2. Model enhancements and data-driven improvements in conversion rate We also made critical updates to our auto underwriting technology. These updates include enriching our existing methodology with additional vehicle valuation data points, improving the predictive accuracy of asset performance over time. 3. Consistently raising capital with attractive financial products As a result of our scale, efficiency and innovative structuring, we are seeing growing investor demand. Our deals continue to be oversubsc ...

PAGAYA'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 as of and for the three and nine months ended September 30, 2023 and 2022 included as Exhibit 99.3 to the Report of Foreign Private Issuer on Form 6-K furnished with the Securities and Exchange Commission (the "SEC") on November 2 ...

Financial Data and Key Metrics Changes - The company expects to achieve an annualized profit of $40 million to $50 million, which is ten times higher than the previous year [2] - Total revenue grew by 8% year-over-year to $196 million, with fee revenue increasing by 14% year-over-year [40][69] - Adjusted EBITDA reached $17.5 million, more than triple the prior year period, marking the second highest EBITDA in the company's history [63] Business Line Data and Key Metrics Changes - Application flow increased by 20% sequentially over the prior quarter, leading to a record network volume of approximately $2 billion [5][39] - The conversion rate remains low, slightly below 2%, indicating potential for growth as the macro environment stabilizes [5][52] - The company raised $3.1 billion across seven different ABS deals in the first half of the year, maintaining its position as the number one personal loan ABS issuer [37] Market Data and Key Metrics Changes - The company is seeing improving trends in asset performance, with early-stage delinquencies declining in its two largest markets: personal loans and auto loans [42] - Investor sentiment appears to be improving, with consumer unsecured ABS issuances higher this quarter than the prior two sequential quarters [44] Company Strategy and Development Direction - The company aims to expand its network and enhance its value proposition to both lenders and investors, focusing on technology and data to improve access to credit [36][64] - The strategy includes maintaining a low conversion rate while managing to deliver record network volume, indicating a cautious approach in the current macro environment [52][68] - The company plans to continue investing in growth while maintaining cost discipline and driving operating leverage [48][102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for new partnerships, particularly with large banks, and anticipates landing another big bank partner within the next 12 months [53] - The company is raising its full-year outlook for network volume and adjusted EBITDA, reflecting strong momentum in the business [48][74] - Management remains prudent regarding the conversion rate in light of ongoing macro uncertainties, indicating a cautious but optimistic outlook [48][103] Other Important Information - The company has implemented cost-saving initiatives, achieving $50 million in annualized cost savings earlier than expected [47] - The weighted average coupon remained stable, contributing to improving returns for investors despite a low conversion rate [42] Q&A Session Summary Question: Can you discuss the strong network volume trends? - The record network volume was driven by strong demand from both sides of the network, with a 20% increase in application flow [76] Question: What is the outlook for the conversion rate? - The conversion rate is being kept low to manage investor returns, with potential for improvement as the macro environment stabilizes [52][103] Question: How is the company managing partnerships with larger banks? - The company is in discussions with many of the top 25 banks and expects to see more conversions based on past successes [53] Question: Can you elaborate on the performance of ABS funds raised? - The company upsized an ABS deal from $600 million to $800 million, indicating strong demand and capability in funding strategies [9] Question: What is the company's strategy regarding personal loans and auto loans? - The company sees personal loans as a complementary product and is focusing on subprime auto lending, which has good penetration with leading lenders [115][116]

18 | --- | --- | --- | --- | --- | |-------------------------------------------|------------------------------------|-----------|----------------------------------|-----------| | Fee revenue less production costs (FRLPC) | Three Months Ended June 30, \n2023 | \n2022 | Six Months Ended June 30, \n2023 | 2022 | | Revenue from fees | $185,685 | $163,302 | $360,939 | $321,627 | | Production costs | (120,613) | (104,980) | (245,670) | (197,260) | | Fee revenue less production costs (FRLPC) | $65,072 | $58,322 | ...

