.

Previous wording

We have built, and we are continuing to scale, a leading AI and data network for the benefit of financial services and other service providers, their customers, and investors. Services providers integrated in our network, which we refer to as our ‘‘Partners,’’ range from high-growth financial technology companies to incumbent banks and financial institutions. We believe Partners benefit from our network to extend financial products to their customers, in turn helping those customers fulfill their financial needs. These assets originated by Partners with the assistance of Pagaya’s AI technology are eligible to be acquired by Financing Vehicles: (i) funds managed or advised by Pagaya or one of its affiliates, (iii) special purpose vehicles established by third-party investors to facilitate the purchase of assets under forward flow agreements and (iv) other similar vehicles (“Financing Vehicles”).

Current wording

We have built, and we are continuing to scale, a leading AI and data network for the benefit of financial services and other service providers, their customers, and investors. Services providers integrated in our network, which we refer to as our ‘‘Partners,’’ range from high-growth financial technology companies to incumbent banks and financial institutions. We believe Partners benefit from our network to extend financial products to their customers, in turn helping those customers fulfill their financial needs. These assets originated by Partners with the assistance of Pagaya’s AI technology are eligible to be acquired by (i) investment funds managed or advised by Pagaya or one of its affiliates, (ii) asset backed securitization (“ABS”) vehicles sponsored or administered by Pagaya or one of its affiliates, (iii) special purpose vehicles established by third-party investors to facilitate the purchase of assets under forward flow agreements and (iv) other similar vehicles (“Financing Vehicles”).

Previous wording

Pagaya’s revenues are primarily derived from Network Volume. We define Network Volume as the gross dollar value of assets originated by our Partners with the assistance of our artificial intelligence (“AI”) technology 1. We generate revenue from network

Current wording

Pagaya’s revenues are primarily derived from Network Volume. We define Network Volume as the gross dollar value of assets originated by our Partners with the assistance of our artificial intelligence (“AI”) technology 1. We generate revenue from network AI fees, contract fees, interest income and investment income. Revenue from fees is comprised of network AI fees and contract fees. Network AI fees can be further broken down into two fee streams, including AI integration fees and capital markets

Previous wording

We primarily earn AI integration fees for the creation and delivery of the assets that comprise our Network Volume.

Current wording

execution fees. We primarily earn AI integration fees for the creation and delivery of the assets that comprise our Network Volume.

Previous wording

Additionally, we have built what we believe to be a leading data science and AI organization that has enabled us to assist our Partners as they make decisions to extend credit to consumers. Excluding Production Costs, headcount, technology overhead and research and development expenses represent the significant portion of our expenses.

Current wording

Additionally, we have built what we believe to be a leading data science and AI organization that has enabled us to assist our Partners as they make decisions to extend credit to consumers. Excluding Production Costs, headcount, technology overhead and research and development expenses represent the most significant portion of our expenses.

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.

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 and products.

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 $3.9 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 and products, 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 $4.2 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. For the three months ended

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. For the six months ended June 30, 2026 and 2025, our top 5 investors collectively accounted for approximately 44% and 52%, respectively, of our total funding.

Previous wording

Geopolitical instability persists in the Middle East and Eastern Europe. The ongoing conflict between Israel, the U.S., and Iran that erupted in February 2026 has resulted in volatility and disruption of global energy and financial markets, which has increased our cost of capital and may diminish investor appetite for risk assets. Management is actively monitoring the situation for systemic risks and has implemented remote-work protocols for our Tel Aviv-based team to maintain business continuity while prioritizing employee safety. We will continue to evaluate our operational protocols as the security landscape evolves. Although these regional dynamics remain a source of uncertainty, to date we have not experienced material impacts on our business from this conflict. Prolonged hostilities or further escalation of this conflict could exacerbate disruptions to the global energy and financial markets, global inflationary pressures, and supply chain challenges, all of which could adversely affect consumer credit demand, investor appetite for risk assets, and our Network Volume.

Current wording

Geopolitical instability persists in the Middle East and Eastern Europe. The ongoing conflict between Israel, the U.S., and Iran that erupted in February 2026 has resulted in volatility and disruption of global energy and financial markets, which has increased our cost of capital and may diminish investor appetite for risk assets. Management is actively monitoring the situation for systemic risks and will continue to evaluate our operational protocols as the security landscape evolves. Although these regional dynamics remain a source of uncertainty, to date we have not experienced material impacts on our business from this conflict. Prolonged hostilities or further escalation of this conflict could exacerbate disruptions to the global energy and financial markets, global inflationary pressures, and supply chain challenges, all of which could adversely affect consumer credit demand, investor appetite for risk assets, and our Network Volume.

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 early 2026 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. 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. 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. 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. 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.

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 early 2026 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. 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. 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. 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. Economic downturns or prolonged uncertainty may pressure the performance of assets acquired by Financing Vehicles from our network.

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 the 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, 2026 and 2025.

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, other measures under U.S. GAAP, and certain non-GAAP financial measures (see the section below entitled “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, 2026 and 2025:

Previous 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. 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, and point-of-sale receivables.

Current wording

We believe that Network Volume metric is 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. 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, and point-of-sale receivables.

Previous wording

Network AI fees. Network AI fees can be further broken down into two fee streams: AI integration fees and capital markets execution fees. We earn AI integration fees for the creation and delivery of the assets that comprise our Network Volume. Multiple funding channels are used to enable the purchase of network assets from our Partners, such as ABS and forward flow arrangements. Capital markets execution fees are earned when a pre-funded, Pagaya-sponsored ABS vehicle is sold by underwriters, as well as upon the execution of forward flow transactions.

Current wording

Network AI fees. Network AI fees can be further broken down into two fee streams: AI integration fees and capital markets execution fees. We earn AI integration fees for the creation and delivery of the assets that comprise our Network Volume. Multiple funding channels are used to enable the purchase of network assets from our Partners, such as ABS and forward flow arrangements. Capital markets execution fees are earned from the market pricing of ABS transactions, as well as upon the execution of forward flow transactions.

Previous wording

Contract fees. Contract fees primarily include administration and management fees, and performance fees. Administration and management fees are contracted upon the establishment of Financing Vehicles and these fees are earned as the Financing Vehicle purchase loans and as the Company provides services over their remaining lives, except for the portion management fees that are recognized at the point in time based on contract terms.

Current wording

Contract fees. Contract fees primarily include administration and management fees, and performance fees. Administration and management fees are contracted upon the establishment of ABS trusts and investment funds. These fees are earned as the ABS trusts purchase loans and as the Company provides services to the ABS trusts and investment funds over their remaining lives. Performance fees are earned if certain Financing Vehicles exceed contractual return hurdles for investors and a significant reversal in the amount of cumulative revenue recognized is not expected to occur.

Previous wording

Additionally, we earn interest income from our risk retention holdings and our corporate cash balances and investment income associated with our ownership interests in certain Financing Vehicles and other proprietary investments.

Current wording

We also earn interest income from our investments in loans and securities, including risk retention holdings and additional investments we may make in our sponsored asset backed securitizations, and our corporate cash balances. We earn investment income associated with our ownership interests in certain investment funds where we are the RIA and other proprietary investments.

Previous wording

Production Costs are primarily comprised of expenses incurred when Network Volume is transferred from Partners into Financing Vehicles, as our Partners are responsible for marketing and customer interaction and facilitating the flow of additional application flow. Accordingly, the amount and growth of our Production Costs are highly correlated to Network Volume. Additionally, but to a lesser extent, Production Costs also include expenses incurred to renovate single-family rental properties.

Current wording

Production Costs are primarily comprised of expenses incurred when Network Volume is transferred from Partners into Financing Vehicles, as our Partners are responsible for marketing and customer interaction and facilitating additional application flow. Accordingly, the amount and growth of our Production Costs are highly correlated to Network Volume.