Pagaya Reports Second Quarter and First Half 2023 Results Exceeded second quarter guidance on all metrics: Raises outlook ranges for full-year 2023 Network Volume and Adjusted EBITDA New York, NY and Tel Aviv, Israel – August 10, 2023 – Pagaya Technologies Ltd. (NASDAQ: PGY) ("Pagaya", the "Company" or "we"), a global technology company delivering artificial intelligence infrastructure for the financial ecosystem, today announced financial results for the second quarter and the first half of 2023 and provid ...

PGY PGY Fintech lenders1 Fintech lenders1 0% 20% 40% 60% 80% 100% 120% 140% 1Q22 2Q22 3Q22 4Q22 1Q23 Fintech lenders Pagaya 1Q22 2Q22 3Q22 4Q22 1Q23 Fintech lenders Pagaya May 16th, 2023 Legal Disclaimer Sources: Trailing 12-month originations, TransUnion; 2021 Receivables, Nilson report; McKinsey & Co. - includes mid-ticket POS financing (~$40B), direct merchant financing (~$10B) and Pay In 4(~$20B); Nuveen Real Estate research, dated 3/9/2022 Network volume (or equivalent measure) indexed by quarter to 1Q ...

Financial Data and Key Metrics Changes - Network volume for Q1 2023 was $1.85 billion, a 12% increase year-over-year, driving total revenue and other income to $187 million, which is 9% higher than last year [28] - Adjusted EBITDA for the quarter was $2 million, with a like-for-like improvement of $14 million sequentially compared to Q1 2022, excluding the impact of the Darwin acquisition [28][89] - The FRLPC margin declined to 2.7% in Q1, below the target of 3% to 4%, but is expected to increase above 3% in Q2 2023 [24][36] Business Line Data and Key Metrics Changes - Application volume for the auto business grew by 51% year-over-year, supported by a large bank onboarded in 2022, with network volume for that partner increasing by 4x since its first quarter on the network [19][50] - Approximately 26% of total origination volumes from the top three personal loan partners were created using the company's network, up from 10% in Q1 2021 [19] Market Data and Key Metrics Changes - The company raised over $16 billion in funding across all financial vehicles since 2020, maintaining a robust funding capability even during market dislocations [20] - The company became the top issuer of personal loan ABS in the U.S. in Q1 2023, holding over 30% market share [29] Company Strategy and Development Direction - The company aims to reach $25 billion in network volume and $1 billion in fee revenues by enhancing value for existing partners, adding new partners, and achieving a 3% to 4% FRLPC margin [30][50] - The acquisition of Darwin is expected to enhance the company's SFR platform and contribute meaningfully to business growth in the future [89] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute through volatility and emphasized a focus on sustainable profitable growth [16][36] - The company is maintaining its full-year guidance due to uncertainties in the macro environment, despite exceeding expectations in Q1 [76][93] Other Important Information - AI integration fees grew by 230 basis points from 5.5% to 7.8% of network volume, reflecting the company's ability to monetize its network effectively [29][35] - The company has onboarded two major asset managers to its network, strengthening relationships with long-term funding investors [29] Q&A Session Summary Question: What is the trajectory of application demand from new platforms? - Management indicated that new partnerships typically start with low application volumes but can grow significantly over time as relationships develop [9][10] Question: How does the company plan to utilize the recent capital raise? - The capital raise is intended to provide resources for potential M&A transactions and to support growth initiatives [4][91] Question: What is the outlook for the conversion rate? - Management believes the conversion rate has bottomed out and expects it to improve as market conditions stabilize [60] Question: How does the company view the impact of regional bank challenges? - The company sees opportunities to utilize its technology to help banks and credit unions improve their funding positions [78] Question: What is the expected normal percentage of partner volume in a more normalized environment? - Management discussed the importance of integration and the potential for continued growth in partner volume, suggesting that the trend is upward [79][97]