Previous wording

Technology, data and product development expenses primarily comprise costs associated with the maintenance and ongoing development of our network and AI technology, including personnel, allocated costs, and other development-related expenses. Technology, data and product development costs, net of amounts capitalized in accordance with U.S. GAAP, are expensed as incurred. The capitalized internal-use software is amortized on a straight-line method over the estimated useful life in technology, data and product development costs. We have invested and believe continued investments in technology, data and product development are important to achieving our strategic objectives.

Current wording

Technology, data and product development expenses primarily comprise costs associated with the maintenance and ongoing development of our network and AI technology, including salaries and personnel-related costs, allocated overhead, and other development-related expenses. Technology, data and product development costs, net of amounts capitalized in accordance with U.S. GAAP, are expensed as incurred. Capitalized internal-use software is amortized on a straight-line method over the estimated useful life, which averages three years. We have invested and believe continued investments in technology, data and product development are important to achieving our strategic objectives.

Previous wording

General and administrative expenses primarily comprise personnel-related costs for our executives, finance, legal and other administrative functions, insurance costs, professional fees for external legal, accounting and other professional services and allocated overhead costs. General and administrative expenses are expensed as incurred.

Current wording

General and administrative expenses primarily comprise salaries and personnel-related costs for our executives, finance, legal and other administrative functions, insurance costs, professional fees for external legal, accounting and other professional services and allocated overhead costs. General and administrative expenses are expensed as incurred.

Previous wording

Gains and (losses) on investments in loans and securities primarily reflects changes in fair value that management identifies as credit losses or reversals of previously recognized credit losses, including remeasurements of instruments accounted for under the fair value option and any gain or loss realized upon sale or termination of such instruments. As of the end of each reporting period, management reviews each security where the fair value is less than the amortized cost to determine whether any portion of the decline in fair value is due to a credit loss and/or whether or not we intend to sell or will be required to sell such security before recovery of its amortized cost basis. The portion of any decline (or recovery) in fair value which management identifies as a credit loss (or a reversal of previously recognized credit loss) is recognized as loss (or gain) on investments in loans and securities.

Current wording

Gains and (losses) on investments in loans and securities primarily reflects changes in fair value that management identifies as credit losses or reversals of previously recognized credit losses, including remeasurements of investments accounted for under the fair value option, and any gain or loss realized upon sale or termination of such instruments. As of the end of each reporting period, management reviews each available for sale security where the fair value is less than the amortized cost to determine whether any portion of the decline in fair value is due to a credit loss and/or whether or not we intend to sell or will be required to sell such security before recovery of its amortized cost basis. The portion of any recovery (or decline) in fair value which management identifies as a credit loss (or a reversal of previously recognized credit loss) is recognized as gain (or loss) on investments in loans and securities.

Previous wording

Other expenses, net primarily consists of interest expenses from borrowings, changes in the fair value of warrant liabilities and other non-recurring items.

Current wording

Other expenses, net primarily consists of interest expenses from borrowings, allowance for doubtful accounts, changes in the fair value of warrant liabilities, and other non-recurring items.

Previous wording

Gains and (Losses) on Investments in Loans and Securities

Current wording

Gains and (Losses) from Extinguishment of Debt

Previous wording

Gains from extinguishment of debt represents the difference between the reacquisition price and the net carrying amount of the retired debt. These amounts include gains from debt repurchases at a discount and losses related to early payment penalties and the write-off of unamortized deferred issuance costs and original issue discounts. Such amounts are recognized in the unaudited condensed consolidated statements of income upon the settlement of the underlying obligations.

Current wording

Gains and (losses) from extinguishment of debt represents the difference between the reacquisition price and the net carrying amount of any retired debt. These amounts include gains from debt repurchases at a discount and losses related to early payment penalties and the write-off of unamortized deferred issuance costs and original issue discounts. Such amounts are recognized in the unaudited condensed consolidated statements of income upon the settlement of the underlying obligations.

Previous wording

We account for taxes on income in accordance with ASC 740, “Income Taxes” (“ASC 740”). We are eligible for certain tax benefits in Israel under the Law for the Encouragement of Capital Investments or the Investment Law at a reduced tax rate of 12%. Accordingly, as we generate taxable income in Israel, our effective tax rate is expected to be lower than the standard corporate tax rate for Israeli companies, which is 23%. Our taxable income generated in the United States or derived from other sources in Israel which is not eligible for tax benefits will be subject to the regular corporate tax rate in their respective tax jurisdictions.

Current wording

We account for taxes on income in accordance with ASC 740, “Income Taxes” (“ASC 740”). We are eligible for certain tax benefits in Israel as a Preferred Technological Enterprise (“PTE”), where income is generally subject to a 12% tax rate unless subject to Pillar Two taxation. Following Israel’s adoption of the OECD Pillar Two framework and the introduction of a Qualified Domestic Minimum Top-Up Tax (“QDMTT”) in late 2025, we became subject to a minimum corporate tax rate of 15%. Accordingly, as we generate taxable income in Israel, our effective tax rate is expected to be lower than the statutory corporate tax rate for Israeli companies of 23%, but subject to the 15% minimum corporate tax rate. Our taxable income generated in the United States or derived from other sources in Israel which is not eligible for tax benefits will be subject to the regular corporate tax rate in their respective tax jurisdictions.

Previous wording

Net income (loss) attributable to noncontrolling interests in our condensed 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 loss attributable to noncontrolling interests in the unaudited condensed 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 loss of these consolidated entities that is not attributable to us.

Previous wording

Total revenue and other income, increased by $28.0 million, or 10%, to $317.9 million for the three months ended March 31, 2026 from $290.0 million for the three months ended March 31, 2025. The increase was primarily driven by an increase in revenue from fees and interest income.

Current wording

Total revenue and other income, increased by $60.6 million, or 19%, to $387.0 million for the three months ended June 30, 2026, compared to $326.4 million for the three months ended June 30, 2025. The increase was primarily driven by an increase in revenue from fees and interest income.

Previous wording

Revenue from fees for the three months ended March 31, 2026 increased by $16.3 million, or 6%, to $299.0 million, compared to the same period in 2025. The increase was primarily due to a $15.4 million increase in Network AI fees, comprised of AI integration fees and capital markets execution fees, from $251.5 million for the three months ended March 31, 2025 to $266.9 million for the three months ended March 31, 2026. 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 9.3% from $2.4 billion for the three months ended March 31, 2025 to $2.6 billion for the three months ended March 31, 2026. Contract fees, comprised of administration and management fees, performances fees, and servicing fees, increased by $1.0 million from $31.2 million for the three months ended March 31, 2025 to $32.1 million for the three months ended March 31, 2026, reflecting an increase in the assets held by securitization vehicles driven by continued business growth.

Current wording

Revenue from fees for the three months ended June 30, 2026 increased by $47.9 million, or 15%, to $365.6 million, compared to $317.7 million for the three months ended June 30, 2025. The increase was primarily due to a $32.5 million increase in Network AI fees, comprised of AI integration fees and capital markets execution fees, to $318.4 million for the three months ended June 30, 2026 from $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 growth in Network Volume, which increased by 33% to $3.5 billion for the three months ended June 30, 2026 from $2.6 billion for the three months ended June 30, 2025. Contract fees, comprised of administration and management fees, performances fees, and servicing fees, increased by $15.5 million to $47.2 million for the three months ended June 30, 2026 from $31.8 million for the three months ended June 30, 2025, reflecting an increase in the assets held by securitization vehicles driven by continued business growth.