Management's Discussion and Analysis of Financial Condition and Results of Operations [Company Overview](index=1&type=section&id=Company%20Overview) Pagaya's AI and data network connects financial service providers, customers, and investors, enhancing creditworthiness and expanding financial product access - Pagaya utilizes an AI and data network to enhance financial product accessibility and improve creditworthiness assessments, addressing outdated manual processes in the financial services industry[3](index=3&type=chunk)[4](index=4&type=chunk) - The company's solution benefits Partners by increasing customer application approvals, driving revenue growth, and reducing customer acquisition costs; benefits customers through enhanced access to financial products; and benefits investors by providing exposure to AI-originated assets[5](index=5&type=chunk) [Recent Developments](index=1&type=section&id=Recent%20Developments) Pagaya acquired Darwin Homes, reduced workforce by 20% for $30M savings, extended a key agreement, and plans a $75M preferred share issuance - Pagaya completed the acquisition of Darwin Homes, Inc. on January 5, 2023, making Darwin a wholly-owned subsidiary[7](index=7&type=chunk)[8](index=8&type=chunk) - On January 18, 2023, Pagaya announced a workforce reduction of approximately **20%** across its Israel and U.S. offices, expecting to achieve approximately **$30 million** in annualized cost savings[9](index=9&type=chunk)[10](index=10&type=chunk) - The Letter Agreement with Radiance Star Pte. Ltd. was extended by three years to June 1, 2028, maintaining the same terms, including the issuance of **2,640,000 warrants**[11](index=11&type=chunk) - Pagaya entered into a Preferred Share Purchase Agreement on April 14, 2023, to issue and sell **60,000,000 Series A Preferred Shares** for an aggregate purchase price of **$75 million** to Oak HC/FT Partners V, L.P. and its affiliates, pending shareholder approval[12](index=12&type=chunk)[14](index=14&type=chunk) [Emerging Growth Company Status](index=3&type=section&id=Emerging%20Growth%20Company%20Status) Pagaya qualifies as an 'emerging growth company' under the JOBS Act, benefiting from reporting exemptions and electing an extended transition for new accounting standards - Pagaya qualifies as an 'emerging growth company' under the JOBS Act, benefiting from exemptions including auditor attestation requirements and reduced executive compensation disclosures[18](index=18&type=chunk) - The company has elected not to opt out of the extended transition period for new or revised financial accounting standards, meaning it will adopt them at the same time as private companies, which may impact comparability with other public companies[19](index=19&type=chunk) - Pagaya will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year following the fifth anniversary of June 22, 2022, (ii) annual total gross revenue of at least **$1.235 billion**, (iii) being deemed a large accelerated filer (market value of ordinary equity held by non-affiliates exceeds **$700 million**), or (iv) issuing more than **$1 billion** in non-convertible debt securities during the prior three-year period[20](index=20&type=chunk) [Foreign Private Issuer Exemptions](index=3&type=section&id=Foreign%20Private%20Issuer%20Exemptions) As a 'foreign private issuer,' Pagaya benefits from distinct SEC reporting requirements, including less frequent filings and exemptions from Regulation FD and Section 16 - Pagaya reports as a 'foreign private issuer' under U.S. SEC rules, allowing it to file annual reports on Form 20-F within **120 days** after the fiscal year-end and furnish reports on Form 6-K for certain disclosures[22](index=22&type=chunk) - The company is exempt from Regulation FD, SEC rules on proxy solicitation, and Section 16 reporting and 'short-swing' profit recovery provisions for its officers, directors, and principal shareholders[22](index=22&type=chunk) [Our Economic Model](index=4&type=section&id=Our%20Economic%20Model) Pagaya's economic model is driven by Network Volume, generating revenue from AI and contract fees, interest, and investments, with Production Costs tied to volume and significant R&D - Pagaya's primary revenue source is Network Volume, which consists of assets originated by Partners with AI assistance and acquired by Financing Vehicles[24](index=24&type=chunk) - Revenue streams include Network AI fees (AI integration and capital markets execution fees), contract fees (management, performance), interest income from risk retention holdings, and investment income[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - Production Costs, which compensate Partners for asset acquisition and origination, are highly correlated to Network Volume. Other significant expenses include headcount, technology overhead, and research and development[27](index=27&type=chunk)[28](index=28&type=chunk) [Key Factors Affecting Our Performance](index=4&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) Pagaya's performance is