Previous wording

Interest income increased by $10.0 million, or 130%, to $17.7 million for the three months ended March 31, 2026 from $7.7 million for the three months ended March 31, 2025. 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 Loss Attributable to Noncontrolling Interests.” The increase in interest income was primarily the result of changes in the structure and composition of our asset portfolio.

Current wording

Interest income for the three months ended June 30, 2026 increased by $11.5 million, or 107%, to $22.2 million compared to $10.7 million for the three months ended June 30, 2025. The increase in interest income was directly related to our investments in loans and securities, including 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 Loss Attributable to Noncontrolling Interests.” The increase was primarily the result of a higher average balance in investments in loans and securities, as well as changes in the structure and composition of our asset portfolio toward a greater proportion of cash-yielding senior note tranches of our sponsored securitization transactions.

Previous wording

Investment income increased by $1.7 million to $1.3 million for the three months ended March 31, 2026, reflecting a favorable impact from the change in valuation of certain proprietary investments.

Current wording

Investment loss for the three months ended June 30, 2026 decreased by $1.3 million to $0.8 million, compared to $2.1 million for the three months ended June 30, 2025, reflecting a less unfavorable impact from the change in valuation of certain proprietary investments.

Previous wording

Production costs increased by $10.5 million, or 6%, to $177.6 million for the three months ended March 31, 2026 from $167.1 million for the three months ended March 31, 2025. This increase was due to an increase in the Network Volume, which increased by 9.3% from $2.4 billion for the three months ended March 31, 2025 to $2.6 billion for the three months ended March 31, 2026, attributable to business growth in addition to the composition of the asset classes that make up our Network Volume.

Current wording

Production costs for the three months ended June 30, 2026 increased by $27.3 million, or 14%, to $218.7 million, compared to $191.5 million for the three months ended June 30, 2025. The increase was due to growth in Network Volume, which increased by 33% to $3.5 billion for the three months ended June 30, 2026 from $2.6 billion for the three months ended June 30, 2025, attributable to continued business growth as well as shifts in the composition of the asset classes and products comprising our Network Volume.

Previous wording

Technology, data and product development costs for the three months ended March 31, 2026 decreased $3.5 million, or 18%, compared to the same period in 2025. The decrease was driven by a $3.2 million decrease in depreciation expenses , net of capitalization (as explained below), and a $0.4 million decrease in consultant expenses. The reduction in depreciation expense was primarily due to an increase in the estimated useful lives of certain internal-use software.

Current wording

Technology, data and product development costs for the three months ended June 30, 2026 decreased by $1.1 million, or 6%, to $17.3 million, compared to $18.5 million for the three months ended June 30, 2025. The decrease was driven by a $3.3 million decrease in depreciation expenses, net of capitalization (as explained below). The reduction in depreciation expense was primarily due to an increase in the estimated useful life of internal-use software effective January 1, 2026. This decrease was partially offset by a $1.4 million increase in compensation expenses primarily driven by the appreciation of the Israeli Shekel against the U.S. Dollar.

Previous wording

During the three months ended March 31, 2026 and 2025, we capitalized $3.6 million and $4.5 million of software development costs, respectively. Depreciation expense, including impairment charges for capitalized software development costs was $2.2 million and $6.2 million during the three months ended March 31, 2026 and 2025, respectively.

Current wording

During the three months ended June 30, 2026 and 2025, we capitalized $3.9 million and $4.0 million of software development costs, respectively. Depreciation expense was $2.6 million and $5.9 million during the three months ended June 30, 2026 and 2025, respectively.

Previous wording

Sales and marketing costs for the three months ended March 31, 2026 increased by $1.5 million, compared to the same period in 2025. The increase was primarily driven by a $0.8 million increase in compensation expenses, including shared-based compensation, and a $0.3 million increase in amortization of intangible assets.

Current wording

Sales and marketing costs for the three months ended June 30, 2026 decreased by $9.6 million, or 49%, to $10.1 million, compared to $19.7 million for the three months ended June 30, 2025. The decrease was primarily driven by a $10.1 million decrease in compensation expenses, including shared-based compensation, which was partially offset by a $0.3 million increase in amortization of intangible assets.

Previous wording

Losses on investments in loans and securities for the three months ended March 31, 2026 increased $9.0 million compared to the same period in 2025. The increase was primarily due to a $13.7 million increase in net losses from the redemption of certain investments. This increase was partially offset by a $4.2 million decrease in credit-related impairment losses on ABS securities. Of the credit-related impairment loss in the current period, $0.5 million is attributable to the noncontrolling interests in certain VIEs and accordingly, does not impact net income attributable to Pagaya shareholders.

Current wording

Losses on investments in loans and securities for the three months ended June 30, 2026 increased by $28.1 million, or 197% to $42.3 million, compared to $14.3 million for the three months ended June 30, 2025. The increase was primarily driven by an increase in credit-related impairment losses on ABS securities. Of the credit-related impairment loss in the current period, $4.3 million is attributable to the noncontrolling interests in certain VIEs and accordingly does not impact net income attributable to Pagaya shareholders.

Previous wording

Income tax expense increased $5.7 million for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily attributable to change in uncertain tax positions, including a decrease during the three months ended March 31, 2025, compared an increase during the three months ended March 31, 2026.

Current wording

Income tax benefit for the three months ended June 30, 2026 was $1.1 million, compared to income tax expense of $5.0 million for the three months ended June 30, 2025. The change was primarily attributable to a favorable change in uncertain tax positions and the utilization of net operating loss carryforwards.

Previous wording

Net loss attributable to noncontrolling interests for the three months ended March 31, 2026 decreased $4.9 million compared to the same period in 2025. 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 held by other investors in the VIE for which we had no economic rights. This amount was primarily driven by a $5.2 million decrease in credit-related impairment loss on the risk retention holdings, partially offset by a $0.4 million decrease in net income generated by consolidated VIEs. For further information regarding credit-related impairment losses, see “—Total Revenue and Other Income” and “—Gains and (Losses) on Investments in Loans and Securities.”

Current wording

Net loss attributable to noncontrolling interests for the six months ended June 30, 2026 decreased by $2.0 million, or 37%, to $3.5 million, compared to $5.5 million for the six months ended June 30, 2025. The decrease was driven by the net loss generated by our consolidated VIEs associated with our risk retention holdings, which represents the net loss of the consolidated VIEs held by other investors in the VIEs for which we have no economic rights. This amount was primarily driven by a $6.0 million of credit-related impairment loss on the risk retention holdings during the current period. For further information regarding credit-related impairment losses, see “—Total Revenue and Other Income” and “—Gains and (Losses) on Investments in Loans and Securities.”

Previous wording

To supplement our consolidated financial statements prepared and presented in accordance with U.S. GAAP, we use the non-GAAP financial measures FRLPC, Fee Revenue Less Production Costs as Percentage of Network Volume (FRLPC %), Adjusted Net Income, and Adjusted EBITDA to provide investors with additional information about our financial performance and to enhance the overall understanding of the results of operations by highlighting the results from ongoing operations and the underlying profitability of our business. We are presenting these non-GAAP financial measures because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple periods with the performance of other companies.

Current wording

To supplement the unaudited condensed consolidated financial statements prepared and presented in accordance with U.S. GAAP, we use the non-GAAP financial measures such as Fee Revenue Less Production Costs (“FRLPC”), FRLPC as a % of Network Volume (“FRLPC %”), Adjusted Net Income, and Adjusted EBITDA to provide investors with additional information about our financial performance and to enhance the overall understanding of the results of operations by highlighting the results from ongoing operations and the underlying profitability of our business. We are presenting these non-GAAP financial measures because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple periods with the performance of other companies.

Previous wording

However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by U.S. GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our consolidated financial statements prepared and presented in accordance with U.S. GAAP.