shaped by partner retention, new partner adoption, AI advancements, funding availability, asset performance, and macroeconomic conditions - Pagaya has retained **100%** of its Partners since inception in 2016, with Partners experiencing approximately **3 times growth** in network-enabled originations between the 3rd and 12th month of onboarding[30](index=30&type=chunk) - In 2022, Pagaya onboarded **6 new Partners**, including Klarna and Ally Financial, which contributed approximately **$650 million** of Network Volume in 2022 and **20%** of total Network Volume in Q1 2023[31](index=31&type=chunk) - Improvements to Pagaya's AI technology benefit from a flywheel effect, with a continually increasing base of training data. Since inception, approximately **$1.3 trillion** in application volume has been evaluated by the network[33](index=33&type=chunk) - The availability of funding from investors is critical, with approximately **$16 billion** raised since 2019, but is subject to market conditions and the performance of AI-originated assets[35](index=35&type=chunk)[36](index=36&type=chunk) - Macroeconomic conditions (e.g., rising interest rates, inflation, bank failures) can impact consumer demand, Partner origination ability, funding availability, and operating costs, though they also provide data for AI improvement[37](index=37&type=chunk) [Key Operating Metrics](index=6&type=section&id=Key%20Operating%20Metrics) Network Volume is Pagaya's key operating metric, directly influencing revenue and reflecting scale, increasing **12%** year-over-year to **$1.85 billion** in Q1 2023 - Network Volume is considered a key operating metric, serving as a proxy for overall scale and reach, directly influencing revenue generation[41](index=41&type=chunk) Network Volume (Three Months Ended March 31) | Metric | 2023 ($ in millions) | 2022 ($ in millions) | % Change | | :------------- | :------------------- | :------------------- | :------- | | Network Volume | $1,850 | $1,650 | 12% | [Components of Results of Operations](index=6&type=section&id=Components%20of%20Results%20of%20Operations) Pagaya's results include network AI, contract, interest, and investment income, offset by Production, R&D, sales, and G&A expenses, with other income/loss and noncontrolling interests impacting net income - Revenue is generated from network AI fees (AI integration and capital markets execution), contract fees (administration, management, performance), interest income from risk retention holdings and cash balances, and investment income from ownership interests in Financing Vehicles[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - Costs and operating expenses include Production Costs (primarily for asset transfer from Partners to Financing Vehicles), research and development (for network and AI technology), sales and marketing (for Partner and investor management), and general and administrative (for executive, finance, legal, and administrative functions)[47](index=47&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) - Other Income (loss), net, primarily consists of changes in the fair value of warrant liabilities and non-recurring items like impairment of investments. Income tax expense is affected by Israeli tax benefits and the geographical mix of taxable income. Net income attributable to noncontrolling interests accounts for the portion of consolidated VIEs' net income not attributable to Pagaya[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [Results of Operations - Three Months Ended March 31, 2023 and 2022](index=7&type=section&id=Results%20of%20Operations) Pagaya's Q1 2023 net loss increased to **$(61.0) million**, driven by higher Production Costs and a significant credit-related impairment, despite **9%** revenue growth Key Financial Results (Three Months Ended March 31) | Metric | 2023 ($ in thousands) | 2022 ($ in thousands) | Change ($ in thousands) | % Change | | :----------------------------------------- | :-------------------- | :-------------------- | :---------------------- | :------- | | Total Revenue and Other Income | 186,638 | 170,534 | 16,104 | 9% | | Total Costs and Operating Expenses | 211,614 | 180,546 | 31,068 | 17% | | Operating Income (Loss) | (24,976) | (10,012) | (14,964) | (149)% | | Other income (loss), net | (66,980) | 313 | (67,293) | NM | | Net Loss Attributable to Pagaya Tech Ltd. | (60,971) | (18,272) | (42,699) | (234)% | | Basic and Diluted Net Loss Per Share | (0.09) | (0.12) | 0.03 | 25% | - Revenue from fees increased by **$16.9 million (11%)** to **$175.3 million**, driven by a **$9.4 million** increase in Network AI fees due to **12% growth** in Network Volume, and a **$7.5 million** increase in contract fees[62](index=62&type=chunk) - Production costs increased by **$32.8 million (36%)** to **$125.1 million**, primarily due to growth in Network Volume and changes in asset class composition[67](index=67&type=chunk) - Other income (loss), net, shifted from a **$0.3 million income** to a **$67.0 million loss**, mainly due to a **$68.3 million net credit-related impairment loss** on certain investments[72](index=72&type=chunk) - Net income attributable to noncontrolling interests decreased by **$46.4 million (530%)** to a loss of **$(37.7) million**, driven by net losses in consolidated VIEs associated with risk retention holdings, including a **$41.9 million credit-related impairment loss**[74](index=74&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=12&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) Pagaya uses Adjusted Net Income (Loss) and Adjusted EBITDA as non-GAAP measures to show ongoing operations and profitability, with both metrics decreasing in Q1 2023 - Adjusted Net Income (Loss) and Adjusted EBITDA are non-GAAP measures used to highlight results from ongoing operations and underlying profitability, excluding non-cash or unpredictable items[76](index=76&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) Adjusted Non-GAAP Financial Measures (Three Months Ended March 31) | Metric | 2023 ($ in thousands) | 2022 ($ in thousands) | | :----------------------- | :-------------------- | :-------------------- | | Adjusted Net Income (Loss) | (11,015) | 4,106 | | Adjusted EBITDA | 2,048 | 4,397 | - Adjusted Net Income (Loss) decreased from **$4.1 million** in Q1 2022 to **$(11.0) million** in Q1 2023, while Adjusted EBITDA decreased from **$4.4 million** to **$2.0 million** over the same period[79](index=79&type=chunk) [Liquidity and Capital Resources](index=13&type=section&id=Liquidity%20and%20Capital%20Resources) Pagaya faces net losses and a deficit, with cash at **$316.8 million**, but expects sufficient liquidity for **12 months** via existing cash, a **$167.5 million** credit facility, **$300 million** equity financing, and a **$75 million** preferred share agreement Liquidity Overview | Metric | March 31, 2023 ($ in millions) | December 31, 2022 ($ in millions) | | :---------------------- | :----------------------------- | :-------------------------------- | | Net Loss (attributable) | (61.0) | (18.3) | | Accumulated Deficit | 475.2 | 414.2 | | Cash, Cash Equivalents | 316.8 | 337.1 | | Shareholders' Equity | 527.9 | N/A | - Pagaya's primary liquidity requirements are to finance risk retention, invest in R&D, and attract/retain employees, with strategic investments planned to support business growth[87](index=87&type=chunk) - The company expects existing cash and PIPE investment proceeds to be sufficient for working capital and capital expenditures for at least the next **12 months**, but acknowledges risks from market conditions and access to funding[88](index=88&type=chunk)[89](index=89&type=chunk) - Pagaya has access to a **$167.5 million Revolving Credit Facility**, a committed equity financing agreement with B. Riley Principal Capital II for up to **$300 million** in Class A Ordinary Shares, and a **$75 million Series A Preferred Share Purchase Agreement** to raise additional capital[90](index=90&type=chunk)[96](index=96&type=chunk)[102](index=102&type=chunk) - The likelihood of warrant holders exercising their warrants for cash is dependent on the market price of Class A Ordinary Shares exceeding **$11.50 per share**, with potential proceeds of up to **$169.6 million**[93](index=93&type=chunk)[94](index=94&type=chunk) [Cash Flow](index=15&type=section&id=Cash%20Flow) Pagaya's Q1 2023 saw increased net cash used in operating activities by **$20.9 million** and investing activities by **$55.7 million**, offset by a **$74.0 million** increase in net cash from financing Summarized Consolidated Cash Flow (Three Months Ended March 31) | Activity | 2023 ($ in thousands) | 2022 ($ in thousands) | Change ($ in thousands) | % Change | | :---------------------------- | :-------------------- | :-------------------- | :---------------------- | :------- | | Net cash used in operating | (23,673) | (2,823) | (20,850) | (739)% | | Net cash used in investing | (99,665) | (43,918) | (55,747) | (127)% | | Net cash provided by financing | 103,024 | 29,042 | 73,982 | 255% | - The increase in net cash used in operating activities was mainly due to an **$89.1 million increase in net loss**, partially offset by a **$71.0 million increase in non-cash charges**, primarily a credit impairment[105](index=105&type=chunk) - The increase in net cash used in investing activities was primarily due to a **$47.7 million increase** in the purchase of investments in loans and securities[107](index=107&type=chunk) - The increase in net cash provided by financing activities was driven by an **$80.0 million increase** in proceeds from the revolving credit facility and a **$19.0 million increase** related to noncontrolling interests, partially offset by a **$26.9 million decrease** from secured borrowing[108](index=108&type=chunk) [Indebtedness](index=16&type=section&id=Indebtedness) Pagaya's indebtedness includes a **$167.5 million** Revolving Credit Facility, with **$95.0 million** drawn and continued access post-SVB closure, plus **5%** credit risk retention in securitization vehicles - Pagaya entered into a **3-year Senior Secured Revolving Credit Facility** for an initial principal amount of **$167.5 million** on September 2, 2022[110](index=110&type=chunk) - As of March 31, 2023, **$95.0 million** was drawn, **$20.0 million** in letters of credit were issued, and **$52.5 million** of borrowing capacity remained available under the Revolving Credit Facility, with Pagaya in compliance with all covenants[116](index=116&type=chunk) - Following the closure of Silicon Valley Bank (SVB) in March 2023, the Credit Agreement obligations were transferred to Silicon Valley Bridge Bank, National Association (SVBBNA), ensuring continued access to the facility[116](index=116&type=chunk)[117](index=117&type=chunk)[119](index=119&type=chunk) - Pagaya sponsors securitization vehicles to purchase loans from Partners and retains at least **5%** of the credit risk of issued securities to comply with risk retention regulatory requirements[121](index=121&type=chunk) [Recent Accounting Pronouncements](index=17&type=section&id=Recent%20Accounting%20Pronouncements) The adoption of ASU No. 2016-13 (Topic 326) regarding credit losses on financial instruments did not materially impact Pagaya's consolidated financial statements - The adoption of ASU No. 2016-13 (Topic 326), related to credit losses on financial instruments, did not materially impact Pagaya's consolidated financial statements[123](index=123&type=chunk) [Critical Accounting Policies and Estimates](index=17&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Detailed information on Pagaya's significant accounting policies and their effects on financial condition and results of operations is available in the Annual Report on Form 20-F - Detailed information on Pagaya's significant accounting policies and their effects on financial condition and results of operations can be found in the audited consolidated financial statements in the Annual Report on Form 20-F[125](index=125&type=chunk) [Quantitative and Qualitative Discussions of Market Risk](index=17&type=section&id=Quantitative%20and%20Qualitative%20Discussions%20of%20Market%20Risk) Pagaya is exposed to credit, liquidity, and interest rate risks through investments and securitization markets, with no material changes in market risk exposure as of March 31, 2023 - Pagaya is exposed to market risks, including credit, liquidity, and interest rate risks, through investments in loans and securities and access to securitization markets[127](index=127&type=chunk) - As of March 31, 2023, there have been no material changes in the company's exposure to market risk compared to December 31, 2022[127](index=127&type=chunk)

[Introduction](index=5&type=section&id=INTRODUCTION) Introduces Pagaya Technologies Ltd., clarifying the report's reliance on statistical data and management estimates, subject to inherent uncertainties - References to 'we,' 'us,' 'our,' 'our business,' 'the Company,' and 'Pagaya' refer to Pagaya Technologies Ltd. and its consolidated subsidiaries[23](index=23&type=chunk) - The Annual Report includes statistical, market, and industry data from publicly available information and independent industry publications, as well as estimates, projections, and forecasts prepared by management, all of which are subject to inherent uncertainties and risks[24](index=24&type=chunk) [Selected Definitions](index=5&type=section&id=SELECTED%20DEFINITIONS) Provides a glossary of key terms and acronyms used throughout the annual report, essential for understanding the company's operations, financial instruments, and regulatory context - Network Capital refers to the total capital currently invested in assets originated by Partners with the assistance of Pagaya's AI technology and network, plus capital committed by asset investors available for new asset acquisition[59](index=59&type=chunk) - Network Volume refers to the gross dollar amount of assets originated by Partners with the assistance of Pagaya's AI technology and acquired by Financing Vehicles[60](index=60&type=chunk) - Partners are financial institutions (banks, peer-to-peer lending networks, online marketplaces, non-bank finance companies, fintechs, etc.) that utilize Pagaya's AI technology and network to assist in creating and originating credit and other assets[72](index=72&type=chunk) - Financing Vehicles include funds managed or advised by Pagaya or its affiliates, securitization vehicles sponsored or administered by Pagaya or its affiliates, and other similar vehicles[52](index=52&type=chunk) [Special Note Regarding Forward-Looking Statements](index=12&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Highlights that the report contains forward-looking statements subject to substantial risks and uncertainties, cautioning readers not to rely solely on them - Forward-looking statements include expectations concerning business outlook, productivity, operational improvements, capital investments, market conditions, economic performance, and future financial performance[92](index=92&type=chunk) - Important factors that could cause actual results to differ materially include changes in interest rates, market conditions, capital availability, AI technology performance, competition, regulatory changes, and the ability to retain key employees[95](index=95&type=chunk)[97](index=97&type=chunk) - The company undertakes no obligation to revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, except as required by law[96](index=96&type=chunk) [Risk Factor Summary](index=15&type=section&id=RISK%20FACTOR%20SUMMARY) Summarizes the principal risks that could significantly and negatively affect Pagaya's business, prospects, financial conditions, or operating results - Key operational risks include rapid growth, potential adverse impacts from a recent workforce reduction, heavy dependence on AI technology, reliance on a limited number of Partners, and challenges in raising capital from asset investors[100](index=100&type=chunk) - Economic conditions such as interest rates, rising inflation, and instability in the banking system can adversely affect the business and the performance of Financing Vehicles, especially since AI technology has not been extensively tested during economic down-cycles[100](index=100&type=chunk)[101](index=101&type=chunk) - Technological and data-related risks involve the inability to continuously improve AI technology, potential for unintentional bias or discrimination in AI, difficulties in protecting intellectual property, and reliance on Partners' borrower data and third-party data[101](index=101&type=chunk)[102](index=102&type=chunk) - Regulatory and legal risks include potential litigation, regulatory actions, consumer complaints, compliance issues, challenges to the 'true lender' status of Partners, and the evolving political and regulatory framework for AI technology[102](index=102&type=chunk) - Risks specific to Single Family Rental (SFR) operations include challenges in integrating Darwin Homes, dependence on general economic and real estate conditions, and issues related to tenant selection, defaults, and compliance with rental laws[102](index=102&type=chunk) [Part I](index=19&type=section&id=PART%20I) Provides comprehensive information about Pagaya, including key details, risk factors, business overview, operational and financial review, and corporate information [Item 1. Identity of Directors, Senior Management and Advisers](index=19&type=section&id=Item%201.%20Identity%20of%20Directors,%20Senior%20Management%20and%20Advisers) States that information regarding the identity of directors, senior management, and advisers is not applicable for this report - Item 1 is marked 'Not applicable'[105](index=105&type=chunk) [Item 2. Offer Statistics and Expected Timetable](index=19&type=section&id=Item%202.%20Offer%20Statistics%20and%20Expected%20Timetable) States that information regarding offer statistics and expected timetable is not applicable for this report - Item 2 is marked 'Not applicable'[106](index=106&type=chunk) [Item 3. Key Information](index=19&type=section&id=Item%203.%20Key%20Information) Provides crucial information about the company, including its capitalization, indebtedness, and a comprehensive discussion of risk factors [A. [Reserved]](index=19&type=section&id=3.A.%20%5BReserved%5D) States that sub-item A is reserved and not applicable - Sub-item A is marked 'Not applicable'[107](index=107&type=chunk) [B. Capitalization and Indebtedness](index=19&type=section&id=3.B.%20Capitalization%20and%20Indebtedness) States that sub-item B is not applicable for this report - Sub-item B is marked 'Not applicable'[108](index=108&type=chunk) [C. Reasons for the Offer and Use of Proceeds](index=19&type=section&id=3.C.%20Reasons%20for%20the%20Offer%20and%20Use%20of%20Proceeds) States that sub-item C is not applicable for this report - Sub-item C is marked 'Not applicable'[109](index=109&type=chunk) [D. Risk Factors](index=19&type=section&id=3.D.%20Risk%20Factors) Discusses various risk factors that could significantly and negatively affect Pagaya's business, operations, and financial performance Net Losses Attributable to Pagaya Technologies Ltd. | Year | Net Loss (in millions) | | :--- | :--------------------- | | 2022 | $(302.3) | | 2021 | $(91.2) | - The company is a rapidly growing company with a relatively limited operating history, making future performance predictions difficult and exposing it to increased risks and uncertainties[113](index=113&type=chunk)[114](index=114&type=chunk) - A **20% workforce reduction** was announced on January 18, 2023, to streamline operations and achieve near-to-medium term priorities, but it may not result in anticipated savings or efficiencies and could disrupt business[121](index=121&type=chunk)[122](index=122&type=chunk) - The business is highly dependent on its AI technology; if it fails to improve, contains errors, or is ineffective, it could adversely affect growth prospects, business, financial condition, and results of operations[139](index=139&type=chunk) - A significant portion of revenue relies on a limited number of Partners, and the ability to raise capital from asset investors at competitive rates is a vital component of the products offered[142](index=142&type=chunk)[145](index=145&type=chunk) - Expansion into new markets like real estate and credit cards carries substantial risks, as the AI technology has not been extensively tested in these areas and may not perform as well as in existing consumer markets[154](index=154&type=chunk)[157](index=157&type=chunk) - The industry is highly competitive, with larger competitors possessing more diversified products, broader Partner/investor bases, and lower-cost funding, which could lead to price reductions, reduced margins, or loss of revenues for Pagaya[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - Regulators, such as the CFPB and FTC, have expressed concerns that certain AI technology may lead to unintentional bias or discrimination in automated credit analysis, potentially subjecting the company to legal or regulatory liability and reputational harm[206](index=206&type=chunk)[207](index=207&type=chunk) - The dual-class structure of Pagaya Ordinary Shares concentrates voting power with the Founders (approximately **77.6%** of the total voting power as of March 31, 2023), effectively limiting other shareholders' ability to influence important determinations and transactions[268](index=268&type=chunk)[269](index=269&type=chunk) - The company and its Partners are subject to a variety of complex federal, state, and local laws related to consumer protection, lending, data protection, and investment advisory services; non-compliance could result in regulatory action, litigation, or monetary payments[277](index=277&type=chunk)[279](index=279&type=chunk) - There is a risk that obligations originated by Partners utilizing Pagaya's network could be successfully challenged on the basis that the Partner was not the 'true lender,' potentially rendering such obligations unenforceable or subjecting the company to penalties[314](index=314&type=chunk)[319](index=319&type=chunk) - The company's operations in Israel expose it to risks related to political, economic, and military conditions in the region, as well as potential disruptions from military reserve duty for employees and differences in Israeli corporate law[342](index=342&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk) - The price of Class A Ordinary Shares and public warrants has been and may continue to be volatile due to various factors, including market and industry changes, analyst comments, and actions by shareholders or short sellers[370](index=370&type=chunk)[373](index=373&type=chunk)[375](index=375&type=chunk) - Future issuances of Class A Ordinary Shares, including under equity incentive plans or through committed equity financing, could dilute the interest of existing shareholders and potentially reduce the market price of the shares

Exhibit 10.1 Execution Version PREFERRED SHARES PURCHASE AGREEMENT This PREFERRED SHARES PURCHASE AGREEMENT (this "Agreement") is entered into on April 14, 2023, by and between Pagaya Technologies Ltd., a company organized under the laws of Israel ("Pagaya" or the "Company"), Oak HC/FT Partners V, L.P., Oak HC/FT Partners V-A, L.P. and Oak HC/FT Partners V-B, L.P (together, the "Investor"). WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securi ...