Current wording

However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by U.S. GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the unaudited condensed consolidated financial statements prepared and presented in accordance with U.S. GAAP.

Previous wording

FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA for the three months ended March 31, 2026 and 2025 are summarized below ($ in thousands):

Current wording

FRLPC, FRLPC %, Adjusted Net Income, and Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025 are summarized below ($ in thousands):

Previous wording

FRLPC is defined as operating income plus technology, data and product development, sales and marketing, and general and administrative costs, and less interest income and net investment income (loss). We use FRLPC as part of our overall assessment of performance, including the preparation of our annual budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance. The Company is including a reconciliation between FRLPC and operating income, which we consider the most directly comparable GAAP financial measure. FRLPC is designed to assess operational efficiency by measuring fee revenue against production costs, excluding operating expenses not directly tied to revenue production, such as technology development, sales and marketing, and general and administrative costs. FRLPC is intended to highlight the scalability of our platform as Network Volume (the gross dollar amount of assets originated or services rendered using our technology) increases, demonstrating our ability to efficiently generate fee revenue while managing production costs. FRLPC %, defined as FRLPC divided by Network Volume, further illustrates this efficiency, showing how effectively we convert Network Volume into fee revenue relative to production costs as our platform scales.

Current wording

FRLPC is defined as operating income plus technology, data and product development, sales and marketing, and general and administrative costs, and less interest income and net investment income (loss). We use FRLPC as part of our overall assessment of performance, including the preparation of our annual budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance. The Company is including a reconciliation between FRLPC and operating income, which we consider the most directly comparable GAAP financial measure. FRLPC is designed to assess operational efficiency by measuring fee revenue against production costs, excluding operating expenses not directly tied to revenue production, such as technology development, sales and marketing, and general and administrative costs. FRLPC is intended to highlight the scalability of our platform as Network Volume (the gross dollar amount of assets originated using our technology) increases, demonstrating our ability to efficiently generate fee revenue while managing production costs. FRLPC %, defined as FRLPC divided by Network Volume, further illustrates this efficiency, showing how effectively we convert Network Volume into fee revenue relative to production costs as our platform scales.

Previous wording

Adjusted Net Income is defined as net income (loss) attributable to Pagaya Technologies Ltd. excluding share-based compensation expense, change in fair value of contingent liability, change in fair value of warrant liability, impairment, including credit-related charges, restructuring expenses, transaction-related expenses, and non-recurring expenses associated with mergers and acquisitions and other one-time expenses. Adjusted EBITDA is defined as net income (loss) attributable to Pagaya Technologies Ltd. excluding share-based compensation expense, change in fair value of contingent liability, change in fair value of warrant liability, impairment, including credit-related charges, restructuring expenses, transaction-related expenses, non-recurring expenses associated with mergers and acquisitions and other one-time expenses, interest expense, income tax expense (benefit), and depreciation and amortization. These items are excluded from our Adjusted Net Income and Adjusted EBITDA measures because they are noncash in nature, or because the amount and timing of these items is unpredictable, is not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful.

Current wording

Adjusted Net Income is defined as net income (loss) attributable to Pagaya Technologies Ltd. excluding share-based compensation expense, change in fair value of contingent liability, change in fair value of warrant liability, impairment loss on certain investments, restructuring expenses, transaction-related expenses, and non-recurring expenses associated with mergers and acquisitions and other one-time expenses. Adjusted EBITDA is defined as net income (loss) attributable to Pagaya Technologies Ltd. excluding share-based compensation expense, change in fair value of contingent liability, change in fair value of warrant liability, impairment, including credit-related charges, restructuring expenses, transaction-related expenses, non-recurring expenses associated with mergers and acquisitions and other one-time expenses, interest expense, income tax expense (benefit), and depreciation and amortization. These items are excluded from our Adjusted Net Income and Adjusted EBITDA measures because they are noncash in nature, or because the amount and timing of these items is unpredictable, is not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful.